2) "Credit" means any loan, mortgage, deed of trust, advance, or

discount; any conditional sales contract; any contract to sell, or sale

or contract of sale of property or services, either for present or future
delivery, under which part or all of the price is payable subsequent to
the making of such sale or contract; any rental-purchase contract;
any contract or arrangement for the hire, bailment, or leasing of
property; any option, demand, lien, pledge, or other claim against, or
for the delivery of, property or money; any purchase, or other
acquisition of, or any credit upon the security of, any obligation of
claim arising out of any of the foregoing; and any transaction or
series of transactions having a similar purpose or effect.

Section 4. Any creditor shall furnish to each person to whom credit is

extended, prior to the consummation of the transaction, a clear
statement in writing setting forth, to the extent applicable and in
accordance with rules and regulations prescribed by the Board, the
following information:
(1) the cash price or delivered price of the property or service to be
acquired;
(2) the amounts, if any, to be credited as down payment and/or tradein;
(3) the difference between the amounts set forth under clauses (1) and
(2);
(4) the charges, individually itemized, which are paid or to be paid by
such person in connection with the transaction but which are not
incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be
financed expressed as a simple annual rate on the outstanding
unpaid balance of the obligation.

Section 6. (a) Any creditor who in connection with any credit

transaction fails to disclose to any person any information in violation
of this Act or any regulation issued thereunder shall be liable to such
person in the amount of P100 or in an amount equal to twice the
finance charged required by such creditor in connection with such
transaction, whichever is the greater, except that such liability shall
not exceed P2,000 on any credit transaction. Action to recover such
penalty may be brought by such person within one year from the date
of the occurrence of the violation, in any court of competent

jurisdiction. In any action under this subsection in which any person

is entitled to a recovery, the creditor shall be liable for reasonable
attorney's fees and court costs as determined by the court

compliance by the Respondent and his anonymous Financier with the mandatory provisions of
the TRUTH IN LENDING ACT in re: the formal issuance by the Lender to the
Borrower of a FULL DISCLOSURE STATEMENT, containing the amount of the
principal loan, the stipulated interest rate, the stimulated penalties and
surcharges, if any and other covenants related to the agreed loan.
.

It will be noted that REPUBLIC ACT No. 3765, AN ACT TO REQUIRE THE
DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF
CREDIT and otherwise known as the TRUTH IN LENDING ACT, declares it to be
the policy of the State to protect its citizens from a lack of awareness of the true cost
of credit to the user by assuring a full disclosure of such cost with a view of preventing
the uninformed use of credit to the detriment of the national economy. (Sec. 2, RA
3765).
It defines "Creditor" as any person engaged in the business of extending
credit (including any person who as a regular business practice make loans or sells or
rents property or services on a time, credit, or installment basis, either as principal or as
agent) who requires as an incident to the extension of credit, the payment of a finance
charge. (Id.).
Section 4 of the said Act provides that any creditor shall furnish to each person to
whom credit is extended, prior to the consummation of the transaction, a clear
statement in writing setting forth, to the extent applicable and in accordance with rules
and regulations prescribed by the Board, the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in
connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed
as a simple annual rate on the outstanding unpaid balance of the obligation.
The said clear statement in writing is commonly called the FULL DISCLOSURE
STATEMENT.

"(c) PNB partially released to [respondents] on several dates,

the total sum of P1,000,000.00 less the advance interests,
which amount [respondents] used for introducing improvements
on the leased property where the hatchery business was
located.
"(d) During the mid-part of the construction of the improvements, PNB refused to
release the balance of P1,000,000.00 allegedly because [respondents] failed to
comply with the banks requirement that Nelly Bedrejo should execute an

undertaking or a lessors conformity provided in Real Estate and Chattel

Mortgage contract dated August 3, 1989, which states, par. 9.07. It is a condition of
this mortgage that while the obligations remained unpaid, the acquisition by the
lessor of the permanent improvements covered by this Real Estate Mortgage as
provided for in the
"(f) Due to the non-release of the remaining balance of the loan applied
for and approved, the productions-operations of the business were
disrupted causing losses to [respondents], and thereafter, to the
closure of the business.
obligation under the Contract of Loan and should therefore be held liable for the
consequential damages suffered by respondents. The trial court held that PNBs
refusal to release the balance of the loan was unjustified for the following reasons: 1)
the banks partial release of the loan of respondents had estopped it from requiring
them to secure the lessors signature on the Real Estate and Chattel Mortgage
Contract; 2) Nelly Bedrejo, the lessor, had no interest in the property and was not in
any manner connected with
respondents could not reasonably be expected to know that it was petitioners unilateral
intention to suspend the release of theP1,000,000 balance until the lessors conformity to
the Mortgage Contract would have been obtained.
Respondents had complied with all the requirements set forth in the recommendation and
approval sheet forwarded by petitioners main office to the Bacolod branch for
implementation; and the Credit Agreement had been executed thereafter. Naturally,
respondents were led to believe and to expect the full release of their approved loan
accommodation. This belief was bolstered by the initial release of the first P1,000,000
portion of the loan.
appear] any obscurity after such execution, the same should not favor the
party who caused such obscurity. Therefore, such obscurity must be
construed against the party who drew up the contract. Art. 1377 of the Civil
Code applies x x x [even] with greater force [to] this type of contract where the
contract is already prepared by a big concern and [the] other party merely
adheres to it."7 (Citations omitted)
Conditions precedent are not favored. Unless impelled by plain and unambiguous
language or by necessary implication, courts will not construe a stipulation as laden
with such burden, particularly when that stipulation would result in a forfeiture or in
inequitable consequences.
chattel mortgage is made effective against third persons by the process of
registration.
PNB violated the Loan Agreement when it refused to release the P1,000,000 balance.
As regards the partial release of that amount, over which respondents executed three
Promissory Notes, the bank is deemed to have complied with its reciprocal
obligation. The Promissory Notes compelled them to pay that initial amount when it
fell due. Their failure to pay any overdue amortizations under those Promissory
Notes rendered them liable thereunder.

Since PNB failed to release the P1,000,000 balance of the loan, the Real
Estate and Chattel Mortgage Contract became unenforceable to that extent.
Relevantly, we quote this Courts ruling in Central Bank of the Philippines
v. Court of Appeals:1111 139 SCRA 46, October 3, 1985.

"The consideration of the accessory contract of real estate mortgage is the

same as that of the principal contract. For the debtor, the consideration of
his obligation to pay is the existence of a debt. Thus, in the accessory
contract of real estate mortgage, the consideration of the debtor in
furnishing the mortgage is the existence of a valid, voidable, or
unenforceable debt.
xxx

xxx

xxx

"[W]hen there is partial failure of consideration, the mortgage becomes

unenforceable to the extent of such failure. Where the indebtedness
actually owing to the holder of the mortgage is less than the sum named in
the mortgage, the mortgage cannot be enforced for more than the actual
sum due."12