PEOPLE vs. CONCEPCION, 44 Phil.

126
FACTS: Venancio Concepcion, President of the Philippine National Bank and a member of the
Board thereof, authorized an extension of credit in favor of "Puno y Concepcion, S en C! to the
mana"er of the #parri branch of the Philippine National Bank "Puno y Concepcion, S en C"
$as a co%partnership $here Concepcion is a partner Subse&uently, Concepcion $as char"ed and
found "uilty in the Court of 'irst (nstance of Ca"ayan $ith violation of section )* of #ct No
+,-, Section )* of #ct No +,-, provides that the National Bank shall not, directly or
indirectly, "rant loans to any of the members of the board of directors of the bank nor to a"ents
of the branch banks Counsel for the defense ar"ue that the documents of record do not prove
that authority to make a loan $as "iven, but only sho$ the concession of a credit .hey averred
that the "rantin" of a credit to the co%partnership "Puno y Concepcion, S en C" by Venancio
Concepcion, President of the Philippine National Bank, is not a "loan" $ithin the meanin" of
section )* of #ct No +,-,
ISSUE: /hether or not the "rantin" of a credit of P)00,000 to the co%partnership "Puno y
Concepcion, S en C" by Venancio Concepcion, President of the Philippine National Bank, a
"loan" $ithin the meanin" of section )* of #ct No +,-,
HELD: .he Supreme Court ruled in the affirmative .he "credit" of an individual means his
ability to borro$ money by virtue of the confidence or trust reposed by a lender that he $ill pay
$hat he may promise # "loan" means the delivery by one party and the receipt by the other
party of a "iven sum of money, upon an a"reement, express or implied, to repay the sum loaned,
$ith or $ithout interest .he concession of a "credit" necessarily involves the "rantin" of "loans"
up to the limit of the amount fixed in the "credit,"
REPUBLIC v. BAGTAS, 116 SCRA 262
FACTS: 1n 2ay 3, 45-3, 6ose Ba"tas borro$ed from the Bureau of #nimal (ndustry three bulls
for one year for breedin" purposes upon payment of a breedin" fee of 407 of the book value of
the bulls #fter one year, the contract $as rene$ed but only for one bull Ba"tas offered to buy
the bulls at book value less depreciation, but the Bureau told him that he should either return the
bulls or pay for their book value Ba"tas failed to pay the book value, so the 8epublic filed an
action $ith the C'( 2anila to order the return of the bulls or the payment of the book value
'elicidad Ba"tas, the survivin" spouse and administratrix of the decedent9s estate, said that the
t$o bulls have already been returned in 45*+, and that the remainin" one died of "unshot durin"
a :uk raid (t $as established that the t$o bulls $ere returned, thus, there is no more obli"ation
on the part of Ba"tas /ith re"ards the bull not returned, 'elicidad maintained that the obli"ation
is extin"uished since the contract is that of a commodatum and that the loss throu"h fortuitous
event should be borne by the o$ner
ISSUE: /hether or not the contract entered into bet$een Ba"tas and the 8epublic is that of
commodatum makin" Ba"tas not liable for the death of the bull
HELD: # contract of commodatum is essentially "ratuitous (f the breedin" fee be considered
compensation, then the contract $ould be a lease of the bull ;nder article 4<,4 of the Civil
Code the lessee $ould be sub=ect to the responsibilities of a possessor in bad faith because she
had continued possession of the bull after the expiry of the contract >ven if the contract
be commodatum, still Ba"tas is liable because article 45-+ of the Civil Code provides that a
bailee in a contract of commodatum is liable for loss of the thin"s even if it should be throu"h a
fortuitous event if he keeps it lon"er than the period stipulated or if the thin" loaned has been
delivered $ith appraisal of its value, unless there is a stipulation exemptin" the bailee from
responsibility in case of a fortuitous event .he loan of one bull $as rene$ed for another period
of one year but Ba"tas kept and used the bull more than one year $here durin" a :uk raid it $as
killed by stray bullets 'urthermore, $hen lent and delivered to the deceased husband of Ba"tas,
the bulls had each an appraised book value (t $as not stipulated that in case of loss of the bull
due to fortuitous event the late husband of the appellant $ould be exempt from liability
PRODUCERS BANK OF THE PHILIPPINES vs. COURT OF APPEALS, GR N. 11!"24
FACTS: Sometime in 45,5, private respondent 'ranklin Vives, upon re&uest of his friend
#n"eles Sanchez and relyin" on the assurance that he could $ithdra$ his money $ithin a
month9s time, issued a check in the amount of .$o :undred .housand Pesos in favor of Sterela
2arketin" and Services o$ned by one Col #rturo ?oronilla Subse&uently, private respondent
and his $ife found out that Sterela can9t be found on the address previously "iven to then, so
they $ent to petitioner Producer9s Bank of the Philippines to verify if their money $as still
intact .hey $ere informed that part of the amount had been $ithdra$n by ?oronilla and that the
latter instructed the bank to debit from the savin"s account the amount and deposit it in his
current account Private respondent filed an action for recovery of sum of money a"ainst
?oronilla, Sanchez, ?uma"pi and petitioner .he trial court ruled in favour of herein private
respondents 1n appeal of the case, the appellate court affirmed the decision of the 8.C
Petitioner contends that the transaction bet$een private respondent and ?oronilla is a simple
loan @mutuumA since all the elements of a mutuum are presentB first, $hat $as delivered by
private respondent to ?oronilla $as money, a consumable thin"C and second, the transaction $as
onerous as ?oronilla $as obli"ed to pay interest :ence, petitioner ar"ues that it cannot be held
liable because it is not privy to the transaction bet$een the latter and ?oronilla Private
respondent, on the other hand, ar"ues that the transaction bet$een him and ?oronilla is not a
mutuum but an accommodation, since he did not actually part $ith the o$nership of
his P+00,00000 but retained some de"ree of control over his money throu"h his $ife $ho $as
made a si"natory to the savin"s account and in $hose possession the savin"s account passbook
$as "iven
ISSUE: /hether or not the contract bet$een Sanchez and ?oronilla and Vives is a contract of
commodatum, thus makin" petitioner Bank liable
HELD: Supreme Court held that the contract is commodatum #lthou"h in vie$ of #rticle 45))
of the Civil Code, the ob=ect in commodatum is non%consumable, but #rticle 45)< of the Civil
Code provides DConsumable "oods may be the sub=ect of commodatum if the purpose of the
contract is not the consumption of the ob=ect, as $hen it is merely for exhibition! .hus, if
consumable "oods are loaned only for purposes of exhibition or $hen the intention of the parties
is to lend consumable "oods and to have the very same "oods returned at the end of the period
a"reed upon, the loan is commodatum and not a mutuum .he evidence sho$s that private
respondent merely "accommodated" ?oronilla by lendin" his money $ithout consideration, as a
favor to his "ood friend Sanchez (t $as ho$ever clear to the parties to the transaction that the
money $ould not be removed from Sterela9s savin"s account and $ould be returned to private
respondent after thirty @)0A days
CAROL#N $. GARCIA vs. RICA $ARIE S. THIO, GR. N. 1!4%&%, $'()h 16, 2**&
