4E CIV REV

7/17/2019 4E CIV REV

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CIVIL LAW REVIEW 2 –

4ECase Digest

4E

7/17/2019 4E CIV REV


Civil Law Review 2 – 4E

TABLE OF CONTENTS

CASE TITLE PAGE NO.

AGA, Greg Mari..............................................................................................5

21. TAN VS. VALDEHUEZA.......................................................................................5

22. JARDENIL VS. SOLAS........................................................................................ 5

ANZO, Nilo Jr. M.............................................................................................

23. RADIOWEALTH FINANCE COMPANY vs. SPOUSES VICENTE AND MA.SUMILANG DEL ROSARIO....................................................................................... 6

24. CASA FILIPINA DEVELOPMENT CORPORATION vs. THE DEPUTYEECUTIVE SECRETARY! OFFICE OF THE PRESIDENT! MALACA"ANG!MANILA! AND JOSE VALENZUELA! JR...................................................................7

AR!A"O, Jose#$i%e........................................................................................&

2#. SECURITY BAN$ AND TRUST COMPANY vs. REGIONAL TRIAL COURT OFMA$ATI! BR %1.......................................................................................................... 8

2%. PNB vs. CA........................................................................................................... 9

AR'(ILLO, )*e%a........................................................................................+

2&. THE ROYAL SHIRT FACTORY! INC. vs. CO BON TIC.....................................10

2'. JOSUE SONCUYA vs. JUAN AZARRAGA! ET AL...........................................11

)A(-I-A, Ce/ille Cat$eri%e........................................................................+2

2(. RELUCIO vs. BRILLANTE)GARFIN..................................................................12

3*. STATE INVESTMENT HOUSE! INC. vs. COURT OF APPEALS......................13

)A(-I-A, Ro01el L....................................................................................+4

31. EASTERN SHIPPING LINES! INC. vs. COURT OF APPEALS .........................14

32. CASTELO vs. COURT OF APPEALS................................................................15

)(-RON, !ri%/ess Ma M............................................................................+33. ATLANTIC GULF AND PACIFIC COMPANY OF MANILA! INC.! vs. COURT OFAPPEALS! CARLITO D. CASTILLO! HEIRS OF CRISTETA CASTILLO +,-CORNELIO CASTILLO............................................................................................ 16

34. CRISMINA GARMENTS! INC.! vs. COURT OF APPEALS +,- NORMASIAPNO..................................................................................................................... 18

C(EVA, Ma Zra......................................................................................+3

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3#. PILIPINAS BAN$ vs. CA................................................................................... 19

3%. TIO $HE CHO vs. CA........................................................................................20

C(EGENG, C$rste%Gia%% C...................................................................2+

3&. A.C. ENTERPRISES! INC.! vs. CONSTRUCTION INDUSTRY ARBITRATION

COMMISSION +,- DEE CONSTRUCTION CORPORATION.................................21

3'. PHILIPPINE NATIONAL BAN$! vs.COURT OF APPEALS! CAPITOL CITYDEVELOPMENT BAN$! PHILIPPINE BAN$ OF COMMUNICATIONS! +,- F.ABANTE MAR$ETING.............................................................................................22

DAVID, $eiglaNerie V................................................................................. 26

3(. SENTINEL INSURANCE CO.! INC. vs. CA........................................................23

4*. PHILAM vs. CA.................................................................................................. 25

DEOACIDO, Ja1esMare/7..........................................................................2

41. SANTULAN vs. FULE........................................................................................ 2642. RUIZ vs. CANEBA..............................................................................................27

DIAZ, arl A0ria%......................................................................................... 2&

43. JOVEN vs. VENTURANZA................................................................................28

44. RCBC vs. CA...................................................................................................... 29

DOMINGO, J*lie8A%%e D...............................................................................6

4#. BRIONES vs. CAMMAYO! ET AL......................................................................30

4%. ANGEL JOSE WAREHOUSING CO.! INC. vs. CHELDA ENTERPRISES +,-

DAVID SYJUECO..................................................................................................... 31D()LADO, Jeri7a Jo ................................................................................62

4&. PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES vs. IAC...32

4'. SANCHEZ vs. BUENVIAJE...............................................................................33

G(ERRERO, J*a% !aolo R.............................................................................66

4(. CA AGRO)INDUSTRIAL DEVELOPMENT CORP vs. THE HONORABLECOURT OF APPEALS +,- SECURITY BAN$ AND TRUST COMPANY...............33

#*. ATO$ FINANCE CORPORATION vs. COURT OF APPEALS! SANYUCHEMICAL CORPORATION! DANILO E. ARRIETA! NENITA B. ARRIETA!PABLITO BERMUNDO +,- LEOPOLDO HALILI....................................................34

ILAGAN, ersti% ae L................................................................................65

#1. ONGSIA$O vs. THE WORLD WIDE INSURANCE AND SURETY CO.! INC....35

#2. CITIZENS SURETY AND INSURANCE COMPANY! INC. vs. COURT OFAPPEALS................................................................................................................. 36

LACANO, arell Marie................................................................................ 69

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#3. DURAN vs. IAC.................................................................................................. 37

#4. CABUHAT vs. CA...............................................................................................38

LIMJA!, Mi/$elle "........................................................................................63

##. A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION vs. COURT

OF APPEALS............................................................................................................39

#%. DEVELOPMENT BAN$ OF THE PHILIPPINES vs. COURT OF APPEALS.....40

L(NAR, Lore%a Ler1a M..............................................................................4+

#&. LAO vs. CA.........................................................................................................41

#'. STATEMENT INVESTMENT HOUSE vs. CA.....................................................42

MAG)(:O, De%ise.................................................................................... 46

#(. FLANCIA vs. COURT OF APPEALS.................................................................43

%*. PREMIER DEVELOPMENT BAN$ vs. COURT OF APPEALS.........................45

MAN(EL, Ma;i%e......................................................................................... 4

%1. DELA MERCED vs. GSIS...................................................................................46

%2. NAVARRO vs. LAGUNA DEVELOPMENT BAN$.............................................47

MORELO, Mi/$elle..................................................................................... 4&

%3. URSAL VS. COURT OF APPEALS....................................................................49

%4. RIZAL COMMERCIAL BAN$ING CORPORATION VS. COURT OF APPEALS.................................................................................................................................. 49

M(!A, Ja%elle............................................................................................ 5

%#. RAMIREZ vs. COURT OF APPEALS................................................................50

%%. PRUDENTIAL BAN$ vs. ALVIAR...................................................................... 51

!ADILLA, sa<el Jea%...................................................................................52

%&. UNION BAN$ OF THE PHILIPPINES vs. HON. COURT OF APPEALS ..........52

%'. DAVID MAGLAUE vs. PLANTERS DEVELOPMENT BAN$.........................53

!ANGANI)AN, M*riel Ielai%e ).....................................................................54

%(. NORTHERN MOTORS! INC. vs. COUIA.........................................................54

&*. PNB vs. RBL ENTERPRISES! INC....................................................................55

RECALDE, Al<erto Jr., D............................................................................... 5

&1. PAMECA WOOD TREATMENT PLANT! INC vs. COURT OF APPEALS +,-DBP...........................................................................................................................56

&2. DIZON vs. GABORRO.......................................................................................57

RECENO, !ia Mit=i........................................................................................5&

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&3. BARRETTO vs. VILLANUEVA...........................................................................58

&4. PHILIPPINE SAVINGS BAN$ vs. LANTIN........................................................60

R(-OR, L%0o%........................................................................................... +

&#. A.C. RANSOM LABOR UNION)CCLU vs. NLRC..............................................61

&%. DBP vs. NLRC....................................................................................................63

ACRO, Marielleri==a.................................................................................5

&&. PHILIPPINE NATIONAL BAN$ vs. TERESITA CRUZ! ET.AL. .........................65

&'. DPB vs. SANTOS............................................................................................... 66

AN JOE, Ri=a risti%a E............................................................................9

&(. ONG vs. COURT OF APPEALS.........................................................................67

'*. BANCO FILIPINO vs. NATIONAL LABOR RELATIONS COMMISSION..........68

-AM)AOAN, Joa% Car1el ..........................................................................3

'1. PAJUYO vs. CA.................................................................................................. 69

'2. REPUBLIC vs. SANDIGANBAYAN....................................................................70

-EJANO, $eri%a.......................................................................................... 9+

'3. ADVOCATES FOR TRUTH IN LENDING! INC. vs. BANG$O SENTRALMONETARY BOARD................................................................................................71

'4. PHILIPPINE PHOSPHATE FERTILIZER CORP. vs. $AMALIG RESOURCESINC............................................................................................................................ 72

VALENCIA, C$arlo%Rei%ier O........................................................................96

'#. CITIBAN$ N.A. vs. SPS. LUIS AND CARMELITA CABAMONGAN +,- /0s,s LUIS CABAMONGAN JR. +,- LITO CABAMONGAN..................................73

'%. DURBAN APARTMENTS CORP. vs. PIONEER INSURANCE AND SURETYCORP........................................................................................................................ 74

O(NG, Wesle...........................................................................................95

'&. SPS LADANGA VS ASENETA..........................................................................75

O(NG, Wesle...........................................................................................9

''. LAND BAN$ OF THE PHILIPPINES vs PAGAYATAN......................................76

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AGA, Greg Mari

21. TAN VS. VALDEHUEZAG.R. NO. L) 3'&4#! A565s/ %! 1(&#C+s/! J.

FACTS7 The plaintiff Lucia Tan instituted an action against the defendants Aradoraldehue!a and "ediculoaldehue!a for #a$ declaration of o%nership andreco&er' of possession of the parcel of land descri(ed in the first cause of action of the co)plaint* and #($ consolidation of o%nership of t%o portions of another parcel of #unregistered$ land descri(ed in the second cause of action of the co)plaint*purportedl' sold to the plaintiff in t%o separate deeds of pacto de retro. +n itsdecision* the ,-+ ordered the defendants to pa' the plaintiff the a)ount of 1*200and 300 for the release of )ortgage de(t and guarant'* respecti&el'* %ith legalinterest of 6/ as of August 15* 1966.

ISSUE7 hether or not the ,-+ erred in the i)position of legal interest on thea)ounts su(ect of the euita(le )ortgages

HELD7 es* the i)position is %ithout legal (asis. Article 1956 of the e% ,i&il ,odestates that o interest shall (e due unless it has (een epressl' stipulated in%riting. -urther)ore* the plaintiff did not pra' for such interest her thesis %as aconsolidation of o%nership* %hich %as properl' reected* the contracts (eingeuita(le )ortgages.

22. JARDENIL VS. SOLASG.R. NO. L)4&'&'! J589 24! 1(42M+,! J.

FACTS7 This is an action for foreclosure of )ortgage. The )ortgage deed includes astipulation that the defendant olas %ill pa' the interest of 12 percent on the loan of 2* 400 fro) o&e)(er 8* 1932 to arch 31* 1934. The )ortgagee* plaintiff :ardenil* granted to olas on the sa)e date of eecution of the deed of )ortgage* anetension of one 'ear fro) the date of )aturit' %ithin %hich to )a;e pa')ent*%ithout )a;ing an' )ention of an' interest %hich the )ortgagor should pa' duringthe additional period.

ISSUE7 +s defendant<appellee (ound to pa' the stipulated interest onl' up to the dateof )aturit' as fied in the pro)issor' note* or up to the date pa')ent is effected=

HELD7 >efendant<appellee has clearl' agreed to pa' interest onl' up to the date of )aturit'* or until arch 31* 1934. As the contract is silent as to %hether after thatdate* in the e&ent of non<pa')ent* the de(tor %ould continue to pa' interest* %ecannot in la%* indulge in an' presu)ption as to such interest other%ise* %e %ould(e i)posing upon the de(tor an o(ligation that the parties ha&e not chosen to agreeupon. Article 1755 of the ,i&il ,ode pro&ides that interest shall (e due onl' %hen ithas (een epressl' stipulated.

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ANZO, Nilo Jr. M.

23. RADIOWEALTH FINANCE COMPANY vs. SPOUSES VICENTE AND MA.SUMILANG DEL ROSARIO.G.R. NO. 13'&3(! JULY %! 2***

PANGANIBAN! J.

FACTS7?n arch 2* 1991* pouses icente and aria u)ilang del "osario#herein respondents$* ointl' and se&erall' eecuted* signed and deli&ered in fa&or of "adio%ealth -inance ,o)pan' #herein petitioner$* a ro)issor' ote for 138*948.+t is here(' agreed that if default (e )ade in the pa')ent of an' of the install)entsor late pa')ent charges thereon as and %hen the sa)e (eco)es due and pa'a(leas specified a(o&e* the total principal su) then re)aining unpaid* together %ith theagreed late pa')ent charges thereon* shall at once (eco)e due and pa'a(le%ithout need of notice or de)and. >efendants defaulted on the )onthl' install)ents.>espite repeated de)ands* the' failed to pa' their o(ligations under their . ?n:une 7* 1993* plaintiff filed a ,o)plaint for the collection of a su) of )one' (efore

the "T, anila. >uring the trial* :as)er -a)atico* the credit and collection officer of plaintiff* presented in e&idence the defendants@ chec; pa')ents* the de)andletter* the custo)ers ledger card* another de)and letter and etropolitan Ban;dishonor slips. -a)atico ad)itted that he did not ha&e personal ;no%ledge of thetransaction or the eecution of an' of these pieces of docu)entar' e&idence* %hichhad )erel' (een endorsed to hi).

ISSUE7 hether or not the o(ligation (eca)e due and de)anda(le.

HELD7 es. The act of lea&ing (lan; the due date of the first install)ent did notnecessaril' )ean that the de(tors %ere allo%ed to pa' as and %hen the' could.+f this %as the intention of the parties* the' should ha&e so indicated in the .Co%e&er* it did not reflect an' such intention. The ote epressl' stipulated that thede(t should (e a)orti!ed )onthl' in install)ents of 11*579.00 for t%el&econsecuti&e )onths. hile the specific date on %hich each install)ent %ould (e due%as left (lan;* the ote clearl' pro&ided that each install)ent should (e pa'a(leeach )onth. -urther)ore* it also pro&ided for an acceleration clause and a latepa')ent penalt'* (oth of %hich sho%ed the intention of the parties that theinstall)ents should (e paid at a definite date. Cad the' intended that the de(torscould pa' as and %hen the' could* there %ould ha&e (een no need for these t%oclauses.eril'*theconte)poraneousandsu(seuentacts of the parties )anifest their intention and;no%ledge that the )onthl' install)ents %ould (e due and de)anda(leeach )onth. +n this case* the conclusion that the install)ents had alread' (eca)e

due and de)anda(le is (olstered (' the fact that respondents started pa'inginstall)ents on the * e&en if the chec;s %ere dishonored (' their dra%ee (an;.either (' their a&o%als that the o(ligation had not 'et )atured nor (' their clai)that a period for pa')ent should (e fied (' a court. etitioner has esta(lished notonl' a cause of action against the respondents* (ut also a due andde)anda(leo(ligation. The o(ligation of the respondents had )atured and the' clearl' defaulted%hentheir chec;s (ounced.

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http://sc.judiciary.gov.ph/jurisprudence/2000/july2000/138739.htm#_edn5

http://sc.judiciary.gov.ph/jurisprudence/2000/july2000/138739.htm#_edn5

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24. CASA FILIPINA DEVELOPMENT CORPORATION vs. THE DEPUTYEECUTIVE SECRETARY! OFFICE OF THE PRESIDENT! MALACA"ANG!MANILA! AND JOSE VALENZUELA! JR.

G.R. NO. (%4(4 MAY 2'! 1((2

MEDIALDEA! J.

FACTS7 ri&ate respondent :ose alen!uela* :r. filed a co)plaint against petitioner ,asa -ilipina >e&elop)ent ,orporation (efore the ?ffice of Appeals* Adudicationand Legal Affairs #?AALA$ of the then Cu)an ettle)ents "egulator' ,o))ission#no% Cousing and Land Dse "egulator' Board$ for its failure to eecute and deli&er the deed of sale and transfer certificate of title. Ce alleged therein that he enteredinto a contract to sell %ith petitioner for the purchase of a 120 s. ). lot for a totalpurchase price of 68*400.00 %ith 16*416.00 as do%npa')ent and the (alance of 51*984.00 to (e paid in 12 eual )onthl' install)ents of 4*915.16 %ith 24/interest per annum starting epte)(er 3* 1984 that on ?cto(er 7* 1985* he )adehis full and final pa')ent under ?.". o. 6266 that despite full pa')ent of the lot*

petitioner refused to eecute the necessar' deed of a(solute sale and deli&er thecorresponding transfer certificate of title to hi) that since ?cto(er 1985* he hadoffered to pa' for or rei)(urse petitioner the epenses for the transfer of the title (utthe latter refuses to accept the sa)e and that he %as constrained to hire a la%'er for a fee to protect his interests. -or petitioner@s defense* it contended that pri&aterespondent@s action is pre)ature (ecause of his failure to co)pl' %ith the other conditional reuire)ents of their contract such as pa')ent of transfer epenses* andthat had the latter paid said fees* it %ould ha&e (een &er' )uch %illing to effect thetransfer of the title.

ISSUE7 hether or not the interest rate of 24/ per annu) is &alid.

HELD7 es. The ruling in Reformina v . Tomol * it )ust (e underscored* dealseclusi&el' %ith cases %here da)ages in the for) of interest is due (ut no specificrate has (een pre&iousl' set (' the parties. +n such cases* the legal interest of 12/ per annum )ust (e applied. +n the present case* ho%e&er* the interest rate of 24/ per annum %as )utuall' agreed upon (' petitioner and pri&ate respondent intheir contract to sell E this %as the interest rate i)posed on pri&ate respondent for the pa')ent of the install)ents on the contract price and there is no reason %h' thissa)e interest rate should not (e euall' applied to petitioner %hich is guilt' of &iolating the reciprocal o(ligation. +n Solid Homes Inc . v . Court of Appeals #170,"A 63 F1989G$* a su(di&ision o%ner* in &iolation of their ?ffsetting Agree)ent*incurred dela' in the deli&er' of a house and lot to the supplier of the construction

)aterials. ?n re&ie%* the issue of %hich rate of interest E the 6/ per annum %hich%as then the legal interest or the stipulated interest rate of 12/ E %as raised.

+t is* thus* e&ident that if a particular rate of interest has (een epressl'stipulated (' the parties* that interest* not the legal rate of interest* shall (e applied.

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ARPAFO, Josephine

2#. SECURITY BAN$ AND TRUST COMPANY vs. REGIONAL TRIAL COURT OFMA$ATI! BR %1G.R. NO. 113(2%! APRIL 3*! 1((1

PONENTEFACTS7 ri&ate respondent agtanggolHuse(io eecuted separate pro)issor'notes in fa&or of petitioner ecurit' Ban; and Trust ,o. #BT,$ %ith a stipulatedinterest of 23/ per annu). ?n all of the pro)issor' notes* pri&ate respondent Leilaentura had signed as co<)a;er.

Huse(io failed and refused to settle the (alance pa'a(le and (' reason of %hich a collection case %as filed in court (' petitioner BT,. The court a uorendered a udg)ent in fa&or of petitioner BT, and the dispositi&e portion statesthat the interest due should onl' (e 12/ annu).

ISSUE7 hether or not the 23/ rate of interest per annu) agreed upon (' petitioner (an; and respondents is allo%a(le and not against the Dsur' La%.

HELD7 es. The rate of interest %as agreed upon (' the parties freel'. ignificantl'*respondent did not uestion that rate. +t is not for respondent court a uo to changethe stipulations in the contract %here it is not illegal. -urther)ore* Article 1306 of thee% ,i&il ,ode pro&ides that contracting parties )a' esta(lish such stipulations*clauses* ter)s and conditions as the' )a' dee) con&enient* pro&ided the' are notcontrar' to la%* )orals* good custo)s* pu(lic order* or pu(lic polic'. e find no &alidreason for the respondent court a uo to i)pose a 12/ rate of interest on theprincipal (alance o%ing to petitioner (' respondent in the presence of a &alidstipulation. +n a loan or for(earance of )one'* the interest due should (e thatstipulated in %riting* and in the a(sence thereof* the rate shall (e 12/ per annu).Cence* onl' in the a(sence of a stipulation can the court i)pose the 12/ rate of interest.

The pro)issor' notes %ere signed (' (oth parties &oluntaril'. Therefore*stipulations therein are (inding (et%een the). "espondent Huse(io* li;e%ise* did notuestion an' of the stipulations therein. +n fact* in the ,o))ent filed (' respondentHuse(io to this court* he chose not to uestion the decision and instead epressedhis desire to negotiate %ith the petitioner (an; for ter)s %ithin %hich to settle hiso(ligation.

+ +H ?- TCH -?"HI?+I* the decision of the respondent court a uo*is here(' A--+"H> %ith the ?>+-+,AT+? that the rate of interest that should (ei)posed (e 23/ per annu).

2%. PNB vs. CAG.R. NO. ''''*! APRIL 3*! 1((1PONENTE

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FACTS7 +n :ul' 1982* pri&ate respondent A)(rosio adilla applied for* and %asgranted (' petitioner B* a credit line of 1.8 )illion* secured (' a real estate)ortgage* for a ter) of t%o #2$ 'ears* %ith 18/ interest per annu). ri&aterespondent eecuted in fa&or of the B a ,redit Agree)ent* t%o #2$ pro)issor'notes in the a)ount of 900*000.00 each* and a "eal Hstate ortgage ,ontract.The instru)ents that are in contention are the ro)issor' otes and the "eal Hstateortgage ,ontract %hich unifor)l' authori!ed the B to increase the stipulated18/ interest per annu) J%ithin the li)its allo%ed (' la% at an' ti)e depending on%hate&er polic' it FBG )a' adopt in the future ro&ided* that* the interest rate onthis note shall (e correspondingl' decreased in the e&ent that the applica(le)ai)u) interest rate is reduced (' la% or (' the onetar' Board.K

ri&ate respondent rene%ed his credit line on :ul' 4* 1984 %ith a reuest thatthe increase of the interest rate of )' )ortgage loan (e fro) 18/ to 21/. Breplied a )onth thereafter and said that such reuest cannot (e granted as HistingLoan olicies of the (an; reuires 32/ for loan of )ore than one 'ear. adilla

thereafter reiterated his reuest to %hich B replied that his interest rate has no%increased to 41/ per annu).

adilla protested the increase of his interest rates through another letter toB and li;e ru((ing salt on his %ound* the petitioner infor)ed hi) on ?cto(er 29*1984* that Jthe interest rate on 'our outstanding lineloan is here(' adusted fro)41/ p.a. to 48/ p.a. Left %ith no recourse* pri&ate respindent filed a co)plaintagainst B in the "T, pra'ing that the latter declare the increases in interest rateas illegal* not &alid nor (inding. The "T, of anila ruled in fa&or of B dis)issingthe co)plaint (ecause the increases of interest %ere properl' )ade.

The pri&ate respondent appealed to the ,ourt of Appeals and the ,A

re&ersed the trial court.

ISSUE7 hether the (an;* %ithin the ter) of the loan %hich it granted to the pri&aterespondent* )a' unilaterall' change or increase the interest rate stipulated therein at%ill and as often as it pleased.

HELD7 o. Although ection 2* .>. o. 116 of :anuar' 29* 1973* authori!es theonetar' Board to prescri(e the )ai)u) rate or rates of interest for loans or rene%al thereof and to change such rate or rates %hene&er %arranted (' pre&ailingecono)ic and social conditions* it epressl' pro&ides that Jsuch changes shall not (e)ade oftener than once e&er' t%el&e )onths.K

+n this case* B* o&er the o(ection of the pri&ate respondent* and %ithoutauthorit' fro) the onetar' Board* %ithin a period of onl' four #4$ )onths* increasedthe 18/ interest rate on the pri&ate respondents loan o(ligation three ti)es. Thoseincreases %ere null and &oid* for if the onetar' Board itself %as not authori!ed to)a;e such changes oftener than once a 'ear* e&en less so )a' a (an; %hich issu(ordinate to the Board.

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econdl'* %hile the pri&ate respondent<de(tor did agree that the interest rate)a' (e increased during the life of the contract Jto such increase %ithin the rateallo%ed (' la%* as the Board of >irectors of the ?"TIAIHH )a' prescri(eK or J%ithin the li)its allo%ed (' la%* no la% %as e&er passed in :ul' to o&e)(er 1984increasing the interest rates on loans or rene%als thereof to 32/* 41/ and 48/ #per annu)$* and no docu)ents %ere eecuted and deli&ered (' the de(tor to effectuatethe increases.

-urther)ore* the unilateral action of the B in increasing the interest rate onthe pri&ate respondents loan* &iolated the )utualit' of contracts ordained in Article1308 of the ,i&il ,ode.JA"T. 1308. The contract )ust (ind (oth contracting partiesits &alidit' or co)pliance cannot (e left to the %ill of one of the).K

+n order that o(ligations arising fro) contracts )a' ha&e the force of la%(et%een the parties* there )ust (e )utualit' (et%een the parties (ased on their essential eualit'. A contract containing a condition %hich )a;es its fulfill)entdependent eclusi&el' upon the uncontrolled %ill of one of the contracting parties* is

&oid. +t %ould ha&e in&ested the loan agree)ent %ith the character of a contract of adhesion* %here the parties do not (argain on eual footing* the %ea;er part's #thede(tor$ participation (eing reduced to the alternati&e Jto ta;e it or lea&e itK.

The increases i)posed (' B also contra&ene Art. 1956 of the ,i&il ,ode%hich pro&ides that Jno interest shall (e due unless it has (een epressl' stipulatedin %riting.KThe de(tor herein ne&er agreed in %riting to pa' the interest increases fied (' theB (e'ond 24/ per annu)* hence* he is not (ound to pa' a higher rate thanthat.That an increase in the interest rate fro) 18/ to 48/ %ithin a period of four #4$)onths is ecessi&e* as found (' the ,ourt of Appeals* is indisputa(le.

ARQUILLO, Buena

2&. THE ROYAL SHIRT FACTORY! INC. vs. CO BON TIC

G.R. NO. L)%313! MAY 14! 1(#4MONTEMAYOR! J.

FACTS7The defendant had 9 da's fro) deli&er' of the shoes to )a;e his choice of

the t%o alternati&es* that is to consider the sale of the 350 pairs of shoes closed at

the flat rate of 7 per pair* sales ta included* or* at the epiration of 9 da's to pa' for

the shoes sold at 8 per pair* and to return the re)aining unsold ones to plaintiff. Atthe epiration of the 9 da's stipulated* failed to return the shoes* and actuall' (egan

)a;ing partial pa')ents on account of the purchase price agreed upon.

ISSUE7hether it %as an outright sale as contended (' the plaintiff* or a sale )erel'

on consign)ent.

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HELD7+t %as a straight sale at the rate of 7 per pair of shoes. +t %as e&identl' not

onl' accepted (' the defendant (ut on it he noted do%n in his o%n hand%riting the

different partial pa')ents of 500* 528 and lastl' of the contro&ersial 420 ('

chec;. e o(&iousl' accepted the straight sale to hi) on credit of the %hole 350 pairs

of shoes for 2*450 and )ade partial pa')ents on account thereof. if the sale had

(een on consign)ent* a stipulation as to the period of ti)e for the return of theunsold shoes should ha&e (een )ade (ut e&identl' that had not (een done and

defendant ;ept the shoes unsold )ore or less indefinitel'* (ut gi&ing the sa)e

ecuse that he could not return the) to the plaintiff (ecause he did not ;no% %here

to return the).

2'. JOSUE SONCUYA vs. JUAN AZARRAGA! ET AL.

G.R. N. L)43#&(! JUNE 14! 1(3'DIAZ! J.

