Molino vs Securitys International Corp.
363 SCRA 358 Defendant Danilo Alto failed to file an Answer, and during the
Security Diners International Corporation ("SDIC") operates a
credit card system under the name of Diners Club through
which it extends credit accommodation to its cardholders for
the purchase of goods and payment of services from its
member establishments to be reimbursed later on by the
cardholder upon proper billing. There are two types of credit
cards issued: one, the Regular (Local) Card which entitles the
cardholder to purchase goods and pay services from member
establishments in an amount not exceeding P10,000.00; and
two, the Diamond (Edition) Card which entitles the cardholder
to purchase goods and pay services from member
establishments in unlimited amounts. One of the requirements
for the issuance of either of these cards is that an applicant
should have a surety. Danilo A. Alto. He got as his surety his
own sister-in-law Jeanette Molino Alto.
16. SURETY. The cardholder shall furnish an adequate surety
or sureties acceptable to Security Diners who shall be jointly
and severally liable with the cardholder to pay Security Diners
all the obligations and charges incurred and credit extended on
the basis of the card. In the event the surety/sureties furnished
the cardholder are discharged the cardholder must furnish a
new surety or sureties acceptable to Security Diners within
thirty (30) days. Otherwise the cardholder's privileges shall be
automatically terminated in accordance with Section 11
hereof." To pay SECURITY DINERS INTERNATIONAL
CORPORATION, hereinafter referred to as `Security Diners'
all the obligations and charges including but not limited to
fees, interest, attorney's fees and all other costs incurred by
him/her in connection with the use of the DINERS CLUB
CARD in accordance with the terms and conditions governing
the issuance and use of the Diners Club Card. Any change or
novation in the agreement or any extension of time granted by
SECURITY DINERS to pay such obligations, charges and
fees, shall not release me/us from this Surety Undertaking, it
being understood that said undertaking is a continuing one and
shall subsist and bind me/us until all such obligations, charges
and fees have been fully paid and satisfied. On February 8,
1988, Danilo wrote SDIC a letter (Exhibit "B") requesting it to
upgrade his Regular (Local) Diners Club Card to a Diamond
(Edition) one. As a requirement of SDIC, Danilo secured
from Jeanette her approval. The latter obliged and so on
March 2, 1988, she signed a Note (Exhibit "C") which states:
"This certifies that I, Jeanette D. Molino, approve of the
request of Danilo and Gloria Alto with Card No. 3651-
203216-0006 and 3651-203412-5007 to upgrade their card
from regular to diamond edition."
P166,408.31. He defaulted in the payment of this obligation.
pre-trial conference respondent moved to have the complaint
dismissed against him, without prejudice to a subsequent re-
filing. Petitioner was left as the lone defendant, sued in her
capacity as surety of Danilo.
In the Answer with Compulsory Counterclaim that she filed
with the RTC, petitioner claimed that her liability under the
Surety Undertaking was limited to P10,000.00 and that she did
not expressly and categorically agree to act as surety for
Danilo in an amount higher than P10,000.00.[3] By way of
counterclaim, she asked for moral and exemplary damages.
Exhibit "C" or Exhibit "1", inter alia, which was a note
bearing petitioner's signature certifying to her approval of
Danilo's request to have his card upgraded should be read
simply as a statement of "no objection" to his request for
upgrading, and not as an assumption of liability for the debts
that Danilo may later owe through the said card.[4] The trial
court also took note of the testimony of Alfredo Vicente, an
officer of respondent, who opined that the consent to be bound
as surety to an upgraded card should be categorical[5] and not
in a simple "no objection" form.
The trial court went on further to state that petitioner was not