FACTS: Sometime in 'ebruary 455*, respondent 8ica 2arie S .hio received from petitioner
Carolyn 2 Earccia a crossed check in the amount of F400,00000 payable to the order of
2arilou Santia"o .hereafter, Carolyn received from 8ica payments of the sum due (n 6une
455*, 8ica received another check in the amount of P*00,00000 from Carolyn and payable to
the order of 2arilou Payments $ere made by 8ica representin" interests .here $as failure to
pay the principal amount hence a complaint for sum of money $ith dama"es $as filed by
Carolyn 8ica contended that she had no obli"ation to petitioner as it $as 2arilou $ho $as
indebted as she $as merely asked to deliver the checks to the latter and that the check payments
she issued $ere merely intended to accommodate 2arilou .he 8.C ruled in favor of Carolyn
but the C# reversed on the "round that there $as no contract bet$een 8ica and Carolyn as t here
is nothin" in the record that sho$s that respondent received money from petitioner and that the
checks received by respondent, bein" crossed, may not be encashed but only deposited in the
bank by the payee thereof, that is, by 2arilou Santia"o herself
ISSUE: /hether or not there $as a contract of loan bet$een petitioner and respondent
HELD: .here Court ruled in the affirmative # loan is a real contract, not consensual, and as
such is perfected only upon the delivery of the ob=ect of the contract #rt 45)- of the Civil Code
provides that Dan accepted promise to deliver somethin" by $ay of commodatum or simple loan
is bindin" upon the parties, but the commodatum or simple loan itself shall not be perfected until
the delivery of the ob=ect of the contract! ;pon delivery of the ob=ect of the contract of loan @in
this case the money received by the debtor $hen the checks $ere encashed the debtor ac&uires
o$nership of such money or loan proceeds and is bound to pay the creditor an e&ual amount (t is
undisputed that the checks $ere delivered to respondent :o$ever, these checks $ere crossed
and payable not to the order of respondent but to the order of a certain 2arilou Santia"o .he
Supreme Court a"rees $ith petitioner that delivery is the act by $hich the res or substance
thereof is placed $ithin the actual or constructive possession or control of another #lthou"h
respondent did not physically receive the proceeds of the checks, these instruments $ere placed
in her control and possession under an arran"ement $hereby she actually re%lent the amounts to
Santia"o :ence, 8ica is the debtor and not 2arilou

COLITO T. PA+U#O vs. COURT OF APPEALS, GR. N. 146"64, +,-. ", 2**4
FACTS: (n 6une 45,5, petitioner Colito . Pa=uyo purchased the ri"hts over a property from
Pedro Perez .hereafter, he constructed a house therein and he and his family lived there Gater,
Pa=uyo a"reed to let private respondent >ddie Euevarra to live in the house for free provided that
the latter maintain the cleanliness and orderliness of the house .hey also a"reed that Euevarra
should leave the premises upon demand Subse&uently, $hen Pa=uyo told Euevarra that he
needed the house, Euevarra refused, hence an e=ectment case $as filed Euevarra claimed that
Pa=uyo had no valid title or ri"ht of possession over the lot $here the house stands because the
lot is $ithin the 4*0 hectares set aside for socialized housin" .he 2.C ruled that the sub=ect of
the a"reement bet$een Pa=uyo and Euevarra is the house and not the lot Pa=uyo is the o$ner of
the house, and he allo$ed Euevarra to use the house only by tolerance .hus, Euevarra9s refusal
to vacate the house on Pa=uyo9s demand made Euevarra9s continued possession of the house
ille"al #""rieved, Euevarra appealed to the 8e"ional .rial Court $hich only affirmed the 2.C
decision #t the C#, the latter reversed the 8.C decision .he Court of #ppeals ruled that the
Hasunduan is not a lease contract but a commodatum because the a"reement is not for a price
certain Since Pa=uyo admitted that he resurfaced only in 455- to claim the property, the
appellate court held that Euevarra has a better ri"ht over the property under Proclamation No
4), #t that time, Euevarra $as in physical possession of the property
ISSUE: /hether or not the contract bet$een petitioner and private respondent is one of
commodatum
HELD: .he Supreme Court held that the contract is not a commodatum D(n a contract of
commodatum, one of the parties delivers to another somethin" not consumable so that the latter
may use the same for a certain time and return it #n essential feature of commodatum is that it is
"ratuitous #nother feature is that the use of the thin" belon"in" to another is for a certain period
.hus, the bailor cannot demand the return of the thin" loaned until after the expiration of the
period stipulated, or after accomplishment of the use for $hich the commodatum is constituted
(f the bailor should have ur"ent need of the thin", he may demand its return for temporary use (f
the use of the thin" is merely tolerated by the bailor, he can demand the return of the thin" at
$ill, in $hich case the contractual relation is called a precarium .he Hasunduan reveals that the
accommodation accorded by Pa=uyo to Euevarra $as not essentially "ratuitous /hile
the Hasunduan did not re&uire Euevarra to pay rent, it obli"ated him to maintain the property in
"ood condition .he imposition of this obli"ation makes the Hasunduan a contract different from
a commodatum .he effects of the Hasunduan are also different from that of a commodatum
/UINTOS vs. BECK, 60 Phil 1*%

FACTS: Beck is a tenant of defendant 2ar"arita Iuintos #s such, Beck occupied Iuintos9
house Iuintos "ranted Beck the use of the furniture found on the leased house, amon" these
$ere three "as heaters and - electric lamps, sub=ect to the condition that the defendant $ould
return them to the plaintiff upon the latterJs demand Iuintos sold the pieces of furniture to 2aria
Gopez and 8osario Gopez and thereafter notified Beck of the conveyance Beck informed
Iuintos that the latter can "et the furniture at the "round floor of the house, ho$ever, at a later
date, Beck told Iuintos that he $ill return only the other furniture but not the "as heaters and the
electric lamps as he is to return them only after the expiration of the lease contract /hen the
lease contract expires, Beck deposited the furniture to the sheriff9s $arehouse Iuintos refused to
"et the furniture in vie$ of the fact that the defendant had declined to make delivery of all of
them Conse&uently, Iuintos brou"ht an action to compel Beck to return her certain furniture
$hich she lent him for his use .he trial court ruled in favour of Beck holdin" that Iuintos failed
to comply $ith her obli"ation to "et the furniture $hen they $ere offered to her 1n appeal of
the case, the Court of 'irst (nstance of 2anila affirmed the lo$er court9s decision :ence, this
petition
ISSUE: /hether or not the trial court erred in rulin" that Iuintos failed to comply $ith her
obli"ation to "et the furniture $hen they $ere offered to her
HELD: .he contract entered into bet$een the parties is one of commadatum ;nder it the
plaintiff "ratuitously "ranted the use of the furniture to the defendant, reservin" for herself the
o$nership thereof By this contract the defendant bound himself to return the furniture to the
plaintiff, upon the latter9s demand .he obli"ation voluntarily assumed by the defendant to return
the furniture upon the plaintiffJs demand, means that he should return all of them to the plaintiff