FACTS7 B' reason of the proceedings had in case o. 11489 of the ,ourt of -irst

+nstance of anila* entitled Testate Hstate of the >eceased :uan A!arraga '

Ial&e!* the defendants surna)ed A!arraga (eca)e inde(ted to Attorne'

LeodegarioA!arraga* %ho represented the) in said case* for attorne'@s fees. parties

also agree that the parcels of land located in Ba'<ang* e% ashington* ,api!* . +.*

are speciall' )ortgaged and su(ect to the pa')ent of the fees of said attorne' of

the testate estate* %hich fees shall (e fied (' the court* and said attorne' )a' hold

said lands under no o(ligation to pa' an' rent until his fees shall ha&e (een full'

paidM Provided, however * that if* at the end of the period of fi&e 'ears fro) the date of

the appro&al of this proect of partition* said parties shall not ha&e (een a(le to pa' infull the fees of said attorne'* then said parcels of land* os. 81* 82 and 83* located in

Ba'<ang* shall (e definitel' adudicated to said attorne'* r. LeodegarioA!arraga* as

his propert'* in pa')ent of his fees* and all su)s %hich he )a' ha&e recei&ed fro)

ti)e to ti)e fro) the interested parties in these testate proceedings* %ithin the said

period* shall (e returned to said partiesM Provided, further * that in case said

interested parties in the testate proceedings shall (e a(le to pa' in full the fees of the

attorne' for the estate (efore the epiration of said period of fi&e 'ears* then said

parcels of land situated in Ba'<ang shall continue in the possession of said attorne'

for an additional period of three 'ears fro) the date of the last pa')ent in the e&ent

that said attorne' )a' ha&e ;ept li&estoc; in said lands.

A(out nine )onths after the court appro&ed* aid attorne' decided to sell and

did sell to the plaintiff his credit against the defendants for the su) of 2*500 %ith all

the rights inherent therein in accordance %ith the agree)ents and stipulations

appearing in said docu)ent.

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hen the plaintiff (eca)e the creditor of the defendants A!arraga (' &irtue of

the sale and cession %hich Attorne' A!arraga had )ade in his fa&or of the rights

%hich said attorne' had* he allo%ed the defendants an etension of a fe% 'ears o&er

the fi&e 'ears %ith in %hich the' %ould ha&e to pa' hi) his credit* or up to -e(ruar'

16* 1926* (ut %ith the epress condition that the' %ould pa' hi) interest at the rate

of 12 per cent per annu)* fro) August 30* 1924 This ter) %as later etended to April 26* 1926 on the reuest of the defendants.

Aside fro) the a(o&e transactions (et%een the plaintiff and the defendants

A!arraga* one of the latter* :oauin A!arraga* eecuted in fa&or of the for)er* the

deed ;no%n as Hhi(it H of the record and dated ?cto(er 14* 1922* (' %hich he sold

to the plaintiff* for the su) of 4*000* his portion of the inheritance in the testate

estate of the late :uan A!arraga ' Ial&e!* consisting of an undi&ided tract of land.

B' &irtue of the transfer )ade to hi) (' :oauin A!arraga and also of the

ter)s conditions enu)erated in said Hhi(it A* the plaintiff too; possession of

practicall' the %hole land of the defendants A!arraga.

ISSUES71. as the contract entered into ('<the A!arraga (rothers* the defendants

herein* %ith Attorne' LeodegarioA!arraga fro) %ho) the plaintiff deri&ed his right* a

sale %ith pacto de retro* or an assign)ent in pa')ent of a de(t* or %as it an

antichresis parta;ing of the nature of %hat %as ancientl' ;no%n as pactocomisorio*

or a )ortgage* or %as it )erel' a loan %ith real estate securit'=

2. as the contract eecuted (' the defendant :oauin A!arraga* on the one hand*

and the plaintiff* on the other* e)(odied in Hhi(it H* a sale %ith pacto de retro or

si)pl' a loan %ith real estate securit'=

HELD7 1. +t is considered as a antichresis or pactocomisorio E not an assign)ent in

pa')ent of a de(t* or a sale %ith pacto de retro (ecause there is nothing in Hhi(it A

to indicate that such %as the intention of the defendants A!arraga or* at least* that

the' (ound the)sel&es to deli&er the land in uestion to the plaintiff and that the

latter should pa' the) the &alue thereof and (ecause there %as %hat )a' (e

considered the resolutor' condition of fi&e 'ears E %as con&erted into a si)ple loan

(' the decisi&e circu)stance that plaintiff chose to collect thereafter* and the o(ligors

agreed to pa' hi)* 12 per cent annual interest. +t is onl' in contracts of loan* %ith or

%ithout guarant'* that interest )a' (e de)anded.

2. ,onsidering the &arious no&ations %hich* as has (een said* had ta;en place and

had (een etended not onl' to the A!arraga (rothers %ith respect to their o(ligation

of 3*000 or 2*700* (ut also to the defendant :oauin A!arraga as regard his

personal de(t of 4*000. Ce no&ated it on -e(ruar' 16* 1926* considering it fro) the

ti)e on as a si)ple loan* inas)uch as on that date he (egan to charge the said

defendant 12 per cent annual interest %ith the latter@s assent and confir)it'

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BAUTITA, !e"ille !a#herine

2(. RELUCIO vs. BRILLANTE)GARFING.R. NO. &%#1'! JULY 13! 1((*FELICIANO! J.

FACTS7ri&ate respondent Neida B. Brillante<Iarfin filed a co)plaint for specificperfor)ance %ith da)ages against petitioner +rene . "elucio* to co)pel the latter toeecute* in co)pliance %ith the ,ontract to Bu' and ell* a final deed of sale in fa&or of the for)er o&er t%o #2$ residential su(di&ision lots in the ariano illageu(di&ision* aga ,it'. ri&ate respondent alleged that the lots* %hich ha&e a totalcontract price of 10*800.00* ha&e alread' (een paid for* as she had alread' paid200.00 as do%n pa')ent* and had su(seuentl' co)pleted pa')ent of 128 eual)onthl' install)ents of 89.45 each a)ounting to 11*450.00 that as the la% allo%sthe charging of interest onl' as )onetar' interest or as co)pensator' interest* noneof %hich ha&e o(tained in her case* as she had ne&er incurred in dela' in thepa')ent of install)ents due* the stipulated interest of si percent #6/$ per annu) on

the outstanding (alance is null and &oid and that the a)ount of 650.00 representingo&erpa')ent (e returned to her.

etitioner alleged that pri&ate respondent is o(liged to pa' interest on theinstall)ent pa')ents of the unpaid outstanding (alance e&en if paid on their duedates per schedule of pa')ents that pri&ate respondent had actuall' (een inarrears in the a)ount of 4*269.40* representing such interest as of :une 1979*%hich therefore entitled petitioner to cancel the contract in uestion.

ISSUE7hether or not petitioner has the right to rescind the contract for pri&aterespondent@s continued refusal to pa' the )onthl' install)ents on the contract price

HELD7o. endor and &endee are legall' free to stipulate for the pa')ent of either the cash price of a su(di&ision lot or its install)ent price. hould the &endee opt topurchase a su(di&ision lot &ia the install)ent pa')ent s'ste)* he is in effect pa'inginterest on the cash price* %hether the fact and rate of such interest pa')ent isdisclosed in the contract or not. The contract for the purchase and sale of a piece of land on the install)ent pa')ent s'ste) in the case at (ar is not onl' uite la%ful italso reflects a &er' %ide spread usage or custo) in our present da' co))ercial life.>espite pri&ate respondent@s failure to full' pa' the stipulated price of the t%o lots inuestion* petitioner* ho%e&er* could not &alidl' rescind the contract not (eing la%full'entitled to do so. etitioner failed to re(ut pri&ate respondents@ allegations that thefor)er had failed to introduce reuired i)pro&e)ents in the su(di&ision.

3*. STATE INVESTMENT HOUSE! INC. vs. COURT OF APPEALSG.R. NO. (*%&%! JUNE 1(! 1((1FELICIANO! J.

FACTS7"espondent spouses "afael and "efugio Auino pledged certain shares of stoc; to petitioner tate +n&est)ent Couse* +nc. in order to secure a loan of

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120*000.00 designated as Account o. +-<82<0631<AA. rior to the eecution of thepledge* respondent<spouses* as an acco))odation to and together %ith thespouses :ose and arcelina Auino* signed an agree)ent #Account o. +-<82<1379<

AA$ %ith petitioner tate for the latter@s purchase of recei&a(les a)ounting to375*000.00. hen Account o. +-<82<0631<AA fell due* respondent spouses paidthe sa)e partl' %ith their o%n funds and partl' fro) the proceeds of another loan%hich the' o(tained also fro) petitioner tate designated as Account o. +-<82<0904<AA. This ne% loan %as secured (' the sa)e pledge agree)ent eecuted inrelation to Account o. +-<820631<AA. hen the ne% loan )atured* tate de)andedpa')ent. "espondents epressed %illingness to pa'* reuesting that upon pa')ent*the shares of stoc; pledged (e released. etitioner tate denied the reuest on theground that the loan %hich it had etended to the spouses :ose and arcelina

Auino #Account o. +-<82<1379< AA$ had re)ained unpaid.

hen respondent spouses learned that their shares of stoc; pledged %ithtate %ill (e sold at pu(lic auction* the' filed a case alleging that the intendedforeclosure sale %as illegal (ecause fro) the ti)e the o(ligation under Account o.

+-<82<0904<AA (eca)e due* the' had (een a(le and %illing to pa' the sa)e* (utpetitioner had insisted that respondents pa' e&en the loan account of :ose andarcelina Auino %hich had not (een secured (' the pledge.

ISSUE7 hether or not respondent spouses %ere in dela'* if not* %hat should the'ha&e (een held lia(le for in accordance %ith la%

HELD7o. ince respondent Auino spouses %ere held not to ha&e (een in dela'*the' %ere properl' lia(le onl' forM #a$ the principal of the loan or 110*000.00 and #($regular or )onetar' interest in the a)ount of se&enteen percent #17/$ per annu).The' %ere not lia(le for penalt' or co)pensator' interest* fied (' the pro)issor'note in Account o. +-<82<0904<AA at t%o percent #2/$ per )onth or t%ent'<four

#24/$ per annu).

Co%e&er* the fact that the respondent Auino spouses %ere not in default didnot )ean that the'* as a )atter of la%* %ere relie&ed fro) the pa')ent not onl' of penalt' or co)pensator' interest at the rate of t%ent'<four percent #24/$per annu)(ut also of regular or )onetar' interest of se&enteen percent #17/$ per annu). Theregular or )onetar' interest continued to accrue under the ter)s of the rele&antpro)issor' note until actual pa')ent is effected.

BAUTITA, Ro$%el L.

31. EASTERN SHIPPING LINES! INC. vs. COURT OF APPEALSG.R. NO. (&412 JULY 12! 1((4VITUG! J.

FACTS7Hastern hipping Lines FHasternG is a co))on carrier engaged intransportation of goods. +t %as supposed to deli&er goods to the consignee %herein

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the latters goods %as co&ered (' )arine insurance polic' (' ercantile +nsurance,o)pan'* +nc. FercantileG. The goods upon reaching the consignee %ere da)agedand thus clai)ed (enefits fro) ercantile %hich )ade the latter (e su(rogated tothe case at (ar. ercantile filed da)age against Hastern %hich %as granted (' thelo%er court %ith the i)position of 12/ interest. Hastern contends that neither thecontract %as eplicit in i)posing the rate of interest* thus* at )ost* the interest after the udg)ent should ha&e onl' (een 6/.

ISSUE7hether the i)position of 12/ interest (' the lo%er court %as ustified.

HELD7 o. +n deciding the case* the ,ourt laid do%n principle %ith regard to thei)position of interest for the pa')ent of da)ages* to %itM

“When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest dueshould be that which may have been stipulated in writing [Art 19! "##$. Furthermore, the interest due shall itself earn legal interest from the

time it is judiciall demanded!

In the a"sence of stipulation, the rate of interest shall "e #$% per annum to "e computed from default, i!e!, from judicial or e&trajudicial demand under and su"ject to the provisions of Article ##'( of theCivil Code!

)hen an o"ligation, not constituting a loan or for"earance of mone,is "reached, an interest on the amount of damages awarded ma "e imposed at the discretion of the court at the rate of '% per annum! *o interest,however, shall "e adjudged on unli+uidated claims or damages e&cept whenor until the demand can "e esta"lished with reasona"le certaint! Accordingl,where the demand is esta"lished with reasona"le certaint, the interest shall "egin to run from the time the claim is made judiciall or e&trajudiciall Art!

##'(, Civil Code- "ut when such certaint cannot "e so reasona"l esta"lished at the time the demand is made, the interest shall "egin to runonl from the date the judgment of the court is made at which time the+uantification of damages ma "e deemed to have "een reasona"l ascertained-! The actual "ase for the computation of legal interest shall, inan case, "e on the amount finall adjudged!

)hen the judgment of the court awarding a sum of mone "ecomesfinal and e&ecutor, the rate of legal interest, whether the case falls under

paragraph # or paragraph $, a"ove, shall "e #$% per annum from suchfinalit until its satisfaction, this interim period "eing deemed to "e " then an

e+uivalent to a for"earance of credit!.

32. CASTELO vs. COURT OF APPEALSG.R. NO. (%3&2 MAY 22! 1((#FELICIANO! J.

FACTS7etitioner ,astelo* et. al. entered a J>eed of ,onditional aleK of a realpropert' located in Hspana* a)paloc* anila in 1982 %ith pri&ate respondent >ela

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"osa. The latter ga&e an initial pa')ent and the rest to (e paid at a certain period.>ela "osa %as not a(le to pa' such (alance. ,ase %as filed in court and petitioners%on in the lo%er court that rescinded the contract. But the appellate court ruled infa&or of >ela "osa. The )ain issue %hen the case %as ele&ated %ith the high courtis to %hat %as the proper rate of interest to (e i)posed and ho% should it (eco)puted. The ter)s of the contract stated as follo%sM/&&&&&&&&&

"!- The "alance of P#'0,123!22 to "e paid on or "efore 4ecem"er 0#, #(3$ without interest and penalt charges5c!- Should the said "alance 6remain unpaid7 " the 89*499, the 89*4:RShere" agree to give the 89*499 a grace period of SI; '- months or up to<une 02, #(30 to pa said "alance provided that interest at the rate of #$%

per annum shall "e charged and #% penalt charge a month shall "eimposed on the remaining diminishing "alance!.

ISSUE7hether the contract full' states the intention of the parties %ith regard to the

proper co)putation of interest in case of defaulted pa')ents.

HELD7 es. The ,ourt held*/The stipulation in the =4eed of Conditional Sale= re+uiring the

pament of interest is not unlawful! The validit of the contract of conditional sale itself has not "een put to +uestion " private respondent dela Rosa and there is nothing in the record to suggest that the same ma "e contrar tolaw, morals, good custom, pu"lic order or pu"lic polic! Accordingl, thecontractual stipulation must "e regarded as "inding and enforcea"le as thelaw "etween the parties!

; &&

Summari>ing the import of the contractual stipulation of the parties?#- 4uring the period from # <anuar #(30 up to 02 <une #(30, private

respondent vendee dela Rosa was "ound to pa interest at the rate of #$% per annum on the unpaid "alance of P#'0,123!22!

$- Commencing on # <ul #(30, and until full pament, dela Rosawas "ound to pa interest at the rate of #$% per annum plus another #$% per annum or #% penalt charge a month-, or a total of $1% per annum to "e computed on the =remaining diminishing 6unpaid7 "alance!=

BUTRON, Prin"ess Ma& M.

33. ATLANTIC GULF AND PACIFIC COMPANY OF MANILA! INC.! vs. COURTOF APPEALS! CARLITO D. CASTILLO! HEIRS OF CRISTETA CASTILLO +,-CORNELIO CASTILLOG.R. NOS. 114'41)42! AUGUST 23! 1((#REGALADO! J.

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FACTS7 +n 1982* petitioner co)pan' co))enced the construction of a steelfa(rication plant in Bauan* Batangas* necessitating dredging operations at theBatangas Ba' in an area adacent to the real propert' of pri&ate respondents. As anoffshoot of said dredging operations* an action for da)ages against herein petitioner.

ri&ate respondents alleged that during the on<going construction of its steeland fa(rication 'ard* petitioner@s personnel and hea&' euip)ent trespassed into theadacent parcels of land (elonging to pri&ate respondents %ithout their consent.These hea&' euip)ent da)aged (ig portions of pri&ate respondents@ propert'. The'further alleged that as a result* the sea silt and %ater o&erflo%ed and %ere depositedupon their land. ,onseuentl'* the said propert' %hich used to (e agricultural landsprincipall' de&oted to rice production and each a&eraging an annual net har&est of 75 ca&ans* could no longer (e planted %ith pala' as the soil (eca)e infertile* salt'*unproducti&e and unsuita(le for agriculture.

etitioner co)pan' denied all the allegations of pri&ate respondents andcontended that its personnel and euip)ent had neither intruded upon nor occupied

an' portion of pri&ate respondents@ landholdings.

The trial court ruled in fa&or of the pri&ate respondents and ordered petitioner<co)pan' to pa' da)ages. Dpon appeal to the ,ourt of Appeals* the appellate courtaffir)ed the decision %ith )odification.

ISSUE7 hether or not the da)ages a%arded %ere unconsciona(le* unreasona(leand ecessi&e* clearl' not %arranted under Articles 20 and 2176 of the ,i&il ,ode.

HELD7 The e&idence on record indu(ita(l' support the findings of the trial andappellate courts that petitioner co)pan' is lia(le for the destruction of the propert' of herein pri&ate respondents and conseuentl' entitle the latter to an a%ard of the

da)ages pra'ed for. uch conclusions and findings of fact (' the lo%er courts areentitled to great %eight on appeal and %ill not (e distur(ed ecept for strong andcogent reasons* none of %hich* ho%e&er* o(tain in the case at (ar. The fact that theappellate court adopted the findings of the trial court* as in this case* )a;es thesa)e (inding upon the upre)e ,ourt* for the factual findings of said appellate courtare generall' (inding on the latter. -or that )atter the findings of the ,ourt of

Appeals (' itself* and %hich are supported (' su(stantial e&idence* are al)ost(e'ond the po%er of re&ie% (' the upre)e ,ourt.

Co%e&er* this ,ourt finds that respondent ,ourt of Appeals co))itted are&ersi(le error of la% in increasing the a)ount of da)ages a%arded to pri&ate

respondents (' the court a uo.

"espondent appellate court eceeded its urisdiction %hen it )odified the udg)ent of the trial court (' increasing the a%ard of da)ages in fa&or of pri&aterespondents %ho* in the first place* did not interpose an appeal therefro). This (eingthe case* the' are presu)ed to (e satisfied %ith the adudication )ade (' the lo%er court. As to the)* the udg)ent of the court (elo% )a' (e said to ha&e attainedfinalit'.

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34. CRISMINA GARMENTS! INC.! vs. COURT OF APPEALS +,- NORMASIAPNOG.R. NO. 12'&21 MARCH (! 1(((PANGANIBAN! J.

FACTS7 >uring the period fro) -e(ruar' 1979 to April 1979* herein petitioner* %hich%as engaged in the eport of girls@ deni) pants* contracted the ser&ices of therespondent* the sole proprietress of the >@il)ar Iar)ents* for the se%ing of 20*762 pieces of assorted girlss deni)s. The petitioner %as o(liged to pa' in thetotal a)ount of 76*410.00. The respondent se%ed the )aterials and deli&ered thesa)e in good order condition. At first* the respondent %as told that the se%ing of so)e of the pants %as defecti&e. he offered to ta;e deli&er' of the defecti&e pants.Co%e&er* she %as later told (' petitioner@s representati&e that the goods %erealread' good. he %as told to ust return for her chec; of 76*410.00. Co%e&er* thepetitioner failed to pa' her the aforesaid a)ount. This pro)pted her to hire theser&ices of counsel %ho %rote a letter to the petitioner de)anding pa')ent of theaforesaid a)ount %ithin ten #10$ da's fro) receipt thereof. A letter %as sent to

respondents counsel* a&erring* inter alia* that the pairs of eans se%n (' her*nu)(ering 6*164 pairs* %ere defecti&e and that she %as lia(le to the FpetitionerG for the a)ount of 49*925.51 %hich %as the &alue of the da)aged pairs of deni) pantsand de)anded refund of the aforesaid a)ount.

Thereafter* the respondent filed her co)plaint against the petitioner for thecollection of the principal a)ount of 76*410.00. The trial court ruled in fa&or of therespondent. The ,ourt of Appeals affir)ed said decision ecept for the a%ard of attorne's fees %hich %as deleted.

ISSUE7 hether or not it is proper to i)pose interest at the rate of t%el&e percent#12/$ per annu) for an o(ligation that does not in&ol&e a loan or for(earance of )one' in the a(sence of stipulation of the parties.

HELD7 o. The ,ourt sustained petitioner@s contention that the interest rate should(e co)puted at si percent #6/$ per annu).

+n 9astern Shipping @ines, Inc! v! Court of Appeals*the ,ourt ga&e thefollo%ing guidelines for the application of the proper interest ratesM

+. hen an o(ligation* regardless of its source* i.e.* la%* contracts* uasi<contracts*delicts or uasi<delicts is (reached* the contra&enor can (e held lia(le for da)ages.The pro&isions under Title O+++ on >a)ages of the ,i&il ,ode go&ern in

deter)ining the )easure of reco&era(le da)ages.

++. ith regard particularl' to an a%ard of interest in the concept of actual andco)pensator' da)ages* the rate of interest* as %ell as the accrual thereof* isi)posed* as follo%sM

1. hen the o(ligation is (reached* and it consists in the pa')ent of a su) of )one'* i.e.* a loan or for(earance of )one'* the interest due should (e that %hich)a' ha&e (een stipulated in %riting. -urther)ore* the interest due shall itself earnlegal interest fro) the ti)e it is udiciall' de)anded. +n the a(sence of stipulation* the

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rate of interest shall (e 12/ per annu) to (e co)puted fro) default* i.e.* fro) udicial or etraudicial de)and under and su(ect to the pro&isions of Article 1169 of the ,i&il ,ode.

2. hen an o(ligation* not constituting a loan or for(earance of )one'* is(reached* an interest on the a)ount of da)ages a%arded )a' (e i)posed at thediscretion of the court at the rate of 6/ per annu). o interest* ho%e&er* shall (eadudged on unliuidated clai)s or da)ages ecept %hen or until the de)and can(e esta(lished %ith reasona(le certaint'. Accordingl'* %here the de)and isesta(lished %ith reasona(le certaint'* the interest shall (egin to run fro) the ti)e theclai) is )ade udiciall' or etraudiciall' #Art. 1169* ,i&il ,ode$ (ut %hen suchcertaint' cannot (e so reasona(l' esta(lished at the ti)e the de)and is )ade* theinterest shall (egin to run onl' fro) the date the udg)ent of the court is )ade #at%hich ti)e the uantification of da)ages )a' (e dee)ed to ha&e (een reasona(l'ascertained$. The actual (ase for the co)putation of legal interest shall* in an' case*(e . . . the a)ount finall' adudged.

3. hen the udg)ent of the court a%arding a su) of )one' (eco)es finaland eecutor'* the rate of legal interest* %hether the case falls under paragraph 1 or paragraph 2* a(o&e* shall (e 12/ per annu) fro) such finalit' until its satisfaction*this interi) period (eing dee)ed to (e (' then an eui&alent to for(earance of credit.

Because the a)ount due in this case arose fro) a contract for a piece of %or;* not fro) a loan or for(earance of )one'* the legal interest of si percent #6/$per annu) should (e applied. -urther)ore* since the a)ount of the de)and could(e esta(lished %ith certaint' %hen the ,o)plaint %as filed* the si percent #6/$interest should (e co)puted fro) the filing of the said ,o)plaint. But after the

udg)ent (eco)es final and eecutor' until the o(ligation is satisfied* the interest

should (e rec;oned at t%el&e percent #/12$ per 'ear.

!U'(A, Ma& Z&ra

3#. PILIPINAS BAN$ vs. CAG.R. NO. (&'&3! AUGUST 12! 1((3UIASON! J.

FACTS7 "espondent filed a co)plaint against petitioner* alleging #1$ that petitioner and Ireatland "ealt' ,orporation eecuted a >acion en ago* %herein itcon&e'ed to petitioner se&eral parcels of land in consideration of the su) of

7*776*335.69 #2$ that Ireatland assigned 2*300*000.00 out of the totalconsideration of the 4acion en Pago* in fa&or of pri&ate respondent and #3$ thatnot%ithstanding her de)and for pa')ent* petitioner in (ad faith* refused and failed topa' the said a)ount assigned to her.

Dpon appeal* the "T, and the ,A* ordered ilipinas Ban; to pa' her the 2*300*000.00 %ith legal interest. The ,ourt of Appeals stated that the action in&ol&esfor(earance of )one'* as the principal a%ard %as the o&erdue de(t. Appl'ing

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,entral Ban; ,ircular o. 416* the ,ourt of Appeals held that the applica(le rate of interest is 12/ per annu). etitioner argues that the applica(le la% is Article 2209of the ,i&il ,ode* not the ,entral Ban; ,ircular o. 416* said article sa'ing that if theo(ligation consists in the pa')ent of a su) of )one'* and the de(tor incurs in dela'*the inde)nit' for da)ages* there (eing no stipulation to the contrar'* shall (e thepa')ent of the interest agreed upon* and in the a(sence of stipulation* the legalinterest* %hich is si per cent per annu).

ISSUE7 hat is the applica(le rate of interest=

HELD7 .>. o. 116* the onetar' Board of ,entral Ban; issued ,entral Ban;,ircular o. 416* %hich pro&idesM that the rate of interest for the loan* or for(earanceof an' )one'* goods* or credits and the rate allo%ed in udg)ents* in the a(sence of epress contract as to such rate of interest* shall (e t%el&e #12/$ per cent per annu).

,ircular o. 416* fiing the rate of interest at 12/ per annu)* deals %ith #1$

loans #2$ for(earance of an' )one'* goods or credit and #3$ udg)ents. :udg)entsspo;en of and referred to in ,ircular o. 416 are udg)ents in litigation in&ol&ingloans or for(earance of an' )one'* goods or credits.

An' other ;ind of )onetar' udg)ent %hich has nothing to do %ith nor in&ol&ing loans or for(earance of an' )one'* goods or credits does not fall %ithin theco&erage of the said la% for it is not* %ithin the a)(it of the authorit' granted to the,entral Ban;. The a)ount to (e paid %as a portion of the 7*776*335.69 %hichpetitioner %as o(ligated to pa' Ireatland as consideration for the sale of se&eralparcels of land. The a)ount of 2*300*000.00 %as assigned (' Ireatland in fa&or of pri&ate respondent. The said o(ligation therefore arose fro) a contract of purchaseand sale and not fro) a contract of loan or )utuu). Cence* %hat is applica(le is the

rate of 6/ perannu) as pro&ided in Article 2209 of the ,i&il ,ode of the hilippinesand not the rate of 12/ per annu) as pro&ided in ,ircular o. 416

3%. TIO $HE CHO vs. CAG.R. NO. &%1*1)*2! SEPTEMBER2*!1((1FERNAN! C.J

FACTS7 etitioner shipped (ags of i)ported fi sh)eals and insured thesa)e%ith respondent insurance co)pan' Hastern Assurance Puret',orp #HA,?$.>uring transit* the (ags %ere found out to (e da)aged thus rendering the fish)eals

useless. etitioner filed a clai) (efore theHA,? %hich denied the sa)e* pro)ptingthe for)er to sue the latter.

The trial court rendered udg)ent ordering HA,? and -ar Hastern hippingto pa' petitioner solidaril' the su) of unpaid pre)iu)s %ith interest at the legal ratefro) the filing of the co)plaint. The sheriff enforcing the %rit of eecution reportedl'fied the legal rate of interest at t%el&e #12/$. "espondent )o&ed to uash the %ritalleging that the legal interest to (e co)puted should (e si #6/$ per cent per annu) in accordance %ith Article 2209 of the ,i&il ,ode and not t%el&e #12/$ per

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cent as insisted upon (' petitioner@s counsel. The ,A reduced the interest to 6/ per annu).

ISSUE7hat is the applica(le rate of interest=

HELD7 etitioner )aintains that not onl' is it unust and unfair (ut it is also contrar'to the correct interpretation of the fiing of interest rates under ections 243 and 244of the +nsurance ,ode. And since petitioner@s clai)s is (ased on an insurancecontract* then it is the +nsurance ,ode %hich )ust go&ern and not the ,i&il ,ode.

The court stated that the +nsurance ,ode is not pertinent to the instant case.+t applies onl' %hen the court finds an unreasona(le dela' or refusal in the pa')entof the clai)s.

either does ,ircular o. 416 of the ,entral Ban; %hich raised the legal rateof interest fro) si #6/$ to t%el&e #12/$ per cent appl' to the case at (ar as (' thepetitioner. The adusted rate )entioned in the circular refers onl' to loans or

for(earances of )one'* goods or credits and court udg)ents thereon (ut not tocourt udg)ents for da)ages arising fro) inur' to persons and loss of propert'%hich does not in&ol&e a loan.