liable for any amount, not even for P10,000.00 which is the
maximum credit limit for Regular Diners Club Cards, since at
the time of the upgrading Danilo had no outstanding credit
card debts.[6
The Court of Appeals found contrary to the lower court, and
declared that the Surety Undertaking signed by petitioner
when Danilo Alto first applied for a Regular Diners Club Card
clearly applied to the unpaid purchases of Danilo Alto under
the Diamond card. She declared that "any change or
novation in the Agreement or any extension of time
granted by SECURITY DINERS to pay such obligation,
charges, and fees, shall not release (her) from this Surety
Undertaking";
The Surety Undertaking expressly provides that petitioner's
liability is solidary. A surety is considered in law as being the
same party as the debtor in relation to whatever is adjudged
touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable.[14] Although the contract of a
surety is in essence secondary only to a valid principal
obligation, his liability to the creditor is direct, primary and
absolute; he becomes liable for the debt and duty of another
although he possesses no direct or personal interest over the
obligations nor does he receive any benefit therefrom.
1
 Secondly, the total value of the materials as reflected
in all the invoices is P117,329.0 while under the
JOSE LAGON v. HOOVEN COMALCO delivery receipts it is only P112, 870.50, or a
INDUSTRIES, INC.
difference of P4,458.00.
G.R. No. 135657 January 17, 2001
Even more strange is the fact that HOOVEN
instituted the present action for collection of sum of
FACTS:
money against Lagon only on 24 February 1987, or
more than five (5) years after the supposed
Petitioner Jose V. Lagon is a businessman
completion of the project. Indeed, it is contrary to
and owner of a commercial building in Tacurong,
common experience that a creditor would take its
Sultan Kudarat. Respondent HOOVEN on the other
own sweet time in collecting its credit, more so in
is a domestic corporation known to be the biggest
this case when the amount involved is not miniscule
manufacturer and installer of aluminum materials in
but substantial.
the country with branch office at E. Quirino Avenue,
Davao City..Sometime in April 1981 Lagon and
All the delivery receipts did not appear to
HOOVEN entered into two (2) contracts, both
have been signed by petitioner or his duly authorized
denominated Proposal, whereby for a total
representative acknowledging receipt of the
consideration of P104,870.00 HOOVEN agreed to
materials listed therein. A closer examination of the
sell and install various aluminum materials in
receipts clearly showed that the deliveries were made
Lagons commercial building in Tacurong, Sultan
to a certain Jose Rubin, claimed to be petitioners
Kudarat. Upon execution of the contracts, Lagon
driver, Armando Lagon, and a certain bookkeeper.
paid HOOVEN P48,000.00 in advance.
Unfortunately for HOOVEN, the identities of these
persons were never been established, and there is no
Lagon, in his answer, denied liability and
way of determining now whether they were indeed
averred that HOOVEN was the party guilty of breach
authorized representatives of petitioner.
of contract by failing to deliver and install some of
WHEREFORE, the assailed Decision of the Court of
the materials specified in the proposals; that as a
Appeals dated 28 April 1997 is MODIFIED.
consequence he was compelled to procure the
Petitioner Jose V. Lagon is ordered to pay respondent
undelivered materials from other sources; that as
Hooven Comalco Industries, Inc., P6,377.66
regards the materials duly delivered and installed by
representing the value of the unpaid materials
HOOVEN, they were fully paid. He counterclaimed
admittedly delivered to him. On the other hand,
for actual, moral, exemplary, temperate and nominal
damages, as well as for attorneys fees and expenses respondent is ordered to pay petitioner P50,000.00 as
of litigation. moral damages, P30,000.00 as attorneys fees and
P46,554.50 as actual damages and litigation
expenses.
ISSUE:

