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Republic vs.

Grijaldo 1965

The appellant contends:


(1) That the appellee has no cause of action against the appellant;
- the loans were secured by a chattel mortgage on the standing crops on a land owned by him
and these crops were lost or destroyed through enemy action his obligation to pay the loans
was thereby extinguished. \

NO LEGAL STANDING:
- The appellee has no privity of contract with the appellant. It is claimed that the transaction
between the Taiwan Bank, Ltd. and the appellant, so that the appellee, Republic of the
Philippines, could not legally bring action against the appellant for the enforcement of the
obligation involved in said transaction.

(2) That if the appellee has a cause of action at all, that action had prescribed; and
(3) That the lower court erred in ordering the appellant to pay the amount of P2,377.23.

HELD:
1. It is true that the Bank of Taiwan, Ltd. was the original creditor and the transaction between the
appellant and the Bank of Taiwan was a private contract of loan. However, pursuant to the
Trading with the Enemy Act, as amended, and Executive Order No. 9095 of the United States; and
under Vesting Order No. P-4, dated January 21, 1946, the properties of the Bank of Taiwan, Ltd.,
an entity which was declared to be under the jurisdiction of the enemy country (Japan), were
vested in the United States Government and the Republic of the Philippines, the assets of the
Bank of Taiwan, Ltd. were transferred to and vested in the Republic of the Philippines. The
successive transfer of the rights over the loans in question from the Bank of Taiwan, Ltd. to the
United States Government, and from the United States Government to the government of the
Republic of the Philippines, made the Republic of the Philippines the successor of the rights, title
and interest in said loans, thereby creating a privity of contract between the appellee and the
appellant.

In defining the word "privy" this Court, in a case, said: The word "privy" denotes the idea of
succession ... hence an assignee of a credit, and one subrogated to it, etc. will be privies; in short,
he who by succession is placed in the position of one of those who contracted the judicial relation
and executed the private document and appears to be substituting him in the personal rights and
obligation is a privy (Alpurto vs. Perez, 38 Phil. 785, 790).

The United States of America acting as a belligerent sovereign power seized the assets of the
Bank of Taiwan, Ltd. which belonged to an enemy country. The confiscation of the assets of the
Bank of Taiwan, Ltd. being an involuntary act of war, and sanctioned by international law, the
United States succeeded to the rights and interests of said Bank of Taiwan, Ltd. over the assets of
said bank. As successor in interest in, and transferee of, the property rights of the United States of
America over the loans in question, the Republic of the Philippines had thereby become a privy to
the original contracts of loan between the Bank of Taiwan, Ltd. and the appellant. It follows,
therefore, that the Republic of the Philippines has a legal right to bring the present action against
the appellant Jose Grijaldo.
2. The obligation of the appellant under the five promissory notes was not to deliver a determinate
thing namely, the crops to be harvested from his land, or the value of the crops that would be
harvested from his land. Rather, his obligation was to pay a generic thing the amount of
money representing the total sum of the five loans, with interest.

The transaction between the appellant and the Bank of Taiwan, Ltd. was a series of five contracts
of simple loan of sums of money. The obligation of the appellant under the five promissory notes
evidencing the loans in questions is to pay the value thereof; that is, to deliver a sum of money
a clear case of an obligation to deliver, a generic thing. Article 1263 of the Civil Code provides:

In an obligation to deliver a generic thing, the loss or destruction of anything of the same
kind does not extinguish the obligation.

The chattel mortgage on the crops growing on appellant's land simply stood as a security for the
fulfillment of appellant's obligation covered by the five promissory notes, and the loss of the
crops did not extinguish his obligation to pay, because the account could still be paid from other
sources aside from the mortgaged crops.

3. Under paragraph 4 of Article 1108 of the Civil Code prescription, both acquisitive and extinctive,
does not run against the State. This Court has held that the statute of limitations does not run
against the right of action of the Government of the Philippines. Secondly, the running of the
period of prescription of the action to collect the loan from the appellant was interrupted by the
moratorium laws.