at the latterJs residence or house .he defendant did not comply $ith this obli"ation $hen he
merely placed them at the disposal of the plaintiff, retainin" for his benefit the three "as heaters
and the four electric lamps .he trial court, therefore, erred $hen it came to the le"al conclusion
that the plaintiff failed to comply $ith her obli"ation to "et the furniture $hen they $ere offered
to her
FRIAS vs. SAN DIEGO1SISON, GR. N. 1!!22", A2(il 4, 2**&
FACT: Petitioner Bobie 8ose V 'rias o$ned a house and lot $hich she ac&uired from (sland
2asters 8ealty and ?evelopment Corporation @(28?CA by virtue of a ?eed of Sale She entered
into a 21# $ith respondent 'lora San ?ie"o%Sison (n the 21#, they had a"reed amon" others
that in the event that on the <
th
month of the <%month period to purchase land, respondent $ould
decide not to purchase, the petitioner has a period of another < months to pay P)2 provided that
the said amount shall earn compounded bank interest for the last six months only 8espondent
decided not to purchase the property so $hat happened $as that the P)2 $ould be considered as
a loan payable $ithin six months Petitioner failed to pay the P+2 Conse&uently, respondent filed
$ith the 8.C a complaint for sum of money 8.C rules in favor of respondent and orders the
payment of P+2 plus compounded interest at )+7 interest per annum pursuant to the 21#
Petitioner appeals to C# .he C# affirms 8.C decision $ith modification $ith re"ard to the
interest from)+7 to +*7 Petitioner opposed to the said decision contendin" that the interest is
contrary to the parties9 2emorandum of #"reementC that the a"reement provides that if
respondent $ould decide not to purchase the property, petitioner has the period of another six
months to pay the loan $ith compounded bank interest for the last six months onlyC that the C#9s
rulin" that a loan al$ays bears interest other$ise it is not a loan is contrary to #rt 45*< of the
Ne$ Civil Code $hich provides that no interest shall be due unless it has been expressly
stipulated in $ritin"
ISSUE: /hether or not the compounded bank interest should be limited to six months as
contained in the 21#
HELD: .he a"reement stipulated in the 21# that the amount "iven shall bear compounded bank
interest for the last six months only @referrin" to the second six%month periodA, does not mean
that interest $ill no lon"er be char"ed after the second six%month period since such stipulation
$as made on the lo"ical and reasonable expectation that such amount $ould be paid $ithin the
date stipulated Considerin" that the petitioner failed to pay the amount "iven $hich under the
21# shall be considered as a loan, the monetary interest for the last six months continued to
accrue until the actual payment of the loaned amount .he payment of re"ular interest constitutes
the price or cost of the money use and thus, until the principal sum due is returned to the creditor,
re"ular interest continues to accrue since the debtor continues to use such principal amount
LIGUTAN vs. COURT OF APPEALS, GR. N. 1"%6&&, F.3(,'(4 12, 2**2
FACTS: Petitioners .olomeo Gi"utan and Geonidas dela Glana obtained a loan from private
respondent Security Bank and .rust Company Petitioners executed a promissory note to pay the
sum loaned $ith an interest of 4*4357 per annum upon maturity and to pay a penalty of *7
every month on the outstandin" principal and interest in case of default 1n maturity of the
obli"ation, petitioners failed to settle the debt despite several demands from the bank
Conse&uently, the bank filed a complaint for recovery of the due amount #fter trial of the case,
the .rial court ruled in favour of the Bank, orderin" petitioners to pay the respondent the sum of
P44-,-4<00 $ith interest thereon at the rate of 4*4357 per annum and *7 per month penalty
char"e amon" others 1n appeal of the case, petitioners prayed for the reduction of the *7
stipulated penalty for bein" unconscionable .he Court of #ppeals ruled that in the interest of
=ustice and public policy, a penalty of )7 per month or )<7 per annum $ould suffice But still,
petitioners dispute the said decision
ISSUE: /hether or not the 4*4357 interest and the penalty of three @)7A percent per month or
thirty%six @)<7A percent per annum imposed by private respondent bank on petitioners9 loan
obli"ation are exorbitant, ini&uitous and unconscionable
HELD: .he &uestion of $hether a penalty is reasonable or ini&uitous can be partly sub=ective
and partly ob=ective (ts resolution $ould depend on such factors as, but not necessarily confined
to, the type, extent and purpose of the penalty, the nature of the obli"ation, the mode of breach
and its conse&uences, the supervenin" realities, the standin" and relationship of the parties, and
the like, the application of $hich, by and lar"e, is addressed to the sound discretion of the court
.he essence or rationale for the payment of interest is not exactly the same as that of a surchar"e
or a penalty # penalty stipulation is not necessarily preclusive of interest /hat may =ustify a
court in not allo$in" the creditor to impose full surchar"es and penalties, despite an express
stipulation therefor in a valid a"reement, may not e&ually =ustify the non%payment or reduction of
interest (ndeed, the interest prescribed in loan financin" arran"ements is a fundamental part of
the bankin" business and the core of a bankJs existence .he Court of #ppeals, exercisin" its
"ood =ud"ment in the instant case, has ri"htly reduced the penalty interest from *7 a month to
)7 a month
GSIS vs. COURT OF APPEALS, GR. N. L1!24&%, O)53.( 2*, 10%6
FACTS: (n 45<4, herein private respondents spouses Nemencio 8 2edina and 6osefina E
2edina applied $ith the herein petitioner Eovernment Service (nsurance System for a loan of
P<00,00000 .he approved loan amount $as only P)*0,00000 at the rate of interest of 57 per
annum compounded monthly and the rate of 57K4+7 per month for any installment or
amortization that remains due and unpaid .he approved loan amount $as further reduced to
P+5*,00000 .he 2edinas accepted the reduced amount and executed a promissory note and a
real estate mort"a"e in favor of ES(S Subse&uently, upon application by the 2edinas, the ES(S
approved an additional loan of P+)0,00000 on the security of the same mort"a"ed properties to
bear interest at 57 per annum compounded monthly and repayable in ten years :o$ever, in
45<*, the 2edinas defaulted in the payment of the monthly amortization on their loan despite
several demands from petitioner :ence, the ES(S imposed 57K4+7 interest on instalments that
are due and unpaid .he 2edinas opposed to this contendin" that the interest rates on the loan
accounts are usurious #fter trial of the case, the trial court ordered the 2edinas full payment of
their obli"ation to the ES(S plus interest at 57 per annum #""rieved, the 2edinas appealed
before the Court of #ppeals but the latter affirmed the lo$er court9s decision
ISSUE: /hether or not the interest rates on the loan accounts of respondent%appellee 2edina
spouses are usurious
HELD: (t has already been settled that the ;sury Ga$ applies only to interest by $ay of
compensation for the use or forbearance of money (nterest by $ay of dama"es is "overned by
#rticle ++05 of the Civil Code of the Philippines $hich provides that Dif the obli"ation consists
in the payment of a sum of money, and the debtor incurs in delay, the indemnity for dama"es,