Whether or not all the materials specified in

the contracts had been delivered and installed by
respondent in petitioners commercial building in
Tacurong, Sultan Kudarat.

RULING:

Firstly, the quantity of materials and the

amounts sated in the delivery receipts do not tally
with those in the invoices covering them,
notwithstanding that, according to HOOVEN OIC
Alberto Villanueva, the invoices were based merely
on the delivery receipts.

2

PROJECT BUILDERS, INC. et al vs. THE COURT OF
APPEALS
[G. R. No. 99433. June 19, 2001] PBI, the developer-builder
of Jovan Condominium Building, via an agreement, obtained a
credit line of P5M from IFC and assigned twenty (20)
contracts to sell with accounts receivable (AR) from
its condominium unit buyers to IFC with recourse to
assignor and on a non-collection basis. T o t a l A R s
assigned was P7, 986,815.38, but only P4,
549,132.72 was released to PBI, with t he
d i f f e r e n c e o f P3, 437,682.66 representing the
discounting fee or finance fee. PBI also executed a
Deed of Real Estate Mortgage in favor of IFC. When
PBI defaulted in the payment of the subject account, IFC
foreclosed the mortgage and was the highest bidder in the
amount of P3, 500,000.00.But prior to redemption, IFC
has been collecting interest from the ARs/contracts
to sell. The foreclosed property was redeemed a year
later, but after application of the redemption
payment, IFC claims that there is still a deficiency
of P1, 323,053.08, Hence, IFC filed a collection complaint.
PBI denies liability and in their answer they allege that
plaintiff has no cause or right of action because the obligation
is already fully paid out of the proceeds of foreclosure sale of
PBIs property. PBI alleged that IFC is the one liable to PBI.
The terms and conditions of the Agreement dated June 15,
1976 material to the case:
b.) This assignment/discounting of the
Contracts to Sell shall be with recourse to
A s s i g n o r a n d o n a n o n - collection basis.
d.) S h o u l d t h e r e b e a d e f a u l t o n t h e p a r t
of the Assignor to pay Assignee or
s h o u l d A s s i g n o r f a i l t o p a y Assignee the
amount or amounts due to Assignee arising from the
assignment of the accounts receivables or remit to Assignee
a lesser amount, the Assignor and/or PABLO
MALASARTE, ROLANDO L. JUSTO, LEANDRO
D.ENRIQUEZ, TEODORO G. BANAS, GALICANO
A. CALAPATIA, JR. shall jointly and severally in
their personal capacities upon demand by the Assignee,
repurchase the Contracts to Sell or installment papers assigned
and/or discounted by Assignor in favor of Assignee
and/or pay Assignee the remaining balance of the
amount of the receivables discounted and/or assigned by
Assignor to Assignee.
TC: Dismissed IFCs complaint and ruled on the counterclaim
ordering IFC it to pay PBI the amount of AR that have not
been compensated, to return to PBI the interest it collected
from PBI from foreclosure to redemption of the real estate
mortgage; and to return pre-paid interest since PBI was not
allowed to use the period of such prepaid interests.CA
reserved TC .and ordered PBI to pay, jointly and severally, to
IFC the deficiency of P1,237,802.48 with interest minus the
amount of the promissory note in the sum of P238,052.53 with
interest.
ISSUE: WON assignor is still liable to the assignee
for interests under the contract to sell, in case of
default, after the mortgage used to guaranty the collection
of the assigned credit, had already been foreclosed.
HELD: YES. IFC, which is engaged in discounting of ARs, is
a financing company as defined by the Financing Company
Act, and the assignment of the contracts to sell falls under the
term credit. An assignment of credit is an act of transferring,
either onerously or gratuitously, the right of an assignor to an
assignee who would then be capable of proceeding against the
debtor for enforcement or satisfaction of the credit. The
transfer of rights takes place upon perfection of the contract,
and ownership of the right, including all appurtenant accessory
rights, is thereupon acquired by the assignee. Where
the assignment is of pure liberality, donation would
apply; while where valuable consideration is involved, a
contract of sale or purchase will apply. In an assignment of a
contract to sell, the assignee is effectively subrogated in place
of the assignor and in a position to enforce the contract to sell
to the same extent as the assignor could. In an assignment of
credit, the consent of the debtor is not essential for its
perfection. A creditor may assign his credit and its accessories
without the debtors consent. The purpose of notice to the
debtor is only to inform him that from date of
assignment, payment should be made to the assignee
and not to the original creditor. Lack of notice to debtor affects
only the efficacy of payment debtor might make. The
assignment was with recourse, and default in
payment of installments had been established when
mortgaged parcels of land were foreclosed. However, the
foreclosure did not preclude private IFC from collecting
interest from the assigned Contracts To Sell from the time of
foreclosure to the redemption of the foreclosed property. The
imposition of interest was a mere enforcement or exercise of
the right to the ownership of the credit or receivables which
the parties stipulated in the 1976 financing agreement. As
owner of the account receivables, IFC was entitled
over the interest payments. This interest is separate
from the purchase discount which is not considered interest
but more of a time price differential.
JUDGMENT: Affirmed CA Decision
3
DBP v. Prudential Bank, 475 SCRA 623 (2005) for a sum of money with damages against DBP.

