HERMOJINA ESTORES, Petitioner, - versus - SPOUSES ARTURO and LAURA

SUPANGAN, Respondents.
FACTS:
On October 3, 1993, petitioner Hermojina Estores and respondent-spouses
Arturo and Laura Supangan entered into a Conditional Deed of Sale [5] whereby
petitioner offered to sell, and respondent-spouses offered to buy, a parcel of land
covered by Transfer Certificate of Title No. TCT No. 98720 located at Naic, Cavite for
the sum of P4.7 million.
Vendor Estores will secure approved clearance from DAR requirements.
If the vendor fails to complete necessary documents within thirty days
without any sufficient reason, or without informing the vendee of its
status, vendee has the right to demand return of full amount of down
payment.
After almost seven years from the time of the execution of the contract and
notwithstanding payment of P3.5 million on the part of respondent-spouses,
petitioner still failed to comply with her obligation as expressly provided in
paragraphs 4, 6, 7, 9 and 10 of the contract. Hence, in a letter [7] dated September
27, 2000, respondent-spouses demanded the return of the amount of P3.5 million
within 15 days from receipt of the letter. In reply, [8] petitioner acknowledged
receipt of the P3.5 million and promised to return the same within 120 days.
Respondent-spouses were amenable to the proposal provided an interest of 12%
compounded annually shall be imposed on the P3.5 million. [9] When petitioner still
failed to return the amount despite demand, respondent-spouses were constrained to
file a Complaint[10] for sum of money before the Regional Trial Court (RTC) of
Malabon against herein petitioner as well as Roberto U. Arias (Arias) who allegedly
acted as petitioners agent.
Respondent spouses prayed that petitioner and Arias be ordered to PAY
the principal amount of Php 3.5 million plus interest of 12%
compounded annually starting October 1, 1993 or an estimated amount
of Php 8.6 million.
Plus damages and Attorneys fees.

Trial ensued thereafter, petitioner and Arias failed to appear hence they
were deemed to have waived the presentation of their evidence. Consequently, the
case was deemed submitted for decision.
Ruling of RTC respondent-spouses entitled to interest but only at the rate of 6% per
annum and not 12% as prayed by them. It also found respondent-spouses entitled to
attorneys fees as they were compelled to litigate to protect their interest.
Ruling of CA The CA noted that the only issue submitted for its resolution is
whether it is proper to impose interest for an obligation that does not involve a loan
or forbearance of money in the absence of stipulation of the parties.

The CA rendered the assailed Decision affirming the ruling of the RTC finding
the imposition of 6% interest proper.[25] However, the same shall start to
run only from September 27, 2000 when respondent-spouses formally
demanded the return of their money and not from October 1993 when the
contract was executed as held by the RTC. The CA also modified the RTCs
ruling as regards the liability of Arias. It held that Arias could not be held
solidarily liable with petitioner because he merely acted as agent of the
latter.
ISSUE:
Whether the imposition of interest and attorneys fees is proper.
Petitioners argument Petitioner insists that she is not bound to pay interest on the
P3.5 million because the Conditional Deed of Sale only provided for the return of the
down payment in case of failure to comply with her obligations.
Respondent-spouses argument Respondent-spouses aver that it is only fair that
interest be imposed on the amount they paid considering that petitioner failed to
return the amount upon demand and had been using theP3.5 million for her benefit.
RULING:
AFFIRMATIVE

Petitioner and Arias averred that they are willing to return the principal
amount of P3.5 million but without any interest as the same was not agreed upon.
They argued that since the Conditional Deed of Sale provided only for the return of
the down payment in case of breach, they cannot be held liable to pay legal interest
as well.
In its Pre-Trial Order [15] dated June 29, 2001, the RTC noted that the
parties agreed that the principal amount of 3.5 million pesos should be returned to
the [respondent-spouses] by the [petitioner] and the issue remaining [is] whether x x
x [respondent-spouses] are entitled to legal interest thereon, damages and attorneys
fees.

Interest may be imposed even in the absence of stipulation in the contract.

o
We sustain the ruling of both the RTC and the CA that it is proper to
impose interest notwithstanding the absence of stipulation in the
contract.
Article 2210 of the Civil Code expressly provides that
[i]nterest may, in the discretion of the court, be allowed upon
damages awarded for breach of contract.
o
There is no question that petitioner is legally obligated to return the
P3.5 million because of her failure to fulfill the obligation under the
Conditional Deed of Sale, despite demand.
o
Petitioner enjoyed the use of the money from the time it was given
to her [30] until now.
Thus, she is already in default of her
obligation from the date of demand, i.e., on September 27, 2000.
CREDTRANS sjbprior | 1

The interest at the rate of 12% is applicable in the instant case.