there bein" no stipulation to the contrary, shall be the payment of the interest a"reed upon! .he
Civil Code permits the a"reement upon a penalty apart from the interest Should there be such an
a"reement, the penalty does not include the interest, and as such the t$o are different and distinct
thin"s $hich may be demanded separately .he stipulation about payment of such additional rate
partakes of the nature of a penalty clause, $hich is sanctioned by la$
EASTERN SHIPPING LINES, INC. vs CA, GR. N. 0&412, +,l4 12, 1004
FACTS: .$o fiber drums of riboflavin $ere shipped from Lokohama, 6apan on board the vessel
o$ned by herein petitioner >astern Shippin" Gines /hen it arrives in 2anila, it $as put unto the
custody of 2etro Port Service, (nc .he latter excepted to one drum $hich is said to be in bad
order and $hich dama"e $as unkno$n to >astern Shippin" Gines Gater, #llied Brokera"e
Corporation received the shipment from 2etro Port Service, (nc /ith one drum dama"ed,
#llied Brokera"e Corporation made deliveries to the consi"neeJs $arehouse .he latter excepted
to one drum that is dama"ed >astern Shippin" Gines averred that due to the one drum that is
dama"ed and due to the fault and ne"li"ence of 2etro Port Service, (nc and #llied Brokera"e
Corporation, the consi"nee suffered losses .he t$o failed and refused to pay the claims for
dama"es Conse&uently, >astern Shippin" Gines $as compelled to pay the consi"nee bein"
subro"ated to all the ri"hts of action of said consi"nee a"ainst 2etro Port Service, (nc and
#llied Brokera"e Corporation .rial ensued and on appeal of the case, the appellate court
affirmed the decision of the trial court orderin" 2etro Port Service and #llied Brokera"e to pay
>astern Shippin" Gines, =ointly and severally, the amount of P45,0)+5*, $ith the present le"al
interest of 4+7 per annum from the date of filin" of the complaints, until fully paid 2etro Port
Service and #llied Brokera"e opposed especially as to the payment of interest contendin" that
the le"al interest on an a$ard for loss or dama"e should be <7 in vie$ of #rticle ++05 of the
Civil Code
ISSUE: /hether or not the payment of le"al interest on an a$ard for loss or dama"e is t$elve
percent @4+7A or six percent @<7A
HELD: #rticle ++05 of the Ne$ Civil Code provides that if the obli"ation consists in the
payment of a sum of money, and the debtor incurs in delay, the indemnity for dama"es, there
bein" no stipulation to the contrary, shall be the payment of interest a"reed upon, and in the
absence of stipulation, the le"al interest $hich is six percent per annum /ith re"ard particularly
to an a$ard of interest in the concept of actual and compensatory dama"es, the rate of interest, as
$ell as the accrual thereof, is imposed, as follo$sB
4 /hen the obli"ation is breached, and it consists in the payment of a sum of money, the
interest due should be that $hich may have been stipulated in $ritin" 'urthermore, the
interest due shall itself earn le"al interest from the time it is =udicially demanded (n the
absence of stipulation, the rate of interest shall be 4+7 per annum to be computed from
default under and sub=ect to the provisions of #rticle 44<5 of the Civil Code
+ /hen an obli"ation, not constitutin" a loan or forbearance of money, is breached, an
interest on the amount of dama"es a$arded may be imposed at the discretion of the court
at the rate of <7 per annum No interest, ho$ever, shall be ad=ud"ed on unli&uidated
claims or dama"es except $hen or until the demand can be established $ith reasonable
certainty #ccordin"ly, $here the demand is established $ith reasonable certainty, the
interest shall be"in to run from the time the claim is made =udicially or extra=udicially
@#rt 44<5, Civil CodeA but $hen such certainty cannot be so reasonably established at
the time the demand is made, the interest shall be"in to run only from the date the
=ud"ment of the court is made @at $hich time the &uantification of dama"es may be
deemed to have been reasonably ascertainedA .he actual base for the computation of
le"al interest shall, in any case, be on the amount finally ad=ud"ed
) /hen the =ud"ment of the court a$ardin" a sum of money becomes final and executory,
the rate of le"al interest, $hether the case falls under para"raph 4 or para"raph +, above,
shall be 4+7 per annum from such finality until its satisfaction, this interim period bein"
deemed to be by then an e&uivalent to a forbearance of credit
SIGA1AN vs. 6ILLANUE6A, GR. N. 1&"22&, +'-,'(4 2*, 2**0
FACTS: :erein respondent #licia Villanueva is en"a"ed in supplyin" office materials and
e&uipments to the Philippine Navy 1ffice @PN1A $here herein Sebastian Si"a%an $orks as a
military officer and comptroller Villanueva alle"ed that Si"a%an offered to loan her the amount
of P*-0,00000 :avin" needed capital for her business transactions $ith the PN1, Villanueva
accepted petitioner9s proposal .he loan a"reement $as not reduced in $ritin" and there $as no
stipulation as to the payment of interest for the loan Villanueva issued t$o checks $orth
P*00,00000 and P+00,00000 Si"a%an $anted to apply the payment of P*-0,00000 to the
principal amount and the excess amount of P4<0,00000 $ould be applied for the interest :e
demanded from Villanueva to pay additional interest $ith a threat to block or disapprove her
transactions $ith the PN1 if she $ould not comply $ith his demand thus respondent paid
additional amounts as interests for the loan Villanueva asked Si"a%an for receipt but petitioner
refused to "ive as it $as not necessary as there $as mutual trust and confidence bet$een them
.he total amount paid by Villanueva totalled P4,+00,00000 /hen Villanueva $as advised by
her la$yer that she made an overpayment, she sent a demand letter to Si"a%an askin" for the
return of the excess amount of P<<0,00000 Si"a%an =ust i"nored Villanueva9s claim for
reimbursement :ence, Villanueva instituted a complaint for sum of money a"ainst herein
petitioner Sebastian Si"a%an #fter trial of the case, the .rial Court ordered petitioner Si"a%an to
refund the excess amount to Villanueva pursuant to the principle of solutio indebiti 1n appeal of
the case, the appellate court affirmed the decision of the 8.C Petitioner filed a motion for
reconsideration but this $as denied :ence, the instant petition
ISSUE: /hether or not there $as interest due to petitioner
HELD: .here $as no interest due to petitioner #rticle 45*< of the Civil Code, $hich refers to
monetary interest, specifically mandates that no interest shall be due unless it has been expressly
stipulated in $ritin" Payment of monetary interest is allo$ed only if there $as an express
stipulation for the payment of interestC and the a"reement for the payment of interest $as
reduced in $ritin" .he concurrence of the t$o conditions is re&uired for the payment of
monetary interest .hus, the collection of interest $ithout any stipulation therefore in $ritin" is
prohibited by la$ (t appears that petitioner and respondent did not a"ree on the payment of
interest for the loan Neither $as there convincin" proof of $ritten a"reement bet$een the t$o
re"ardin" the payment of interest Compensatory interest is not char"eable in the instant case
because it $as not duly proven that respondent defaulted in payin" the loan #lso, as earlier
found, no interest $as due on the loan because there $as no $ritten a"reement as re"ards
payment of interest
CARPO vs. CHUA 7 D# NG, GR. Ns. 1!*&&" 7 1!"!00, S.25.83.( "*, 2**!