FACTS: Lirag Textile Mills, Inc. (Litex) opened
an irrevocable commercial letter of credit with
Prudential Bank. This was in connection with its
importation of 5,000 spindles for spinning
machinery with drawing frame, simplex fly frame,
ring spinning frame and various accessories, spare
parts and tool gauge. These were released to Litex
under covering trust receipts it executed in favor
of Prudential Bank. Litex installed and used the
items in its textile mill located in Montalban, Rizal.
-On 1980, DBP granted a foreign currency loan in
the amount of US$4,807,551 to Litex. To secure the
loan, Litex executed real estate and chattel
mortgages on its plant site in Montalban, Rizal,
including the buildings and other improvements,
machineries and equipments there. Among the
machineries and equipments mortgaged in favor
of DBP were the articles covered by the trust
receipts.
-When Prudential Bank learned about DBPs plan
for the overall rehabilitation of Litex, Prudential
Bank notified DBP of its claim over the various
items covered by the trust receipts which had
been installed and used by Litex in the textile mill.
Prudential Bank informed DBP that it was the
absolute and juridical owner of the said items and
they were thus not part of the mortgaged assets that
could be legally ceded to DBP.
TC and CA: In favor of Prudential Bank. Applying
the provisions of PD 115 and held that the
ownership over the contested articles belonged to
Prudential Bank as entrust or, not to Litex.
Consequently, even if Litex mortgaged the items to
DBP and the latter foreclosed on such mortgage,
DBP was duty bound to turn-over the proceeds to
Prudential Bank being the party that advanced the
payment for them
HELD: The articles were owned by Prudential Bank and
they were only held by Litex in trust. While it was
allowed to sell the items, Litex had no authority to
dispose of them or any part thereof or their proceeds
through conditional sale, pledge or any other means.-Article
2085 (2) of the Civil Code requires that, in a contract of
pledge or mortgage, it is essential that the pledger or
mortgagor should be the absolute owner of the thing
pledged or mortgaged.
-Article 2085 (3) further mandates that the person
constituting the pledge or mortgage must have the free
disposal of his property, and in the absence thereof, that
he be legally authorized for the purpose.
-Litex had neither absolute ownership, free disposal nor
the authority to freely dispose of the articles. Litex could
not have subjected them to a chattel mortgage. Their
inclusion in the mortgage was void and had no legal
effect. There being no valid mortgage, there could also
be no valid foreclosure or valid auction sale.

-For the failure of Litex to pay its obligation,

DBP extra-judicially foreclosed on the real
estate and chattel mortgages, including the articles
claimed by Prudential Bank.-Prudential Bank sent again
a letter to DBP reasserting its claim over the items
covered by trust receipts in its name and advising
DBP not to include them in the auction. It also
demanded the turn-over of the articles
or alternatively, the payment of their value.