+n the case of Philippine Ra""it us @ines, Inc! vs! Cru> the ,ourt declaredthat the legal rate of interest is si #6/$ per cent per annu)* and not t%el&e #12/$per cent* %here a udg)ent a%ard is (ased on an action for da)ages for personalinur'* not use or for(earance of )one'* goods or credit. +n the sa)e &ein* the ,ourtheld in BSIS vs! Court of Appeals* that the rates under the Dsur' La% #a)ended ('.>. 116$ are applica(le onl' to interest (' %a' of co)pensation for the use or for(earance of )one'* interest (' %a' of da)ages is go&erned (' Article 2209 of the,i&il ,ode. And in the light of the fact that the contending parties did not allege the

rate of interest stipulated in the insurance contract* the legal interest %as properl'pegged (' the Appellate ,ourt at si #6/$ per cent.

!U)'G*'NG, !hr&s#enGiann !.

3&. A.C. ENTERPRISES! INC.! vs. CONSTRUCTION INDUSTRYARBITRATION COMMISSION +,- DEE CONSTRUCTION CORPORATIONG.R. NO. 1*1444 MAY (! 1((#UIASON! J.

FACTS7 ri&ate respondent in its econd artial otion for "econsideration insists

that it is entitled to interest at the rate of 12/ per annum on the )onetar' a%ardgi&en the) (' the ,onstruction +ndustr' Ar(itration ,o))ission #,+A,$. +t contends

that under Hecuti&e ?rder o. 1008 dated -e(ruar' 4* 1985 and the "ules of

rocedure Io&erning ,onstruction Ar(itration* ar(itral a%ards are final and

inappeala(le and pursuant to our ruling in Hastern hipping Lines* +nc. &. ,ourt of

Appeals* 234 ,"A 78 #1994$* )onetar' a%ards in all udg)ents that (eca)e final

and eecutor'* regardless of the nature of the o(ligation* shall (ear legal interest of

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12/ per annum. The o(ligation that %as (reached in the ar(itration case at (ench

%as not (ased on a loan or for(earance of )one'* and therefore %as not co&ered ('

,entral Ban; ,ircular o. 416.

+n Reformina v! Tomol, <r!* 139 ,"A 260 #1985$* the upre)e ,ourt )ade it

clear that the a%ard of legal interest at 12/ per annum under said ,entral Ban;,ircular shall (e adudged onl' in cases in&ol&ing the loan or for(earance of )one'.

Co%e&er* in 9astern Shipping @ines, Inc .* %e held that %hen the udg)ent a%arding

a su) of )one' (eco)es final and eecutor'* the )onetar' a%ard shall earn

interest at 12/ per annum fro) the date of such finalit' until its satisfaction*

regardless of %hether the case in&ol&es a loan or for(earance of )one'. The reason

is that this interi) period is dee)ed to (e (' then eui&alent to a for(earance of

credit.

ISSUE7hether or not legal interest of 12/ per annu) shall set in fro) the )o)ent

a udg)ent has (eco)e Jfinal and inappeala(leK

HELDM o. +t appears that pri&ate respondent euated* and %rongl' at that* the ter)

final and inappeala(le as used in H.?. o. 1008 and the "ules of rocedure

Io&erning ,onstruction Ar(itration %ith the ter) final and eecutor' as used

in 9astern Shipping @ines, Inc . A final and inappeala(le udg)ent is not the sa)e

as a final and eecutor' one. The for)er (eco)es eecutor' onl' as in the case of

an a%ard (' the ,+A, after the lapse of 30 da's fro) receipt of notice thereof and

no petition for re&ie% to the upre)e ,ourt is )ade #"ules of rocedure Io&erning

,onstruction Ar(itration* Art. O+* ec. 1$.The ,+A, a%ard did not (eco)e final and

eecutor' until after ser&ice of a cop' of the "esolution dated April 8* 1992 of this

,ourt* den'ing the )otion for reconsideration.

3'. PHILIPPINE NATIONAL BAN$! vs.COURT OF APPEALS! CAPITOL CITYDEVELOPMENT BAN$! PHILIPPINE BAN$ OF COMMUNICATIONS! +,- F.ABANTE MAR$ETINGG.R. NO. 1*&#*' APRIL 2#! 1((%$APUNAN! J.

FACTSM A chec; %as issued (' the inistr' of Hducation and ,ulture pa'a(le to -.

A(ante ar;eting. This chec; %as dra%n against hilippine ational Ban;. -.

A(ante* a client of ,apitol ,it' >e&elop)ent Ban; #,apitol$* deposited theuestioned chec; in its sa&ings account %ith said (an;. +n turn* ,apitol deposited the

sa)e in its account %ith the hilippine Ban; of ,o))unications #B,o)$ %hich* in

turn* sent the chec; to petitioner for clearing. etitioner cleared the chec; as good

and* thereafter* B,o) credited ,apitol@s account for the a)ount stated in the

chec;.

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Co%e&er* on ?cto(er 19* 1981* petitioner returned the chec; to B,o) and

de(ited B,o)@s account for the a)ount co&ered (' the chec;* the reason (eing

that there %as a )aterial alteration of the chec; nu)(er. B,o) then proceeded

to de(it the account of ,apitol for the sa)e a)ount* and su(seuentl'* sent the

chec; (ac; to petitioner. etitioner* ho%e&er* returned the chec; to B,o). ,apitol

could not* in turn* de(it -. A(ante ar;eting@s account since the latter had alread'%ithdra%n the a)ount. ,apitol de)anded the re<crediting of the a)ount. B,o)

follo%ed suit fro) petitioner. The parties de)anded the re<crediting of the a)ount.

ince the de)ands of ,apitol %ere not heeded* it filed a ci&il suit %ith the "egional

Trial ,ourt of anila against B,o) %hich* in turn* filed a third<part' co)plaint

against petitioner for rei)(urse)entinde)nit' %ith respect to the clai)s of ,apitol.

etitioner* on its part* filed a fourth<part' co)plaint against -. A(ante ar;eting.

"egional Trial ,ourt ordered B,o) to re<credit or rei)(urse plaintiff ,apitol

,it' >e&elop)ent Ban; the a)ount of 97*650.00* plus interest of 12 percent and

ordered to pa' ,apitol ,it' >e&elop)ent Ban; attorne'@s fees in the a)ount of TenThousand #10*000.00$ esos (ut B,o) is entitled to rei)(urse)entinde)nit'

fro) B and hilippine ational Ban; to (e* in turn rei)(ursed or inde)nified ('

-. A(ante ar;eting for the sa)e a)ount.

,ourt of Appeals )odified (' ee)pting B,o) fro) lia(ilit' to plaintiff<

appellee for attorne'@s fees and ordering B to honor the chec; for 97*650.00*

%ith interest as declared (' the trial court* and pa' plaintiff<appellee attorne'@s fees

of 10*000.00. etitioner appealed.

ISSUEM hether or not the a%ard of attorne'@s fees is proper.

HELDM o. The a)ount of 10*000.00 as attorne'@s fees %as deleted. The trial court

and the ,ourt of Appeals failed to eplicitl' state the rationale for the said a%ard. +n

Consolidated an D Trust Corporation Solid"an- v . Court of Appeals the upre)e

,ourt ruled thatM the a%ard of attorne'@s fees lies %ithin the discretion of the court

and depends upon the circu)stances of each case. Co%e&er* the discretion of the

court to a%ard attorne'@s fees under Article 2208 of the ,i&il ,ode of the hilippines

de)ands factual* legal and euita(le ustification* %ithout %hich the a%ard is a

conclusion %ithout a pre)ise and i)properl' left to speculation and conecture. +t

(eco)es a &iolation of the proscription against the i)position of a penalt' on the

right to litigate. The reason for the a%ard )ust (e stated in the tet of the court@sdecision. +f it is stated onl' in the dispositi&e portion of the decision* the sa)e shall

(e disallo%ed. As to the a%ard of attorne'@s fees (eing an eception rather than the

rule* it is necessar' for the court to )a;e findings of fact and la% that %ould (ring the

case %ithin the eception and ustif' the grant of the a%ard.

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+A(I+, heiglaNerie (.

3(. SENTINEL INSURANCE CO.! INC. vs. CAG.R. NO. L)#24'2! FEBRUARY 23! 1((*REGALADO! J.

FACTS7 etitioner entinel +nsurance ,o.* +nc.* %as the suret' in a contract of suret'ship entered into %ith e)esioA!cueta* r.* doing (usiness under @ala'anTrading. Both of the) (ound the)sel&es* @ointl' and se&erall'* to full' andreligiousl' guarantee the co)pliance %ith the ter)s and stipulations of the credit linegranted (' pri&ate respondent "ose +ndustries* +nc.* in fa&or of A!cueta* in thea)ount of 180*00.00. Bet%een o&e)(er 23 to >ece)(er 23* 1974* A!cueta)ade &arious purchases of tires* (atteries and tire tu(es fro) the pri&ate respondent(ut failed to pa'* pro)pting the latter to de)and pa')ent (ut (ecause A!cueta failedto settle his accounts* the case %as referred to the +nsurance ,o))issioner %hoin&ited the attention of the petitioner on the )atter and the latter cancelled theuret'ship Agree)ent on a' 13* 1975 %ith due notice to the pri&ate respondent.

ean%hile* pri&ate respondent filed %ith the a;ati ,-+ a co)plaint for collection of su) of )one' against petitioner and A!cueta.

The ,-+ ruled in fa&or of the respondent and ordered the petitioner to pa'interest on the principal o(ligation at the rate of 14/ per annu) at the rate of 2/e&er' 45 da's co))encing fro) April 30* 1975 until the a)ount is full' paid.

The petitioner filed a )otion for clarification of the udg)ent (ecause it %ouldappear that aside fro) the 14/ interest i)posed on the principal o(ligation* anadditional 2/ e&er' 45 da's corresponding to the additional penalt' has (eeni)posed against the petitioner %hich i)position %ould (e usurious.

The udge denied the )otion on the theor' that the udg)ent* ha&ing (eco)efinal and eecutor'* can no longer (e a)ended or corrected.

The petitioner then filed a petition %ith the ,A. The ,A granted the petition*stating that courts are e)po%ered* e&en after decisions ha&e (eco)e final* tocorrect clerical errors or )ista;es in the decisions.

Cence* the present petition.

ISSUE7 hether or not the i)position of interest is proper.

HELD7 o. The ,A did not err in ordering the clarification of the decision of the trialcourt (' a)ending the uestioned part of its dispositi&e portion to include the phraseda)age dues to )odif' the stated rate of 2/* re)o&ing an' )isconception that it is(eing i)posed as interest.

To clarif' an a)(iguit' or correct a clerical error in the udg)ent* the court)a' resort to the pleadings filed (' the parties* the findings of fact and theconclusions of la% epressed in the tet or (od' of the decision.

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+ndeed* this %as %hat the ,A did in resol&ing the original petition. +t ea)inedthe co)plaint filed against the petitioner and noted that to order defendant to pa'interest at 14 per centu) and damage dues at the rate of 2/ e&er' 45 da'sco))encing fro) April 30* 1975 up to the ti)e the full a)ount is full' paid.

The state)ent that the i)position of 2/ interest e&er' 45 da's co))encing

fro) April 30* 1975 on top of the 14/ per annu) #as %ould (e the i)pression fro) asuperficial reading of the dispositi&e portion of the trial court@s decision$ %ould (eusurious is a sound o(ser&ation. +t should* ho%e&er* (e stressed that sucho(ser&ation %as on the theoretical assu)ption that the rate of 2/ is (eing i)posedas interest, not as damage dues %hich %as the intend)ent of the trial court.

,ertainl'* the da)age dues in this case do not include and are not included inthe co)putation of interest as the t%o are of different categories and are distinctclai)s %hich )a' (e de)anded separatel'.hile interest for)s part of theconsideration of the contract itself* da)age dues #penalties* and so forth$ are usuall')ade pa'a(le onl' in case of default or non<perfor)ance of the contract.

4*. PHILAM vs. CAG.R. NO. L)4&1'*! MAY 1(! 1('*ABAD SANTOS! J.

FACTS7 The respondent filed a ,i&il ,ase against the petitioner. The ,-+ orderedthe petitioner to pa' ,oncordia a&alta the a)ount of 75*000.00 %ith legal interestand attorne's fees.

The petitioner appealed the decision to the ,A. The ,A affir)ed the decisionof the lo%er court. Accordingl'* the petitioner paid %hat %as ordered.The petitioner %as then ad&ised (' the respondent and her counsel that the pa')ent did not satisf'

the udg)ent (ecause a co)pound interest or an additional su) of 10*375.77 )ust(e paid.

The petitioner refused to pa' the additional su). The respondent secured a%rit of eecution for the sa)e %hich the petitoner sought to uash. +n resol&ing theuestion* the respondent udge issued an order in fa&or of the respondent* issuing a%rit of eecution.

Cence* this petition.

ISSUE7 hether or not the petitioner is o(ligated to pa' co)pound interest underthe udg)ent.

HELD7 o. The udg)ent ordered the pa')ent of si)ple legal interest onl'. +t saidnothing a(out the pa')ent of co)pound interest. Accordingl'* %hen the respondent

udge ordered the pa')ent of co)pound interest he %ent (e'ond the confines of hiso%n udg)ent %hich had (een affir)ed (' the ,ourt of Appeals and %hich had(eco)e final. -unda)ental is the rule that eecution )ust confor) to that ordainedor decreed in the dispositi&e part of the decision. Li;e%ise* a court cannot* ecept for clerical errors or o)issions* a)end a udg)ent that has (eco)e final.

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+'OA!I+O, Ja%esMare"

41. SANTULAN vs. FULE

G.R. NO. L)#(%%4 DECEMBER 2%! 1('4

AUINO!J.

FACTS7 This case is a(out the collection of legal interest on the su) of 30*000 as

the &alue of i)pro&e)ents on a foreshore land* %hich interest %as not included in

this ,ourt@s decision of >ece)(er 15* 1977 in Santulan vs! 9&ecutive Secretar, L<

28021* 80 ,"A 548.

+n that decision this ,ourt affir)ed the order of the Dndersecretar' of

Agriculture and atural "esources dated >ece)(er 14* 1954 %hich ga&e due

course to the lease application of :ulian antulan pro&ided that he rei)(ursed

Antonio Lusin the appraised &alue of the eisting i)pro&e)ents #pp. 574<5* 80

,"A$.

hen the case %as re)anded to the trial court* :udge -ule in his order of

epte)(er 2* 1981 directed the heirs of antulan to rei)(urse the heirs of Lusin the

su) of 30*000 as the &alue of the i)pro&e)ents =with legal interest= from

#(EE until paid. Ce affir)ed said order in his order of :anuar' 13* 1982. antulan@s

heirs appealed under "epu(lic Act o. 5440 fro) the order i)posing 6/ legal

interest.

ISSUE7 ? the i)position of legal interest (' the trial court %hen the fruits ha&e

(een gathered (' the possessor and it %as not agreed upon (' the parties %as

correct=

HELD7 e hold that the order is de&oid of legal (asis. +t is o(&iousl' not sanctioned

(' article 2209 of the ,i&il ,ode %hich pro&ides that if the o(ligation consists in the

pa')ent of a su) of )one'* and the de(tor incurs in dela'* the inde)nit' for

da)ages* there (eing no stipulation to the contrar'* shall (e the pa')ent of the

interest agreed upon* and in the a(sence of stipulation* the legal interest* %hich is si

percent per annum!

antulan@s o(ligation to rei)(urse Lusin the &alue of his i)pro&e)ents %as

intended to a&oid unust enrich)ent. +nterest %as not de)anded (' Lusin %hen thecase %as pending in the ad)inistrati&e agencies and in the courts. This ,ourt@s final

udg)ent* %hich is the la% of the case* did not pro&ide for interest. There is no

reason for the trial court to add interest to the udg)ent.

The eaction of interest is not onl' illegal. +t is also )anifestl' unust under

the facts of this protracted contro&ers'. Lusin and his heirs ha&e recei&ed the fruits of

the disputed land since the' ha&e (een in possession thereof. As noted in Trillana

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vs! anansala, 96 hil. 865* no interest is to (e satisfied (ecause the fruits gathered

(' the possessor are considered as interest.

42. RUIZ vs. CANEBA

G.R. NO. '4''4! DECEMBER 3! 1((*.

PARAS! J.

FACTS7ri&ate respondents Nenaidaangalang and Adolfo ,ru! are co))on<la%spouses and o%ners in co))on of a 2<store' house and lots descri(ed in Transfer ,ertificate of Title #T,T$ o. 56053 of the "egistr' of >eeds of ,aloocan ,it' (utregistered onl' in the na)e of Nenaidaangalang. etitioners* the spouses Hulalio. "ui! and +lu)inada . "ui! are the lessees of >oor o. 1 of the aforesaid t%ostore' house di&ided into 2 doors* for a )onthl' rental of 650.00.Hulalio "ui! andNenaidaangalang eecuted an agree)ent %here it %as pro&ided that "ui! %ill (u'the house and lot for the su) of 175*000.00to (e paid as follo%sM +OT -+HTC?DA> H? #65*000.00$ do%n pa')ent and %ill assu)e the a)ount of (alance of TC+"T ?H TC?DA> -+H CD>"H> H? #31*500.00$ %iththe BAQ ?- TCH C+L++H +LA>* arulas Branch* etro anila that after pa')ent of said (alance )ortgage* a (alance of se&ent' eight thousand fi&ehundred pesos #78*500.00$ %ill (e pa'a(le on or (efore >ece)(er 31* 1983 )'failure to co)pl' %ith the a(o&e conditions of pa')ent* the said propert' a(o&edescri(ed %ill (e open for sale and all partial pa')ents %ill (e refunded (' issNenaida . angalang.There is disagree)ent ho%e&er as to the a)ount paid toangalang on the (alance of 78*500.00. angalang )aintains that she recei&edonl' 33*793.00 %hile "ui! insists that the' paid 53*073.00.

Thus* the "ui! spouses filed a co)plaint on April 24* 1984 for specificperfor)ance %ith da)ages against Nenaidaangalang and Adolfo ,ru!.+n an'e&ent* the trial court found that the "ui! spouses failed to pa' in full the (alance of 78*500.00 on or (efore >ece)(er 31* 1983 as stipulated and e&en on the etendedperiod of arch 22* 1984. Cence* the "ui! spouses are not entitled to their pra'er for specific perfor)ance %ith da)ages. +n the sa)e (reath* the trial court decided that itis onl' fair that Nenaidaangalang returnrefund to the "ui! spouses the pa')ent)ade (' the latter. ?n appeal to the upre)e ,ourt the "ui!s clai) for pa')ent of interest as angalang %as not a(le to pa' the refund after the decision %as rendered(' the trial court after t%o failed )otion for eecutions %ere granted at the rate of 24/ interest co)pounded annuall'* the alleged legal rate under ,entral Ban;,ircular.

ISSUE7 ? The ,lai) for interest is %ell founded despite not (eing ordered (' the

trial court in its udg)ent=

HELD7 +t has (een held in the case of Santulan v! Fule, #00 SCRA G'$ #(31- that

%here the court udg)ent %hich did not pro&ide for interest is alread' final* there is

no reason to add interest in the udg)ent. +nterest %as not de)anded (' the "ui!es

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%hen the case %as pending (efore the lo%er court* hence* there is no reason for this

,ourt to grant such clai). As ruled (' this ,ourt* such clai) is groundless since the

decision and orders sought to (e enforced do not direct the pa')ent of interest and

ha&e long (eco)e final #Canoni>ado v! :rdoe>enite>, #1( SCRA EEE 6#(3G7-!

+IAZ, *arl A$rian

43. JOVEN vs. VENTURANZAGR NO. L)2%*#'! OCTOBER 2'! 1(&&MA$ASIAR! J.

FACTSM ?riginal plaintiff -eli ,ortes* su(stituted (' A)paro:o&en de ,ortes uponthe death of the for)er* and plaintiff oel ,ortes* filed an action for the foreclosure of real estate )ortgage against defendants enturan!a and ?ledan.

laintiff -eli ,ortes* original o%ner of nine parcels of land and plaintiff oel,ortes* o%ner of 24 parcels of land* sold their properties to defendants %ho agreedto pa' ointl' and se&erall' the total su) of 716*573.90 %ith interest of 6/ per annu) under a >eed of ale %ith urchase one' ortgage. As securit'* thedefendants )ortgaged the 33 parcels of land registered in the "egister of >eedsBulacan. Co%e&er* %hen the o(ligation on the )ortgage fell due on >ece)(er 1*1962* defendants failed and refused to pa' despite de)ands for pa')ent. -or their defense* defendants enturan!a alleged that the (alance %as not 'et due andde)anda(le and that such o(ligation to pa' the (alance %as conditioned upon thesale of their haciendas in ,aga'an de ?ro and ,a)arines ur (' epropriation. ?nthe other hand* defendants ?ledan alleged that the cause of action against the) has(een etinguished and therefore did not (eco)e due and de)anda(le (' reason of

no&ation of the original agree)ent %hich affected the )aterial changes in the)anner and condition of ti)e of pa')ent of the (alance of the )ortgage o(ligation.

Also* (' %a' of cross<clai)* defendants ?ledan alleged that the' entered into anagree)ent %ith their co<defendants enturan!a and sold all their shares* o%nershipand interest in the propert' su(ects of the deed of sale %ith purchase )one')ortgage.

ISSUEM hether or not plaintiffs are entitled to an action to foreclose the real estate)ortgage constituted on the 33 parcels of land for failure of defendants to secure thepa')ent of the (alance %hen the o(ligation (eca)e due and de)anda(le.

HELDM es. ?n the defendants enturan!as defense that the co)plaint %as filedpre)aturel'* there is no dispute that plaintiffs filed their co)plaint on >ece)(er 12*1962 that under the ter) of the contract* the defendants %ere gi&en until :anuar' 1*1962 %ithin %hich to pa' their o(ligation and that :anuar' 1* 1962 had passed%ithout the defendants ha&ing paid to the plaintiffs the su) of 576*573.90 and thecorresponding interest thereon not%ithstanding repeated de)ands for pa')ent.

Therefore* %hen plaintiffs filed the co)plaint on >ece)(er 12* 1962* theeffects of default as against the defendants had alread' arisen. Besides* no less

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than the defendants enturan!asthe)sel&es ad)itted in their (rief that the' %eredela'ed in the pa')ent of the (alance of their o(ligation to the plaintiffs. ?ne cannotad)it (eing dela'ed in the pa')ent of his o(ligation unless he (elie&es that hiso(ligation is alread' due and de)anda(le. tated other%ise* there is no dela' if theo(ligation is not 'et due.

The alleged cause of their default in pa'ing the (alance of the price* for failure to recei&e the price for the purchase of their haciendas in ,aga'an de ?roand ,a)airnes ur* is neither force )aeure nor an act of Iod. Cence* their failureto pa' is not ustified.

As to the defense of defendants ?ledan* the agree)ent relied upon ('defendants does not sho% that plaintiffs inter&ened in* )uch less ga&e their consentto* the su(stitution. The plaintiffs denied ha&ing consented to the transfer of rightsfro) the ?ledans to the enturan!as alone. Thus* defendants ?ledan failed toesta(lish ani)us no&andi* %hether epressed or i)plied* on the part of the creditors*the ,orteses* plaintiffs. Thus* the defendants enturan!as and ?ledans are ordered

to pa' ointl' and se&erall' plaintiffs<appellees.

44. RCBC vs. CAGR NOS L)12''33! 12''34! 12''%%! APRIL 2*! 1(('MELO! J.

FACTSM "espondent Io'uP ons* +nc. #I?D$ applied for credit facilities andacco))odations %ith petitioner ",B, at its Binondo Branch %hich a)ounted to117. As securit' for its credit facilities %ith ",B,* I?D eecuted to% real estate)ortgages and t%o chattel )ortgages in fa&or of ",B,. I?D o(tained in its na)ea total of ten insurance policies fro) ala'an +nsurance ,o)pan'* +nc. #+,?$. +n

-e(ruar' 1992* Alchester +nsurance Agenc'* +nc* the insurance agent %here I?Do(tained the ala'an insurance policies* issued nine endorse)ents in fa&or of ",B,* see)ingl' upon instructions of I?D.

?n April 27* 1992* one of I?Ds factor' (uildings in alen!uela %as gutted(' fire. ,onseuentl'* I?D su()itted its clai) for inde)nit' on account of the lossinsured against. +,? denied the clai) on the ground that the insurance policies%ere either attached pursuant to %rits of attach)entsgarnish)ents issued ('&arious courts or that the insurance proceeds %ere also clai)ed (' other creditors of I?D alleging (etter rights to the proceeds than the insured.

",B,* one of I?Ds creditors* also filed %ith +,? its for)al clai) o&er the proceeds of the insurance policies* (ut said clai)s %ere also denied for thesa)e reasons that +,? denied I?Ds clai)s.

ISSUEM hether or not the ",B,* as )ortgagee* has an' right o&er the insurancepolicies ta;en (' I?D* the )ortgagor* in case of the occurrence of loss.

HELDM es. +t is settled that a )ortgagor and a )ortgagee ha&e separate anddistinct insura(le interests in the sa)e )ortgaged propert'* such that one of the)

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)a' insure the sa)e propert' for his o%n sole (enefit. +t is to (e noted that nineendorse)ent docu)ents %ere prepared (' Alchester* in fa&or of ",B,. ",B,* ingood faith* relied upon the endorse)ent docu)ents sent to it* as per stipulation.?&er and a(o&e this* I?D continued* in the )eanti)e* to eno' the (enefits of thecredit facilities etended to it (' ",B,.

I?D cannot see; relief under ection 53 of the +nsurance ,ode %hichpro&ides that the proceeds of insurance shall eclusi&el' appl' to the interest of theperson in %hose na)e or for %hose (enefit it is )ade. The peculiarit' of thecircu)stances presents a ustification to ta;e eception to the application of the saidpro&ision. +t has (een esta(lished that it %as the intention of the parties to designate",B, as the part' for %hose (enefit the insurance policies %ere ta;en out.

I?D continued until the occurrence of the fire* to eno' the (enefits of thecredit facilities etended (' ",B, %hich %as conditioned upon the endorse)ent of the insurance policies to (e ta;en (' I?D to co&er the )ortgaged properties.

Thus* the insurance proceeds )a'* therefore* (e eclusi&el' applied to",B,* %hich under the factual circu)stances of the case* is trul' the person or entit' for %hose (enefit the policies %ere clearl' intended.

+OMINGO, Julie-Anne +.

4#. BRIONES vs. CAMMAYO! ET AL.G.R. NO. L) 23##(! OCTOBER 4! 1(&1DIZON! J.

FACTS7 Aurelio I. Briones filed an action in the unicipal ,ourt of anila againstdefendants* all surna)ed ,a))a'o* to reco&er fro) the)* ointl' and se&erall'* the

a)ount of 1*500.00* plus da)ages* attorne'@s fees and costs of suit. Thedefendants ans%ered that a )ortgage contract %as eecuted for securing thepa')ent of 1*500.00 for a period of one 'ear* %ithout interest* (ut the plaintiff deli&ered to the defendant ri)iti&o onl' the su) of 1*200.00 and %ithheld the su)of 300.00 %hich %as intended as ad&ance interest for one 'ear that on account of said loan of 1*200.00* defendant ri)iti&o paid to the plaintiff the total su) of 330.00 %hich plaintiff* illegall' and unla%full' refuse to ac;no%ledge as partpa')ent of the account (ut as an interest of the said loan for an etension of another ter) of one 'ear and that said contract of loan entered into (et%een plaintiff anddefendant ri)iti&o is a usurious contract. Briones denied the allegations of thecounterclai). The unicipal ,ourt rendered udg)ent sentencing the defendants to

pa' the plaintiff %ith interests thereon plus attorne'@s fees. The ,ourt of -irst+nstance of anila also ordered the defendants to pa' the plaintiff. >efendants clai)that the trial court erred in sentencing the) to pa' the principal of the loannot%ithstanding its finding that the sa)e %as tainted %ith usur'. +t is not no%disputed that the contract of loan in uestion %as tainted %ith usur'.