FACTS: :erein petitioner spouses ?avid Carpo and 8echilda Carpo contracted a loan from
>leanor Chua and >lma ?y N" for a certain sum of money payable $ithin six @<A months $ith an
interest rate of six percent @<7A per month secured by a mort"a"ed of the spouses Carpo of their
residential house and lot Petitioners failed to pay the loan upon demand Conse&uently, the real
estate mort"a"e $as extra=udicially foreclosed, mort"a"ed property sold at a public auction, and
the house and lot $as a$arded to respondents, $ho $ere the only bidders ;nable to exercise
their ri"ht of redemption by petitioners, a certificate of sale $as issued in the name of
respondents :o$ever, petitioners continued to occupy the said house and lot, thus respondents
file a petition for $rit of possession $hich $as "ranted by the .rial Court Petitioners filed a
complaint for annulment of real estate mort"a"e and the conse&uent foreclosure proceedin"s
claimin" that the rate of interest stipulated in the principal loan a"reement is clearly null and void
for bein" excessive, ini&uitous, unconscionable and exorbitant Conse&uently, they also ar"ue
that the nullity of the a"reed interest rate affects the validity of the real estate mort"a"e

ISSUE: /hether or not the a"reed rate of interest of <7 per month or ,+7 per annum is so
excessive, ini&uitous, unconscionable and exorbitant that it should have been declared null and
void
HELD: (n a lon" line of cases, the Supreme Court has invalidated similar stipulations on interest
rates for bein" excessive, ini&uitous, unconscionable and exorbitant Pursuant to the freedom of
contract principle embodied in #rticle 4)0< of the Civil Code, contractin" parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided they are
not contrary to la$, morals, "ood customs, public order, or public policy (n the ordinary course,
the codal provision may be invoked to annul the excessive stipulated interest (n the case at bar,
the stipulated interest rate is <7 per month, or ,+7 per annum By the standards set by
=urisprudence, this stipulation is similarly invalid
$ACALINAO 6. BPI, 6** SCRA 6&
FACTS: Petitioner (leana 2acalinao defaulted on the payment of her BP( credit card dues
.here $as a stipulation in a contract that the char"es andKor balance shall earn )7 per month and
additional penalty fee of another )7 per month .he 8e"ional .rial Court reduced the )7
monthly interest to +7 1n appeal of the case, the Court of #ppeals reversed the decision of the
8.C holdin" that petitioner 2acalinao freely availed herself of the credit card facility offered by
respondent Bank of the Philippine (slands to "eneral publicC contracts of adhesion are not invalid
per se Petitioner assailed the appellate court9s decision alle"in" that the interest rate and penalty
char"es are unconscionable and ini&uitous at )<7 per annum
ISSUE: /hether or not the interest rate and penalty char"es are unconscionable and ini&uitous at
)<7 per annum
HELD: .he interest rate and penalty char"es are unconscionable and ini&uitous at )<7 per
annum .he Supreme Court held that the interest rate and penalty char"e of )7 per month or the
)<7 per annum should be reduced to +7 per month or +-7 per annum (n a lon" line of cased
decided by the Supreme Court, it considered the )<7 per annum to be excessive and
unconscionable Citin" #rticle4++5, in exercisin" this po$er to determine $hat is ini&uitous and
unconscionableC courts must consider the circumstances of each case since $hat may be
ini&uitous and unconscionable in one maybe totally =ust and e&uitable in another (n the
instant case, 2acalinao made partial payments to BP( .herefore, the interest rate and penalty
char"e of )7 per month or )<7 per annum should be reduced to +7 per month or +-7 per
annum
BANK OF THE PHILIPPINE ISLANDS 6S IAC, 164 SCRA 6"*
FACTS: #rthur and Vivienne Canlas opened a =oint current account in CB.C no$ Bank of the
Philippine (slands :o$ever, the bank teller erroneously placed the old account number of 2r
Canlas on the ne$ account Conse&uently, the subse&uent deposits made by the spouses Canlas
$ere not reflected in the ne$ account (t $as found out only $hen a check issued by Viviene $as
dishonored due to insufficiency of funds .hus, the spouses Canlas instituted a suit for dama"es
.he bank on the other hand alle"ed that it should not be held liable merely on account of the
inadvertence of its employees
ISSUE: /hether or not the Bank of the Philippine (slands is liable
HELD: .he Supreme Court ruled in the affirmative .here is no merit in petitionerJs ar"ument
that it should not be considered ne"li"ent, much less held liable for dama"es on account of the
inadvertence of its bank employee for #rticle 44,) of the Civil Code only re&uires it to exercise
the dili"ence of a "ood father of family .he bank is not expected to be infallible but it must bear
the blame for not discoverin" the mistake of its teller despite the established procedure re&uirin"
the papers and bank books to pass throu"h a battery of bank personnel $hose duty it is to check
and countercheck them for possible errors #pparently, the officials and employees tasked to do
that did not perform their duties $ith due care
BISHOP OF +ARO 6S DELA PENA, 26 Phil 144
FACTS: (n 4353, 'r #"ustin ?ela Pena deposited in his personal account a sum of money
entrusted to him for the construction of a leper hospital .hereafter, 'ather ?e la PeMa $as
arrested by the military authorities as a political prisoner /hile under detention, 'r ?ela Pea
made an order on said bank in favor of the ;nited States #rmy officer under $hose char"e he
$as then for the sum thus deposited in said bank .he arrest of 'ather ?e la PeMa and the
confiscation of the funds in the bank $ere the result of the claim of the military authorities that
he $as an insur"ent and that the funds thus deposited had been collected by him
for revolutionary purposes .he money $as taken from the bank by the military authorities by
virtue of such order and $as turned over to the Eovernment
ISSUE: /hether or not 'ather de la PeMa is liable for the loss of the money under his trust
HELD: .he Supreme Court ruled in the ne"ative 'ather ?e la PeMaJs liability is determined by
those portions of the Civil Code $hich relate to obli"ations #lthou"h the Civil Code states that
"a person obli"ed to "ive somethin" is also bound to preserve it $ith the dili"ence pertainin" to a
"ood father of a family" (t also provides, follo$in" the principle of the 8oman la$, ma=or casus
est, cui humana infirmitas resistere non potest, that "no one shall be liable for events $hich could
not be foreseen, or $hich havin" been foreseen $ere inevitable, $ith the exception of the cases
expressly mentioned in the la$ or those in $hich the obli"ation so declares"
TRIPLE16 FOOD SER6ICES INC. vs. FILIPINO $ERCHANTS INSURANCE
CO$PAN#, GR. N. 16*!!4, F.3(,'(4 21, 2**!