-There being no concrete action on DBPs part,

Prudential Bank, in a letter dated, made a final demand
on DBP for the turn-over of the contested articles or the
payment of their value. Without the knowledge of
Prudential Bank, however, DBP sold the Litex textile
mill, as well as the machineries and equipments therein,
to Lyon Textile Mills, Inc. (Lyon)-Since its demands
remained unheeded, Prudential Bank filed a complaint

4
Ongkeko vs BPI Express Card Corp, 486 SCRA 206

Facts:
Vicente Ongkeko acted as surety for his employee,
Lina Lodovica, in the latters application for credit
card with BPI Express Card Corporation (BECC).
The application was approved and Lodovica was
given a P3,000.00 credit limit. In 1991, the credit
card was renewed and Lodovicas credit limit was
increased to P10,000.00. As of May 12, 1996,
Lodovicas outstanding balance amounted
toP22,476.61. BECC filed an action for sum of
money against Lodovica and Ongkeko. In his
Answer, Ongkeko admitted his undertaking but
claimed that he can only be liable for the original
credit limit of P3,000.00 and that the renewal of the
credit card without his consent extinguished his
undertaking.

Issue:
whether or not Ongkeko is liable as surety.

Held:
The Supreme Court held in the affirmative. Article
1730 of the Civil Code provides: If the terms of a
contract are clear and leave no doubt upon the
intention of the contracting parties, the literal
meaning of its stipulations shall control. Under the
suretyship contract, Ongkeko solidarily obliged
himself to pay BECC all the liabilities incurred under
the credit card account, whether under the principal,
renewal, or extension card issued, regardless of the
changes or novation in the terms and conditions in
the issuance and use of the credit card. The terms and
conditions of his undertaking are unambiguous and
well-defined; thus, there is no room for interpretation
only application. Given that Lodovica reneged on
her obligations under the credit card account,
Ongkeko is, therefore, liable (Ongkeko vs.
BECC, G.R. No. 147275, March 31, 2006