ISSUE7 hether the creditor is entitled to collect fro) the de(tor the a)ountrepresenting the principal o(ligation

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HELD7 es. Dnder Act 2655 a usurious contract is &oid that the creditor had no rightof action to reco&er the interest in ecess of the la%ful rate (ut that this did not )eanthat the de(tor )a' ;eep the principal recei&ed (' hi) as loan E thus unustl'enriching hi)self to the da)age of the creditor. The Dsur' La%* (' its letter andspirit* did not depri&e the lender of his right to reco&er fro) the (orro%er the )one'actuall' loaned to and eno'ed (' the latter. +n si)ple loan %ith stipulation of usurious interest* the prestation of the de(tor to pa' the principal de(t* %hich is thecause of the contract* is not illegal. The illegalit' lies onl' as to the prestation to pa'the stipulated interest hence* (eing separa(le* the latter onl' should (e dee)ed&oid* since it is the onl' one that is illegal. The principal de(t re)aining %ithoutstipulation for pa')ent of interest can (e reco&ered (' udicial action. And in case of such de)and* and the de(tor incurs in dela'* the de(t earns interest fro) the date of the de)and. uch interest is not due to stipulation* for there %as none* the sa)e(eing &oid. "ather* it is due to the general pro&ision of la% that in o(ligations to pa')one'* %here the de(tor incurs in dela'* he has to pa' interest (' %a' of da)ages.

4%. ANGEL JOSE WAREHOUSING CO.! INC. vs. CHELDA ENTERPRISES+,- DAVID SYJUECOG.R. NO. L) 2#&*4! APRIL 24! 1(%'BENGZON! J.P.!J.

FACTS7 laintiff corporation filed suit against the partnership ,helda Hnterprises and>a&id 'ueco* its capitalist partner* for reco&er' of alleged unpaid loans in the totala)ount of 20*880.00* %ith legal interest fro) the filing of the co)plaint* plusattorne'@s fees of 5*000.00. Alleging that post dated chec;s issued (' defendantsto pa' said account %ere dishonored* that defendants@ industrial partner* ,hellara) +.ohinani* had left the countr'* and that defendants ha&e re)o&ed or disposed of their propert'* or are a(out to do so* %ith intent to defraud their creditors* preli)inar'

attach)ent %as also sought. A %rit of attach)ent o&er the real properties o%ned ('alentin Afa(le* :r.. "T, ordered Afa(le* :r. To pa' >a&id 66*500 plus interest fro):ul' 24* 1974* until full' paid. "T, a)ended its decison and ruled that legal rate of interest should (e co)puted fro) :anuar' 4* 1966* instead of fro) :ul' 24* 1974.

Afa(le appealed to the ,ourt of Appeals and then to the upre)e ,ourt. +n (othinstances* the decision of the lo%er court %as affir)ed. Hntries of udg)ent %ere)ade and the record of the case %as re)anded to Branch 27 for the final eecution.

An Alias rit of Hecution %as issued (' &irtue of %hich respondent heriff elchor . eRa conducted a pu(lic auction. heriff eRa infor)ed the petitioner that thetotal a)ount of the udg)ent is 270*940.52. The a)ount included a co)putation of si)ple interest. Afa(le* ho%e&er* clai)ed that the udg)ent a%ard should (e

3*027*238.50* (ecause the a)ount due ought to (e (ased on co)poundedinterest. Although the auctioned properties %ere sold to the petitioner* heriff eRadid not issue the ,ertificate of ale (ecause there %as an ecess in the (id price inthe a)ount of 2*941*524.47* %hich the petitioner failed to pa' despite notice. >a&idfiled a otion pra'ing that respondent :udge ,ru! issue an order directingrespondent heriff eRa to prepare and eecute a certificate of sale in his fa&or. Cisreason is that co)pound interest* %hich is allo%ed (' Article 2212 of the ,i&il ,ode*should appl' in this case. >a&id clai) that in co)puting the interest due of the66*500.00* interest should (e co)puted at 6/ on the principal su) of 66*500.00

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pursuant to Article 2209 and then Jinterest on the legal interestK should also (eco)puted in accordance %ith the language of Article 2212 of the ,i&il ,ode.

ISSUE7 hether co)pounded interest could (e further earned %here no interest isstipulated

HELD7o. +n cases %here no interest stipulated* no co)pounded interest could (efurther earned. The ,ourt ruled that Article 2212 conte)plates the presence of stipulated or con&entional interest %hich has accrued %hen de)and %as udiciall')ade. +n cases %here no interest had (een stipulated (' the parties* as in the caseof hilippine A)erican Accident +nsurance* no accrued con&entional interest couldfurther earn interest upon udicial de)and. +n this case* no interest %as stipulated ('the parties. +n the pro)issor' note deno)inated J,o)pro)ise Agree)entK signed ('the Afa(le* :r. %hich %as dul' accepted (' the >a&id no interest %as )entioned.That (eing the case* the interest should onl' (e su(ect to a si)ple interest.

+UBLA+O, Jeria Jo& *.

4&. PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES vs. IACG.R. NO. &31('! SEPTEMBER 2! 1((2NOCON! J.

FACTS7 ?n a' 21* 1974* >a&ao Ti)(er ,orporation* >AT+,?" for (re&it'* and theri&ate >e&elop)ent ,orporation #>,$ entered into a loan agree)ent %here('>, etended to >AT+,?" a loan in foreign currenc' eui&alent to DS265*000.00 and another in the a)ount of 2*500*000.00 for the purpose of esta(lishing a ;iln dr'ing and %ood%or;ing plant in ati* >a&ao ?riental.

+n the (eginning* >, %as charging a total of nineteen #19/$ per centinterest per annu) on the peso loan and eighteen and three<fourths #18<34/$ per cent on the foreign currenc' loan. The penalt' charges %as increased to t%o #2/$per cent per )onth %ith regard to the peso loan* >, (egan charging a total of fort' t%o #42/$ per cent per annu) on the peso loan. >AT+,?" o(tained a loan of 4.4 )illion pesos and has paid a total of a(out 3 )illion pesos* the re)aining(alance on the principal de(t left unpaid is a(out 1.4 )illion pesos* to %hichrespondents )ust still pa' the petitioner.

ISSUE7 hether or not >, &iolated the Dsur' La%.

HELD7H. +nas)uch as the loan agree)ent herein %as entered into on a' 21*1974* the pre&ailing la% applica(le is Act o. 2655* other%ise ;no%n as the Dsur'La%* as a)ended (' .>. o. 116* %hich too; effect on :anuar' 29* 1974. ection 2of Act o. 2655 pro&idesM o person or corporation shall directl' or indirectl' ta;e or recei&e )one' or other propert'* real or personal* or choses in action* a higher rateof interest or greater su) of &alue including co))ission pre)iu)s* fines andpenalties for the loan or rene%al thereof or for(earance of )one'* goods or credit*%here such loan or rene%al or for(earance is secured in %hole or in part (' a)ortgage upon real estate* the title to %hich is dul' registered or (' a docu)ent

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con&e'ing such real estate at an interest* than t%el&e percent per annu). The usur'la% therefore* as a)ended (' residential >ecree 116* fied all interest rates for allloans %ith )aturit' of )ore than 360 da's at t%el&e #12/$ per cent per annu)including pre)iu)s* fines and penalties.

The la% should not (e interpreted to )ean forfeiture of the principal loan asthat %ould (e unustl' enriching the (orro%er. The unpaid principal de(t still standsand re)ains &alid (ut the stipulation as to the usurious interest is &oid* conseuentl'*the de(t is to (e considered %ithout stipulation as to the interest.

4'. SANCHEZ vs. BUENVIAJEG.R. NO. L)#&314! NOVEMBER 2(! 1('3ABAD SANTOS! J.

FACTS7?n August 25* 1976* Aleo anche! sued Teodoro anche! and Leonor antilles in the unicipal ,ourt of Bato* ,a)arines ur* for the reco&er' of

2*000.00 %hich the latter had pro)ised to pa' in t%o notes. aid notes alsocontained stipulations for interest at the rate of 10/ per )onth The unicipal ,ourtrendered udg)ent ordering Teodoro anche! onl' to pa' to Aleo anche!2*000.00 plus interest thereon at the legal rate fro) the filing of the co)plaint.

ISSUE7hether or not in a loan %ith usurious interest (oth the loan and the usuriousinterest are &oid.

HELD7?. +t is no% %ell<settled thatM the Dsur' La% #Act o. 2655$* (' its letter andspirit* does not depri&e the lender of his right to reco&er of the (orro%er the )one'actuall' loaned this onl' in the case that the interest collected is usurious. The la%*as it is no%* does not pro&ide for the forfeiture of the capital in fa&or of the de(tor in

usurious contract.

GU'RR'RO, Juan Paolo R.

4(. CA AGRO)INDUSTRIAL DEVELOPMENT CORP vs. THE HONORABLECOURT OF APPEALS +,- SECURITY BAN$ AND TRUST COMPANYG.R. NO. (**2& MARCH 3! 1((3DAVIDE! JR.! J.

FACTS7?n 3 :ul' 1979* petitioner #through its resident* ergio Aguirre$ and thespouses "a)on and aula ugao entered into an agree)ent %here(' the for)er

purchased fro) the latter t%o #2$ parcels of land for a consideration of 350*625.00. A do%n pa')ent has (een )ade and an agree)ent that until the full purchase pricehas (een paid* the certificates of title shall (e ;ept in the safet' deposit (o of an'(an;. The safet' deposit (o %as that of ecurit' Ban; %ith the follo%ingstipulationsM a$ The (an; is not a depositar' of the contents of the safe and it hasneither the possession nor control of the sa)e* and ($ The (an; has no interest%hatsoe&er in said contents* ecept herein epressl' pro&ided* and it assu)esa(solutel' no lia(ilit' in connection there%ith. After the eecution of the contract* t%o#2$ renter@s ;e's %ere gi&en to the renters E one to Aguirre #for the petitioner$ and

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the other to the ugaos. A guard ;e' re)ained in the possession of the respondentBan;. The safet' deposit (o has t%o #2$ ;e'holes* one for the guard ;e' and theother for the renter@s ;e'* and can (e opened onl' %ith the use of (oth ;e's.etitioner clai)s that the certificates of title %ere placed inside the said (o. A certainrs. "a)os %anted to (u' the said lands and the parties agreed thereto* (ut* %henthe' opened the safet' deposit (o* the titles %ere not there and the sale did not)ateriali!e. As a result* the ugao spouses sued the (an; (ut the latter in&o;ed thestipulations.

ISSUE7hether or not the contract %as that of a lease or a deposit.HELD7 +t %as neither (oth* it %as a special ;ind of deposit. +t cannot (e

characteri!ed as an ordinar' contract of lease under Article 1643 (ecause the full

and a(solute possession and control of the safet' deposit (o %as not gi&en to the

oint renters E the petitioner and the ugaos. The guard ;e' of the (o re)ained

%ith the respondent Ban; %ithout this ;e'* neither of the renters could open the (o.

?n the other hand* the respondent Ban; could not li;e%ise open the (o %ithout the

renter@s ;e'. +n this case* the said ;e' had a duplicate %hich %as )ade so that (othrenters could ha&e access to the (o. e o(ser&e* ho%e&er* that the deposit theor'

itself does not altogether find unani)ous support e&en in A)erican urisprudence.

e agree %ith the petitioner that under the latter* the pre&ailing rule is that the

relation (et%een a (an; renting out safe<deposit (oes and its custo)er %ith respect

to the contents of the (o is that of a (ail or and (ailee* the (ail)ent (eing for hire

and )utual (enefit. This is ust the pre&ailing &ie% (ecauseM There is* ho%e&er* so)e

support for the &ie% that the relationship in uestion )ight (e )ore properl'

characteri!ed as that of landlord and tenant* or lessor and lessee. +t has also (een

suggested that it should (e characteri!ed as that of licensor and licensee. The

relation (et%een a (an;* safe<deposit co)pan'* or storage co)pan'* and the renter of a safe<deposit (o therein* is often descri(ed as contractual* epress or i)plied*

oral or %ritten* in %hole or in part. But there is apparentl' no urisdiction in %hich an'

rule other than that applica(le to (ail)ents go&erns uestions of the lia(ilit' and

rights of the parties in respect of loss of the contents of safe<deposit (oes.

#*. ATO$ FINANCE CORPORATION vs. COURT OF APPEALS! SANYUCHEMICAL CORPORATION! DANILO E. ARRIETA! NENITA B. ARRIETA!PABLITO BERMUNDO +,- LEOPOLDO HALILIG.R. NO. '**&' MAY 1'! 1((3FELICIANO! J.

FACTS7 Ato; and an'u ,he)ical entered into a ,ontinuing uret'ship Agree)entin fa&or of Ato;-inance%ith the latter (eing the creditor and an'u ,he)ical andse&eral stoc;holders as sureties. an'u ,he)ical* in consideration of receipt fro)

Ato; -inance of the a)ount of 105*000.00* assigned se&eral recei&a(les in fa&or of Ato;. Later* additional trade recei&a(les %ere assigned (' an'u ,he)ical to Ato;-inance %ith a total face &alue of 100*378.45. Ato; -inance co))enced actionagainst an'u ,he)ical* and the sureties (efore the "T, to collect the su) of

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120*240.00. Ato; -inance alleged that an'u ,he)ical had failed to collect andre)it the a)ounts due under the trade recei&a(les. an'u ,he)ical and theindi&idual pri&ate respondents sought dis)issal of Ato;@s clai) upon the ground thatsuch clai) had prescri(ed under Article 1629 of the ,i&il ,ode and for lac; of causeof action. The pri&ate respondents contended that the ,ontinuing uret'ship

Agree)ent* (eing an accessor' contract* %as null and &oid since* at the ti)e of itseecution* an'u ,he)ical had no pre<eisting o(ligation due to Ato; -inance.

+t is the contention of respondents that the suret'ship agree)ent is null and&oid (ecause it is notin consonance %ith the la%s on guarant' and securit'. The saidagree)ent %as entered into (' theparties t%o 'ears (efore the >eed of Assign)ent%as eecuted.

Thus* allegedl'* it ran counter to the pro&ision that guarant' cannot eistindependentl' (ecause (' nature it is )erel' an accessor' contractM first* (ecausethis contract* ust li;e guarant'* cannot eist %ithout a &alid o(ligation #Art. 2052* ,i&il,ode$ and* second* although it )a' (e gi&en as securit' for future de(t #Art. 2053*

,.,.$* the o(ligation conte)plated in the case at (ar cannot (e considered @futurede(t@ as en&isioned (' this la%.

ISSUE7 hether or not a suret' agree)ent* (eing an accessor' contract* (eeffected to secure future #non<eisting$ de(ts. a' the continuing suret'shipagree)ent (e declared null and &oid for alleged lac; of consideration since there%as still no pre<eisting o(ligation for the suret' to attach to.

HELD7 uret' agree)ents )a' secure future de(ts. +t is true that a guarant' or asuret'ship agree)ent is an accessor' contract in the sense that it is entered into for the purpose of securing the perfor)ance of another o(ligation %hich is deno)inatedas the principal o(ligation. +t is also true that Article 2052 of the ,i&il ,ode states that

a guarantee cannot eist %ithout a &alid o(ligation. This legal proposition is not*ho%e&er* li;e )ost legal principles* to (e read in an a(solute and literal )anner andcarried to the li)it of its logic.

ILAGAN, *ers#in *a&e L.

#1. ONGSIA$O vs. THE WORLD WIDE INSURANCE AND SURETY CO.! INC.G.R. NO. L) 12*&&! JUNE 2&! 1(#'BAUTISTA ANGELO! J.

FACTS7 ,atalina de Leon eecuted in fa&or of Augusto ?ngsia;o a pro)issor' note

in the a)ount of 1*200.00* pa'a(le in 90 da's after date* %ith interest at 1/ per )onth. Thereafter* a suret' (ond %as eecuted (' the principal de(tor* and theorld ide +nsurance P uret' ,o.* +nc.* as suret'* %here(' the' (ound to pa' saida)ount ointl' and se&erall' to the creditor. Ca&ing the o(ligation unpaid on the dateof its )aturit' not%ithstanding the de)ands )ade upon the principal de(tor and thesuret'* the creditor (rought an action to reco&er the sa)e fro) the). :udg)ent %asrendered in fa&or of the creditor.

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+n the udg)ent* the principal de(tor %as ordered to pa' the creditor. Thesuret' %as li;e%ise ordered to pa' the creditor (ut %ith the pro&iso that Jeecutionshould not issue against Fthe suret'G until a return is )ade (' the heriff uponeecution against Fthe principal de(torG sho%ing that the udg)ent against her re)ained unsatisfied in %hole or in part and pro&ided* further* that Fthe principalde(torG shall rei)(urse to Fthe suret'G %hate&er a)ount the latter )ight pa' under this udg)ent together %ith such epenses as )a' (e necessar' to effectuate saidrei)(urse)ent.K

ISSUE7hether or not the suret' onl' acted as a guarantor and as such its lia(ilit'cannot (e eacted until after the propert' of the principal shall ha&e (een ehausted.

HELD7 ?. The suret' has no ustification %hate&er to resist the clai) of the creditor for in the udg)ent appealed fro) it is precisel' pro&ided that eecution of udg)entshould not issue against the suret' until after it is sho%n that the eecution of the

udg)ent against the principal de(tor has (een returned (' the sheriff unsatisfied*%hich %as the onl' ecuse gi&en (' said suret' in not fulfilling its co))it)ent under

the (ond. And 'et* the suret' appealed fro) said udg)ent ust to put up theadditional defense that its lia(ilit' under the (ond has alread' epired (ecause of thecondition that its lia(ilit' shall epire on -e(ruar' 10* 1952. The ,ourt considers thisstipulation as unfair and unreasona(le for it practicall' nullifies the nature of theunderta;ing assu)ed (' the suret'. +t should (e noted that the principal o(ligation ispa'a(le 90 da's fro) date of issue* %hich falls on -e(ruar' 10* 1952. ?nl' on thisdate can de)and for pa')ent (e )ade on the principal de(tor. +f the principal de(tor should fail to pa' and resort is )ade to the suret' for pa')ent on the net da'* it%ould (e unfair for the suret' to allege that its lia(ilit' has alread' epired. As theter)s of the (ond should (e gi&en a reasona(le interpretation* it is logical to holdthat the lia(ilit' of the suret' attaches as soon as the principal de(tor defaults* andnotice thereof is gi&en the suret' %ithin reasona(le ti)e to ena(le it to ta;e steps to

protect its interest. After all* the suret' has a re)ed' under the la%* %hich is toforeclose the counter(ond put up (' the principal de(tor.

#2. CITIZENS SURETY AND INSURANCE COMPANY! INC. vs. COURT OFAPPEALSG.R. NO. L)4'(#'! JUNE 2'! 1(''GUTIERREZ! JR.! J.

FACTS7 ,iti!ens uret' and +nsurance ,o)pan'* +nc. issued 2 suret' (onds toguarantee co)pliance (' the principal ascual . ere! Hnterprises of its o(ligation

under a ,ontract of ale of Ioods entered into %ith inger e%ing achine ,o. +nconsideration of the issuance of the aforesaid (onds* the principal de(tor eecutedinde)nit' agree)ents %herein he o(ligated hi)self and the Hnterprises to inde)nif'the suret' ointl' and se&erall'* %hate&er pa')ents ad&ances and da)age it )a'suffer or pa' as a result of the issuance of the suret' (onds. +n addition* the principalde(tor put up a collateral securit' (' eecuting a deed of assign)ent of his stoc;lu)(er and thereafter* (' eecuting a second real estate )ortgage in fa&or of thesuret' to guarantee the fulfill)ent of said o(ligation.

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The principal de(tor failed to co)pl' %ith its o(ligation %ith the creditor.,onseuentl'* the suret' %as co)pelled to pa'* as it did pa'. The principal de(tor %as a(le to partiall' inde)nif' the suret' lea&ing an unpaid (alance. ot%ithstandingse&eral de)ands for the unpaid portion* the principal de(tor failed to rei)(urse thesuret'. The suret' filed a )one' clai) against the estate of the late icasiaar)iento %hich %as (eing ad)inistered (' the principal de(tor. +n opposing the)one' clai)* the principal de(tor asserts that the suret' (onds and the inde)nit'agree)ents had (een etinguished (' the eecution of the deed of assign)ent.

ISSUE7hether or not the suret' (onds are etinguished (' &irtue of the eecutionof the deed of assign)ent.

HELD7 o. The deed of assign)ent cannot (e regarded as an a(solute con&e'ance%here(' the o(ligation under the suret' (onds %as auto)aticall' etinguished. Thesu(seuent acts of the principal de(tor (olster the fact that the deed of assign)ent%as intended )erel' as a securit' for the issuance of the 2 suret' (onds. artialpa')ents %ere )ade after the eecution of the deed of assign)ent to satisf' the

o(ligation under the 2 suret' (onds. ince later pa')ents %ere )ade to pa' theinde(tedness* it follo%s that no de(t %as etinguished upon the eecution of thedeed of assign)ent. oreo&er* a second real estate )ortgage %as eecuted ande&entuall' cancelled. +f indeed the deed of assign)ent etinguished the o(ligation*there %as no reason for a second )ortgage to still ha&e to (e eecuted.

The proper procedure %as for the suret' to collect the re)aining unpaidportion of the suret' fro) the sales of lu)(er and to return %hate&er re)ained to theprincipal de(tor. The ,ourt cannot order the return (ecause the estate of the spouseof the principal de(tor has not as;ed for an' return of ecess lu)(er or its &alue.

LA!ANO, *arell Marie

#3. DURAN vs. IACG.R. NO. L)%41#(! SEPTEMBER 1*! 1('#PONENTE

FACTS7>uran o%ned 2 parcels of land co&ered (' a Transfer ,ertificate of Title of the "egister of >eeds of ,aloocan ,it'. he left the hilippines in :une 1954 andreturned in a' 1966.

?n a' 13* 1963* a >eed of ale of the t%o lots )entioned %as )ade in

fa&or of >uran@s )other %ho* on >ece)(er 3* 1965* )ortgaged the sa)e propert' to

Tiangco. hen >uran ca)e to ;no% a(out the )ortgage )ade (' her )other* she

%rote the "egister of >eeds of ,aloocan ,it' infor)ing the latter that she had not

gi&en her )other an' authorit' to sell or )ortgage an' of her properties in the

hilippines. -ailing to get an ans%er fro) the registrar* she returned to the

hilippines. ean%hile* %hen her )other failed to redee) the )ortgage properties*

foreclosure proceedings %ere initiated (' Tiangco and* ulti)atel'* the sale (' the

sheriff and the issuance of ,ertificate of ale in fa&or of the latter.

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>uran clai)s that the >eed of ale in fa&or of her )other is a forger'* sa'ing

that at the ti)e of its eecution in 1963 she %as in the Dnited tates. ?n the other

hand* the ad&erse part' alleges that the signatures of >uran in the said >eed are

genuine and* conseuentl'* the )ortgage )ade (' her )other in fa&or of Tiangco is

&alid.

ISSUE7 hether Tiangco %as a (u'er in good faith and for &alue

HELD7 H. An innocent purchaser for &alue rel'ing on a torrens title issued isprotected. A )ortgagee has the right to rel' on %hat appears in the certificate of titleand* in the a(sence of an'thing to ecite suspicion* he is under no o(ligation to loo;(e'ond the certificate and in&estigate the title of the )ortgagor appearing on the faceof said certificate.

+n the case at (ar* Tiangco* in good faith relied on the certificate of title in thena)e of >urans )other and e&en on the supposition that the sale %as &oid* the

general rule that the direct result of a pre&ious illegal contract cannot (e &alid #on thetheor' that the spring cannot rise higher than its source$ cannot appl here for the,ourt is confronted %ith the functionings of the Torrens 'ste) of "egistration. Thedoctrine to follo% is si)ple enoughM a fraudulent or forged docu)ent of sale )a'(eco)e the "??T of a &alid title if the certificate of title has alread' (een transferredfro) the na)e of the true o%ner to the na)e of the forger or the na)e indicated ('the forger.

#4. CABUHAT vs. CAG.R. NO. 12242#! SEPTEMBER 2'! 2**1PONENTE7

FACTS7 ar' Ann Arede %as (arel' three da's old %hen ercedes Arede infor)all'adopted her as the latter@s o%n daughter. +n >ece)(er* 1972* ercedes purchased aparcel of land situated in Bag(ag* Ligtong* "osario* ,a&ite registered in ar' Ann

Arede@s na)e and the corresponding title %as issued (' the "egister of >eeds of ,a&ite on >ece)(er 9* 1972.

Dpon reaching the age of )aorit' and un;no%n to ercedes* ar' Ann

Arede o(tained a reconstituted o%ner@s duplicate of T,T thru the use of a falsified

court order supposedl' issued (' the "egional Trial ,ourt of ,a&ite on >ece)(er

16* 1988* %here(' the court purportedl' directed the "egister of >eeds of ,a&ite to

issue another o%ner@s duplicate cop' of T,T* %hich ar' Ann Arede clai)ed to ha&e

lost. Dsing this reconstituted title* ar' Ann Arede )ortgaged the land to the "ural

Ban;* of o&eleta* ,a&ite on -e(ruar' 28* 1989. Dpon release of the )ortgage* theland %as again )ortgaged (' ar' Ann Arede on a' 16* 1990* this ti)e to

-lordeli!a,a(uhat for the a)ount of 300*000.00* %hich )ortgage %as registered

(' ,a(uhat on the follo%ing da' at the "egister of >eeds of ,a&ite.

+t appeared ho%e&er that prior to the second )ortgage on a' 16* 1990* the

su(ect lot %as sold (' ar' Ann Arede to ercedes Arede in consideration of the

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su) of 100*000.00 as e&idenced (' a >eed of ale dated :anuar' 17* 1990.

Dnfortunatel'* this sale %as not registered (' ercedes. Cence* upon ;no%ledge of

the )ortgage to ,a(uhat* ercedes %as pro)pted to co))ence the instant suit for

annul)ent of title.

ISSUE7 hether ,a(uhat is %as an innocent )ortgagee for &alue

HELD7 es. The record sho%s that ,a(uhat loaned the a)ount of 300*000.00 to

ar' Ann* pro&ing that not onl' %as she an innocent )ortgagee for &alue* (ut also

one %ho in good faith relied on the clean title of ar' Ann. +n accepting such a

)ortgage* ,a(uhat %as not reuired to )a;e further in&estigation of the title

presented to her to (ind the propert' (eing gi&en as securit' for the loan.

+n fine* the pre&ailing urisprudence is that a )ortgagee has a right to rel' in

good faith on the certificate of title of the )ortgagor of the propert' gi&en as securit'

and in the a(sence of an' sign that )ight arouse suspicion* has no o(ligation to

underta;e further in&estigation. Cence* e&en if the )ortgagor is not the rightful o%ner

of* or does not ha&e a &alid title to* the )ortgaged propert'* the )ortgagee in good

faith is nonetheless entitled to protection.

LIMJAP, Mi"helle F.

##. A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION vs.COURT OF APPEALS G.R. NO. 12#*## OCTOBER 3*! 1(('MENDOZA! J.

FACTS7 A. -rancisco "ealt' and >e&elop)ent ,orporation granted a loan of 7.5

illion to spouses "o)ulo and Hrlinda:a&illonar* in consideration of %hich the latter

eecuted the follo%ing docu)entsM #a$ a pro)issor' note stating an interest charge

of 4/ per )onth for si )onths #($ a deed of )ortgage o&er realt' and #c$ an

undated deed of sale of the )ortgaged propert' in fa&or of the )ortgagee. The

pro)issor' note epressl' pro&ided that upon failure of the ?"TIAI?" to pa'

the interest %ithout prior arrange)ent %ith the ?"TIAIHH* full possession of the

propert' %ill (e transferred and the deed of sale %ill (e registered. -or this purpose*

the o%ner@s duplicate of T,T o. 58748 %as deli&ered to petitioner. etitioner clai)s

that pri&ate respondents failed to pa' the interest and* as a conseuence* it

registered the sale of the land in its fa&or on -e(ruar' 21* 1992. etitioner

de)anded possession of the )ortgaged realt' and the pa')ent of 4/ )onthl'

interest fro) a' 1992* plus surcharges. As respondent spouses refused to &acate*

petitioner filed the present action for possession (efore the "egional Trial ,ourt in

asig ,it'. +n their ans%er* respondents ad)itted lia(ilit' on the loan (ut alleged that

it %as not their intent to sell the realt' as the undated deed of sale %as eecuted ('

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the) )erel' as an additional securit' for the pa')ent of their loan. The "T,

rendered decision in fa&or of petitioner. ?n appeal* the ,ourt of Appeals re&ersed the

decision of the trial court and ruled that the deed of sale %as &oid for (eing in fact a

pactumcommissorium %hich is prohi(ited (' Art. 2088 of the ,i&il ,ode.