o
The general rule is that the applicable rate of interest shall be
computed in accordance with the stipulation of the parties.[31]
Absent any stipulation, the applicable rate of interest shall be 12%
per annum when the obligation arises out of a loan or a
forbearance of money, goods or credits. In other cases, it shall be
six percent (6%).[32] In this case, the parties did not stipulate as
to the applicable rate of interest. The only question remaining
therefore is whether the 6% as provided under Article 2209
of the Civil Code, or 12% under Central Bank Circular No.
416, is due.
o
The contract involved in this case is admittedly not a loan but a
Conditional Deed of Sale. However, the contract provides that the
seller (petitioner) must return the payment made by the buyer
(respondent-spouses) if the conditions are not fulfilled. There is no
question that they have in fact, not been fulfilled as the seller
(petitioner) has admitted this. Notwithstanding demand by the
buyer (respondent-spouses), the seller (petitioner) has failed to
return the money and should be considered in default from the
time that demand was made on September 27, 2000.
o
Even if the transaction involved a Conditional Deed of Sale,
can the stipulation governing the return of the money be
considered as a forbearance of money which required
payment of interest at the rate of 12%? We believe so.
o
In Crismina Garments, Inc. v. Court of Appeals, [33] forbearance
was defined as a contractual obligation of lender or creditor to
refrain during a given period of time, from requiring the borrower or
debtor to repay a loan or debt then due and payable.
o
The phrase forbearance of money, goods or credits is meant to
have a separate meaning from a loan, otherwise there would have
been no need to add that phrase as a loan is already sufficiently
defined in the Civil Code.[34] Forbearance of money, goods or
credits should therefore refer to arrangements other than loan
agreements, where a person acquiesces to the temporary use of
his money, goods or credits pending happening of certain events or
fulfillment of certain conditions. In this case, the respondentspouses parted with their money even before the conditions were
fulfilled. They have therefore allowed or granted forbearance to
the seller (petitioner) to use their money pending fulfillment of the
conditions. They were deprived of the use of their money for the
period pending fulfillment of the conditions and when those
conditions were breached, they are entitled not only to the return
of the principal amount paid, but also to compensation for the use
of their money. And the compensation for the use of their money,
absent any stipulation, should be the same rate of legal interest
applicable to a loan since the use or deprivation of funds is similar
to a loan.

Petitioners unwarranted withholding of the money which rightfully

pertains to respondent-spouses amounts to forbearance of money
which can be considered as an involuntary loan. Thus, the
applicable rate of interest is 12% per annum.

CHEE KIONG YAM, AMPANG MAH, ANITA YAM JOSE Y.C. YAM AND RICHARD
YAM, petitioners, vs.
HON. NABDAR J. MALIK, Municipal Judge of Jolo, Sulu (Branch I), THE
PEOPLE OF THE PHILIPPINES, ROSALINDA AMIN, TAN CHU KAO and LT. COL.
AGOSTO SAJOR respondents.
FACTS:
Private respondents filed a case of Estafa against petitioners with the MTC of
Jolo, Sulu under presiding Judge Nabdar J. Malik. He issued warrants of arrest against
petitioners after making the above determination; and he undertook to conduct trial
on the merits of the charges which were docketed in his court as Criminal Cases No.
M-111, M-183 and M-208.
Respondent judge is said to have acted without jurisdiction, in excess of
jurisdiction and with grave abuse of discretion because the facts recited in the
complaints did not constitute the crime of estafa, and assuming they did, they were
not within the jurisdiction of the respondent judge.
In a resolution dated May 23, 1979, we required respondents to comment in
the petition and issued a temporary restraining order against the respondent judge
from further proceeding with Criminal Cases Nos. M-111, M-183 and M-208 or from
enforcing the warrants of arrest he had issued in connection with said cases.
Comments by the respondent judge and the private respondents pray for
the dismissal of the petition but the Solicitor General has manifested that the People
of the Philippines have no objection to the grant of the reliefs prayed for, except the
damages.
In Criminal Case No. M-111 respondent Rosalinda M. Amin charges
petitioners Yam Chee Kiong and Yam Yap Kieng with estafa through
misappropriation of the amount of P50,000.00. But the complaint states on
its face that said petitioners received the amount from respondent Rosalinda
M. Amin "as a loan."
In Criminal Case No. M-183 respondent Tan Chu Kao charges petitioners
Yam Chee Kiong, Jose Y.C. Yam, Ampang Mah and Anita Yam, alias Yong Tay,
with estafa through misappropriation of the amount of P30,000.00. Likewise,
the complaint states on its face that the P30,000.00 was "a simple loan."
In Criminal Case No. M-208 respondent Augusto Sajor charges petitioners
Jose Y.C. Yam, Anita Yam alias Yong Tai Mah, Chee Kiong Yam and Richard
CREDTRANS sjbprior | 2

Yam, with estafa through misappropriation of the amount of P20,000.00.

Unlike the complaints in the other two cases, the complaint in Criminal Case
No. M-208 does not state that the amount was received as loan. However, in
a sworn statement dated September 29, 1976, submitted to respondent
judge to support the complaint, respondent Augusto Sajor states that the
amount was a "loan."
ISSUE:
Whether or not
misappropriation.

the

three

criminal

complaints

constitute

estafa

FACTS:
On December 23,1981, private respondent David filed I.S. No. 81-31938 in
the Office of the City Fiscal of Manila, which case was assigned to respondent Lota for
preliminary investigation.

through

RULING:
NEGATIVE
We agree with the petitioners that the facts alleged in the three criminal complaints
do not constitute estafa through misappropriation.

violation of Central Bank Circular No. 364 and related regulations regarding
foreign exchange transactions