5
Acol vs Phil. Commercial Credit Card,Inc 496
SCRA422
Facts:
On August 20, 1982, petitioner Manuel Acol applied
with respondent for a Bankard credit card and
extension.[4] Both were issued to him shortly thereafter.
For several years, he regularly used this card, purchasing
from respondents accredited establishments and paying
the corresponding charges for such purchases.
The petitioner discovered the loss of his credit
card. After exhausting all efforts to find it, the first hour
of the following day he called up respondents office and
reported the loss. The representative he spoke to told
him that his card would be immediately included in the
circular of lost cards. Petitioner called up respondent to
reiterate his report on the loss of his card. The
Respondents representative advised him to put into
writing the notice of loss and to submit it, together with
the extension cards of his wife and daughter.
A day before receiving the written notice, respondent
issued a special cancellation bulletin informing its
accredited establishments of the loss of the cards of the
enumerated holders, including petitioners.
Unfortunately, it turned out that somebody used
petitioners card on April 19 and 20, 1987 to buy
commodities worth P76,067.28. The Petitioner informed
respondent he would not pay for the purchases made
after April 19, 1987, the day he notified respondent of
the loss. The respondent agreed to reverse the disputed
billings, pending the result of an investigation of
petitioners account.
The respondent reversed its earlier position to delete the
disputed billings and insisted on collecting within 15
days from notice. It alleged that it was the most
practicable procedure and policy of the company. The
respondent filed suit in the Regional Trial Court (RTC)
of Manila[5] against petitioner for the collection
of P76,067.28, plus interest and penalty charges.
After considering the evidence, the trial court dismissed
the case and ordered the respondent-plaintiff to pay
petitioner attorneys fees of P10,000 and the costs of the
suit.[7] The RTC denied respondents motion for
reconsideration.[8]
Respondent appealed to the Court of Appeals, which,
while not disputing factual findings, reversed the RTC
ruling and held petitioner liable for the P76,067.28. The
Court of Appeals denied petitioners motion for
reconsideration. Thus, this petition.
Issue:
whether or not the contested provision in the contract
(provision no. 1 of the Terms and Conditions) was valid
and binding on the petitioner, given that the contract was
one of adhesion.
Held: The petition has merit.
The facts of this case are virtually identical with those
of Ermitao v. Court of Appeals.[9] In that case, petitioner-
extension cardholder ManuelitaErmitao lost her card on
the night of August 29, 1989 when her bag was snatched
in Makati. That very same evening, she reported the loss
and immediately thereafter sent written notice to the
respondent credit card company, BPI Express Card
Corp. (BECC). The verbal and written notices
notwithstanding, respondent insisted on billing
petitioner.
In the event the card is lost or stolen, the cardholder
agrees to immediately report its loss or theft in writing to
BECC purchases made/incurred arising from the use of
the lost/stolen card shall be for the exclusive account of
the cardholder and the cardholder continues to be liable
for the purchases made through the use of the lost/stolen
BPI Express Card until after such notice has been given
to BECC and the latter has communicated such loss/theft
to its member establishments.
The stipulation devised by respondent BECC required
two conditions before the cardholder could be relieved of
responsibility from unauthorized charges: (1) the receipt
by the card issuer of a written notice from the cardholder
regarding the loss and (2) the notification to the issuers
accredited establishments regarding such loss.
Under such a stipulation, petitioner could have
theoretically done everything in his power to give
respondent the required written notice. But if respondent
took a reasonable time (which could be indefinite) to
include the card in its cancellation bulletin, it could still
hold the cardholder liable for whatever unauthorized
charges were incurred within that span of time. This
would have been truly iniquitous, considering the
amount respondent wanted to hold petitioner liable for.
Article 1306 of the Civil Code prohibits contracting
parties from establishing stipulations contrary to public
policy. The assailed provision was just such a
stipulation. It is without any hesitation therefore that we
strike it down. The petition is hereby GRANTED.
6
Alvaro vs Ternida, 479 SCRA 288
Facts:
On May 26, 1986, Julita mortgaged the land to spouses
Salvador de Vera and Juanita Orinion for P28,000. She
signed a mortgage document that provides Julita with 3
years to repurchase the land from the date of execution.
After a year, Salvador executed a Deed of Transfer of
Mortgage in favor of spouses Jose Calpito and Zoraida
Valelo for P32,000. Julita requested P3,000 additional
from Jose Calpito and Zoraida Valelo. Julita signed a
Deed of Sale with Right to Repurchase.
On May 22, 1990, Julita asked for an additional P1,000
from Calpito, but Calpito told her that they transferred
the mortgage to Tito Alvaro and Maria Valelo. Julita
asked for P1,000 from Alvaro, and she was asked to sign
a Deed of Absolute Sale whom she thought at that time
was a mortgage document.
Held:
The decision of the CA was sustained. The
transaction between Julita and Alvaro in May 22,
1990 was an equitable mortgage and not an absolute
sale. The Deed of Absolute Sale that Julita signed
did not define Julitas intention of totally
conveying the ownership of the property to Alvaro.
The true intention of Julita in the execution of the
Deed of Absolute Sale was not to convey the
ownership of the property to Alvaro but merely to
secure the loan obtained by Julita as seen in the
circumstances surrounding the execution and
performance of the terms of the contracts which
Julita was made to sign involving the subject
property, are inconsistent with the theory that the
property was sold.

Julita tried to redeem the property from Alvaro but she

was refused. Alvaro claimed that they purchased the
property and were issued a Tax Declaration No. 2747.9

October 1, 1997, Julita filed a complaint for Annulment

of Deed of Sale Documents and Tax Declaration No.
2747 w/ RTC. Trial court dismissed the complaint for
lack of cause of action. Julita filed a motion for
reconsideration but was denied.

On appeal, Court of Appeals (CA) reversed the decision

of the RTC in dismissing the case of Julita. CA decided
that the Deed of Absolute Sale dated May 22, 1990 that
was signed by Julita in favor of Alvaro must be
construed as an equitable mortgage, giving Julita the
right to redeem the property which would take effect
upon payment of their mortgage to Alvaro.

Issue:
1. Did the CA committed an error in law when it
declared the transaction between the parties as equitable
mortgage and not an absolute sale;
2. Did the CA committed an error in law when it
declared the annulment of tax declaration 2747 in the
names of the petitioners;
3. Did the CA committed an error in law when it
failed to apply the jurisprudential rule laid down in
abilla vs. gobonseng, jr., 374 scra 51;
4. Did the CA committed an error in law when it
failed to apply the principle of laches and estoppel;
5. Did the CA committed an error in law when it
failed to award damages in favor of the petitioners.