ISSUE7 hether or not the agree)ent constitutes pactumcommissorium.

HELD7 es. The stipulations in the pro)issor' notes pro&iding that* upon failure of

respondent spouses to pa' interest* o%nership of the propert' %ould (e

auto)aticall' transferred to petitioner and the deed of sale in its fa&or %ould (e

registered* are in su(stance a pactumcommissorium. The' e)(od' the t%o

ele)ents of pactumcommissorium* to %itM The prohi(ition on pactu)co))issoriu)

stipulations is pro&ided for (' Article 2088 of the ,i&il ,odeM #1$ that there should (e

a pledge or )ortgage %herein a propert' is pledged or )ortgaged (' %a' of securit'

for the pa')ent of the principal o(ligation and #2$ that there should (e a stipulation

for an auto)atic appropriation (' the creditor of the thing pledged or )ortgaged in

the e&ent of non<pa')ent of the principal o(ligation %ithin the stipulated period. The

contention that the proscri(ed stipulation should (e found in the )ortgage deed itself

to (e declared &oid is %ithout )erit. ,ourt categoricall' ruled that a )ortgagee@s

)ere act of registering the )ortgaged propert' in his o%n na)e upon the

)ortgagor@s failure to redee) the propert' a)ounted to the eercise of the pri&ilege

of a )ortgagee in a pactumcommissorium.Thus* the su(ect transaction is &oid

rendering the registration of the deed of sale co&ering the su(ect lot also &oid.

#%. DEVELOPMENT BAN$ OF THE PHILIPPINES vs. COURT OF APPEALS

G.R. NO. 11'3%&. JANUARY #! 1(('

DAVIDE! JR.! J .

FACTS7 L'dia . ,u(a is a grantee of a -ishpond Lease Agree)ent o. 2083 fro)

the Io&ern)ent. he o(tained loans fro) the >e&elop)ent Ban; of the hilippines

in the a)ounts of 109*000.00 109*000.00 and 98*700.00 under the ter)s

stated in the ro)issor' otes. As securit' for said loans* ,u(a eecuted t%o >eeds

of Assign)ent of her Leasehold "ights. u(seuentl'* ,u(a failed to pa' her loan onthe scheduled dates. ithout foreclosure proceedings* %hether udicial or etra<

udicial* >B appropriated the Leasehold "ights of ,u(a o&er the fishpond in

uestion. After >B has appropriated the Leasehold "ights of ,u(a o&er the

fishpond in uestion* >B* in turn* eecuted a >eed of ,onditional ale of the

Leasehold "ights in fa&or of ,u(a o&er the sa)e fishpond in uestion. After %hich* a

ne% -ishpond Lease Agree)ent o. 2083<A dated arch 24* 1980 %as issued in

fa&or ,u(a onl'* ecluding her hus(and. hen ,u(a failed to pa' the a)orti!ation

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as stated in >eed of ,onditional ale* >B sent a otice of "escission thru otarial

Act. After the otice of "escission* >B too; possession of the Leasehold "ights of

the fishpond in uestion. Thereafter* >B conducted a pu(lic (idding and thereafter

eecuted a >eed of ,onditional ale in fa&or of Agripina,aperal. ,aperal %as

a%arded -ishpond Lease Agree)ent o. 2083<A. Thus* ,u(a filed a

co)plaintagainst >B and Agripina,aperal filed ,u(a for the declaration of nullit' of >Bs appropriation of ,u(as rights* title* and interests o&er a 44<hectare fishpond

located in Bolinao* angasinan* for (eing &iolati&e of Article 2088 of the ,i&il ,ode

The trial court resol&ed the issue in fa&or of ,u(a. ?n appeal* the ,ourt of Appeals

declared as &alid the act of >B in appropriating ,u(as leasehold rights and interest

under -ishpond Lease Agree)ent o. 2083.

ISSUE7 hether the act of >B in appropriating to itself ,DBAs leasehold rightso&er the fishpond in uestion %ithout foreclosure proceedings %as contrar' to Article2088 of the ,i&il ,ode and* therefore* in&alid.

HELD7 es. ,ondition no. 12 did not pro&ide that the o%nership o&er the leasehold

rights %ould auto)aticall' pass to >B upon ,DBAs failure to pa' the loan on

ti)e. +t )erel' pro&ided for the appoint)ent of >B as attorne'<in<fact %ith

authorit'* a)ong other things* to sell or other%ise dispose of the said real rights* in

case of default (' ,u(a and to appl' the proceeds to the pa')ent of the loan. This

pro&ision is in confor)it' %ith Article 2087 of the ,i&il ,ode* %hich authori!es the

)ortgagee to foreclose the )ortgage and alienate the )ortgaged propert' for the

pa')ent of the principal o(ligation. >B* ho%e&er* eceeded the authorit' &ested ('

condition no. 12 of the deed of assign)ent %hen it appropriated the leasehold rights%ithout foreclosure proceedings. Besides* an assign)ent to guarantee an o(ligation*

as in the present case* is &irtuall' a )ortgage and not an a(solute con&e'ance of

title %hich confers o%nership on the assignee. At an' rate* >Bs act of

appropriating ,DBAs leasehold rights %as &iolati&e of Article 2088 of the ,i&il ,ode*

%hich for(ids a creditor fro) appropriating* or disposing of* the thing gi&en as

securit' for the pa')ent of a de(t.

LUNAR, Lorena Ler%a M.

#&. LAO vs. CA2&# SCRA 23&! G.R. N. 11#3*&! :1((&;PANGANIBAN! J.

FACTS7 ri&ate "espondent Better Co)es "ealt' and Cousing ,orporation filed aco)plaint for unla%ful detainer against etitioner anuel Lao. etitioner clai)ed thathe is the true o%ner of the house and lot located at Dnit +* o. 21 . >o)ingo treet*ue!on ,it' and that the pri&ate respondent purchased the sa)e fro) petitioners

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fa)il' corporation* . >o)ingo "ealt' P >e&elop)ent ,orporation (ut alleged theagree)ent %as actuall' a loan secured (' )ortgage.

ISSUE7 +s the contract an A(solute ale or an Huita(le ortgage=

HELD7Based on the conduct of the petitioner and pri&ate respondent and e&en theter)inolog' of the second option to purchase* the intent and agree)ent (et%eenthe) %as undou(tedl' one of euita(le )ortgage and not of sale.

First * possession of the propert' in the contro&ers' re)ained %ith etitioner anuel Lao %ho %as the (eneficial o%ner of the propert'* (efore* during and after the alleged sale.+t is settled that a J pacto de retro sale should (e treated as a)ortgage %here the #propert'$ sold ne&er left the possession of the &endors.K

Second * the option gi&en to anuel Lao to purchase the propert' incontro&ers' had (een etended t%ice through docu)ents eecuted (' r. Tan BunD'* resident and ,hair)an of the Board of Better Co)es "ealt' P Cousing

,orporation. The %ording of the first etension is a re&elation that the parties reall'intended to (e (ound (' a loan %ith )ortgage* not (' a pacto de retro.

Third * anuel Lao and his (rother %ere in such Jdire need of )one'K thatthe' )ortgaged their to%nhouse units registered under the na)e of . >o)ingo"ealt' ,orporation* the fa)il' corporation put up (' their parents* to ri&ate"espondent Better Co)es "ealt' P Cousing ,orporation. +n retrospect* it is eas' to(la)e etitioner anuel Lao for not de)anding a refor)ation of the contract toreflect the true intent of the parties. But this see)ing inaction is sufficientl'eplained (' the Lao (rothers desperate need for )one'* co)pelling the) to signthe docu)ent purporting to (e a sale after the' %ere told that the sa)e %as ust for Jfor)alit'.K

There %as no sale of the disputed propert'. Cence* it still (elongs topetitioners fa)il' corporation* . >o)ingo "ealt' P >e&elop)ent,orporation. ri&ate respondent* (eing a )ere )ortgagee* has no right to eectpetitioner. ri&ate respondent* as a creditor and )ortgagee* J cannotappropriate the things gi&en (' %a' of pledge or )ortgage* or dispose of the). An'stipulation to the contrar' is null and &oid.K

#'. STATEMENT INVESTMENT HOUSE vs. CA2#4 SCRA 3%'! G.R. N. 11##4':1((%;

FRANCISCO! J.

FACTS7 pouses ,anuto and a. Aran!a!u ?reta* and the olid Co)es* +nc.#?L+>$ eecuted ,ontract to ell o. 36 in&ol&ing a parcel of land. Dpon signing of the contract* the spouses ?reta )ade pa')ent a)ounting to 7*869.40* %ith theagree)ent that the (alance shall (e pa'a(le in )onthl' install)ents of 45 1.70* at12/ interest per annu).?L+> eecuted se&eral real estate )ortgage contracts infa&or of tate +n&est)ent Co)es* #sic$ +nc. #TATH$ o&er its su(di&ided parcels of land* one of %hich is the su(ect lot. ?L+> failed to co)pl' %ith its )ortgage

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o(ligations contract* TATH etra<udiciall' foreclosed the )ortgaged propertiesincluding the su(ect lot. pouses ?reta filed a co)plaint (efore the Cousing andLand Dse "egulator' Board* CLD"B* against the de&eloper ?L+> and TATH for failure on the part of ?L+> Jto eecute the necessar' a(solute deed of sale as %ellas to deli&er title to said propert'.

ISSUE7 Are pri&ate respondent spouses ?retas unregistered rights o&er the su(ectpropert' superior to the registered )ortgage rights of petitioner tate +n&est)entCouse* +nc. #TATH$=

HELD7 es. TATHs registered )ortgage right o&er the propert' is inferior to that of respondents<spouses unregistered right. The unrecorded sale (et%eenrespondents<spouses and ?L+> is preferred for the reason that if the original o%ner #?L+>* in this case$ had parted %ith his o%nership of the thing sold then he nolonger had o%nership and free disposal of that thing so as to (e a(le to )ortgage itagain. "egistration of the )ortgage is of no )o)ent since it is understood to (e%ithout preudice to the (etter right of third parties.

The ,ourt too; udicial notice of the unifor) practice of financing institutionsto in&estigate* ea)ine and assess the real propert' offered as securit' for an' loanapplication especiall' %here* as in this case* the su(ect propert' is a su(di&ision lotlocated at ue!on ,it'* .. +t is a settled rule that a purchaser or )ortgageecannot close its e'es to facts %hich should put a reasona(le )an upon his guard*and then clai) that he acted in good faith under the (elief that there %as no defect inthe title of the &endor or )ortgagor. etitioners constructi&e ;no%ledge of the defectin the title of the su(ect propert'* or lac; of such ;no%ledge due to its negligence*ta;es the place of registration of the rights of respondents<spouses. Cence*petitioner %as not a purchaser or )ortgagee in good faith. etitioner cannot solel'rel' on %hat )erel' appears on the face of the Torrens Title.

MAGBUO, +enise

#(. FLANCIA vs. COURT OF APPEALSG.R. NO. 14%((&! APRIL 2%! 2**#CORONA! J.

FACTS7 laintiffs spouses Iodofredo and >o)inica -lancia purchased fro)defendant ?a;land >e&elop)ent "esources ,orp. a parcel of land in ue!on ,it'.>efendant corporation authori!ed plaintiffs to transport all their personal (elongings

to their house at the aforesaid lot. ?n >ece)(er 24* 1992* plaintiffs recei&ed a cop'of the eecution foreclosing the )ortgage issued (' the "T,* Branch 98 orderingdefendant heriff Hrnesto ula to sell at pu(lic auction se&eral lots for)erl' o%ned(' defendant corporation including su(ect lot of plaintiffs. laintiffs said that thealleged )ortgage of su(ect lot is null and &oid as it is not authori!ed (' plaintiffspursuant to Art. 2085 of the ,i&il ,ode %hich reuires that the )ortgagor )ust (e thea(solute o%ner of the )ortgaged propert'.

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>efendant illia) ?ng Ienato* then filed his ans%er a&erring that co<defendant ?a;land >e&elop)ent "esources ,orporation )ortgaged to Ienato t%oparcels of land including that of the -lancias as securit' and guarant' for thepa')ent of a loan in the su) of 2*000*000.00. The said real estate )ortgage has(een dul' annotated at the (ac; of T,T o. 366380. >ue to non<pa')ent of theloan* defendant Ienato filed an action for foreclosure of the real estate )ortgageagainst co<defendant corporation. The trial court ruled against defendant corporationand ordered defendant heriff Hrnesto ula to cause the sale at pu(lic auction of theproperties co&ered (' T,T o. 366380.

Ienato said plaintiffs ha&e no cause of action against hi) and that thealleged plaintiffs ,ontract to ell is not registered %ith the "egister of >eeds of ue!on ,it' to affect defendant Ienato and the latter is thus not (ound (' theplaintiffs ,ontract to ell. Ienato li;e%ise a&ers that registered )ortgage is superior to plaintiffs alleged ,ontract to ell and it is sufficient for defendant Ienato as)ortgagee to ;no% that the su(ect T,T o. 366380 %as clean at the ti)e of theeecution of the )ortgage contract %ith defendant corporation.

ISSUES7hether or not the registered )ortgage constituted o&er the propert' %as&alid.

HELD7 H* the registered )ortgage constituted o&er the propert' %as &alid. Dnder Art. 2085 of the ,i&il ,ode* the essential reuisites of a contract of )ortgage areM #a$that it (e constituted to secure the fulfill)ent of a principal o(ligation #($ that the)ortgagor (e the a(solute o%ner of the thing )ortgaged and #c$ that the personsconstituting the )ortgage ha&e the free disposal of their propert'* and in the a(sencethereof* that the' (e legall' authori!ed for the purpose.

All these reuire)ents are present in this case. As to the first essentialreuisite of a )ortgage* it is undisputed that the )ortgage %as eecuted on a' 15*1989 as securit' for a loan o(tained (' ?a;land fro) Ienato. As to the second andthird reuisites* %e need to discuss the difference (et%een a contract of sale and acontract to sell .

+n a contract of sale* title to the propert' passes to the &endee upon thedeli&er' of the thing sold in a contract to sell* o%nership is* (' agree)ent* reser&ed(' the &endor and is not to pass to the &endee until full pa')ent of the purchaseprice. ?ther%ise stated* in a contract of sale* the &endor loses o%nership o&er thepropert' and cannot reco&er it unless and until the contract is resol&ed or rescinded

in a contract to sell* title is retained (' the &endor until full pa')ent of the price.

+n the contract (et%een petitioners and ?a;land* aside fro) the fact that it%as deno)inated as a contract to sell, the intention of ?a;land not to transfer o%nership to petitioners until full pa')ent of the purchase price %as &er' clear. Actsof o%nership o&er the propert' %ere epressl' %ithheld (' ?a;land fro) petitioner.

All that %as granted to the) (' the occupanc' per)it %as the right to possess it.,learl'* %hen the propert' %as )ortgaged to Ienato in a' 1989* %hat %as in

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effect (et%een ?a;land and petitioners %as a contract to sell* not a contract of sale.?a;land retained a(solute o%nership o&er the propert'.

?%nership is the independent and general po%er of a person o&er a thing for purposes recogni!ed (' la% and %ithin the li)its esta(lished there('. According to

Art. 428 of the ,i&il ,ode* this )eans thatM

/The owner has the right to enjo and dispose of a thing, without other limitations than those esta"lished " law!.

Aside fro) the jus utendi and the jus a"utendi inherent in the right to eno'the thing* the right to dispose* or the jus disponendi * is the po%er of the o%ner toalienate* encu)(er* transfor) and e&en destro' the thing o%ned. Because ?a;landretained all the foregoing rights as o%ner of the propert'* it %as entitled a(solutel' to)ortgage it to Ienato. Cence* the )ortgage %as &alid.

%*. PREMIER DEVELOPMENT BAN$ vs. COURT OF APPEALS

G.R. NO. 12'122! MARCH 1'! 2**#GARCIA! J.

FACTS7 T%o different persons %ith eactl' the sa)e na)e* i!e!* icente T.Iara'ga'* each clai)ed eclusi&e o%nership of Lot 23 located in ue!on ,it' ('&irtue of an o%ners duplicate certificate each had possession of during the period)aterial co&ering said lot. ?ne held T,T o. 9780 #as registered in the anila"egistr' (efore the creation of ue!on ,it'$ and the other* T,T o. 9780 #693$ #thene% T,T o. under the ue!on ,it' "egistr' after the creation of ue!on ,it'$.

?n April 17* 1979* one of the t%o icente T. Iara'ga's* a resident of ,e(u,it' #hereinafter referred to as Iara'ga' of ,e(u$* eecuted a deed of sale o&er thelot descri(ed in and co&ered (' his T,T o. 9780 #693$ in fa&or of hisnephe%* :oselito . Iara'ga'. The sale not%ithstanding* the o%ners duplicatecertificate re)ained for so)e ti)e in the sellers possession.

+n another transaction* the other icente T. Iara'ga'* a resident of "i!al#hereinafter referred to as Iara'ga' of "i!al$* sold to Li(erto I. a)(ao and :esusB. "odrigue! the sa)e propert' descri(ed in T,T 9780.

A fire gutted a portion of the ue!on ,it' hall and destro'ed in the process

the original cop' of T,T o. 9780 #693$ on file %ith the "egistr' of >eeds of ue!on,it'. +t %as thereafter reconstituted.

The deed of sale eecuted (' Iara'ga' of ,e(u in fa&or of :oselito%asregistered. Thereafter* thru the efforts of sa)e Hngr. ,orte!* Lot 23 %as su(di&idedinto three #3$ lots* na)el'M Lot 23<A* Lot 23<B and Lot 23<, for %hich T,T os.14414* 14415 and 14416* respecti&el'* %ere issued.

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:oselito sold Lot 23<A to Lilian Toundis %ho* pursuant to a ,ontract to ellundertoo; to pa' :oselito the (alance of the 2.5 illion purchase price once she isplaced in possession of a fenced<off propert'. And* for shares of stoc;* :oselitoassigned Lot 23<B and Lot 23<, to ,entur' "ealt' and >e&elop)ent,orporation %hich* after securing T,T os. 34390 and 34391 therefor*)ortgaged the sa)e to re)iere >e&elop)ent Ban;* +nc. to secure a 2.5 illionloan.

ISSUE7 hether or not the )ortgage constituted in fa&or of re)iere >e&elop)entBan; %as &alid.

HELD7 ?. re)iere Ban; cannot (e accorded the status of an innocent )ortgageefor &alue visJvis the )ortgage of the lots constituted in its fa&or (' ,entur' "ealt'.re)iere Ban; acted in (ad faith (ecause despite the eistence of alleged Ushanties%hich are in fact and in truth (ig structures in the said lot re)iere Ban; proceededin the eecution of the )ortgage contract.

+f the land )ortgaged is in the possession of a person other than the)ortgagor* the )ortgagee is reuired to go (e'ond the certificate of title and )a;einuiries as to the rights of the actual possessors. -ailure to do so %ould )a;e hi) a)ortgagee in (ad faith and thus in&alidate the )ortgage.

MANU'L, Ma/ine

%1. DELA MERCED vs. GSISG.R. NO. 14*3('! SEPTEMBER 11! 2**1

YNARES)SANTIAGO! J.

FACTS7?n epte)(er 25* 1956* pouses Nulueta o(tained a loan fro) I+* as

securit' for %hich the' )ortgaged the lands co&ered (' T,T o. 26105 of the

Antonio u(di&ision illage %ith stipulation that certain lots %ithin T,T o. 26105

shall (e ecluded fro) the )ortgage (ecause the' ha&e (een either pre&iousl' sold

to third parties or donated to the go&ern)ent.

?n epte)(er 3* 1957* the Nulueta spouses eecuted a contract to sell%here(' the'. undertoo; to sell to -rancisco dela erced and H&arista endo!a lots

identified as Lots 6* 7* 8 and 10* Bloc; 2* Antonio u(di&ision co&ered (' T,T o.

26105. ?n ?cto(er 26* 1972* after full pa')ent (' ,ol. dela erced of the purchase

price* a >eed of A(solute ale %as eecuted (' the Nuluetas in his fa&or.

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?n ?cto(er 15* 1957* another loan %as etended (' I+ to the Nulueta

spouses* secured (' a )ortgage on the properties included in T,T os. 26105 and

50256 also %ithin the Antonio u(di&ision.

Dpon default of pouses Nulueta* I+ etraudiciall' foreclosed the)ortgage and %as a(le to acuire the )ortgaged propert'. pouses anlongatpurchased Lot 6* Bloc; 2 of Antonio illage fro) a pu(lic sale conducted (' I+.

etitioner ,ol. -rancisco dela erced instituted a ,i&il ,ase against I+and the spouses Nulueta* pra'ing* a)ong others* that the foreclosure sale of Lot 6*Bloc; 2 a)ong others (e declared null and &oid* since the )ortgage eecuted ('pouses Nulueta and I+* %as also &oid fro) the (eginning. etitioners a&er that%hen pouses Nulueta )ortgaged their propert' to I+ on ?cto(er 15* 1957* the'%ere no longer the o%ners of the lots su(ect of this litigation* the sa)e ha&ing (eensold to -rancisco dela erced (' &irtue of the contract to sell eecuted onepte)(er 3* 1957. Cence* the )ortgage %as &oid fro) its inception and Il* as)ortgagee* acuired no (etter right not%ithstanding the registration of the )ortgage.

"espondent )aintained that the lots (eing clai)ed (' petitioners %ereincluded in the real estate )ortgage eecuted (' the Nuluetas in fa&or of I+.hile pouses anlongat alleged that since -rancisco dela erced ne&er registeredthe contract to sell and deed of a(solute sale %ith the "egister of >eeds* the sa)ecannot affect the rights of third persons such as their daughter* Hli!a(eth anlongat*%ho dealt in good faith %ith I+ as the prior registered o%ner.

ISSUE7 hether the unregistered sale in fa&or of petitioners is superior to aregistered )ortgage in fa&or of respondents.

HELD7 es* etitioners@ rights of o%nership o&er the properties in dispute* al(eitunregistered* are superior to the registered )ortgage rights of I+ o&er the sa)e.The eecution and &alidit' of the contract to sell dated epte)(er 3* 1957 eecuted(' the Nulueta spouses* as the for)er su(di&ision o%ner* in fa&or of -rancisco delaerced* are (e'ond ca&il. There is also no dispute that the contract to sell %asentered into (' .the parties (efore the third )ortgage %as constituted on ?cto(er 15*1957 (' the Nuluetas in fa&or of I+ on the propert' co&ered (' T,T o. 26105*%hich included the su(ect lots. -rancisco dela erced %as a(le to full' pa' thepurchase price to the &endor* %ho later eecuted a deed of a(solute sale in his fa&or.Co%e&er* the Nuluetas defaulted on their loans hence* the )ortgage %as foreclosedand the properties %ere sold at pu(lic auction to I+ as the highest (idder.

"egistered )ortgage right o&er the propert' is inferior to that of unrecordedsale for the reason that if the original o%ner had parted %ith his o%nership of thething sold then he no longer had o%nership and free disposal of that thing so as to(e a(le to )ortgage it again. "egistration of the )ortgage is of no )o)ent since it isunderstood to (e %ithout preudice to the (etter right of third parties.

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Therefore* the registered right of I+ as )ortgagee of the propert' isinferior to the unregistered right of -rancisco dela erced. The unrecorded sale(et%een -rancisco dela erced as the &endee of* the propert' and the Nuluetas* theoriginal o%ners* is preferred for the sa)e reason stated a(o&e.

%2. NAVARRO vs. LAGUNA DEVELOPMENT BAN$G.R. NO. 12(42' FEBRUARY 2&! 2**3SANDOVAL)GUTIERREZ! J.

FACTS7 The late ,atalino a&arro and his %ife ,onsuelo Cernande! originall'o%ned Lot o. 1513<A. The' sold 56 of the unsegregated portion of the lot to their children* na)el'* Leticia* Hsther* Bena)in* Luciana and Leoni!a* all surna)eda&arro. B' &irtue of the sale* T,T o. 244200 %as issued in their na)es. pousesBena)in and "osita a&arro* herein petitioners* are listed therein as co<o%ners of the propert'.

ithout the ;no%ledge and consent of petitioners pouses Bena)in and"osita a&arro* spouses >onalito elasco and Hsther a&arro* conspiring %ith thelatters sister Luciana a&arro* eecuted a falsified >eed of A(solute ale %hereinthe' )ade it appear that the entire lot %as sold to said spouses elascofor 35*000.00. T,T o. 244200 %as thus cancelled and in lieu thereof* T,T o.114526 %as issued in the na)es of spouses elasco. u(seuentl'* the' )ortgagedthe propert' to respondent econd Laguna >e&elop)ent Ban; to secure pa')ent of a loan.

Dpon failure of spouses elasco to pa' their loan* respondent (an; had the)ortgage foreclosed. etitioners pouses Bena)in and "osita a&arro* introducing

the)sel&es as attorne's<in<fact of Hsther a&arro<elasco* %rote respondent (an;*offering to redee) the propert' for 450*000.00. Co%e&er* the' failed to do so.Cence* o%nership thereof %as consolidated in the na)e of respondent (an; under T,T o. 168230 issued.

etitioners filed a co)plaint against respondent (an; and spouses elascopra'ing for the #a$ annul)ent of the )ortgage #($ cancellation of T,T o. 168230 inthe na)e of respondent (an;.

+n their co)plaint* petitioners alleged that the sale of the lot %ith respect totheir 16 share is &oid a" initio considering that their signatures appearing in the>eed of A(solute ale %ere falsified. ,onseuentl'* the )ortgage contract in&ol&ingtheir share eecuted (' spouses elasco and respondent (an; is li;e%ise &oid.

ISSUE7 hether etitioners are estopped fro) uestioning the &alidit' of the)ortgage and its foreclosure.

HELD7 es* +t (ears reiterating that in their t%o letters to respondent (an; earlier )entioned* petitioners did not state that spouses elasco falsified their signaturesappearing in the >eed of A(solute ale. or did the' uestion the &alidit' of the

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)ortgage and its foreclosure. +ndeed* those letters could ha&e led respondent (an;to (elie&e that petitioners recogni!ed the &alidit' of the >eed of A(solute ale andthe )ortgage as %ell as its su(seuent foreclosure.

Article 1431 of the ,i&il ,ode states that through estoppel an ad)ission or representation is rendered conclusi&e upon the person )a;ing it* and cannot (edenied or dispro&ed as against the person rel'ing thereon.A person* %ho (' hisdeed or conduct has induced another to act in a particular )anner* is (arred fro)adopting an inconsistent position* attitude or course of conduct that there(' causesloss or inur' to another.

MOR'LO, Mi"helle

%3. URSAL VS. COURT OF APPEALSG.R. N. 142411! O</= 14! 2**#AUSTRIA)MARTINEZ! J.%

FACTS7 The spouses :esus and ,ristitaoneset #onesets$ are the registeredo%ners of a 333<suare )eter land together %ith a house thereon situated at itioLaguna* Basa;* ,e(u ,it'. ?n :anuar' 9* 1985* the' eecuted a J,ontract to ellLot P CouseK in fa&or of petitioner inifredaDrsal. After pa'ing si )onthl'install)ents* petitioner stopped pa'ing due to the onesets failure to deli&er to her the transfer certificate of title of the propert' as per their agree)ent and (ecause of the failure of the onesets to turn o&er said title* petitioner failed to ha&e the contractof sale annotated thereon.Dn;no%n to petitioner* the onesets eecuted ono&e)(er 5* 1985 an a(solute deed of sale in fa&or of >r. "afael ,anora* :r. o&er the said propert' for 14*000.00.