In order that a person can be convicted of Article 315 paragraph 1 b of the

RPC, it must be proven that he has the obligation to deliver or return the
same money, goods or personal property that he received. Petitioners had
no such obligation to return the same money, i.e., the bills or coins, which
they received from private respondents. This is so because as clearly stated
in criminal complaints, the related civil complaints and the supporting sworn
statements, the sums of money that petitioners received were loans.
It can be readily noted from Article 1933 of NCC that in simple loan
(mutuum), as contrasted to commodatum, the borrower acquires ownership
of the money, goods or personal property borrowed. Being the owner, the
borrower can dispose of the thing borrowed (Article 248, Civil Code) and his
act will not be considered misappropriation thereof.
In U.S. vs. Ibaez, 19 Phil. 559, 560 (1911), this Court held that it is not
estafa for a person to refuse to nay his debt or to deny its existence.
It appears that respondent judge failed to appreciate the distinction
between the two types of loan, mutuum and commodatum, when he
performed the questioned acts, He mistook the transaction between
petitioners and respondents Rosalinda Amin, Tan Chu Kao and Augusto Sajor
to be commodatum wherein the borrower does not acquire ownership over
the thing borrowed and has the duty to return the same thing to the lender.

TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS,

petitioners, vs.
THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY FISCAL
FELIZARDO N. LOTA and CLEMENT DAVID, respondents.

Petition for prohibition and injunction.

The instant petition seeks to prohibit public respondents from proceeding

with the preliminary investigation of I.S. No. 81-31938, in which petitioners
were charged by private respondent Clement David, with estafa and

David charged petitioners with estafa and violation of Central Bank Circular
No. 364 and related Central Bank regulations on foreign exchange transactions.
David invested with Nation Savings and Loan Association (NSLA):
o
Php 1.1M on 9 deposits
o
Php 13K on savings account deposits
o
USD 10K on time deposit
o
USD 15K under a receipt and guarantee of payment
o
USD 50K under a receipt
That David was induced into making the aforestated investments by Robert
Marshall an Australian national who was allegedly a close associate of petitioner
Guingona Jr., then NSLA President, petitioner Martin, then NSLA Executive VicePresident of NSLA and petitioner Santos, then NSLA General Manager; that on March
21, 1981 NSLA was placed under receivership by the Central Bank, so that David filed
claims therewith for his investments and those of his sister.
On July 22, 1981 David received a report from the Central Bank that only
P305,821.92 of those investments were entered in the records of NSLA; that,
therefore, the respondents in I.S. No. 81-31938 misappropriated the balance of the
investments, at the same time violating Central Bank Circular No. 364 and related
Central Bank regulations on foreign exchange transactions; that after demands,
petitioner Guingona Jr. paid only P200,000.00, thereby reducing the amounts
misappropriated to P959,078.14 and US$75,000.00.
At the inception of the preliminary investigation before respondent Lota,
petitioners moved to dismiss the charges against them for lack of jurisdiction
because David's claims allegedly comprised a purely civil obligation which was itself
novated. Fiscal Lota denied the motion to dismiss (Petition, p. 8).
But, after the presentation of David's principal witness, petitioners filed the
instant petition because: (a) the production of the Promisory Notes, Banker's
Acceptance, Certificates of Time Deposits and Savings Account allegedly showed that
the transactions between David and NSLA were simple loans, i.e., civil obligations on
the part of NSLA which were novated when Guingona, Jr. and Martin assumed them;
and (b) David's principal witness allegedly testified that the duplicate originals of the
aforesaid instruments of indebtedness were all on file with NSLA, contrary to David's
claim that some of his investments were not record (Petition, pp. 8-9).
CREDTRANS sjbprior | 3

Petitioners alleged that they did not exhaust available administrative

remedies because to do so would be futile (Petition, p. 9) [pp. 153-157, rec.].

ISSUE:
Whether public respondents acted without jurisdiction when they investigated the
charges (estafa and violation of CB Circular No. 364 and related regulations regarding
foreign exchange transactions) subject matter of I.S. No. 81-31938.
RULING:
AFFIRMATIVE
There is merit in the contention of the petitioners that their liability is civil in nature
and therefore, public respondents have no jurisdiction over the charge of estafa.
A casual perusal of the December 23, 1981 affidavit complaint will show that
from March 20, 1979 to March, 1981, private respondent David, together with his
sister, Denise Kuhne, invested with the NSLA a sum of total of P1,159,078.14
deposits. It appears further that private respondent David, together with his sister,
made investments in the aforesaid bank in the amount of US$75,000.00.
The records reveal that when the aforesaid bank was placed under
receivership on March 21, 1981, petitioners Guingona and Martin, upon the request
of private respondent David, assumed the obligation of the bank to private
respondent David by executing on June 17, 1981 a joint promissory note in favor of
private respondent acknowledging an indebtedness of Pl,336,614.02 and
US$75,000.00.
Petitioners Guingona and Martin agreed to divide the said indebtedness, and
petitioner Guingona personally acknowledged an indebtedness of P668,307.01 (1/2 of
P1,336,614.02) and US$37,500.00 (1/2 of US$75,000.00) in favor of private
respondent. The aforesaid promissory notes were executed as a result of deposits
made by Clement David and Denise Kuhne with the Nation Savings and Loan
Association.
It must be pointed out that when private respondent David invested his
money on nine and savings deposits with the aforesaid bank, the contract that was
perfected was a contract of simple loan or mutuum and not a contract of deposit.
Article 1980 NCC provides that fixed, savings, and current deposits ofmoney in banks and similar institutions shall be governed by the
provisions concerning simple loan.
This Court also declared in the recent case of Serrano vs. Central Bank of
the Philippines that bank deposits are in the nature of irregular deposits. They are
really 'loans because they earn interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are to be covered by the law on
loans.