7
Dino vs Jardines, 481 SCRA 226
FACTS:
Petitioner Leonides filed a petition for Consolidation of
Ownership with the RTC of Baguio City alleging that on
January 31, 1987, respondent Jardines executed in her
favor a Deed of Sale with Pacto de retro over a parcel of
land with improvements which amounted to P165,000.00.
It was stipulated that the period for redemption would
expire in six months or on July 29 1987 however none
among Dino and his heirs were able to redeem the
property. Jardines countered that the true contract of the
parties was that of a loan and the deed with pacto de retro
sale was a mere security to such loan. The amount of the
property was around half a million and respondent
averred that it was unthinkable for her to sell the property
for only P165,000.00 In fact, the loan was even covered
by interest at the rate of 9% to be paid monthly. The court
rendered its decision declaring the contract as one of deed
of sale with right to repurchase or pacto de retro and that
petitioner acquired whatever rights Jardines had over the
parcel of land, and she now became owner of the same.
However, upon appeal to the Court of Appeals, the
judgment was reversed with the finding that the contract
was one of Equitable Mortgage and not one of Pacto de
Retro.
Issue:
Whether or not the contract was one of Pacto de Retro or
an Equitable Mortgage
2. When the vendor remains in possession as
lessee or otherwise;
3. When upon or after the expiration of the right to
repurchase another instrument extending the
period of redemption or granting a new period is
executed;
4. When the purchases retains for himself a part of
the purchase price;
5. In any other case where it may be fairly
inferred that the real intention of the parties is
that the transaction shall secure the payment
of a debt or the performance of any other
obligation.
In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall
be subject to usury laws.
It was held in the case of Legaspi vs. Ong that the
presence of even one of the above-mentioned
circumstances as enumerated in Article 1602 is
enough basis to declare a contract of sale with pacto
de retro as an equitable mortgage. Further, under
Article 1603, in case f doubt, a contract purporting to
be a sale with right to repurchase shall be construed
as an equitable mortgage. The circumstances under
paragraphs 2 and 5 are present in the case at bar. The
property is still in the hands of petitioner and it is
clearly shown that intention of the parties was merely
for the property to stand as security for the loan.

Held:

The Supreme Court upheld the ruling of the Court of

Appeals. The findings of said court are based on
documentary evidence and on admissions and stipulation
of facts made by the parties. It was strengthened by the
fact that a) respondent is still in actual physical possession
of the property; b) respondent is the one paying the real
property taxes on the property; and c) the amount of the
supposed sale price, P165,000.00 earns monthly interest.

Under Article 1602 of the Civil Code: The Contract shall

be presumed to be an equitable mortgage, in any of the
following cases:

1. When the price of a sale with right to repurchase

is unusually inadequate;
8
Cuyco vs Cuyco, 487 SCRA 693 will earn an interest of 12% per annum until fully paid.

Facts: On the 2nd issue, as a general rule, a mortgage liability

Spouses Feliciano & Adelina Cuyco, petitioners,
obtained a loan of 1.5M at a rate of 18% interest per
annum and secured by real estate mortgage over a parcel
of land with improvements, from Spouses Renato &
Filipina Cuyco, respondents. Subsequent loans were also
obtained, however the contracts covering some of the
loans were not expressed as to whether they were still
covered by the same mortgage. Petitioners defaulted
payments, so that the respondents sued for foreclosure
and sale of the property to settle the obligations of the
petitioners.
is usually limited to the amount mentioned in the
contract. An obligation is not secured by a mortgage
unless it comes fairly within the terms of the mortgage
contract. It is clear from a perusal of theafore quoted real
estate mortgage that there is no stipulation that the
mortgaged realty shall also secure future loans and
advancements. Thus, what applies is the general rule
above stated.