?n epte)(er 15* 1986* the onesets eecuted another sale* this ti)e%ith pacto de retro %ith "estitutoBundalo.?n the sa)e da'* Bundalo* as attorne'<in<fact of the onesets* eecuted a real estate )ortgage o&er said propert' %ith "uralBan; of Larena #hereafter Ban;$ located in iuior for the a)ountof 100*000.00.-or the failure of the onesets to pa' the loan* the Ban; ser&ed anotice of etraudicial foreclosure dated :anuar' 27* 1988 on Bundalo. Drsal filed anaction for declaration of non<effecti&it' of )ortgage and da)ages against theonesets* Bundalo and the Ban; due to fraud and (ad faith in )ortgaging thepropert'.

ISSUE7 hether the Ban; failed to loo; (e'ond the transfer certificate of title of the

propert' for %hich it )ust (e held lia(le

HELD7 e agree. Ban;s cannot )erel' rel' on certificates of title in ascertaining thestatus of )ortgaged properties as their (usiness is i)pressed %ith pu(lic interest*the' are epected to eercise )ore care and prudence in their dealings than pri&ateindi&iduals. +ndeed* the rule that persons dealing %ith registered lands can rel' solel'on the certificate of title does not appl' to (an;s.etitioners rights %ere li)ited toas;ing for specific perfor)ance and da)ages fro) the onesets. pecific

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perfor)ance* ho%e&er* is no longer feasi(le at this point as eplained a(o&e. This(eing the case* it follo%s that petitioner ne&er had an' cause of action againstrespondent Ban;. Ca&ing no cause of action against the (an; and not (eing ano%ner of the su(ect propert'* petitioner is not entitled to redee) the su(ectpropert'.

%4. RIZAL COMMERCIAL BAN$ING CORPORATION VS. COURT OFAPPEALSG.R. N. 12''%%! A>8 2*! 1(('MELO! J.7

FACTS7 I?D applied for credit facilities and acco))odations %ith ",B, at itsBinondo Branch. A credit facilit' in the a)ount of 30 )illion %as initiall'granted. Dpon I?Ds application and D's and Laos reco))endation* ",B,seecuti&e co))ittee increased I?Ds credit facilit' to 50 )illion* then to 90)illion* and finall' to 117 )illion.As securit' for its credit facilities %ith ",B,*

I?D eecuted t%o real estate )ortgages and t%o chattel )ortgages in fa&or of ",B,* %hich %ere registered %ith the "egistr' of >eeds at alen!uela* etroanila. I?D o(tained in its na)e a total of ten insurance policies fro) +,?. ?n

April 27* 1992* one of I?Ds factor' (uildings in alen!uela %as gutted (' fireandit clai)ed inde)nit' fro) +,? (ut the latter denied the clai) on the ground that theinsurance policies %ere either attached pursuant to %rits of attach)entsgarnish)ents issued (' &arious courts or that the proceeds %ere alsoclai)ed (' other creditors of I?D. I?D* alleging (etter rights to the proceeds*filed for specific perfor)ance and da)ges (efore the "T, of anila. The trial courtruled in fa&or of I?D for the fire loss clai)s (ut ordered it to pa' ",B, its loano(ligations. ?n appeal to the ,A* it affir)ed the ruling %ith regard to the lia(ilities of

+,? and ",B,. The trial court and appellate courts (oth held that* since theendorse)ents do not (ear the signature of an' officer of I?D* the' concluded thatthe endorse)ents are defecti&e. The ,A then ordered I?D to pa' its o(ligation to",B, %ithout an' interest* surcharges and penalties.

ISSUE7 hether ",B,* as )ortgagee* has an' right o&er the insurance policiesta;en (' I?D* the )ortgagor* in case of the occurrence of loss.

HELD7 RCBC 0+s + 60/ v /0 ,s5+,< ><-s.+t is settled that a)ortgagor and a )ortgagee ha&e separate and distinct insura(le interests in thesa)e )ortgaged propert'* such that each one of the) )a' insure the sa)e propert'for his o%n sole (enefit. There is no uestion that I?D could insure the

)ortgaged propert' for its o%n eclusi&e (enefit. +n the present case* although itappears that I?D o(tained the su(ect insurance policies na)ing itself as the solepa'ee* the intentions of the parties as sho%n (' their conte)poraneous acts* )ust(e gi&en due consideration in order to (etter ser&e the interest of ustice and euit'.

To per)it I?D to capitali!e on its non<confir)ation of these endorse)ents%hile it continued to eno' the (enefits of the credit facilities of ",B, %hich (elie&edin good faith that there %as due endorse)ent pursuant to their )ortgage contracts*

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is to countenance gra&e contra&ention of pu(lic polic'* fair dealing* good faith* and ustice. uch an unust situation* the ,ourt cannot sanction. Dnder the peculiar circu)stances o(taining in this case* the ,ourt is (ound to recogni!e ",B,s rightto the proceeds of the insurance policies if not for the actual endorse)ent of thepolicies* at least on the (asis of the euita(le principle of estoppel.

MUPA, Janelle

%#. RAMIREZ vs. COURT OF APPEALSG.R. NO. 133'41! AUGUST 1#! 2**3CARPIO)MORALES! J.

FACTS7 ri&ate respondents spouses Loreto ,lara&all and ictoria ,lara&alleecuted a deed of sale in fa&or of the spouses -rancisco "a)ire!* :r. and ,arolina"a)ire! co&ering a parcel of land %ith an option to repurchase the propert' %ithin aperiod of t%o 'ears. At the epiration of the t%o<'ear period* the ,lara&alls failed toredee) the propert'* pro)pting the) to file a co)plaint against the spouses

"a)ire! to co)pel the latter to sell the propert' (ac; to the). After trial* udg)ent%as rendered in fa&or of the spouses "a)ire! %hich %as* on appeal* affir)ed (' the,ourt of Appeals. ?n re&ie%* ho%e&er* this ,ourt* finding that the >eed of A(soluteale %ith option to repurchase eecuted %as one of euita(le )ortgage* re&ersedthe decision. -ollo%ing the death of -rancisco "a)ire!* :r.* pri&ate respondents fileda co)plaint for accounting and da)ages against herein petitioners.

etitioners alleged that the co)plaint does not state a cause of action sinceprior to the date %hen rede)ption %as to (e effected* the registered o%ners of thepropert' %ere the spouses "a)ire! %ho %ere entitled to the rentals and fruitsthereof.

ISSUE7 hether petitioners contention that the' o%n the su(ect propert' is correct.

HELD7The fla% in petitioners argu)ent ste)s fro) their su()ission that thespouses "a)ire!* as J&endees*K %ere the o%ners of the propert' after it %asregistered in their na)es follo%ing the eecution of the deed of sale in their fa&or.The declaration* ho%e&er* (' this ,ourt in the first case that the deed of sale %ithoption to repurchase entered into (' the spouses "a)ire! and pri&ate respondents%as an euita(le )ortgage necessaril' ta;es the deed out of the a)(it of the la% onsales and puts into operation the la% on )ortgage. +t is a %ell<esta(lished doctrinethat the )ortgagors default does not operate to &est the )ortgagee the o%nership of the encu)(ered propert' and the act of the )ortgagee in registering the )ortgaged

propert' in his o%n na)e upon the )ortgagors failure to redee) the propert'a)ounts to pactumcommissorium* a forfeiture clause declared (' this ,ourt ascontrar' to good )orals and pu(lic polic' and* therefore* &oid. Before perfect titleo&er a )ortgaged propert' )a' thus (e secured (' the )ortgagee* he )ust* in caseof non<pa')ent of the de(t* foreclose the )ortgage first and thereafter purchase the)ortgaged propert' at the foreclosure sale.

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%%. PRUDENTIAL BAN$ vs. ALVIARG.R. NO. 1#*1(&! JULY 2'! 2**#TINGA! J.

FACTS7 ?n :ul' 1975* psAl&iar eecuted a "eal Hstate ortgage in fa&or of rudential Ban;. The )ortgage %as registered and secures the pa')ent of the 250;loan and those that )a' hereafter (e o(tained (' the ortgagor. ?n ?cto(er 1976*>on Al&iar eecuted a pro)issor' note #$ for 2.64. This %as secured (' aJhold outK on his foreign currenc' A %ith the (an;. ?n >ece)(er 1976* the pseecuted for >onalco Trading* as resident,hair)an of the Board* and * another %orth 545;. The loan %as secured (' J,lean< hase out Te)porar' ?&erdraft#T?>$K. ?n arch 1977* Ban; infor)ed >onalco of the appro&al of the loan* %hich%ill (e used to liuidate the o&erdraft. This loan %as secured (' >eeds of assign)ent on t%o eecuted (' Banco) "ealt' and the chattel )ortgage on&arious hea&' and transpo euip)ent. ?n arch 1979* the ps paid the Ban; 2 to(e applied to the o(ligations of Al&iar "ealt'* and for the release of the "H for the450; . The Ban; accepted the pa')ent and released the )ortgage. ?n

:anuar' 1980* the Ban; )o&ed for etraudicial foreclosure of the )ortgage due tothe total unpaid o(ligation of 1.6 on the 3 s. "esp. ps the foreclosure isunla%ful since the' had alread' paid the loan that %as secured (' the "H

etitioner Ban; contends that the pa')ent %as for Al&iar "ealt' and not for the 450; and that the (lan;et )ortgage clause or Jdragnet clauseK co&ers notonl' the 250; loan (ut all su(seuent loans o(tained (' the ps* therefore theforeclosure %as &alid. The ps on the other hand contends that the dragnet clausecannot (e applied (ecause the s %ere secured (' different for)s of securit'

ISSUE7 ? real estate )ortgage secures onl' the first loan of 250*000.

HELD7T%o schools of thoughtM #1$ >ragnet clause co&er all de(ts* including futureones #2$ it %ill not secure a note that is separatel' co&ered (' another securit'. The, chose the 2nd school of thought. +t held that dragnet clauses are entered into %ithan i)plied understanding that su(seuent loans need not (e secured (' other securities* as said loans %ill (e secured (' the first )ortgage. The court held that thefirst securit' #dragnet$ is a continuing offer (' the (orro%er to secure future loans*and %hen the lender accepts a different securit'* then he did not accept the offer.The 1st and 2nd s %ere secured (' different securities. 1st (' the (lan;et)ortgage in uestion* and the 2nd (' the foreign currenc' sa&ings account.

The foreclosure of the "H should onl' (e for the 250; loan. +t can onl' (e

foreclosed as to the 2nd

note if the proceeds of the -,A that secures it is notenough to co&er the 2nd loan.

PA+ILLA, )sa0el Jean

%&. UNION BAN$ OF THE PHILIPPINES vs. HON. COURT OF APPEALSG.R. NO. 1%4(1*! SEPTEMBER 3*! 2**#

YNARES)SANTIAGO! J.

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FACTSM >"ossa +ncorporated #>"+$ agreed to )ortgage its parcels of land in fa&or of Dnion Ban; of the hilippines #Dnion Ban;$ as securit' for the credit facilit' of :osephine arine Trading ,orporation #:T,$. :T, a&ailed 3 )illion fro) thecredit line.

u(seuentl'* Dnion Ban; increased the credit facilit' of :T, to 27 )illion* fro)%hich :T, a&ailed of a(out 18 )illion. Dpon :T,s failure to pa' its o(ligation*Dnion Ban; instituted foreclosure proceedings on >"+s properties. >"+s properties%ere auctioned %here Dnion Ban; %as declared the highest (idder for 15*300*000.00.

Thereafter* >"+ filed a supple)ental co)plaint see;ing to declare the pu(licsale as null. +t clai)ed that its lia(ilit' is onl' 3 )illion %hich %as the lia(ilit'incurred (' :T, under its first agree)ent %ith Dnion Ban;. Co%e&er* Dnion Ban;alleged that >"+ %as lia(le to :T,s total outstanding o(ligations* regardless of %hether it %as incurred during or su(seuent to the first agree)ent.

The "T, dis)issed the co)plaint for lac; of )erit. ?n appeal* the ,Are&ersed said decision. hile it upheld Dnion Ban;s right to foreclose* it found that>"+s )ortgage lia(ilit' is pegged at 3 )illion and %hich %as later a)ended andincreased to 8.61 )illion. +t ruled that >"+ could not (e held lia(le for )ore than8.61 )illion e&en if :T, a&ailed )ore than this a)ount.

ISSUEM hether the lia(ilit' of >"+ is li)ited onl' to 8.61 )illion.

HELDM o. The pertinent pro&isions of the "eal Hstate ortgage pro&ide the partiesintent to constitute >"+s real estate properties as continuing securities* lia(le for thecurrent as %ell as the future o(ligations of :T,. +ndeed* a )ortgage lia(ilit' is

usuall' li)ited to the a)ount )entioned in the contract* (ut %here the intent of thecontracting parties is )anifest that the )ortgage propert' shall also ans%er for futureloans or ad&ance)ents* the sa)e is &alid and (inding (et%een the parties. This is%hat the , referred to as J(lan;et )ortgage clauseK or Jdragnet clauseK. AJ(lan;et )ortgage clause*K also ;no%n as a Jdragnet clauseK in A)erican

urisprudence* is one %hich is specificall' phrased to su(su)e all de(ts of past or future origins.

+n this case* >"+ epressl' agreed to secure all the o(ligations of :T,*%hether presentl' o%ing or su(seuentl' incurred. Thus* its lia(ilit' is not li)ited to8.61 )illion onl'. H&en if >"+ is considered as an acco))odation )ortgagor onl'*

its lia(ilit' %ould still eceed 8.61 )illion.

%'. DAVID MAGLAUE vs. PLANTERS DEVELOPMENT BAN$G.R. NO. 1*(4&2. MAY 1'! 1(((PARDO! J.

FACTSM The spouses Hg)idioaglaue and a(ina a'a%al %ere the o%ners of aparcel of land* situated in an iguel Bulacan. ?n arch 1974* the spouses

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aglaue o(tained a loan of 2*000 fro) the Bulacan >e&elop)ent Ban; e&idenced(' a pro)issor' note* pa'a(le on or (efore arch 19* 1975* in t%o install)ents* thefirst pa')ent of 1*000.00* shall (e due on epte)(er 19* 1974* and the secondpa')ent of 1*000.00* shall (e due on arch 19* 1975* %ith interest at 12/ per annu). To secure the loan* the spouses eecuted a deed of real estate )ortgage onsaid land* including its i)pro&e)ents.

?n epte)(er that sa)e 'ear* a(ina a'a%al died. ?n >ece)(er 1977*Hg)idioaglaue paid lanters >e&elop)ent Ban; the a)ount of 2*000.00* %hichthe (an; accepted. ?n April 9* 1979* Hg)idioaglaue died.

?n epte)(er 15* 1978* for non<pa')ent in full of the loan* the (an; etra< udiciall' foreclosed on the real estate )ortgage. The (an; %as the highest (idder. After the lapse of the rede)ption period* the (an; consolidated its title to thepropert' and (eca)e its registered o%ner. ean%hile* >a&id aglaue* as heir of the deceased spouses filed %ith the ,-+ ofBulacan a co)plaint for annul)ent of thesale conducted (' the ro&incial heriff of Bulacan* recon&e'ance of title* %ith

da)ages* and inunction. The "T, and the ,A (oth dis)issed the co)plaint for lac;of )erit.

ISSUEM hether the Ban; should ha&e filed its clai) in the settle)ent of estate of the deceased )ortgagors.

HELDM ?. According to "ule 86* ection 7 of the "e&ised "ules of ,ourt* the rule isthat a secured creditor holding a real estate )ortgage has 3 options in case of deathof the de(tor. These areM

#l$ to %ai&e the )ortgage and clai) the entire de(t fro) the estate of the)ortgagor as an ordinar' clai)#2$ to foreclose the )ortgage udiciall' and pro&e an' deficienc' as an

ordinar' clai) and#3$ to rel' on the )ortgage eclusi&el'* foreclosing the sa)e at an'ti)e(efore it is (arred (' prescription* %ithout right to file a clai) for an'deficienc'.

?(&iousl'* respondent (an; a&ailed itself of the third option. Thus* the ,affir)s in full the appealed decision.

PANGANIBAN, Muriel Ielaine B.

%(. NORTHERN MOTORS! INC. vs. COUIA

G.R. NO. L)4**1'! DECEMBER 1#! 1(&#AUINO! J.

FACTS7 A otion for "econsideration of the ,ourt@s "esolution holding that the lienof orthern otors* +nc.* as chattel )ortgagee* o&er certain taica(s is superior tothe le&' )ade on the said ca(s (' respondent Conesto ?ng* the assignee of theunsecured udg)ent creditor of the chattel )ortgagor* anila ello% Taica( ,o.*+nc. ?ng in&o;es his supposed legal and euit' status visavis the )ortgagedtaica(s. Ce also contends that his sole recourse %as to le&' upon the taica(s

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%hich %ere in the possession of the udg)ent<de(tor anila ello% Taica( ,o.*%hile orthern otors* +nc.* as unpaid seller and )ortgagee* still has anindependent legal re)ed' to reco&er the unpaid (alance of the price against the)ortgagor.

-urther)ore* ?ng ad)its that the )ortgagee@s right to the )ortgagedpropert' is superior to that of the udg)ent creditor* (ut he contends that the rightsof the purchasers of the cars at the eecution sale should (e respected. Ce reasonsout the' %ere not parties to the )ortgage and that the' acuired the cars prior to the)ortgagee@s assertion of its rights thereto.

ISSUE7 hether respondent ?ng has the right to le&' upon the )ortgaged taica(s=

HELD7 o. The essence of the chattel )ortgage is that the )ortgaged chattelsshould ans%er for the )ortgage credit and not for the udg)ent credit of the)ortgagor@s unsecured creditor. The )ortgagee is not o(ligated to file anindependent action for the enforce)ent of his credit. To reuire hi) to do so %ould

(e a nullification of his lien and %ould defeat the purpose of the chattel )ortgage%hich is to gi&e hi) preference o&er the )ortgaged chattels for the satisfaction of hiscredit. "espondent ?ng@s proposition is de&oid of an' legal sanction and is glaringl'contrar' to the nature of a chattel )ortgage. To uphold that contention is to destro'the essence of chattel )ortgage as a para)ount encu)(rance on the )ortgagedchattel.

The other argu)ent raised (' respondent ?ng is also untena(le. The third<part' clai) filed (' orthern otors* +nc. should ha&e alerted the purchasers to theris; %hich the' %ere ta;ing %hen the' too; part in the auction sale. oreo&er* at aneecution sale the (u'ers acuire onl' the right of the udg)ent<de(tor %hich in thiscase %as a )ere right or euit' of rede)ption. The sale did not etinguish the pre<

eisting )ortgage lien.

Thus* the ,ourt denied the otion for "econsideration filed (' ?ng and theheriff of anila.

&*. PNB vs. RBL ENTERPRISES! INC.G.R. NO. 14(#%(! MAY 2'. 2**4PANGANIBAN! J.

FACTS7 o)eti)e in 1987* respondents opened a pra%n hatcher' in an Hnriue*

egros ?ccidental and for this purpose* leased fro) ell' Bedreo a parcel of land%here the operations %ere conducted. +n order to increase productions and i)pro&ethe hatcher' facilities* respondents applied for and %as appro&ed a loan of 2*000*000.00* (' petitioner B. To secure its pa')ent* a real estate )ortgageo&er 2 parcels of land and another real estate and chattel )ortgage o&er the(uildings* culture tan;s and other hatcher' facilities located in the leased propert' of ell' Bedreo* %ere eecuted (' the respondents in fa&or of B. B partiall'release on se&eral dates a total su) of 1*000*000 less the ad&ance interests.Co%e&er* during the )id<part of the construction of the i)pro&e)ents* B refused

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to release the (alance allegedl' (ecause respondents failed to co)pl' %ith the(an;s reuire)ent that ell' Bedreo should eecute an underta;ing or a Ulessorsconfor)it' pro&ided in "eal Hstate and ,hattel ortgage contract. The saidunderta;ing states that +t is a condition of this )ortgage that %hile the o(ligationsre)ained unpaid* the acuisition (' the lessor of the per)anent i)pro&e)entsco&ered (' this "eal Hstate ortgage as pro&ided for in the co&ering Lease,ontract* shall (e su(ect to this )ortgage. -or this purpose* the )ortgagor here('underta;es to secure the lessors confor)it' hereto. -or the alleged failure on thepart of the respondents* B foreclosed the )ortgaged properties.

Thereafter* respondents instituted an action against B. etitioner B filedits Ans%er %ith ,ounterclai) alleging that the lessor@s confor)it' %as not anadditional reuire)ent (ut %as alread' part of the ter)s and conditions contained inthe "eal Hstate and ,hattel ortgage contract and that the release of the (alance of the loan %as conditioned on the co)pliance and su()ission of the reuired lessorsconfor)it'.

ISSUE7 hether the non<release of the (alance of the loan (' petitioner B is ustified=

HELD7 o. B@s contention that the lessors signature in the conforme portion of the "eal Hstate and ,hattel ortgage ,ontract %as a condition precedent to therelease of the (alance of the loan to respondents is not persuasi&e. +f the partiestrul' intended to suspend the release of the 1*000*000 (alance of the loan until thelessors confor)it' to the ortgage ,ontract %ould ha&e (een o(tained* suchcondition should ha&e (een plainl' stipulated either in that ,ontract or in the ,redit

Agree)ent. The tenor of the language used pro&ision on the contract* as %ell as itsposition relati&e to the %hole ,ontract* negated the supposed intention to )a;e therelease of the loan su(ect to the fulfill)ent of the clause. o%here did B eplicitl'

state that the release of the second half of the loan acco))odation %as su(ect tothe )ortgagors procure)ent of the lessors confor)it' to the ortgage ,ontract.

A(sent such a condition* the efficac' of the ,redit Agree)ent stood* and petitioner %as o(ligated to release the (alance of the loan. +ts refusal to do so constituted a(reach of its reciprocal o(ligation under the Loan Agree)ent.

R'!AL+', Al0er#o Jr., +.

&1. PAMECA WOOD TREATMENT PLANT! INC vs. COURT OF APPEALS +,-DBPG.R. NO. 1*%43#. JULY 14! 1(((

GONZAGA)REYES! J.

FACTS7 PAMECA loaned 2*000*000.00 fro) respondent Ban;. AH,A* throughits resident Te&es* eecuted a pro)issor' notepro)ising to pa' the loan ('install)ent. A chattel )ortgage consisting of in&entories* furniture and euip)ent*%as )ade to co&er the loan. Dpon default* the Ban; etraudiciall' foreclosed thechattel )ortgage and purchased the sa)e for 322*350.00. "espondent (an; filed aco)plaint for the collection of the (alance of 4*366*332.46 against petitioner

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AH,A and pri&ate petitioners herein* as solidar' de(tors %ith AH,A under thepro)issor' note. The "T,* affir)ed (' the ,A ordered that the plaintiffs pa' thea)ounts pra'ed for. The' also in&o;e that Art. 2015 applies in the case at (ar in thatdeficiencies and ecesses in auction sales of thing pledged can no longer (ereco&ered as it applies to chattel )ortgage as %ell.

ISSUE7 hether deficiencies can (e reco&ered (' the (an; in a ,hattel ortgagesale.

HELD7 H. +n pledge* the sale of the thing pledged etinguishes the entire principalo(ligation* such that the pledgor )a' no longer reco&er proceeds of the sale inecess of the a)ount of the principal o(ligation. The ,hattel ortgage La%epressl' entitles the )ortgagor to the (alance of the proceeds* upon satisfaction of the principal o(ligation and costs. ince the ,hattel ortgage La% (ars the creditor<)ortgagee fro) retaining the ecess of the sale proceeds there is a corollar'o(ligation on the part of the de(tor<)ortgagee to pa' the deficienc' in case of areduction in the price at pu(lic auction.The lo%er court o&erloo;ed the fact that the

chattels included in the chattel )ortgage are onl' gi&en as securit' and not as apa')ent of the de(t* in case of a failure of pa')ent.

The theor' of the lo%er court %ould lead to the a(surd conclusion that if thechattels )entioned in the )ortgage* gi&en as securit'* should sell for )ore than thea)ount of the inde(tedness secured* that the creditor %ould (e entitled to the fulla)ount for %hich it )ight (e sold* e&en though that a)ount %as greatl' in ecess of the inde(tedness.

Lastl'* the language of the note as signed (' the petitioners sho% that pri&atepetitioners intended to (ind the)sel&es solidaril' as co<)a;ers %ith petitioner AH,A in the loan.

&2. DIZON vs. GABORROG.R. NO. L)3%'21! JUNE 22! 1(&'GUERRERO! J.

FACTS7:ose >i!on %as the o%ner three parcels of land. To secure a loan of 38*000.00 to >B and 93*831.91 to B* he constituted a first and second)ortgage lien o&er the sa)e parcels. Dpon default* the lands %ere etraudiciall'foreclosed in 1959. After that* Ia(orro and >i!on )ade a @>eed of ale %ith

Assu)ption of ortgage@ for 131*831.91. A second contract called J?ption tourchase "eal HstateK %as eecuted the sa)e da'. The said contract ga&e >i!onthe option to repurchase said parcels %ithin 5 'ears. >i!on assigned his right of rede)ption to Ia(orro.

+n 1961* >i!on %rote a letter to Ia(orro* offering to rei)(urse Ia(orro of %hat he paid to the (an;s (ut %ithout tendering an' cash* and de)anding anaccounting of the inco)e and of the propert'* contending that the transaction the'entered into %as one of antichresis. Ia(orro did not accede to the de)ands. +n1962* >i!on sued Ia(orro alleging that the docu)ents >eed of ale ith

Assu)ption of ortgage and the ?ption to urchase "eal Hstate did not epress the

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true intention and agree)ent (et%een the parties that their real agree)ent %as notan a(solute sale of the said parcels of land (ut )erel' an euita(le )ortgage. >Bcontended that (' ?cto(er 1959* >i!on %as not the o%ner (ut onl' had a right of rede)ption to the lands. The trial court and the ,ourt of Appeals held that suchcontract %as an a(solute sale.

ISSUE7 hether the @>eed of ale %ith Assu)ption of ortgage@* and ?ption tourchase "eal Hstate is an a(solute sale or an euita(le )ortgage.

HELD7o. uch an instru)ent cannot (e legall' considered a real andunconditional sale of the parcels of land (ecause there %as a(solutel' no )one'consideration A> (ecause the properties had alread' (een pre&iousl' sold at aforeclosure sale di&esting the petitioner of his right to o%nership. The onl' legaleffect of this ?ption >eed is to grant >i!on the right to reco&er the properties uponrei)(ursing Ia(orro of the total su)s of )one' that he )a' ha&e paid to >B andB on account of the )ortgage de(ts* the said right to (e eercised %ithin thestipulated 5 'ears period.

The agree)ent (et%een >i!on and Ia(orro s one of those inno)inatecontracts under Art. 1307 of the e% ,i&il ,ode (ut parta;ing of the nature of theantichresis insofar as the principal parties are concerned. "efor)ation of thecontract is there(' called for. :urisprudence is to the effect that the purchaser of landsold at pu(lic auction under a %rit of eecution onl' has an inchoate right in thepropert'* su(ect to (e defeated and ter)inated %ithin the period of 12 )onths fro)the date of sale* (' a rede)ption on the part of the o%ner. Therefore* the udg)entde(tor in possession of the propert' is entitled to re)ain therein during the periodallo%ed for rede)ption.

A udg)ent de(tor* %hose propert' is )a' transfer his right of rede)ption to

an' one %ho) he )a' desire. The right to redee) land sold under eecution %ithin12 )onths is a propert' right and )a' (e sold &oluntaril' (' its o%ner and )a' also(e attached and sold under eecution.

R'!'NO, Pia Mi#1i

&3. BARRETTO vs. VILLANUEVAG.R. N. L)14(3' DECEMBER 2(! 1(%2REYES! J.B.L.! J.7

FACTSM "osario )ortgaged the propert' to the "eha(ilitation -inance ,orporation#"-,$ to secure repa')ent of a loan of 11*000* in install)ents* (ut that the de(tor failed to pa' so)e of the install)ent %here the "-,* on 24 August 1949* foreclosedthe )ortgage* and acuired the propert'* su(ect to the de(tors right to redee) or repurchase the said propert' and that on 25 epte)(er 1950* the "-, consolidatedits o%nership* and the certificate of title of the ,ru!ados %as cancelled and a ne%certificate issued in the na)e of the "-,.