FACTS: 2ary 6o%#nne ?e #sis dined at petitionerJs Kamayan Restaurant ?e #sis $as usin" a
2itsubishi Ealant Super Saloon 2odel 455* issued by her employer Crispa .extile (nc 1n said
date, ?e #sis availed of the valet parkin" service of petitioner and entrusted her car key to
petitionerJs valet counter #fter$ards, a certain 2adridano, valet attendant, noticed that the car
$as not in its parkin" slot and its key no lon"er in the box $here valet attendants usually keep
the keys of cars entrusted to them .he car $as never recovered .hereafter, Crispa filed a claim
a"ainst its insurer, herein respondent 'ilipino 2erchants (nsurance Company, (nc :avin"
indemnified Crispa for the loss of the sub=ect vehicle, '2(C(, as subro"ee to CrispaJs ri"hts, filed
$ith the 8.C at 2akati City an action for dama"es a"ainst petitioner .riple%V 'ood Services,
(nc Petitioner claimed that the complaint failed to adduce facts to support the alle"ations of
recklessness and ne"li"ence committed in the safekeepin" and custody of the sub=ect vehicle
Besides, $hen ?e #sis availed the free parkin" stab $hich contained a $aiver of petitioner9s
liability in case of loss, she had thereby $aived her ri"hts
ISSUE: /hether or not petitioner .riple%V 'ood Services, (nc is liable for the loss
HELD: .he Supreme Court ruled in the affirmative (n a contract of deposit, a person receives
an ob=ect belon"in" to another $ith the obli"ation of safely keepin" it and returnin" the same #
deposit may be constituted even $ithout any consideration (t is not necessary that the depositary
receives a fee before it becomes obli"ated to keep the item entrusted for safekeepin" and to
return it later to the depositor Petitioner cannot evade liability by ar"uin" that neither a contract
of deposit nor that of insurance, "uaranty or surety for the loss of the car $as constituted $hen
?e #sis availed of its free valet parkin" service
CA AGRO1INDUSTRIAL DE6ELOP$ENT CORP. 6S CA, 201 SCRA 426
FACTS: Petitioner C# #"ro%(ndustrial ?evelopment Corp and the spouses 8amon and Paula
Pu"ao rented a Safety ?eposit Box Security Bank and .rust Company Certificates of title of
parcels of land $ere then stored therein .hereafter, a certain 2rs 2ar"arita 8amos offered to
buy t$o lots from petitioner 2rs 8amos demanded the execution of a deed of sale $hich
necessarily entailed the production of the certificates of title (n vie$ thereof, #"uirre,
accompanied by the Pu"aos, then proceeded to the Bank to open the safety deposit box and "et
the certificates of title :o$ever, $hen opened in the presence of the BankJs representative, the
box yielded no such certificates By virtue of $hich, petitioner filed an action a"ainst the bank
for the loss .he bank, ho$ever, contended that they are not liable for the loss because, aside
from the $aiver si"ned by the petitioner, $hat transpired bet$een them is a contract of lease and
not deposit
ISSUE: /hether or not the contractual relation bet$een a commercial bank and another party in
a contract of rent of a safety deposit box $ith respect to its contents placed by the latter one of
bailor and bailee or one of lessor and lessee
HELD: .he contract for the rent of the safety deposit box is not an ordinary contract of lease as
defined in #rticle 4<-) of the Civil Code :o$ever, the Court do not fully subscribe to its vie$
that the same is a contract of deposit that is to be strictly "overned by the provisions in the Civil
Code on depositC the contract in the case at bar is a special kind of deposit (t cannot be
characterized as an ordinary contract of lease under #rticle 4<-) because the full and absolute
possession and control of the safety deposit box $as not "iven to the =oint renters N the
petitioner and the Pu"aos .he "uard key of the box remained $ith the respondent BankC $ithout
this key, neither of the renters could open the box 1n the other hand, the respondent Bank could
not like$ise open the box $ithout the renterJs key (n this case, the said key had a duplicate
$hich $as made so that both renters could have access to the box
#HT REALT# CORPORATION 6S. CA, GR. N. 126&%*, F.3(,'(4 1&, 2**!
FACTS: 2aurice 2clou"hlin is an #ustralian philanthropist, businessman, and a tourist (n his
various trips from #ustralia "oin" to different countries, one of $hich is the Philippines, he
$ould stay in .ropicana (nn $hich is o$ned by L:. 8ealty Corp #fter series of transactions
$ith the inn as depositary of his belon"in"s, he noticed that his money and several =e$elries
$ould be either reduced or lost :e then decided to file an action a"ainst .ropicana and its inn%
keepers :o$ever, the latter ar"ued that they have no liability $ith re"ard to the loss by virtue of
the undertakin" si"ned by 2clou"hlin Such undertakin" is a $aiver of the inn9s liability in case
of any loss .he 8.C and C# both decided that such undertakin" is null and void as contrary to
the express provisions of the la$ :ence, the petition
ISSUE: /hether or not the sub=ect undertakin" is null and void
HELD: .he court ruled in the affirmative #rt +00) of the Civil Code provides that, the hotel%
keeper cannot free himself from responsibility by postin" notices to the effect that he is not liable
for the articles brou"ht by the "uest #ny stipulation bet$een the hotel%keeper and the "uest
$hereby the responsibility of the former as set forth in #rticles 4553 to +004 is suppressed or
diminished shall be void
E.9OBEL INC. vs. COURT OF APPEALS, GR. N. 11"0"1, $'4 6, 100%
FACT: Private respondent spouses 8aul and >lea Claveria, doin" business under the name
"#"ro Brokers," applied for a loan $ith respondent Consolidated Bank and .rust Corporation
@no$ S1G(?B#NHA to finance the purchase of t$o maritime bar"es and one tu"boat $hich
$ould be used in their molasses business .he loan $as "ranted sub=ect to the condition that
respondent spouses $ill execute a chattel mort"a"e over the three vessels to be ac&uired and that
a continuin" "uarantee be executed by #yala (nternational Philippines, (nc, no$ petitioner >
Oobel, (nc in favor of S1G(?B#NH 8espondent spouses defaulted in the payment of the entire
obli"ation upon maturity :ence, S1G(?B#NH filed a complaint for sum of money $ith a
prayer for a $rit of preliminary attachment a"ainst respondent spouses and petitioner Petitioner
moved for dismissal .he trial court denied the motion to dismiss and re&uired petitioner to file
an ans$er Petitioner assailed the trial court9s order .he appellate court dismissed the petition
ISSUE: /hether or not petitioner > Oobel (nc, under the continuin" "uaranty obli"ated itself to
S1G(?B#NH as a "uarantor or a surety
H.l:: Petitioner under the continuin" "uaranty obli"ated itself to S1G(?B#NH as a surety #
surety is distin"uished from a "uaranty in that a "uarantor is the insurer of the solvency of the
debtor and thus binds himself to pay if the principal is unable to pay, it is the "uarantorJs o$n
separate undertakin", in $hich the principal does not =oin $hile a surety is the insurer of the
debt, and he obli"ates himself to pay if the principal does not pay and is usually bound $ith his
principal by the same instrument, executed at the same time, and on the same consideration .he
contract clearly discloses that petitioner assumed liability to S1G(?B#NH, as a re"ular party to
the undertakin" and obli"ated itself as an ori"inal promissor (t bound itself =ointly and severally
to the obli"ation $ith the respondent spouses .he use of the term ""uarantee" does not ipso
facto mean that the contract is one of "uaranty #uthorities reco"nize that the $ord ""uarantee"
is fre&uently employed in business transactions to describe not the security of the debt but an
intention to be bound by a primary or independent obli"ation .he trial court has observed that
the interpretation of a contract is not limited to the title alone but to the contents and intention of
the parties
INTERNATIONAL FINANCE CORP. vs. I$PERIAL TE;TILE $ILLS INC. GR. N.