Hence, the relationship between the private respondent and the Nation
Savings and Loan Association is that of creditor and debtor; consequently, the
ownership of the amount deposited was transmitted to the Bank upon the perfection
of the contract and it can make use of the amount deposited for its banking
operations, such as to pay interests on deposits and to pay withdrawals. While the
Bank has the obligation to return the amount deposited, it has, however, no
obligation to return or deliver the same money that was deposited. And, the failure of
the Bank to return the amount deposited will not constitute estafa through
misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code,
but it will only give rise to civil liability over which the public respondents have no
jurisdiction.
But even granting that the failure of the bank to pay the time and savings
deposits of private respondent David would constitute a violation of paragraph 1(b) of
Article 315 of the Revised Penal Code, nevertheless any incipient criminal liability
was deemed avoided, because when the aforesaid bank was placed under
receivership by the Central Bank, petitioners Guingona and Martin assumed the
obligation of the bank to private respondent David, thereby resulting in the novation
of the original contractual obligation arising from deposit into a contract of loan and
converting the original trust relation between the bank and private respondent David
into an ordinary debtor-creditor relation between the petitioners and private
respondent. Consequently, the failure of the bank or petitioners Guingona and Martin
to pay the deposits of private respondent would not constitute a breach of trust but
would merely be a failure to pay the obligation as a debtor.
Moreover, while it is true that novation does not extinguish criminal liability,
it may however, prevent the rise of criminal liability as long as it occurs prior to the
filing of the criminal information in court.
In the case at bar, there is no dispute that petitioners Guingona and Martin
executed a promissory note on June 17, 1981 assuming the obligation of the bank to
private respondent David; while the criminal complaint for estafa was filed on
December 23, 1981 with the Office of the City Fiscal. Hence, it is clear that novation
occurred long before the filing of the criminal complaint with the Office of the City
Fiscal.
Consequently, as aforestated, any incipient criminal liability would be
avoided but there will still be a civil liability on the part of petitioners Guingona and
Martin to pay the assumed obligation.
In conclusion, considering that the liability of the petitioners is purely civil in
nature and that there is no clear showing that they engaged in foreign exchange
transactions, We hold that the public respondents acted without jurisdiction when
they investigated the charges against the petitioners. Consequently, public
respondents should be restrained from further proceeding with the criminal case for
to allow the case to continue, even if the petitioners could have appealed to the
Ministry of Justice, would work great injustice to petitioners and would render
meaningless the proper administration of justice.
CREDTRANS sjbprior | 4

(The SC initially dismissed the case for failure of petitioner to sufficiently show that
CA had committed any reversible error in its questioned judgment which had
dismissed petitioners petition for review for having been filed out of time. But on
August 10, 1990, SC resolved to set aside the dismissal of the case and give due
course to the petition.)
YONG CHAN KIM, petitioner, vs.
PEOPLE OF THE PHILIPPINES, HON. EDGAR D. GUSTILO, Presiding Judge,
RTC, 6th Judicial Region, Branch 28 Iloilo City and Court of Appeals (13th
Division) respondents
FACTS:
Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture
Department of the Southeast Asian Fisheries Development Center (SEAFDEC) with
head station at Tigbauan, Province of Iloilo. As Head of the Economics Unit of the
Research Division, he conducted prawn surveys which required him to travel to
various selected provinces in the country where there are potentials for prawn
culture.
Travel Order No.2222 for June16 to July21, 1982, received Php6,438.00
as cash advance to defray his travel expenses.
T.O. 2268 for June30 to July4, 1982, received a cash advance of
Php495.00.

ISSUE:
Whether or not the petitioner committed estafa?
RULING:
NEGATIVE
We find merit in the petition.

On 14 January 1983, petitioner presented both travel orders for liquidation,

submitting Travel Expense Reports to the Accounting Section. When the Travel
Expense Reports were audited, it was discovered that there was an overlap of four (4)
days (30 June to 3 July 1982) in the two (2) travel orders for which petitioner
collected per diems twice. In sum, the total amount in the form of per diems and
allowances charged and collected by petitioner under Travel Order No. 2222, when he
did not actually and physically travel as represented by his liquidation papers, was
P1,230.00.

In September 1983, two (2) complaints for Estafa were filed against the
petitioner before the Municipal Circuit Trial Court at Guimbal, Iloilo, docketed as
Criminal Case Nos. 628 and 631.
In Criminal Case No.628 MTC rendered a decision finding Yong Chan Kim
guilty beyond reasonable doubt for the crime of Estafa penalized under
paragraph l(b) of Article 315, RPC.
In Criminal Case No.631 was subsequently dismissed for failure to
prosecute.
Petitioner appealed from the decision of the Municipal Circuit Trial Court in
Criminal Case No. 628. On 30 July 1987, the Regional Trial Court in Iloilo City in
Criminal Case No. 20958 affirmed in toto the trial court's decision. On 30 October
1987, petitioner filed with the appellate court a petition for review. As earlier stated,
on 29 April 1988, the Court of Appeals dismissed the petition for having been filed
out of time. Petitioner's motion for reconsideration was denied for lack of merit.
Hence, the present course.