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hile on 26 :ul' 1951 the "-, did eecute a deed selling (ac; the propert'to the erst%hile )ortgagors and for)er o%ners ,ru!ados in install)ents* su(ect tothe condition #a)ong others$ that the title to the propert' and its i)pro&e)ents shallre)ain in the na)e of the ,orporation #"-,$ until after said purchase price*ad&ances and interest shall ha&e (een full' paid* as of 27 epte)(er 1952*,ru!ado had onl' paid a total of 1*360* and had defaulted on si )onthl'a)orti!ations for %hich reason the "-, rescinded the sale* and forfeited thepa')ents )ade* in accordance %ith the ter)s of the contract of 26 :ul' 1951.

ean%hile* on 10 arch 1953 that the ,ru!ados sold to ura L. illanue&a alltheir rights* title* interest and do)inion on and o&er the propert'* lot* house* andi)pro&e)ents for 19*000.00* the (u'er underta;ing to assu)e pa')ent of theo(ligation to the "-,. Co%e&er* the (u'er could onl' pa' 5*500 on account of thenote* for %hich reason the &endor o(tained udg)ent for the unpaid (alance. +n the)eanti)e* the (u'er illanue&a %as a(le to secure a clean certificate of title #o.32526$* and )ortgaged the propert' to appellant agdalena Barretto to secure aloan of 30*000.03* said )ortgage ha&ing (een dul' recorded.

ura illanue&a defaulted on the )ortgage loan in fa&or of Barretto. The latter foreclosed the )ortgage in her fa&or* o(tained udg)ent* and upon its (eco)ing finalas;ed for eecution on 31 :ul' 1958. ?n 14 August 1958* ,ru!ado filed a )otion for recognition for her &endor@s lien in the a)ount of 12*000.00 plus legal interest*in&o;ing Articles 2242* 2243* and 2249 of the ne% ,i&il ,ode. After hearing* the court(elo% ordered the lien annotated on the (ac; of ,ertificate of Title o. 32526* %iththe pro&iso that in case of sale under the foreclosure decree the &endor@s lien andthe )ortgage credit of appellant Barretto should (e paid pro rata fro) the proceeds

ISSUE7 hether or not their right as )ortgagees #Barettos$ re)ain superior to theunrecorded clai) of herein appellee #,ru!ado$ for the (alance of the purchase price

of her rights* title* and interest in the )ortgaged propert'.

HELD7 The right of the )ortgagees #Barrettos$ re)ain superior. +t is clear fro) thefacts a(o&e<stated that o%nership of the propert' had passed to the "eha(ilitation-inance ,orporation since 1950* %hen it consolidated its purchase at the foreclosuresale and o(tained a certificate of title in its corporate na)e. The su(seuent contractof resale in fa&or of the ,ru!ados did not re&est o%nership in the)* since the' failedto co)pl' %ith its ter)s and conditions* and the contract itself pro&ided that the titleshould re)ain in the na)e of the "-, until the price %as full' paid.

Therefore* %hen after defaulting in their pa')ents due under the resale

contract %ith the "-, the appellant ,ru!ados sold to illanue&a their rights* title*interest and do)inion to the propert'* the' )erel' assign %hate&er rights or clai)sthe' )ight still ha&e thereto the o%nership of the propert' rested %ith the "-,. Thesale fro) ,ru!ado to illanue&a* therefore* %as not )uch a sale of the land and itsi)pro&e)ents as it %as a uitclai) deed in fa&or of illanue&a. +n la%* operati&e sale%as that fro) the "-, to the latter* and it %as the "-, that should (e regarded asthe true &endor of the propert'. At the )ost* the ,ru!ados transferred to illanue&aan option to acuire the propert'* (ut not the propert' itself* and their credit*

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therefore* can not legall' constitute a &endor@s lien on the corpus of the propert' thatshould stand on an eual footing %ith )ortgaged credit held (' appellants Barretto.

&4. PHILIPPINE SAVINGS BAN$ vs. LANTING.R. N. L)33(2(. S>/?= 2! 1('3P,,/

FACTS7 +n&ol&ed in this case is a duple<apart)ent house on a lot co&ered (' T,To. 86195 situated at an >iego treet* a)paloc* anila* and o%ned (' thespouses -ilo)eno and ocorro Ta(ligan.The duple<apart)ent house %as (uilt for the spouses (' pri&ate respondent ,andido "a)os* a dul' licensed architect and(uilding contractor* at a total cost of 32*927.00. The spouses paid pri&aterespondent the su) of 7*139.00 onl'. Cence* the latter used his o%n )one'*25*788.50 in all* to finish the construction of the duple<apart)ent.

ean%hile* on >ece)(er 16* 1966* -e(ruar' 1* 1967* and -e(ruar' 28*

1967* the spouses Ta(ligan o(tained fro) petitioner hilippine a&ings Ban; three#3$ loans in the total a)ount of 35*000.00* the purpose of %hich %as to co)pletethe construction of the duple<apart)ent. To secure pa')ent of the loans* thespouses eecuted in fa&or of the petitioner three #3$ pro)issor' notes and three #3$deeds of real estate )ortgages o&er the propert' su(ect )atter of this litigation. Alldeeds of )ortgages eecuted %ere dul' registered.

The spouses failed to pa' their )onthl' a)orti!ations. As a result thereof* thepetitioner (an; foreclosed the )ortgages* and at the pu(lic auction held on :ul' 23*1969* %as the highest (idder.Dpon the other hand* the pri&ate respondent filed anaction against the spouses to collect the unpaid cost of the construction of theduple<apart)ent (efore the ,ourt of -irst +nstance of anila. >uring its pendenc'*

the pri&ate respondent succeeded in o(taining the issuance of a %rit of preli)inar'attach)ent* and pursuant thereto* had the propert' in uestion attached.,onseuentl'* a notice of ad&erse clai) %as annotated at the (ac; of Transfer ,ertificate of Title o. 86195.

?n August 26* 1968* a decision %as rendered in ,i&il ,ase o. 69228 infa&or of the pri&ate respondent and against the spouses. A %rit of eecution %asaccordingl' issued (ut %as returned unsatisfied.

As the spouses did not ha&e an' properties to satisf' the udg)ent in ,i&il,ase o. 69228* the pri&ate respondent addressed a letter to the petitioner for the

deli&er' to hi) #pri&ate respondent$ of his pro<rata share in the &alue of the duple<apart)ent in accordance %ith Article 2242 of the ,i&il ,ode. The petitioner refused topa' the pro<rata &alue pro)pting the pri&ate respondent to file the instant action.

ISSUE7 hether or not the pri&ate respondent is entitled to clai) a pro<rata share inthe &alue of the propert' in uestion.

HELD7 The pri&ate respondents clai) )ust re)ain su(ordinate to the petitioner (an;s title o&er the propert' e&idenced (' T,T o. 101864. +n the case at (ar*

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although the lo%er court found that there %ere no ;no%n creditors other than theplaintiff and the defendant herein* this cannot (e conclusi&e. +t %ill not (ar other creditors in the e&ent the' sho% up and present their clai)s tate petitioner (an;*clai)ing that the' also ha&e preferred liens against the propert' in&ol&ed.,onseuentl'* Transfer ,ertificate of Title o. 101864 issued in fa&or of the (an;%hich is supposed to (e indefeasi(le %ould re)ain constantl' unsta(le anduestiona(le. uch could not ha&e (een the intention of Article 2243 of the ,i&il,ode although it considers clai)s and credits under Article 2242 as statutor' liens.either does the >e Barreto case sanction such insta(ilit'. +n fact* an annotation* assuggested a(o&e* %ould insure to the (enefit of the pu(lic* particularl' those %ho)a' su(seuentl' %ish to (u' the propert' in uestion or %ho ha&e a (usinesstransaction in connection there%ith. +t %ould facilitate the enforce)ent of a legalstatutor' right %hich cannot (e (arred (' laches #ee anila "ailroad ,o. &. Lu!onte&edoring ,o.* 100 hil. 135$.

Dnder the >e Barreto decision* the full application of Articles 2242 and 2249de)ands that there )ust first (e so)e proceeding %here the class of all thepreferred creditors )a' (e (indingl' adudicated* such as insol&enc'* the settle)ent

of a decedents estate under "ule 87 of the "ules of ,ourt* or other liuidationproceedings of si)ilar i)port.

RUTOR, L&n$on

&#. A.C. RANSOM LABOR UNION)CCLU vs. NLRCG.R. N. L)%(4(4 M+9 2(! 1('&MELENCIO)HERRERA! J.

FACTS7+n t%o pre&ious ,+" cases* A, "A? ,orporation %as held guilt' of DL of interference and discri)ination and thus ordered to reinstate 22 e)plo'ees

%ith (ac;%ages fro) :ul' 25* 1969 until actuall' reinstated* a)ounting to at 199*276.00* and %ithout loss of seniorit' rights and other pri&ileges appurtenant totheir e)plo')ent. uccessi&e eecutions %ere filed (ut %as opposed until Later this%as reduced to 164*984.00. "A? later %as granted clearance to ceaseoperation due to financial difficulties and ter)inate its e)plo')ent %ithout preudiceto the right of the su(ect e)plo'ees to see; redress of grie&ances under eistingla%s and decrees.

o)eti)e in 1974* the D+? filed another otion for Hecution alleging thatalthough "A? had assu)ed a posture of suffering fro) (usiness re&erse* itsofficers and principal stoc;holders had organi!ed a ne% corporation* the "osario

+ndustrial ,orporation. Hecution still failed.

D+? again filed an e<parte otion for rit of Hecution and Iarnish)entpra'ing that the rit issue against the ?fficersAgents of "A? personall' and or their estates.

LA Tito -. Ienilo issued in 1980* an ?rder declaring pri&ate corp "?A"+?and its officer lia(le and that a %rit of eecution (e issued for 164*984.00 againstrespondent corporation and its officersagents. L",* on appeal* )odified the

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>ecision (' relie&ing the officers and agents* holding onl' its president as lia(le for the (ac;%ages.

The , in the first ,ertiorari* set aside the L", order and reinstated %ith)odification the ?rder of the La(or Ar(iter Tito -. Ienilo of 1980 that personallia(ilit' for the (ac;%ages due the 22 stri;ers shall (e li)ited to "u(en Cernande!*%ho %as resident of "A? in 1974* ointl' and se&erall' %ith other residentsof the sa)e corporation %ho had (een elected as such after 1972 or up to the ti)ethe corporate life %as ter)inated. " %as sought (' (oth parties.

ISSUE7 hether or not alleged (an;ruptc' of "A? furnishes no ustification for non<pa')ent of (ac;%ages to the e)plo'ees

HELD7 ?* the alleged (an;ruptc' of "A? furnishes no ustification for non<pa')ent of (ac;%ages to the e)plo'ees concerned ta;ing into consideration Article110 of the La(or ,ode* %hich pro&idesM

ART. 11*. or;er preference in case of (an;ruptc'. < +n the e&ent of (an;ruptc'or liuidation of an e)plo'er@s (usiness* his %or;ers shall eno' first preference

as regards %ages due the) for ser&ices rendered during the period prior to the

(an;ruptc' or liuidation* an' pro&ision of la% to the contrar' not%ithstanding.

Dnpaid %ages shag (e paid in full (efore other creditors )a' esta(lish an'

clai) to a share in the assets of the e)plo'er.

The ter) %ages refers to all re)unerations* earnings and other (enefits in

ter)s of )one' accruing to the e)plo'ees or %or;ers for ser&ices rendered.

The' are to (e paid in full (efore other creditors )a' esta(lish an' clai) to a

share in the assets of the e)plo'er.

S</, 1*. a')ent of %ages in case of (an;ruptc'.<Dnpaid %ages earned ('

the e)plo'ees (efore the declaration of (an;ruptc' or udicial liuidation of the

e)plo'er@s (usiness shall (e gi&en first preference and shall (e paid in full

(efore other creditors )a' esta(lish an' clai) to a share in the assets of the

e)plo'er.

The foregoing pro&isions are (ut in consonance %ith the principles of social

ustice and protection to la(or guaranteed (' past and present ,onstitutions and are

not reall' (eing gi&en an' retroacti&e effect %hen applied herein.

The right of the e)plo'ees concerned to (ac;%ages a%arded the) had

alread' &ested at the ti)e and e&en (efore clearance %as granted. ote should also

(e ta;en of the fact that the clearance %as %ithout preudice to the right of su(ect

e)plo'ees to see; redress of grie&ances under eisting la%s and decrees.

The %or;er preference applies e&en if the e)plo'er@s properties are

encu)(ered (' )eans of a )ortgage contract* as in this case. o that* %hen

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)achiner' and euip)ent of "A? %ere sold to "e&elations anufacturing

,orporation for 2 in 1975* the right of the 22 la(orers to (e paid fro) the

proceeds should ha&e (een recogni!ed* e&en though it is clai)ed that those

proceeds %ere turned o&er to the ,o))ercial Ban; and Trust ,o)pan' #,o)trust$

in pa')ent of "A? o(ligations* since the %or;ers@ preference is o&er and a(o&e

the clai) of other creditors.

or;ers are to (e paid in full (efore other creditors )a' esta(lish an' clai)

to a share in the assets of the e)plo'erM... v, @ /0 ?>89s >>/s + ,<5?=- =9 ?+,s @ +?/6+6 <,/+</! s/88 /0 s +6s 0<0 ,9 @s/ >@,<, <+s @ =+,5>/<9 85-+/, + -589 >/</- =9 +, +5/?+/<@s/ 8, v +,- +=v +88 /0 +8 ,<5?=+,<s , /0 s+->>/s. O/0s! s +6s ?+9 = ?>88- =9 @<8s5@ ?/6+6s! +,- +s + <,s5,<! /0 +@</- >vs, @ /0 N

L+= C- 58- = ,-- ?+,,68ss.

&%. DBP vs. NLRC

G.R. NO. 1*'*31! MARCH 1! 1((#BELLOSILLO! J.%

FACTS7 ri&ate respondent Leonor A. Ang %as a personnel officer %ith Tropical

hilippines ood +ndustries* +nc. #T++$* a corporation engaged in the )anufacture

and sale of &eneer* pl'%ood and sa%dust panel (oards.

Later petitioner >B* as )ortgagee of T++* foreclosed its plant facilities andeuip)ent. As a conseuence pri&ate respondent %as &er(all' ter)inated fro) the

ser&ice.

Aggrie&ed* pri&ate respondent filed %ith the La(or Ar(iter a co)plaint for

separation pa'* 13th )onth pa'* &acation and sic; lea&e pa'* salaries and

allo%ances against T++* its I* and petitioner.

LA found T++ pri)aril' lia(le to pri&ate respondent (ut onl' for her

separation pa' and &acation and sic; lea&e pa' (ecause her other clai)s %ere later

paid after the co)plaint %as filed. The I %as a(sol&ed. But %ith respect to

petitioner* it %as held su(sidiaril' lia(le in the e&ent the co)pan' failed to satisf' the udg)ent. The LA rationali!ed that the right of an e)plo'ee to (e paid (enefits due

hi) fro) the properties of his e)plo'er is superior to the right of the latter@s

)ortgage*

L", affir)ed LAs ruling.

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ISSUE7 hether pu(lic respondent co))itted gra&e a(use of discretion in holding

that Art. 110 of the La(or ,ode* as a)ended* %hich refers to %or;er preference in

case of (an;ruptc' or liuidation of an e)plo'er@s (usiness is applica(le to the

present case not%ithstanding the a(sence of an' for)al declaration of (an;ruptc' or

udicial liuidation of T++.

HELD7 H* pu(lic respondent gra&el' a(used its discretion in affir)ing the decision

of the La(or Ar(iter. Art. 110 should not (e treated apart fro) other la%s (ut applied

in conunction %ith the pertinent pro&isions of the ,i&il ,ode and the +nsol&enc' La%

to the etent that piece<)eal distri(ution of the assets of the de(tor is a&oided.

+n in 4P v . Santos, the/0, art 100 of the La(or code , 8. / s< 1* "ule

+++* Boo; +++* of the "e&ised "ules and "egulations +)ple)enting the La(or ,ode*

%as interpreted to )ean thatM. . . a declaration of ban&ruptcy or a 'udicial li(uidation must be present before

the wor&er)s preference may be enforced . Thus* Article 110 of the La(or ,ode

and its i)ple)enting rule cannot (e in&o;ed (' the respondents in this case a(sent

a for)al declaration of (an;ruptc' or a liuidation order. The rationale is that to hold

Art! ##2 to "e applica"le also to e&trajudicial proceedings would "e putting the

worer in a "etter position than the State which could onl assert its own prior

preference in case of a judicial proceeding!

aid art and i)ple)enting rules %ere a)ended (ut although the ter)s

declaration #of (an;ruptc'$ or udicial #liuidation$ ha&e (een nota(l' eli)inated*

still in 4P v . *@RC * this ,ourt did not alter its original position that the right to

preference gi&en to %or;ers under Art. 110 cannot eist in an' effecti&e %a' prior to

the ti)e of its presentation in distri(ution proceedings.

The rationale has (een epressed in the recent case of 4P v . Secretar of

@a"or #I.". o. 79351* 28 o&e)(er 1989$* %hich %e uoteM A preference of credit (esto%s upon the preferred creditor an ad&antage of

ha&ing his credit satisfied first ahead of other clai)s %hich )a' (e

esta(lished against the de(tor. Logicall'* it (eco)es )aterial onl' %hen the

properties and assets of the de(tors are insufficient to pa' his de(ts in full for

if the de(tor is a)pl' a(le to pa' his &arious creditors in full* ho% can the

necessit' eist to deter)ine %hich of his creditors shall (e paid first or

%hether the' shall (e paid out of the proceeds of the sale #of$ the de(tor@s

specific propert'. Indu"ita"l, the preferential right of credit attains

significance onl after the properties of the de"tor have "een inventoried and

li+uidated, and the claims held " his various creditors have "een esta"lished

+n the present case* /0 s +s 9/ , -<8++/, @ =+,5>/<9 , 5-<+885-+/, @ TPWII. H,<! / 58- = >?+/5 / ,@< /0 s>@,<.

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PREFERENCE DISTINGUISHED FROM LIEN. A preference applies onl' to clai)s %hich do not attach to specific properties.

A lien creates a charge on a particular propert'. The right of first preference as

regards unpaid %ages recogni!ed (' Article 110 does not constitute a lien on the

propert' of the insol&ent de(tor in fa&or of %or;ers. +t is (ut a preference of credit intheir fa&or* a preference in application. +t is a )ethod adopted to deter)ine and

specif' the order in %hich credits should (e paid in the final distri(ution of the

proceeds of the insol&ent@s assets. +t is a right to a first preference in the discharge of

the funds of the udg)ent de(tor . . .+n the %ords of Repu"lic v . Peralta, supraM

A/<8 11* @ /0 L+= C- -s ,/ >5>/ / <+/ + 8, , @+v @ s ?>89s @ 5,>+- +6s /0 5>, +88 @ /0 >>/s 5>, +,9 >+/<58+ >>/9 ,- =9 /0 ?>89.Claims for unpaid wages

do not therefore fall at all within the categor of speciall preferred claims

esta"lished under Articles $$1# and $$1$ of the Civil Code, e&cept to the e&tent that

such claims for unpaid wages are alread covered " Article $$1#, num"er '?

=claims for la"orers? wages, on the goods manufactured or the wor done5= or "

Article $$1$, num"er 0, =claims of la"orers and other worers engaged in the

construction reconstruction or repair of "uildings, canals and other wors, upon said

"uildings, canals and other wors . . . . To the etent that clai)s for unpaid %ages fall

outside the scope of Article 2241* nu)(er 6* and 22421 nu)(er 3* the' %ould co)e

%ithin the a)(it of the categor' of ordinar' preferred credits under Article 2244.

The >B anchors its clai) on a )ortgage credit. A )ortgage directl' and

i))ediatel' su(ects the propert' upon %hich it is i)posed* %hoe&er the possessor

)a' (e* to the fulfill)ent of the o(ligation for %hose securit' it %as constituted#Article 2176* ,i&il ,ode$. +t creates a real right %hich is enforcea(le against the

%hole %orld. +t is a 8, on an identified i))o&a(le propert'* %hich a preference is

not. A recorded )ortgage credit is a special preferred credit under Article 2242 #5$ of

the ,i&il ,ode on classification of credits. The preference gi&en (' Article 1l0* %hen

not falling %ithin Article 2241 #6$ and Article 2242 #3$* of the ,i&il ,ode and not

attached to an' specific propert'* is all ordinar' preferred credit although its i)pact is

to )o&e it fro) second priorit' to first priorit' in the order of preference esta(lished

(' Article 2244 of the ,i&il ,ode.

A!RO, Marielle*ri11a

&&. PHILIPPINE NATIONAL BAN$ vs. TERESITA CRUZ! ET.AL.G.R.NO. '*#(3! DECEMBER 1'! 1('(GANCAYCO! J.

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FACTS7 o)eti)e in 1980* Aggregate ining Hponents #AHO$ laid<off a(outse&ent' percent #70/$ of its e)plo'ees (ecause it %as eperiencing (usinessre&erses. The retained e)plo'ees* herein respondents* %hich constituted thirt'percent #30/$ of the %or; force* %ere not paid their %ages. The non<pa')ent ofsalaries %ent on until :ul' 1982 %hen AHO co)pletel' ceased its operations.u(seuentl'* AHO entered into an operating agree)ent %ith T.. an Andres>e&elop)ent ,orporation for the lease of the for)ers )achineries. The e)plo'eessought redress fro) the La(or Ar(iter* clai)ing non<pa')ent of %ages andseparation pa'. "uling in fa&or of the unpaid e)plo'ees* the La(or Ar(iter ordered

AHO* T.. an Andres >e&elop)ent ,orporation and petitioner B* the)ortgagee<creditor of AHO* to effectuate the pa')ent of respondents clai)s. Bappealed %ith the L",* (ut the latter affir)ed the La(or Ar(iters decision. +n thepresent petition* B no% uestions the preference of the %or;ers lien o&er an'other clai). B also argues that the %or;ers lien does not appl' to the e)plo'ersproperties %hich are encu)(ered (' )ortgage contracts.

ISSUE7 hether or not the %or;ers lien eno's preference o&er other clai)s andcan (e i)posed upon the )ortgaged properties of the e)plo'er.

HELD7 es. Article 110 of the La(or ,ode upholds the preference accorded to the

%or;ers. The phrase Jan provision of law to the contrar notwithstanding. stated in

said pro&ision indicates that the preference shall pre&ail despite the order set forth in

Articles 2241 to 2245 of the ,i&il ,ode concerning the classification* concurrence

and preference of credits. -urther)ore* the ,i&il ,ode pro&isions )ust 'ield to Article

110 of the La(or ,ode (ecause the latter %as signed into la% decades after the ,i&il

,ode too; effect. +t has (een esta(lished that %hene&er t%o statutes of different

dates and of contrar' tenor are of eual theoretical application to a particular case*

the statute of later date )ust pre&ail (eing a later epression of legislati&e %ill.

oreo&er* the pronounce)ent of the ,ourt in A!C! Ransom @a"or KnionCC@K vs!

*@RC is to the effect that* the %or;er preference applies e&en if the e)plo'ers

properties are encu)(ered (' )eans of a )ortgage contract and that an' conflict

(et%een Article 110 of the La(or ,ode and Articles 2241 to 2245 of the ,i&il ,ode

)ust (e resol&ed in fa&or of the for)er.

&'. DPB vs. SANTOSG.R.NO. &'2%1)%2! MARCH '! 1('(

GUTIERREZ! JR.! J.

FACTS7 +n t%o separate cases against"i&erside ills ,orporation #",$* the La(or Ar(iter a%arded separation pa'* %ages* and other )onetar' (enefits to the indi&idualco)plainants (elonging to hilippine Association ?f -ree La(or Dnions #A-LD<", ,CATH"$ and a)ahang>i%anganggaga%asa ",<-- ,CATH"*herein pri&ate respondents* in the total a)ount of 85*961*058.70. The >eput'heriff* ho%e&er* failed to collect said a)ount so he le&ied upon the personal andreal properties of ",. ean%hile* >B o(tained a %rit of possession of all the

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properties of ", after ha&ing etra<udiciall' foreclosed the sa)e at pu(lic auction.The %rit of possession pre&ented the scheduled auction sale of the ", properties%hich %ere le&ied upon (' the pri&ate respondents. +n a petition filed (' the pri&aterespondents* the La(or Ar(iter Teodorico>ogelio declared the latters preference asregards the %ages and other (enefits due the). ?n appeal* the L", re)anded thecase to respondent La(or Ar(iter Ariel antos* %ho li;e%ise declared that the for)er e)plo'ees of ", eno' first preference as regards separation pa' and other (enefits o&er the encu)(rances asserted (' >B. +n the present petition* >B no%argues that there )ust (e a udicial declaration* or at least* a cogni!ance (' anappropriate court or ad)inistrati&e agenc' of (an;ruptc' of the e)plo'er. ?n theother hand* respondents contend* a)ong others* that under Article 110 of the La(or ,ode and its i)ple)enting rule* the clai)s of the la(orers for unpaid %ages andother )onetar' (enefits due the) for ser&ices rendered prior to (an;ruptc' eno'first preference in the satisfaction of credits against a (an;rupt co)pan'.

ISSUE7 hether or not the %or;ers preference under Article 110 of the La(or ,ode

can (e enforced e&en if theres no declaration of (an;ruptc' of the e)plo'er or udicial liuidation of its properties.

HELD7 o. A declaration of (an;ruptc' or a udicial liuidation )ust (e present

(efore the %or;er@s preference )a' (e enforced. Article 110 of the La(or ,ode and

its i)ple)enting rule cannot (e in&o;ed (' the respondents a(sent a for)al

declaration of (an;ruptc' or a liuidation order. Article 110 )ust not (e &ie%ed in

isolation and )ust al%a's (e rec;oned %ith the pro&isions of the ,i&il ,ode.

-urther)ore* as eplained in the case of Philippine Savings an v! @antin* the

reason (ehind the necessit' for a udicial proceeding or a proceeding in re) (efore

the concurrence and preference of credits )a' (e applied* is that proceedings in

re)* such as insol&enc' and settle)ent of a decedents estate* are (inding against

the %hole %orld. All persons ha&ing interest in the su(ect )atter in&ol&ed* %hether

the' %ere notified or not* are euall' (ound. ,onseuentl'* a liuidation of si)ilar

i)port or @other eui&alent general liuidation )ust also necessaril' (e a proceeding

in re) so that all interested persons %hether ;no%n to the parties or not )a' (e

(ound (' such proceeding.

AN JO', Ri1a *ris#ina '.

&(. ONG vs. COURT OF APPEALSG.R. NO. 112'3*! FEBRUARY 1! 1((%BELLOSILLO! J.

FACTS7 :err' ?ng filed %ith the "T, of ue!on ,it' a petition for the surrender of titles of t%o parcels of land %hich %ere not redee)ed after (eing foreclosed and soldto hi). The "ural Ban; of ?longapo #"B?$ filed a )otion to dis)iss contending that

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it %as undergoing liuidation and that it is the liuidation court %hich has eclusi&e urisdiction to ta;e cogni!ance of the petitioners clai).

The "T, denied the )otion to dis)iss holding that the su(ect lots %ere nolonger considered assets of "B? %hen its liuidation %as co))enced.The appellatecourt re&ersed the decision and noted that the pro&isions of ".A. o. 265 states thatthe liuidation court shall ha&e urisdiction to adudicate disputed clai)s against the(an;. J>isputed clai)sK refer to all clai)s* %hether the' (e against the assets of theinsol&ent (an;* for specific perfor)ance* (reach of contract* da)ages* or %hate&er.

ISSUE7 hether or not the liuidation court has urisdiction o&er petitioners clai).

HELD7 es* the petition should ha&e (een filed %ith the liuidation court. The udicialliuidation is intended to pre&ent )ultiplicit' of actions against the insol&ent (an;.The la%)a;ing (od' conte)plated that for con&enience onl' one court* if possi(le*should pass upon the clai)s against the insol&ent (an;.

+t is not necessar' that a clai) (e initiall' disputed in a court or agenc' (eforeit is filed %ith the liuidation court. ince "B? is insol&ent* other clai)ants not pri&'to their transaction )a' (e in&ol&ed. As far as those clai)ants are concerned* in thea(sence of certificates of title in the na)e of petitioner* su(ect lots still for) part of the assets of the insol&ent (an;.