16*"24, Nv. 1!, 2**!
FACTS: Petitioner (nternational 'inance Corporation @('CA and respondent Philippine
Polyamide (ndustrial Corporation @PP(CA entered into a loan a"reement $herein ('C extended to
PP(C a loan payable in 4< semi%annual installments $ith interest at the rate of 407 per annum on
the principal amount of the loan advanced and outstandin" from time to time # "uarantee
a"reement $as executed $ith (mperial .extile 2ills, (nc @(.2A, Erand .extile 2anufacturin"
Corporation @ErandtexA and ('C as parties (.2 and Erandtex a"reed to "uarantee PP(C9s
obli"ations under the loan a"reement .here $as a reschedule of payments as re&uested by
PP(C ?espite the reschedulin" of the installment payments, ho$ever, PP(C defaulted :ence,
('C served a $ritten notice of default to PP(C demandin" the latter to pay the outstandin"
principal loan and all its accrued interests ?espite such notice, PP(C failed to pay the loan and
its interests ('C, to"ether $ith ?BP, applied for the extra=udicial foreclosure of mort"a"es on
the real estate, buildin"s, machinery, e&uipment plant and all improvements o$ned by PP(C
('C and ?BP $ere the only bidders durin" the auction sale PP(C failed to pay the remainin"
balance, thus, ('C demanded (.2 and Erandtex, as "uarantors of PP(C, to pay the outstandin"
balance :o$ever, despite the demand made by ('C, the outstandin" balance remained unpaid
Conse&uently, ('C filed a complaint a"ainst PP(C and (.2 for the payment of the outstandin"
balance plus interests and attorney9s fees .he trial court held PP(C liable for the payment of the
outstandin" loan plus interests and attorney9s fees :o$ever, the trial court relieved (.2 of its
obli"ation as "uarantor 1n appeal of the case, the Court of #ppeals reversed the decision of the
trial court .he C#, ho$ever, held that (.29s liability as a "uarantor $ould arise only if and
$hen PP(C could not pay Since PP(C9s inability to comply $ith its obli"ation $as not
sufficiently established, (.2 could not immediately be made to assume the liability :ence, this
petition
Iss,.: /hether or not (.2 is a surety, and thus solidarily liable $ith PP(C for the payment of
the loan
H.l:: (.2 is a surety, and thus solidarily liable $ith PP(C for the payment of the loan #s
#rticle +0-, provides, a suretyship is created $hen a "uarantor binds itself solidarily $ith the
principal obli"or /hile referrin" to (.2 as a "uarantor, the a"reement specifically stated that
the corporation $as D=ointly and severally! liable (t further stated that (.2 $as a primary
obli"or, not a mere surety (.2 thereby brou"ht itself to the level of PP(C and could not be
deemed merely secondarily liable .hose $ords emphasize the nature of their liability, $hich the
la$ characterizes as a suretyship .herefore, (.2 bound itself to be solidarily liable $ith PP(C
for the latter9s obli"ations under the loan a"reement $ith ('C
PHIL. BLOO$ING $ILLS INC. vs. CA., GR. N. 142"%1, O)5. 1!, 2**"
FACTS: Petitioner Philippine Bloomin" 2ills, (nc @PB2A obtained a loan from .raders 8oyal
Bank @.8BA Chin", the Senior Vice%President of PB2, si"ned ?eed of Suretyship in his
personal capacity and not as mere "uarantors but as primary obli"ors PB2 and Chin" filed a
petition for suspension of payments $ith the S>C, and eventually placed under rehabilitation
receivership Conse&uently, .8B dismissed complaint as to PB2 Chin" then alle"ed that the
?eed of Suretyship executed in 45,, could not ans$er for obli"ations not yet in existence at the
time of its execution (t could not ans$er for debts contracted by petitioner PB2 in 4530 and
4534 No accessory contract of suretyship could arise $ithout an existin" principal contract of
loan
Iss,.: /hether or not Chin" is liable for credit obli"ations contracted by Philippine Bloomin"
2ills (nc a"ainst .raders 8oyal Bank before and after the execution of the ?eed of Suretyship
H.l:: Chin" is liable for credit obli"ations contracted by Philippine Bloomin" 2ills (nc a"ainst
.raders 8oyal Bank before and after the execution of the ?eed of Suretyship .his is evident
from the tenor of the deed itself, referrin" to amounts to PB2 may no$ be indebted or may
hereafter become indebted to .raders 8oyal Bank .he la$ expressly allo$s a suretyship for
future debts #rticle +0*) provides that a "uaranty may also be "iven as security for future debts,
the amount of $hich is not yet kno$n, there can be no claim a"ainst the "uarantor until the debt
is li&uidated
ESCANO '-: SILOS vs. ORTIGAS, +(., GR. N. 1!10!", +,-. 20, 2**&
FACTS: Private ?evelopment Corporation of the Philippines @P?CPA entered into a loan
a"reement $ith 'alcon 2inerals, (nc $hereby P?CP a"reed to make available and lend to
'alcon a sum certain 8espondent 8afael 1rti"as, 6r, et al, stockholder officers of 'alcon,
executed an #ssumption of Solidary Giability $hereby they a"reed to assume in their individual
capacity, solidary liability $ith 'alcon for the due and punctual payment of the loan contracted
by 'alcon $ith P?CP .$o separate "uaranties $ere executed to "uarantee the payment of the
same loan by other stockholders and officers of 'alcon, actin" in their personal and individual
capacities 1ne Euaranty $as executed by petitioner Salvador >scaMo, $hile the other by
petitioners 2ario 2 Silos, 8icardo C Silverio, et al .$o years later, an a"reement developed to
cede control of 'alcon to >scaMo, Silos and 6oseph 2 2atti .hus, contracts $ere executed
$hereby 1rti"as, Eeor"e # Scholey, (nductivo and the heirs of then already deceased Eeor"e .