In order that a person can be convicted of estafa under the RPC, it must
be proven that he had the obligation to deliver or return the same
money, good or personal property that he had received.
Was petitioner under obligation to return the same money
(cash advance) which he had received? We belive not.
o
Liquidation simply means the settling of an indebtedness. An
employee, such as herein petitioner, who liquidates a cash advance
is in fact paying back his debt in the form of a loan of money
advanced to him by his employer, asper diems and allowances.
Similarly, as stated in the assailed decision of the lower court, "if
the amount of the cash advance he received is less than the
amount he spent for actual travel . . . he has the right to demand
reimbursement from his employer the amount he spent coming
from his personal funds. 12 In other words, the money advanced by
either party is actually a loan to the other. Hence, petitioner was
under no legal obligation to return the same cash or money, i.e.,
the bills or coins, which he received from the private respondent.
The ruling of the trial judge that ownership of the cash advanced to the
petitioner by private respondent was not transferred to the latter is
erroneous. Ownership of the money was transferred to the petitioner.
Even the prosecution witness, Virgilio Hierro, testified to this fact.
Since ownership of the money (cash advance) was transferred to
petitioner, no fiduciary relationship was created. Absent this fiduciary
relationship between petitioner and private respondent, which is an
essential element of the crime of estafa by misappropriation or
conversion, petitioner could not have committed estafa.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs.

GUARIA AGRICULTURAL AND REALTY DEVELOPMENT
Respondent.

CORPORATION,

FACTS:
In July 1976, Guaria Corporation applied for a loan from DBP to finance the
development of its resort complex situated in Trapiche, Oton, Iloilo. The loan, in the
amount of P3,387,000.00, was approved on August 5, 1976. Prior to the release of
CREDTRANS sjbprior | 5

the loan, DBP required Guaria Corporation to put up a cash equity of P1,470,951.00
for the construction of the buildings and other improvements on the resort complex.
In relation to this loan:

Respondent executed a promissory note that would be due on

November 3, 1988.

On October 5, 1976, Guaria Corporation executed a real estate

mortgage over several real properties in favor of DBP as security
for the repayment of the loan.

On May 17, 1977, Guaria Corporation executed a chattel

mortgage over the personal properties existing at the resort
complex and those yet to be acquired out of the proceeds of the
loan, also to secure the performance of the obligation.
The loan was released in several instalments, and Guaria Corporation used
the proceeds to defray the cost of additional improvements in the resort complex. In
all, the amount released totaled P3,003,617.49, from which DBP withheld
P148,102.98 as interest.
Guaria Corporation demanded the release of the balance of the loan, but
DBP refused. Instead, DBP directly paid some suppliers of Guaria Corporation over
the latter's objection. DBP found upon inspection of the resort project, its
developments and improvements that Guaria Corporation had not completed the
construction works.
In a letter dated February 27, 1978, and a telegram dated June 9, 1978, DBP
thus demanded that Guaria Corporation expedite the completion of the project, and
warned that it would initiate foreclosure proceedings should Guaria Corporation not
do so.
Unsatisfied with the non-action and objection of Guaria Corporation, DBP
initiated extrajudicial foreclosure proceedings. A notice of foreclosure sale was sent
to Guaria Corporation. The notice was eventually published, leading the clients and
patrons of Guaria Corporation to think that its business operation had slowed down,
and that its resort had already closed.
On January 6, 1979, Guaria Corporation sued DBP in the RTC to demand
specific performance of the latter's obligations under the loan agreement, and to stop
the foreclosure of the mortgages.
DBP moved for the dismissal of the complaint, stating that the
mortgaged properties had already been sold to satisfy the obligation of
Guaria Corporation at a public auction held on January 15, 1979 at the
Costa Mario Resort Beach Resort in Oton, Iloilo.
Guaria Corporation amended the complaint on February 6, 1979 to seek
the nullification of the foreclosure proceedings and the cancellation of the certificate
of sale. DBP filed its answer on December 17, 1979, and trial followed upon the
termination of the pre-trial without any agreement being reached by the parties.
DBP applied for the issuance of a writ of possession by the RTC. At first,
the RTC denied the application but later granted it upon DBP's motion
for reconsideration. Aggrieved, Guaria Corporation assailed the

granting of the application before the CA on certiorari. After the CA

dismissed the petition for certiorari, DBP sought the implementation of
the order for the issuance of the writ of possession over Guaria
Corporation's opposition, the RTC issued the writ of possession on June
16, 1982.
Ruling of the RTC The court hereby resolves that the extra-judicial sales of the
mortgaged properties of the plaintiff on January 15, 1979 are null and void, so with
the consequent issuance of certificates of sale to the defendant of said properties,
the registration thereof with the Registry of Deeds and the issuance of the transfer
certificates of title involving the real property in its name.
Ruling of the CA The Decision dated January 6, 1998, rendered by the Regional
Trial Court of Iloilo City, Branch 25 in Civil Case No. 12707 for Specific Performance
with Preliminary Injunction is hereby AFFIRMED with MODIFICATION, in that the award
for attorney's fees is deleted.
ISSUE:
Whether or not the foreclosure of the mortgaged properties was valid and proper.
Petitioners Argument DBP submits that the loan had been granted under its
supervised credit financing scheme for the development of a beach resort, and the
releases of the proceeds would be subject to conditions that included the verification
of the progress of works in the project to forestall diversion of the loan proceeds; and
that under Stipulation No. 26 of the mortgage contract, further loan releases would
be terminated and the account would be considered due and demandable in the
event of a deviation from the purpose of the loan, including the failure to put up the
required equity and the diversion of the loan proceeds to other purposes. It assails
the declaration by the CA that Guaria Corporation had not yet been in default in its
obligations despite violations of the terms of the mortgage contract securing the
promissory note.
Respondents Argument Guaria Corporation counters that it did not violate the
terms of the promissory note and the mortgage contracts because DBP had fully
collected the interest notwithstanding that the principal obligation did not yet fall due
and become demandable.
RULING:
NEGATIVE
The appeal lacks merit.
The agreement between DBP and Guaria Corporation was a loan. Under the
law, a loan requires the delivery of money or any other consumable object by one
party to another who acquires ownership thereof, on the condition that the same
amount or quality shall be paid. Loan is a reciprocal obligation, as it arises from the
same cause where one party is the creditor, and the other the debtor. The obligation
of one party in a reciprocal obligation is dependent upon the obligation of the other,
and the performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it when it
becomes due and demandable.
CREDTRANS sjbprior | 6