RTC rendered judgment ordering the petitioners to settle

the amount of loans plus interests compounded, the
interest of 18% shall also earn the legal interest of 12%.
On appeal, CA affirmed RTC's decision as to interests
but clarified that the mortgage could only cover those
loans contracts that w
ere expressly stating so, and that payment of the
principal obligation 18% per annum shall discharge the
property mortgage.

Issue:
1. Are the courts correct in compounding the interests
and adding a legal interest over the stipulated interest?
2. Should the subsequent loans be covered by the
mortgage however absent the stipulations?

Held:
On the first issue, Yes, the courts did not erred in
applying the rules in application of interest enunciated in
Eastern Shipping Lines, Inc v. CA which states in
paragraph 1, When an obligation is breached, and it
consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions
of Article 1169 of the Civil Code. Applying the rules in
Eastern Shipping case, the Court laid down the following
formula: TOTAL AMOUNT DUE = [principal + interest
+ interest on interest] - partial payments made Interest =
principal x 18 % per annum x no. of years from due date
until finality of judgment Interest on interest = Interest
computed as of the filing of the complaint (September
10, 1997) x 12% x no. of years until finality of judgment
Total amount due as of the date of finality of judgment

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Aznar vs Citybank. N.A., 519 SCRA 287 signature or handwriting of the maker.
Facts: Pertinent sections of Rule 5 read:
Section 1. Burden of proving authenticity. The
The herein petitioner, Emmanuel B. Aznar, is a
person seeking to introduce an electronic document
prominent businessman and entrepreneur in
in any legal proceeding has the burden of proving
Cebu. He decided to treat his wife together with
its authenticity in the manner provided in this Rule.
their grandchildren for an Asian Tour using his
Section 2. Manner of authentication. Before any
Citibank credit card. He deposited P485,000 to his
private electronic document offered as authentic is
account to increase his ordinary credit limit from
received in evidence, its authenticity must be
P150,000 to P635,000. He bought tickets to Kuala
proved by any of the following means:
Lumpur amounting to P235,000. When they were
(a) By evidence that it had been digitally signed by
in Kuala Lumpur, they decided to purchases things
the person purported to have signed the same;
to which the credit card was dishonoured for over
(b) by evidence that other appropriate security
the limit. Eventually the agency further
procedures or devices as may be authorized by the
dishonoured the card and even mentioned that the
Supreme Court or by law for authentication of
petitioner be a swindler. In that note, they decided
electronic documents were applied to the document;
to go back Philippines and instantly filed a
or
complaint for damages. The lower court initially
(c) By other evidence showing its integrity and
dismissed the complaint on the ground that their
reliability to the satisfaction of the judge.
was no proper authentication as to the print out of
the computer generated document presented as
Indeed there was no proper authentication of the
evidence before the court. The petitioner filed a
electronic evidence presented by the petitioner
motion for the re-raffle of the case, raising the
before the court which is the print out of the
contention that the judge was also a holder of
computer generated document where on it printed
Citibank credit card. The judge later acceded with
that the card was over the limit. During the trial the
the contention of petitioner and ordered for the
petitioner mentioned that desk officer phoned
company to pay enormous amount of damages to
someone and eventually the hard copy was given to
the plaintiff. When the case was elevated before the
him signed by one named Nubi, however such was
CA the latter denied such.
not witnessed by the petitioner or he does not have
personal knowledge of such authentication.
Issue:
The high court denied the petition.
Whether or not the print out of the computer
generated document was properly authenticated to
be admissible before the court?

Held:
No, the Supreme Court mentioned the following:
Section 5, Rule 10 of the Rules of Civil Procedure
cannot be excluded as it qualifies as electronic
evidence following the Rules on Electronic
Evidence which provides that print-outs are also
originals for purposes of the Best Evidence Rule;

Section 20 of Rule 132 of the Rules of Court. It

provides that whenever any private document
offered as authentic is received in evidence, its due
execution and authenticity must be proved either by
(a) anyone who saw the document executed or
written; or (b) by evidence of the genuineness of the

10