Scholey assi"ned their shares of stock in 'alcon to >scaMo, Silos and 2atti Part of the
consideration that induced the sale of stock $as a desire by 1rti"as, et al, to relieve themselves
of all liability arisin" from their previous =oint and several undertakin"s $ith 'alcon, includin"
those related to the loan $ith P?CP .hus, an ;ndertakin" $as executed by the concerned
parties $ith >scaMo, Silos and 2atti identified in the document as Dsureties,! on one hand, and
1rti"as, (nductivo and the Scholeys as Dobli"ors,! on the other :o$ever, 'alcon subse&uently
defaulted in its payments #fter P?CP foreclosed on the chattel mort"a"e, there remained a
subsistin" deficiency of P*,000,000, $hich 'alcon did not satisfy despite demand (n order to
recover the indebtedness, P?CP filed a complaint for sum of money a"ainst 'alcon, 1rti"as,
>scaMo, Silos, Silverio and (nductivo 1rti"as filed to"ether $ith his ans$er a cross%claim
a"ainst his co%defendants 'alcon, >scaMo and Silos, and also manifested his intent to file a third%
party complaint a"ainst the Scholeys and 2atti .he cross%claim lod"ed a"ainst >scaMo and Silos
$as predicated on the 453+ ;ndertakin", $herein they a"reed to assume the liabilities of 1rti"as
$ith respect to the P?CP loan >scaMo, 1rti"as and Silos each sou"ht to seek a settlement $ith
P?CP .he first to come to terms $ith P?CP $as >scaMo, $ho entered into a compromise
a"reement (n exchan"e, P?CP $aived or assi"ned in favor of >scaMo 4K) of its entire claim in
the complaint a"ainst all of the other defendants in the case .hen 1rti"as entered into his o$n
compromise a"reement $ith P?CP, alle"edly $ithout the kno$led"e of >scaMo, 2atti and Silos
.hereby, 1rti"as a"reed to pay P?CP P4)2 as full satisfaction of the P?CP9s claim a"ainst
1rti"as Silos and P?CP entered into a Partial Compromise #"reement $hereby he a"reed to
pay P*00k in exchan"e for P?CP9s $aiver of its claims a"ainst him (n the meantime, after
havin" settled $ith P?CP, 1rti"as pursued his claims a"ainst >scaMo, Silos and 2atti, on the
basis of the 453+ ;ndertakin" :e initiated a third%party complaint a"ainst 2atti and Silos, $hile
he maintained his cross%claim a"ainst >scaMo 8.C issued the Summary 6ud"ment, orderin"
>scaMo, Silos and 2atti to pay 1rti"as, =ointly and severally, the amount of P4)2, as $ell as
P+0H in attorney9s fees .he trial court ratiocinated that none of the third%party defendants
disputed the 453+ ;ndertakin"
ISSUE: /hether or not petitioners are solidarily liable to respondent 1rti"as
H.l:: Petitioners are not solidarily liable to respondent 1rti"as (n case there is a concurrence of
t$o or more creditors or of t$o or more debtors in one and the same obli"ation, #rticle 4+0, of
the Civil Code states that amon" them, there is a solidary liability only $hen the obli"ation
expressly so states, or $hen the la$ or the nature of the obli"ation re&uires solidarity! #rticle
4+40 supplies further that the indivisibility of an obli"ation does not necessarily "ive rise to
solidarity Nor does solidarity of itself imply indivisibility .hus, the presumption is that the
obli"ation is only =oint (t thus becomes incumbent upon the party alle"in" that the obli"ation is
indeed solidary in character to prove such fact $ith a preponderance of evidence .he
;ndertakin" does not contain any express stipulation that the petitioners a"reed Dto bind
themselves =ointly and severally! in their obli"ations to the 1rti"as "roup, or any such terms to
that effect :ence, such obli"ation established in the ;ndertakin" is presumed only to be =oint
1rti"as, as the party alle"in" that the obli"ation is in fact solidary, bears the burden to overcome
the presumption of =ointness of obli"ations :e has failed to dischar"e such burden .he term
Dsurety! has a specific meanin" under our Civil Code #s provided in #rticle +0-, in a surety
a"reement the surety undertakes to be bound solidarily $ith the principal debtor .hus, a surety
a"reement is an ancillary contract as it presupposes the existence of a principal contract (t
appears that 1rti"as9 ar"ument rests solely on the solidary nature of the obli"ation of the surety
under #rticle+0-, (n tandem $ith the nomenclature Dsureties! accorded to petitioners and 2atti
in the ;ndertakin", ho$ever, this ar"ument can only be viable if the obli"ations established in
the ;ndertakin" do partake of the nature of a suretyship as defined under #rticle +0-, in the first
place .hat clearly is not the case here, not$ithstandin" the use of the nomenclature Dsureties! in
the ;ndertakin"
TUPA9 I6 '-: TUPA9 v. CA '-: BPI, GR. N. 14!!&%, Nv. 1%, 2**!
FACTS: Petitioners 6ose .upaz (V and Petronila .upaz $ere Vice%President for 1perations and
Vice%PresidentK.reasurer, respectively, of >l 1ro >n"raver Corporation >l 1ro Corporation had
a contract $ith the Philippine #rmy to supply the latter $ith survival bolos Petitioners, on
behalf of >l 1ro Corporation, applied $ith respondent Bank of the Philippine (sland for t$o
commercial letters of credit to finance the purchase of the ra$ materials for the survival bolos
.he letters of credit $ere in favor of >l 1ro Corporation9s suppliers, .anchaoco 2anufacturin"
(ncorporated and 2aresco 8ubber and 8etreadin" Corporation 8espondent bank "ranted
petitioners9 application and issued t$o letters of credit Simultaneously, petitioners si"ned trust
receipts in favor of respondent bank 1n September )0, 4534, petitioner 6ose .upaz si"ned, in
his personal capacity, a trust receipt correspondin" to one letter of credit $hile on 1ctober 5,
4534, both petitioners si"ned, in their capacities as officers of >l 1ro Corporation, a trust receipt
correspondin" to the other #fter .anchaoco (ncorporated and 2aresco Corporation delivered
the ra$ materials to >l 1ro Corporation, respondent bank paid the former /hen petitioners did
not comply $ith their undertakin" under the trust receipts after respondent bank9s several
demands, the latter char"ed petitioners $ith estafa under the .rust 8eceipts Ga$ .he trial court
ac&uitted petitioners of estafa on reasonable doubt ho$ever it found petitioners solidarily liable
$ith >l 1ro Corporation for the balance of >l 1ro Corporation9s principal debt under the trust
receipts Petitioners appealed to the Court of #ppeals contendin" that their ac&uittal operates to
extin"uish their civil liability and so they are not personally liable for >l 1ro Corporation9s
debts .he Court of #ppeals affirmed the trial court9s rulin" :ence, this petition
ISSUE: /hether or not petitioners are solidarily liable $ith >l 1ro Corporation
HELD: (n the trust receipt dated 5 1ctober 4534, petitioners si"ned as officers of >l 1ro
Corporation By so si"nin" that trust receipt, petitioners did not bind themselves personally liable
for >l 1ro Corporation9s obli"ation :ence, for the trust receipt dated 5 1ctober 4534,
petitioners are not personally liable for >l 1ro Corporation9s obli"ation 'or the trust receipt
dated )0 September 4534, petitioner 6ose .upaz si"ned alone in his personal capacity, he did not
indicate that he $as si"nin" as >l 1ro Corporation9s Vice%President for 1perations :ence,
petitioner 6ose .upaz bound himself personally liable for >l 1ro Corporation9s debts Not bein"
a party to the trust receipt dated )0 September 4534, petitioner Petronila .upaz is not liable
under such trust receipt