DBP's foreclosure of the mortgage and the sale of the mortgaged properties
at its instance were premature, and, therefore, void and ineffectual.

DBP's actuations were legally unfounded. It is true that loans are often
secured by a mortgage constituted on real or personal property to
protect the creditor's interest in case of the default of the debtor. By its
nature, however, a mortgage remains an accessory contract dependent
on the principal obligation,33 such that enforcement of the mortgage
contract will depend on whether or not there has been a violation of the
principal obligation. While a creditor and a debtor could regulate the
order in which they should comply with their reciprocal obligations, it is
presupposed that in a loan the lender should perform its obligation - the
release of the full loan amount - before it could demand that the
borrower repay the loaned amount. In other words, Guaria Corporation
would not incur in delay before DBP fully performed its reciprocal
obligation.
Considering that it had yet to release the entire proceeds of the loan,
DBP could not yet make an effective demand for payment upon Guaria
Corporation to perform its obligation under the loan. According to
Development Bank of the Philippines v. Licuanan,35 it would only be
when a demand to pay had been made and was subsequently refused
that a borrower could be considered in default, and the lender could
obtain the right to collect the debt or to foreclose the mortgage. Hence,
Guaria Corporation would not be in default without the demand.

FACTS:

Petitioner Dario Nacar filed a complaint for constructive dismissal before the
Arbitration Branch of the National Labor Relations Commission (NLRC) against
respondents Gallery Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR
Case No. 01-00519-97
On October 15, 1998, the Labor Arbiter rendered a Decision 3 in favor of
petitioner and found that he was dismissed from employment without a valid or just
cause. Thus, petitioner was awarded backwages and separation pay in lieu of
reinstatement in the amount of P158,919.92.
Respondents appealed to the NLRC, but it was dismissed for lack of merit in
the Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the
decision of the Labor Arbiter. Respondents filed a motion for reconsideration, but it
was denied.
Dissatisfied, respondents filed a Petition for Review on Certiorari before the
CA. On August 24, 2000, the CA issued a Resolution dismissing the petition.
Respondents filed a Motion for Reconsideration, but it was likewise denied in a
Resolution dated May 8, 2001. Respondents then sought relief before the Supreme
Court, docketed as G.R. No. 151332. Finding no reversible error on the part of the CA,
this Court denied the petition in the Resolution dated April 17, 2002.
An Entry of Judgment was later issued certifying that the resolution became
final and executory on May 27, 2002. The case was, thereafter, referred back to the
Labor Arbiter. A pre-execution conference was consequently scheduled, but
respondents failed to appear.

Assuming that DBP could already exact from the latter its compliance
with the loan agreement, the letter dated February 27, 1978 that DBP
sent would still not be regarded as a demand to render Guaria
Corporation in default under the principal contract because DBP was
only thereby requesting the latter "to put up the deficiency in the value
of improvements."

On November 5, 2002, petitioner filed a Motion for Correct Computation,

praying that his backwages be computed from the date of his dismissal on January
24, 1997 up to the finality of the Resolution of the Supreme Court on May 27,
2002.11 Upon recomputation, the Computation and Examination Unit of the NLRC
arrived at an updated amount in the sum of P471,320.31.12

Having found and pronounced that the extrajudicial foreclosure by DBP was
premature, and that the ensuing foreclosure sale was void and ineffectual, the Court
affirms the order for the restoration of possession to Guarifia Corporation and the
payment of reasonable rentals for the use of the resort. The CA properly held that the
premature and invalid foreclosure had unjustly dispossessed Guarifia Corporation of
its properties. Consequently, the restoration of possession and the payment of
reasonable rentals were in accordance with Article 561 of the Civil Code, which
expressly states that one who recovers, according to law, possession unjustly lost
shall be deemed for all purposes which may redound to his benefit to have enjoyed it
without interruption.

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter

ordering the Sheriff to collect from respondents the total amount of P471,320.31.
Respondents filed a Motion to Quash Writ of Execution, arguing, among other things,
that since the Labor Arbiter awarded separation pay of P62,986.56 and limited
backwages ofP95,933.36, no more recomputation is required to be made of the said
awards. They claimed that after the decision becomes final and executory, the same
cannot be altered or amended anymore.14 On January 13, 2003, the Labor Arbiter
issued an Order15 denying the motion. Thus, an Alias Writ of Execution16 was issued
on January 14, 2003.