Frias vs. San Diego Sison (2007)

HELD:
A loan always bears interest otherwise it is not a loan, is flawed since a simple loan may be gratuitous or
with a stipulation to pay interest.

The payment of regular interest constitutes the price or cost of the use of money and thus, until the
principal sum due is returned to the creditor, regular interest continues to accrue since the debtor
continues to use such principal amount.[28] It has been held that for a debtor to continue in possession of
the principal of the loan and to continue to use the same after maturity of the loan without payment of
the monetary interest, would constitute unjust enrichment on the part of the debtor at the expense of the
creditor.

Lirag Textile vs. SSS (1987)

Petitioners claim that respondent SSS merely became and still is a preferred stockholder of the petitioner
corporation, the redemption of the shares purchased by said respondent being dependent upon the
financial ability of petitioner corporation. Petitioner corporation, thus, has no obligation to redeem the
preferred stocks.

On the other hand, respondent SSS claims that the Purchase Agreement is a debt instrument, imposing
upon the petitioners the obligation to pay the amount owed, and creating as between them the relation
of creditor and debtor, not that of a stockholder and a corporation.
HELD:
The Purchase Agreement is, indeed, a debt instrument. Its terms and conditions unmistakably show that
the parties intended the repurchase of the preferred shares on the respective scheduled dates to be an
absolute obligation which does not depend upon the financial ability of petitioner corporation. This
absolute obligation on the part of petitioner corporation is made manifest by the fact that a surety was
required to see to it that the obligation is fulfilled in the event of the principal debtor's inability to do so.
The unconditional undertaking of petitioner corporation to redeem the preferred shares at the specified
dates constitutes a debt which is defined "as an obligation to pay money at some fixed future time, or at a
time which becomes definite and fixed by acts of either party and which they expressly or impliedly, agree
to perform in the contract.

If the parties intended it [SSS] to be merely a stockholder of petitioner corporation, it would have been
sufficient that Preferred Certificates Nos. 128 and 139 were issued in its name as the preferred certificates
contained all the rights of a stockholder as well as certain obligations on the part of petitioner
corporation. However, the parties did in fact execute the Purchase Agreement, at the same time that the
petitioner corporation issued its preferred stock to the respondent SSS. The Purchase Agreement serves
to define the rights and obligations of the parties and to establish firmly the liability of petitioners in case
of breach of contract. The Certificates of Preferred Stock serve as additional evidence of the agreement
between the parties, though the precise terms and conditions thereof must be read together with, and
regarded as qualified by the terms and conditions of the Purchase Agreement.

The rights given by the Purchase Agreement to respondent SSS are rights not enjoyed by ordinary
stockholders. This fact could only lead to the conclusion made by the trial court that:

The aforementioned rights specially stipulated for the benefit of the plaintiff [respondent
SSS] suggest eloquently an intention on the part of the plaintiff [respondent SSS] to
facilitate a loan to the defendant corporation upon the latter's request. In order to afford
protection to the plaintiff which otherwise is provided by means of collaterals, as the
plaintiff exacts in its grants of loans in its ordinary transactions of this kind, as it is looked
upon more as a lending institution rather than as an investing agency, the purchase
agreement supplied these protective rights which would otherwise be furnished by
collaterals to the loan. Thus, the membership in the board is to have a watchdog in the
operation of the business of the corporation, so as to insure against mismanagement
which may result in losses not entirely unavoidable since payment for purposes of
redemption as well as the dividends is expressly stipulated to come from profits and/or
surplus. Such a right is never exacted by an ordinary stockholder merely investing in the
corporation.

The Purchase Agreement provided that failure on the part of petitioner to repurchase the preferred shares
on the scheduled due dates renders the entire obligation due and demandable, with petitioner in such
eventuality liable to pay 12% of the then outstanding obligation as liquidated damages. These features of
the Purchase Agreement, taken collectively, clearly show the intent of the parties to be bound therein as
debtor and creditor, and not as corporation and stockholder.

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