'*. BANCO FILIPINO vs. NATIONAL LABOR RELATIONS COMMISSIONG.R. NO. '213#! AUGUST 2*! 1((*MEDIALDEA! J.

FACTS7Banco -ilipino %as placed under recei&ership* and later ordered liuidated(' the onetar' Board. r. >i!on* the Hecuti&e ice resident of Banco -ilipino*

filed %ith the liuidator a reuest for the pa')ent to hi) of the cash eui&alent of his&acation and sic; lea&e credits and unependedunused rei)(ursa(le allo%ance.Cis clai)s %ere not paid (' the liuidator upon counsels ad&ice that >i!ons clai)should (e treated as a clai) of a creditor and should therefore (e processedpursuant to the liuidation plan as appro&ed (' the onetar' Board.

>i!on filed a co)plaint %ith the la(or ar(iter. The la(or ar(iter upheld her urisdiction and pro)ulgated a decision in fa&or of >i!on (ut %ithheld his de)and for pa')ent of )oral da)ages and attorne's fees. Both parties appealed to the L",%hich increased the a%ard due >i!on and further ordered pa')ent of da)ages andattorne's fees.

ISSUE7 hether or not the L", has urisdiction o&er >i!ons )one' clai)s.

HELD7 es* the L", has urisdiction. There is nothing in ec. 29 of ".A. o. 265%hich suggests that the urisdiction of the liuidation court to adudicate clai)sagainst the insol&ent (an; is eclusi&e. Article 217 of the La(or ,ode eplicitl'pro&ides that la(or ar(iters ha&e original and eclusi&e urisdiction o&er )one'clai)s of an e)plo'ee against his e)plo'er.

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e do not thin; that this urisdiction %ould (e lost si)pl' (ecause a for)er e)plo'er had (een placed under liuidation. The legislature dee)ed it %ise toconfer urisdiction o&er la(or disputes to a (od' eclusi&el' of others and e are notprepared to di&est such authorit' fro) the la(or ar(iter and the L", a(sent an'clear pro&ision of la% to that effect.

TAMBAOAN, Joan !ar%el .

'1. PAJUYO vs. CA43* SCRA 4(2! G.R. N. 14%3%4! JUNE 3! 2**4CARPIO! J.

FACTS7etitioner ,olito T. au'o #Jau'oK$ paid 400 to a certain edro ere! for the rights o&er a 250<suare )eter lot in Barrio a'atas* ue!on ,it'. Ce thenconstructed a house )ade of light )aterials on the lot %here he and his fa)il' li&edfro) 1979 to 7 >ece)(er 1985.

?n 8 >ece)(er 1985* au'o and pri&ate respondent Hddie Iue&arra#JIue&arraK$ eecuted a Qasunduan or agree)ent. The said Qasunduan pro&idesthat au'o* as o%ner of the house* allo% Iue&arra to li&e in the house for freepro&ided Iue&arra %ould )aintain the cleanliness and orderliness of the house.Iue&arra pro)ised that he %ould &oluntaril' &acate the pre)ises on au'osde)and.

o)eti)e in epte)(er 1994* au'o infor)ed Iue&arra of his need of thehouse and de)anded that Iue&arra &acate the house. Iue&arra refused %hichpro)pted au'o to file an eect)ent case against Iue&arra %ith the etropolitanTrial ,ourt of ue!on ,it'* Branch 31 #JT,K$.

The T, and "T, ruled in fa&or of au'o. Co%e&er* on appeal the ,ourt of Appeals re&ersed the T, and "T, rulings* %hich held thatthe Lasunduan (et%een au'o and Iue&arra created a legal tie a;in to that of alandlord and tenant relationship. The ,ourt of Appeals ruled that the Lasunduan isnot a lease contract (ut acommodatum (ecause the agree)ent is not for a pricecertain.

ISSUE7 hether or not the Qasunduan is a contract of co))odatu).

HELD7o. +n a contract of co))odatu)* one of the parties deli&ers to another

so)ething not consu)a(le so that the latter )a' use the sa)e for a certain ti)e andreturn it. An essential feature of co))odatu) is that it is gratuitous. Another featureof co))odatu) is that the use of the thing (elonging to another is for a certainperiod. Thus* the (ailor cannot de)and the return of the thing loaned until after epiration of the period stipulated* or after acco)plish)ent of the use for %hich theco))odatu) is constituted. +f the (ailor should ha&e urgent need of the thing* he)a' de)and its return for te)porar' use. +f the use of the thing is )erel' tolerated(' the (ailor* he can de)and the return of the thing at %ill* in %hich case the

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contractual relation is called a precariu). Dnder the ,i&il ,ode* precariu) is a ;indof co))odatu).

The Qasunduan re&eals that the acco))odation accorded (' au'o toIue&arra %as not essentiall' gratuitous. hile the Qasunduan did not reuireIue&arra to pa' rent* it o(ligated hi) to )aintain the propert' in good condition. Thei)position of this o(ligation )a;es the Qasunduan a contract different fro) aco))odatu). The effects of the Qasunduan are also different fro) that of aco))odatu). ,ase la% on eect)ent has treated relationship (ased on tolerance asone that is a;in to a landlord<tenant relationship %here the %ithdra%al of per)ission%ould result in the ter)ination of the lease. The tenants %ithholding of the propert'%ould then (e unla%ful. This is settled urisprudence.

H&en assu)ing that the relationship (et%een au'o and Iue&arra is one of co))odatu)* Iue&arra as (ailee %ould still ha&e the dut' to turn o&er possessionof the propert' to au'o* the (ailor. The o(ligation to deli&er or to return the thingrecei&ed attaches to contracts for safe;eeping* or contracts of co))ission*

ad)inistration and co))odatu). These contracts certainl' in&ol&e the o(ligation todeli&er or return the thing recei&ed. The upre)e ,ourt held au'o has a (etter right of possession o&er the propert' in&ol&ed than Iue&arra.

'2. REPUBLIC vs. SANDIGANBAYANG.R. NO. 1%%'#(! APRIL 12! 2*11BERSAMIN! J.

FACTS7 This is a consolidated case initiated (' the "epu(lic on the alleged illgotten%ealth of the arcos. A)ong the seuestered propert' %as the si!a(le (loc; of shares representing 20/ of the outstanding capital stoc; of an iguel ,orporation#,$.

?ne of the i)pleaded defendants %as Hduardo . ,ouangco* :r. %ho ser&edas a pu(lic officer during the arcos ad)inistration. >uring the period of hisincu)(enc' as a pu(lic officer* he acuired assets* funds* and other propert' grossl'and )anifestl' disproportionate to his salaries* la%ful inco)e and inco)e fro)legiti)atel' acuired propert'.Allegedl'* ,ouangco purchased a (loc; of 33*000*000shares of , stoc; through the 14 holding co)panies o%ned (' the ,++- ?il ills.

The su(ect , shares %ere purchased fro) loan proceeds fro) D,Band ad&ances fro) the ,++- ?il ills. The andigan(a'an ruled that the coco le&'funds %ere prima facie pu(lic funds. This ruling of the andigan(a'an (eca)e the

(asis for the seuestration of the , shares of stoc;s.

ISSUE7hether or not ,ouangco had co))itted (reach of an' fiduciar' duties asan officer and )e)(er of the Board of >irectors of the D,B for purchasing theuestioned , stoc;s %ith the proceeds of the loan he o(tained fro) D,B.

HELD7o. The A)ended ,o)plaint contained no clear factual allegation on %hich topredicate the application of Articles 1455 and 1456 of the ,i&il ,ode* and ection 31

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of the ,orporation ,ode. Although the trust relationship supposedl' arose fro),ouangcos (eing an officer and )e)(er of the Board of >irectors of the D,B* thelin; (et%een this alleged fact and the (orro%ings or ad&ances %as not esta(lished.or %as there e&idence on the loans or (orro%ings* their a)ounts* the appro&ingauthorit'* etc.

The thrust of the "epu(lic that the funds %ere (orro%ed or lent )ight e&enpreclude an' conseuent trust i)plication. +n a contract of loan* one of the parties#creditor$ deli&ers )one' or other consu)a(le thing to another #de(tor$ on thecondition that the sa)e a)ount of the sa)e ;ind and ualit' shall (e paid. ?%ing tothe consu)a(le nature of the thing loaned* the resulting dut' of the (orro%er in acontract of loan is to pa'* not to return* to the creditor or lender the &er' thing loaned.This eplains %h' the o%nership of the thing loaned is transferred to the de(tor uponperfection of the contract. ?%nership of the thing loaned ha&ing transferred* thede(tor eno's all the rights conferred to an o%ner of propert'* including the right touse and eno' jus utendi-, to consu)e the thing (' its use # jus a"utendi-, and todispose jus disponendi $* su(ect to such li)itations as )a' (e pro&ided (' la%.

H&identl'* the resulting relationship (et%een a creditor and de(tor in a contract of loan cannot (e characteri!ed as fiduciar'.

A trust receipt transaction is not classified as a si)ple loan and ischaracteri!ed as fiduciar'* (ecause the Trust "eceipts La% #.>. o. 115$ punishesthe dishonest' and a(use of confidence in the handling of )one' or goods to thepreudice of another regardless of %hether the latter is the o%ner.

Based on the foregoing* a de(tor can appropriate the thing loaned %ithoutan' responsi(ilit' or dut' to his creditor to return the &er' thing that %as loaned or toreport ho% the proceeds %ere used. or can he (e co)pelled to return the proceedsand fruits of the loan* for there is nothing under our la%s that co)pel a de(tor in a

contract of loan to do so. As o%ner* the de(tor can dispose of the thing (orro%ed andhis act %ill not (e considered )isappropriation of the thing. The onl' lia(ilit' on hispart is to pa' the loan together %ith the interest that is either stipulated or pro&idedunder eisting la%s.

T'JANO, herina

'3. ADVOCATES FOR TRUTH IN LENDING! INC. vs. BANG$O SENTRALMONETARY BOARDG.R. NO. 1(2('%! JANUARY 1#! 2*13REYES! J.

FACTS7 etitioner Ad&ocates for Truth in Lending* +nc. #A-T+L$ is a non<profit* non<

stoc; corporation organi!ed to engage in pro (ono concerns and acti&ities relating to

)one' lending issues. ".A. o. 265* %hich created the ,entral Ban; #,B$ of the

hilippines on :une 15* 1948* e)po%ered the ,B<B to* a)ong others* set the

)ai)u) interest rates %hich (an;s )a' charge for all t'pes of loans and other

credit operations* %ithin li)its prescri(ed (' the Dsur' La%. ?n arch 17* 1980* the

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Dsur' La% %as a)ended (' residential >ecree #.>.$ o. 1684* gi&ing the ,B<B

authorit' to prescri(e different )ai)u) rates of interest %hich )a' (e i)posed for

a loan or rene%al thereof or the for(earance of an' )one'* goods or credits*

pro&ided that the changes are effected graduall' and announced in ad&ance. +n its

"esolution o. 2224 dated >ece)(er 3* 1982* the ,B<B issued ,B ,ircular o.

905* eries of 1982* effecti&e on :anuar' 1* 1983. ection 1 of the ,ircular* under itsIeneral ro&isions* re)o&ed the ceilings on interest rates on loans or for(earance of

an' )one'* goods or credits. The ,ircular then %ent on to a)end Boo;s + to + of

the ,Bs anual of "egulations for Ban;s and ?ther -inancial +nter)ediaries

#anual of "egulations$ (' re)o&ing the applica(le ceilings on specific interest

rates. ?n :une 14* 1993* resident -idel . "a)os signed into la% ".A. o. 7653

esta(lishing the Bang;oentralngilipinas #B$ to replace the ,B.

ISSUE7 hether or not the lifting of the ceilings for interest rates authori!e

stipulations charging ecessi&e* unconsciona(le* and iniuitous interest

HELD7 o. +t is settled that nothing in ,B ,ircular o. 905 grants lenders a carte

(lanche authorit' to raise interest rates to le&els %hich %ill either ensla&e their

(orro%ers or lead to a he)orrhaging of their assets. As held in ,astro &. TanM The

i)position of an unconsciona(le rate of interest on a )one' de(t* e&en if ;no%ingl'

and &oluntaril' assu)ed* is i))oral and unust. +t is tanta)ount to a repugnant

spoliation and an iniuitous depri&ation of propert'* repulsi&e to the co))on sense

of )an. +t has no support in la%* in principles of ustice* or in the hu)an conscience

nor is there an' reason %hatsoe&er %hich )a' ustif' such i)position as righteous

and as one that )a' (e sustained %ithin the sphere of pu(lic or pri&ate )orals.

tipulations authori!ing iniuitous or unconsciona(le interests ha&e (eenin&aria(l' struc; do%n for (eing contrar' to )orals* if not against the la%.

onetheless* the nullit' of the stipulation of usurious interest does not affect the

lenders right to reco&er the principal of a loan* nor affect the other ter)s thereof.

Thus* in a usurious loan %ith )ortgage* the right to foreclose the )ortgage su(sists*

and this right can (e eercised (' the creditor upon failure (' the de(tor to pa' the

de(t due. The de(t due is considered as %ithout the stipulated ecessi&e interest*

and a legal interest of 12/ per annu) %ill (e added in place of the ecessi&e

interest for)erl' i)posed.

'4. PHILIPPINE PHOSPHATE FERTILIZER CORP. vs. $AMALIGRESOURCES INC.G.R. NO. 1%#%*'! DECEMBER! 13! 2**&TINGA! J.

FACTS7 Qa)alig "esources +nc. %as a reseller of fertili!ers purchased fro)hilippine hosphate -ertili!er ,orp. #hilphos$. ursuant to their agree)ent*Qa)alig purchased and )ade ad&anced pa')ent for fertili!er products of &arious

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grade to hilphos. rior to the release of the co))odities* ho%e&er* Qa)alig sentletters reuesting for readust)ents %hich* in turn* %ere granted. u(seuentl'*hilphos infor)ed Qa)alig that the latter )ade o&er%ithdra%als of stoc;s in anilaand +lo<ilo* hence* o(liged to pa' the for)er 546*645.30. hilphos de)anded thatthe a)ount (e settled on or (efore :ul' 31* 1986* other%ise 34/ interest per annu)%ill (e charged against Qa)alig. Qa)alig denied )a;ing o&er%ithdra%als andrefused to )a;e pa')ents.

A case for the collection of the su) of )one' %as filed (efore the "T, of

a;ati* %hich ruled in fa&or of hilphos. ?n appeal* the ,ourt of Appeals re&ersed

the ruling of the trial court. Cence* this petition to the upre)e ,ourt.

ISSUE7 hether or not Qa)alig is lia(le to pa' 546*645.30 %ith 34/ interest per

annu)

HELD7 o* petition does not ha&e )erit. The upre)e ,ourt held that the

o&er%ithdra%als %ere caused (' hilphos failure to co)pl' %ith the polic' of usingprescri(ed for)s. The ,ourt furthers that as hilphos could ha&e pre&ented the loss*

it is (ut fair that it should suffer the loss. Thus* the &alue of the unauthori!ed

%ithdra%als should (e for the account of hilphos and not shifted to Qa)alig ! As to

the interest* the ,ourt reaffir)ed that no stipulation %as )ade sho%ing that the

parties intended to pa' for interest. ursuant to Article 1956 of the ,i&il ,ode* no

interest shall (e due unless it has (een epressl' stipulated in %riting. Dnilateral

i)position of interest* li;e %hat hilphos did in this case* shall not (e allo%ed.

(AL'N!IA, !harlonReinier O.

'#. CITIBAN$ N.A. vs. SPS. LUIS AND CARMELITA CABAMONGAN +,-/0 s,s LUIS CABAMONGAN JR. +,- LITO CABAMONGANG.R. NO. 14%(1'! MAY 2! 2**%AUSTRIA)MARTINEZ! J.

FACTS7 ?n August 16* 1993* "espondent pouses opened a oint JandorK foreigncurrenc' ti)e deposit fro) herein petitioner (an;. +t %as a deposit in trust for their sons* a)ounting to S55*216.69 for a ter) of 182 da's or until -e(ruar' 14* 1994* at2.5625 per cent interest per annu).

?n o&e)(er of that sa)e 'ear* a %o)an introducing herself as ,ar)elita,a(a)ongan %ent to the a;ati (ranch of petitioner and indicated her intention of pre<ter)inating the said foreign currenc' deposit. he presented se&eral proof of identification* including a passport and three cards. The transaction %as done after 40 )inutes %ith said person getting the deposited )one'. The account officer reali!ed that said person left an identification card* pro)pting her to call theresidence of respondents. he %as a(le to tal; to the %ife of Lito,a(a)ongan and

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i))ediatel' rela'ed this infor)ation to ps. ,a(a)ongan %ho %as apparentl' in A)erica.

Cerein respondent spouses i))ediatel' infor)ed the (an; on the )atter (utthe latter %as ne&ertheless con&inced that it %as ,ar)elita %ho )ade the pre<ter)ination. This pro)pted respondents to file a case for specific perfor)ance.

The decision of the court* %hich %as upheld (' the appellate courts* orderedherein petitioners to pa' the respondents of the a)ount of the deposit plus legalinterest. The appellate court* ho%e&er* )odified the courts ruling (' stating that legalinterest should onl' run fro) the ti)e etra<udicial de)and %as )ade.

etitioners are uestioning* a)ong others* the i)position of an interest rateon the a)ount de)anded* stating that such is not a loan or for(earance of )one'.

ISSUE7 hether or not the a)ount of interest i)posed is proper and if so* %henshould it (e i)posed

HELD7 The ,ourt ruled that the ti)e deposit su(ect )atter of herein petition is asi)ple loan. The pro&isions of the e% ,i&il ,ode on si)ple loan go&ern the contract(et%een a (an; and its depositor. pecificall'* Article 1980 thereof categoricall'pro&ides that . . . sa&ings . . . deposits of )one' in (an;s and si)ilar institutionsshall (e go&erned (' the pro&isions concerning si)ple loan. Thus* the relationship(et%een a (an; and its depositor is that of a de(tor<creditor* the depositor (eing thecreditor as it lends the (an; )one'* and the (an; is the de(tor %hich agrees to pa'the depositor on de)and.

As to the interest rate* the stipulated interest rate of 2.562/ per annu) shallappl' for the 182<da' contract period fro) August 16* 1993 to -e(ruar' 14* 1994.

-or the period fro) the date of etra<udicial de)and* epte)(er 16* 1994* until fullpa')ent* the rate of 12/ shall appl'. As for the inter&ening period (et%een -e(ruar'15* 1994 to epte)(er 15* 1994* the rate of interest then pre&ailing granted (',iti(an; shall appl' since the ti)e deposit pro&ided for roll o&er upon )aturit' of theprincipal and interest.

'%. DURBAN APARTMENTS CORP. vs. PIONEER INSURANCE AND SURETYCORP.G.R. NO. 1&(41(! JANUARY 12! 2*11NACHURA! J.

FACTSM "espondent herein* (' right of su(rogation* filed a co)plaint for reco&er' of da)ages against herein petitioner. The records of the case disclose that one :effre'ee chec;ed in at ,it' Iarden Cotel* petitioners (usiness na)e* on April 30 2002.r. ee %as dri&ing a u!u;i Irand itara* the ;e's of %hich he surrendered topetitioners attendant* and thereafter a par;ing custo)er clai) stu( %as gi&en tohi). ?n a' 1*2002* he %as infor)ed (' the hotel that his &ehicle %as carnapped%hile it %as par;ed unattended in front of Huita(le ,+ Ban;.

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Cerein respondent inde)nified r. ee for the loss and thereafter* filed aclai) against petitioner for their negligence in the loss of said &ehicle. "espondentsho%ed e&idence pointing out to a si)ilar pre&ious case of carnapping in&ol&ingpetitioner and noted their lac; of precaution to pre&ent a repetition of such incident.

+n their ans%er* herein petitioner stated that ee ne&er chec;ed in at the hoteland %as )erel' a guest of one r. ontero. +t further clai)ed that r. ee )erel'reuested their attendant to par; the &ehicle at an' a&aila(le par;ing space to %hichthe' )erel' o(liged as a special pri&ilege.

etitioner failed to appear during pre<trial and thus* the ,ourt grantedrespondents )otion to present e<parte. The e&idence presented sho%ed thatpetitioner has an agree)ent %ith Huita(le ,+ Ban; to use the latters par;ingspace as petitioner onl' has 12 par;ing spaces for guests. A decision in fa&or of respondent herein %as issued holding petitioner lia(le for the loss of r. ees&ehicle.

ISSUE7 hether or not petitioner is lia(le for the loss of the &ehicle and on %hatground does said lia(ilit' stand on=

HELDM The ,ourt upheld the ruling of the lo%er court* stating that respondent %asa(le to pro&e that a contract of necessar' deposit eisted (et%een the insured eeand petitioner.

"ecords sho% that upon arri&al at the ,it' Iarden Cotel* r. ee ga&e noticeto the door)an and par;ing attendant of the said hotel a(out his itara %hen heentrusted its ignition ;e' to the latter. The attendant issued a &alet par;ing custo)er clai) stu( to r. ee* par;ed the itara at the Huita(le ,+ Ban; par;ing area* and

placed the ignition ;e' inside a safet' ;e' (o %hile r. ee proceeded to the hotello((' to chec; in. The Huita(le ,+ Ban; par;ing area (eca)e an anne of ,it'Iarden Cotel %hen the )anage)ent of the said (an; allo%ed the par;ing of the&ehicles of hotel guests thereat in the e&ening after (an;ing hours.

,learl'* the insured deposited his &ehicle for safe;eeping %ith petitioner*through the latters e)plo'ee. +n turn* the attendant issued a clai) stu( to r. ee.Thus* the contract of deposit %as perfected fro) r. ees deli&er'* %hen he handedo&er to the attendant the ;e's to his &ehicle* %hich the latter recei&ed %ith theo(ligation of safel' ;eeping and returning it. Dlti)atel'* petitioner is lia(le for the lossof ees &ehicle.

)OUNG, 2esle&

'&. SPS LADANGA VS ASENETAG.R. NO. 14#'&4! SEPTEMBER 3*! 2**#CORONA! J.

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FACTS7 Bernardo Aseneta and al&acion Ladanga are (oth reared and educted (',ele)encia Ladanga. Bernardo %as legall' adopted (' ,le)entia %hile al&acion isher niece. >uring her lifeti)e ,le)enia co)plained of not recei&ing rentals of her propert' fro) al&acion* %ith %ho) she entrusted such collection. Dponin&estigation* Bernado found out that said properties %as sold (' ,le)entia toal&acion for a price )uch lo%er that its fair )ar;et &alue and he also alleged that it%as fraudulent (ecause upon inuir' %ith ,le)entia the latter denied of the sale.

Dpon his instance* Bernardo %as a%arded %ith the guardianship of spinster ,le)entia. B' such po%er* Bernardo filed se&eral actions of recon&e'ance.,le)entia died during pendenc' of said cases and %as thereafter su(stituted (' her legal heir Bernardo.Bernardo %on the case for %hich the land su(ect of si)ulatedsale %as ordered to (e returned. Co%e&er* it %as disco&ered that al&acion sold theland to another during pendenc' of case decided.

Bernardo filed conte)pt proceedings against al&acion.

ISSUE7 hether selling propert' annotated %ith lis pendens is conte)pt.

HELD7 o. A land annotated %ith lis pendens can (e sold. The onl' effect onl' of such annotation is that the land sold is su(ect to the outco)e of the case

+n order there (e conte)pt in case of land annotated %ith lis pendens* thereshould first (e custodial legis (' the court on the su(ect propert'. +f there (ecustodial legis then selling the sa)e %hen the propert' is in safe;eeping of the courtand %ithout its consent is a clear diso(edience and disrespect of the authorit' of thecourt holding the propert'.

There (eing no custodia legis o&er the propert' in this case* then charge of

conte)pt shall not (e sustained

)OUNG, 2esle&

''. LAND BAN$ OF THE PHILIPPINES vs PAGAYATANG.R. NO. 1'2#&2! JUNE 1'! 2*12SERENO! J.

FACTS7 Lu(rica is the assignee of -ederico ,. unta' o&er certain parcels ofagricultural land a portion of the said propert' %ith an area of 311.7682 hectares*

%as placed under the land refor).The >epart)ent of Agrarian "efor) #>A"$ andthe LB fied the &alue of the land at 5*056*833.54 %hich a)ount %as deposited in₱

cash and (onds in fa&or of Lu(rica.

etitioners reected the &aluation of their properties* hence the ?ffice of thero&incial Agrarian "efor) Adudicator #A"A>$ conducted su))ar' ad)inistrati&eproceedings for deter)ination of ust co)pensation and thereafter fied thepreli)inar' ust co)pensation at 51*800*286.43 for the 311.7682 hectares and₱

21*608*215.28 for the 128.7161 hectares. LB ,ontested it (efore "T,₱

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etitioners filed separate otions to >eposit the reli)inar' aluation *pra'ing a)ong others that LB deposit the preli)inar' co)pensation deter)ined ('the A"A>.

The ,ourt of Appeals held that the trial court correctl' ordered LB to depositthe a)ounts pro&isionall' deter)ined (' the A"A> as there is no la% %hichprohi(its LB to )a;e a deposit pending the fiing of the final a)ount of ustco)pensation. A T"? %as su(seuent' issued enoining the o%ners to collect thepro&isional &alue of the land deter)inded (' A"A>* not%ithstanding appro&al ofthe court for LB to )a;e such deposit pro&isionall' deter)ined.

An order %as )ade to the effect that the cash deposit and (onds (e turnedo&er to cler; of court. ?ne of the heirs contended that it is in &iolation of the T"?enoining collection and that there %as no necessit' to ph'sicall' transfer possessionto latter since the (onds and , %as in cler; of courts na)e

ISSUE7 hether T"? on collection of )onetar' proceeds proscri(es such a)ount to(e placed in custodia legis

HELD7 ?. There is an eisting order for LB to pa' the pro&isional a)ountdeter)ined (' A"A> (ut %as su(ect to T"? on collection. +f collection is enoinedand the )one' ordered (e not deli&ered it is i)proper if the interested part' %ill (ethe depositor and depositar' at the sa)e ti)e. The solution of court a uo to place itin custodial legis is perfectl' &alid and called upon (' afore)entioned fact.

-or propert' to (e in custodia legis* it )ust ha&e (een la%full' sei!ed andta;en (' legal process and authorit'* and placed in the possession of a pu(lic officer

such as a sheriff* or of an officer of the court e)po%ered to hold it such as arecei&er .F15G Therefore* it %as onl' a natural conseuence for respondent udge toorder the ph'sical turno&er of the deposits* %hich had alread' (een placed under thena)e of the ,ler; of ,ourt

Lu(rica is the assignee of -ederico ,. unta' o&er certain parcels ofagricultural land a portion of the said propert' %ith an area of 311.7682 hectares*%as placed under the land refor).The >epart)ent of Agrarian "efor) #>A"$ andthe LB fied the &alue of the land at 5*056*833.54 %hich a)ount %as deposited in₱

cash and (onds in fa&or of Lu(rica.

etitioners reected the &aluation of their properties* hence the ?ffice of the

ro&incial Agrarian "efor) Adudicator #A"A>$ conducted su))ar' ad)inistrati&eproceedings for deter)ination of ust co)pensation and thereafter fied thepreli)inar' ust co)pensation at 51*800*286.43 for the 311.7682 hectares and₱

21*608*215.28 for the 128.7161 hectares. LB ,ontested it (efore "T,₱

etitioners filed separate otions to >eposit the reli)inar' aluation *pra'ing a)ong others that LB deposit the preli)inar' co)pensation deter)ined ('the A"A>.

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The ,ourt of Appeals held that the trial court correctl' ordered LB to depositthe a)ounts pro&isionall' deter)ined (' the A"A> as there is no la% %hichprohi(its LB to )a;e a deposit pending the fiing of the final a)ount of ustco)pensation. A T"? %as su(seuent' issued enoining the o%ners to collect thepro&isional &alue of the land deter)inded (' A"A>* not%ithstanding appro&al ofthe court for LB to )a;e such deposit pro&isionall' deter)ined.

An order %as )ade to the effect that the cash deposit and (onds (e turnedo&er to cler; of court. ?ne of the heirs contended that it is in &iolation of the T"?enoining collection and that there %as no necessit' to ph'sicall' transfer possessionto latter since the (onds and , %as in cler; of courts na)e.

4E CIV REV

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