DARIO NACAR, vs.

GALLERY FRAMES AND/OR FELIPE BORDEY, JR.

Respondents again appealed before the NLRC, which on June 30, 2003
issued a Resolution17 granting the appeal in favor of the respondents and ordered
the recomputation of the judgment award.

CREDTRANS sjbprior | 7

On August 20, 2003, an Entry of Judgment was issued declaring the

Resolution of the NLRC to be final and executory. Consequently, another preexecution conference was held, but respondents failed to appear on time. Meanwhile,
petitioner moved that an Alias Writ of Execution be issued to enforce the earlier
recomputed judgment award in the sum of P471,320.31.18
The records of the case were again forwarded to the Computation and
Examination Unit for recomputation, where the judgment award of petitioner was
reassessed to be in the total amount of only P147,560.19.
Petitioner then moved that a writ of execution be issued ordering
respondents to pay him the original amount as determined by the Labor Arbiter in his
Decision dated October 15, 1998, pending the final computation of his backwages
and separation pay.
On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to
satisfy the judgment award that was due to petitioner in the amount of P147,560.19,
which petitioner eventually received.
Petitioner then filed a Manifestation and Motion praying for the recomputation of the monetary award to include the appropriate interests.19
On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion,
but only up to the amount ofP11,459.73. The Labor Arbiter reasoned that it is the
October 15, 1998 Decision that should be enforced considering that it was the one
that became final and executory. However, the Labor Arbiter reasoned that since the
decision states that the separation pay and backwages are computed only up to the
promulgation of the said decision, it is the amount of P158,919.92 that should be
executed. Thus, since petitioner already receivedP147,560.19, he is only entitled to
the balance of P11,459.73.
Petitioner then appealed before the NLRC,21 which appeal was denied by
the NLRC in its Resolution22 dated September 27, 2006. Petitioner filed a Motion for
Reconsideration, but it was likewise denied in the Resolution23dated January 31,
2007.
Aggrieved, petitioner then sought recourse before the CA, docketed as CAG.R. SP No. 98591.
On September 23, 2008, the CA rendered a Decision24 denying the petition.
The CA opined that since petitioner no longer appealed the October 15, 1998
Decision of the Labor Arbiter, which already became final and executory, a belated
correction thereof is no longer allowed. The CA stated that there is nothing left to be
done except to enforce the said judgment. Consequently, it can no longer be
modified in any respect, except to correct clerical errors or mistakes.

ISSUE:
Whether or not petitioner is entitled to the payment of interest from finality of the
decision until full payment by the respondents.
RULING:
AFFIRMATIVE
The petition is meritorious.
Later na ni na case kay wala ko kasabot sa decision sa SC.
CELESTINA T. NAGUIAT, petitioner, vs.
COURT OF APPEALS and AURORA QUEAO, respondents
FACTS:
Queao applied with Naguiat for a loan in the amount of Two Hundred
Thousand Pesos (P200,000.00), which Naguiat granted. On 11 August 1980, Naguiat
indorsed to Queao Associated Bank Check No. 090990 (dated 11 August 1980) for
the amount of Ninety Five Thousand Pesos (P95,000.00), which was earlier issued to
Naguiat by the Corporate Resources Financing Corporation. She also issued her own
Filmanbank Check No. 065314, to the order of Queao, also dated 11 August 1980
and for the amount of Ninety Five Thousand Pesos (P95,000.00). The proceeds of
these checks were to constitute the loan granted by Naguiat to Queao.3
To secure the loan, Queao executed a Deed of Real Estate Mortgage dated
11 August 1980 in favor of Naguiat, and surrendered to the latter the owners
duplicates of the titles covering the mortgaged properties.4 On the same day, the
mortgage deed was notarized, and Queao issued to Naguiat a promissory note for
the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00), with interest at 12%
per annum, payable on 11 September 1980.5 Queao also issued a Security Bank
and Trust Company check, postdated 11 September 1980, for the amount of TWO
HUNDRED THOUSAND PESOS (P200,000.00) and payable to the order of Naguiat.
Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. On the following day, 12 September 1980,
Queao requested Security Bank to stop payment of her postdated check, but the
bank rejected the request pursuant to its policy not to honor such requests if the
check is drawn against insufficient funds.6
On 16 October 1980, Queao received a letter from Naguiats lawyer,
demanding settlement of the loan. Shortly thereafter, Queao and one Ruby
Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queao told Naguiat
that she did not receive the proceeds of the loan, adding that the checks were
retained by Ruebenfeldt, who purportedly was Naguiats agent.7
Naguiat applied for the extrajudicial foreclosure of the mortgage with the
Sheriff of Rizal Province, who then scheduled the foreclosure sale on 14 August 1981.
Three days before the scheduled sale, Queao filed the case before the Pasay City
CREDTRANS sjbprior | 8

RTC,8 seeking the annulment of the mortgage deed. The trial court eventually
stopped the auction sale.

Ruling of the RTC rendered judgment, declaring the Deed of Real Estate Mortgage
null and void, and ordering Naguiat to return to Queao the owners duplicates of her
titles to the mortgaged lots.

Ruling of the CA affirmed in toto the RTC decision.

ISSUE:
Whether private respondent received the loan proceeds which were supposed to be
covered by the two checks petitioner had issued.

RULING:
NEGATIVE

No evidence was submitted by Naguiat that the checks she issued or

endorsed were actually encashed or deposited. The mere issuance of the checks did
not result in the perfection of the contract of loan. For the Civil Code provides that
the delivery of bills of exchange and mercantile documents such as checks shall
produce the effect of payment only when they have been cashed.20 It is only after
the checks have produced the effect of payment that the contract of loan may be
deemed perfected. Art. 1934 of the Civil Code provides:
An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple loan
itself shall not be perfected until the delivery of the object of the contract."
A loan contract is a real contract, not consensual, and, as such, is perfected
only upon the delivery of the object of the contract.21 In this case, the objects of the
contract are the loan proceeds which Queao would enjoy only upon the encashment
of the checks signed or indorsed by Naguiat. If indeed the checks were encashed or
deposited, Naguiat would have certainly presented the corresponding documentary
evidence, such as the returned checks and the pertinent bank records. Since Naguiat
presented no such proof, it follows that the checks were not encashed or credited to
Queaos account.

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,

vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN
VALDEZ, respondents.
The principal issue in this case is whether or not a decision of the Court of Appeals
promulgated a long time ago can properly be considered res judicata by respondent
Court of Appeals in the present two cases between petitioner and two private
respondents.

Petitioner Vicar applied for registration of title over Lots 1,2,3 and 4 situated
in La Trinidad, Benguet with the Land Registration Court.
The Land Registration Court confirmed to the registrable title of Vicar to the
lots.
Heirs of Valdez and Heirs of Octaviano, herein private respondents appealed
the decision of the Land Registration Court to the Court of Appeals.
CA reversed the LRCs decision and dismissed the Vicars application as to
Lots 2 and 3. (CA GR 38830-R)
Heirs of Octaviano file a Motion For Recon with CA to order the registration
of Lot 3 in their names.
Heirs of Valdez files a Motion for Recon with CA to have Lots 2 and 3
registered in their names.
CA denied the 2 MFRs.
Vicar filed with the Supreme Court a petition for review on certiorari of the
CAs decision to dismiss its application for registration on Lots 2 and 3.
Heirs of Valdez filed with SC a petition for review.
SC denied both petitions for lack of merit.
Heirs of Octaviano filed with CFI Baguio a Motion for Execution of Judgment
praying that they will be placed in possession of Lot 3.
o
The CFI denied the motion on the ground that the CAs decision did
not grant the Heirs of Octaviano any affirmative relief.
Heirs of Octaviano filed with CA a petition for certiorari and mandamus, that
was subsequently dismissed.
Heirs of Octaviano filed a civil case for recovery of possession of Lot 3.
Heirs of Octaviano likewise filed a civil case for recovery of possession of Lot
2.
o
The plaintiffs argue that the defendant Vicar is barred from setting
up the defense of ownership and/or long and continuous possession
of the two lots in question since this is barred by prior judgment of
the Court of Appeals in CA-G.R. No. 038830-R under the principle of
res judicata. Plaintiffs contend that the question of possession and
ownership have already been determined by the Court of Appeals
and affirmed by the Supreme Court
o
Defendant Vicar maintains that the principle of res judicata would
not prevent them from litigating the issues of long possession and
ownership because the dispositive portion of the prior judgment in
CA-G.R. No. 038830-R merely dismissed their application for
registration and titling of lots 2 and 3. Defendant Vicar contends
that only the dispositive portion of the decision, and not its body, is
the controlling pronouncement of the Court of Appeals.

ISSUE:
WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in
commodatum, a gratuitous loan for use.
RULING:

FACTS:
CREDTRANS sjbprior | 9

During trial, the Heirs of Octaviano presented one (1) witness, who testified
on the alleged ownership of the land in question (Lot 3) by their
predecessor-in-interest, Egmidio Octaviano; his written demand to Vicar for
the return of the land to them; and the reasonable rentals for the use of the
land at P10,000 per month. On the other hand, Vicar presented the Register
of Deeds for the Province of Benguet, Atty. Sison, who testified that the land
in question is not covered by any title in the name of Egmidio Octaviano or
any of the heirs. Vicar dispensed with the testimony of Mons. Brasseur when
the heirs admitted that the witness if called to the witness stand, would
testify that Vicar has been in possession of Lot 3, for 75 years continuously
and peacefully and has constructed permanent structures thereon.

Private respondents were able to prove that their predecessors' house was
borrowed by petitioner Vicar after the church and the convent were destroyed. They
never asked for the return of the house, but when they allowed its free use, they
became bailors in commodatum and the petitioner the bailee.
The bailees' failure to return the subject matter of commodatum to the bailor did
not mean adverse possession on the part of the borrower. The bailee held in trust the
property subject matter of commodatum. The adverse claim of petitioner came only
in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar
by such adverse claim could not ripen into title by way of ordinary acquisitive
prescription because of the absence of just title.
The Court of Appeals found that petitioner Vicar did not meet the requirement of
30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it
satisfy the requirement of 10 years possession for ordinary acquisitive prescription
because of the absence of just title. The appellate court did not believe the findings
of the trial court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was
acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there
was absolutely no documentary evidence to support the same and the alleged
purchases were never mentioned in the application for registration.
The Court of Appeals found that the predecessors-in-interest and private
respondents were possessors under claim of ownership in good faith from 1906; that
petitioner Vicar was only a bailee in commodatum; and that the adverse claim and
repudiation of trust came only in 1951.

CREDTRANS sjbprior | 10