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8/3/2019 Week1 Cases

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People v. Concepcion

• Venancio Concepcion, President of PNB, throughspecial authorization authorized an extension ofcredit in favor of "Puno y Concepcion, S. en C." inthe amount of P300,000, security of whichconsisted of 6 demand notes.

• The notes, together with the interest, were takenup and paid a month after the grant of the notes.

• 50% of the said firm was owned by Venancio's wife.• Venancio Concepcion, as President of the

Philippine National Bank and as member of theboard of directors of this bank, was charged in theCourt of First Instance of Cagayan with a violationof section 35 of Act No. 2747. Found guilty by→ CFI.◦ Section 35: "The National Bank shall not,

directly or indirectly, grant loans to any of themembers of the board of directors of the banknor to agents of the branch banks." Any act→ of such would be punishable.

• Note that later on, the 2 sections (provisions)embodying this offense was subsequently repealed.(These two sections were in effect in 1919 when

the alleged unlawful acts took place, but wererepealed by Act No. 2938, approved on January 30,1921. )

Issue:1. WON the granting of credit to the copartnership

was a loan within the meaning of Act. No. 2747?2. WON it was a discount rather than a loan?3. WON the grant of a credit constituted an indirect

loan?Held:

1. No.1. Argument: Acts only show concession of a

credit/2. The "credit" of an individual means his ability

to borrow money by virtue of the confidence

or trust reposed by a lender that he will paywhat he may promise.

3. A "loan" means the delivery by one party andthe receipt by the other party of a given sumof money, upon an agreement, express orimplied, to repay the sum loaned, with orwithout interest.

4. The concession of a "credit" necessarilyinvolves the granting of "loans" up to the limitof the amount fixed in the "credit,"

2. Loan.1. Discount is a mode of loaning money with the

distinctions that (1) In a discount, interest isdeducted in advance, while in a loan, interestis taken at the expiration of a credit; (2) adiscount is always on double-name paper; aloan is generally on single-name paper.

2. The law covers loans and not discounts butthe conclusion is inevitable that the demandnotes signed by the firm "Puno y Concepcion,

S. en C." were not discount paper but weremere evidences of indebtedness, because (1)interest was not deducted from the face ofthe notes, but was paid when the notes felldue; and (2) they were single-name and notdouble-name paper.

3. Yes.1. In the interpretation and construction of

statutes, the primary rule is to ascertain andgive effect to the intention of the Legislature.

2. In this instance, the purpose of theLegislature is plainly to erect a wall of safetyagainst temptation for a director of the bank.The prohibition against indirect loans is arecognition of the familiar maxim that no man

may serve two masters — that where personalinterest clashes with fidelity to duty thelatter almost always suffers. If, therefore, itis shown that the husband is financiallyinterested in the success or failure of hiswife's business venture, a loan to partnershipof which the wife of a director is a member,falls within the prohibition.

Republic v. Bagtas

• Jose Bagtas borrowed from the Bureau of AnimalIndustry, 3 bulls , for a period of one year from 8May 1948 to 7 May 1949 for breeding purposessubject to a government charge of breeding fee of10% of the book value of the bulls.

• Upon the expiration, Bagtas asked for a renewal of1 more year. But the Secretary only approved therenewal with respect to only 1 bull for anotheryear. He also requested the return of the twobulls.

• Jose V. Bagtas wrote to the Director of AnimalIndustry that he would pay the value of the threebulls. He reiterated this request later on to buythem with a deduction of yearly depreciation.

• Director of Animal Industry advised him that thebook value of the three bulls could not be reducedand that they either be returned or their book

value paid not later than 31 October 1950.• Bagtas failed to pay and/or return the bulls SO

republic commenced an action against him prayingthat he be ordered to return the three bulls loanedto him or to pay their book value in the total sumof P3,241.45 and the unpaid breeding fee in thesum of P199.62, both with interests, and costs; andthat other just and equitable relief be granted.

•Jose V. Bagtas asked that the complaint bedismissed because he could not pay/return thebulls.

• TC sentencing the latter (defendant) to pay the→ value of the bulls + breeding costs.

• Republic moved for a writ of execution Granted→ by the court.

• Felicidad Bagtas, SS, filed a motion alleging that 2bulls were already returned and that the 3 rd bullwas shot and died from the wound thereof during aHuk raid. She prayed that the execution bequashed. –> DENIED BY COURT.

Issue:• WON contract is commodatum or a lease?• WON the death of the bull by virtue of a F.E.,

Bagtas' widow is relieved from the duty ofreturning the bull or paying its value?

Held: No.Ratio:

• Lease.◦ A contract of commodatum is essentially

gratuitous.1 If the breeding fee be considereda compensation, then the contract would be alease of the bull. Under article 1671 of theCivil Code the lessee would be subject to theresponsibilities of a possessor in bad faith,because she had continued possession of thebull after the expiry of the contract.

• No.◦

Nevertheless, even if the contract iscommodatum.▪ SS is still liable because Art. 1942

provides that: bailee in commondatum isliable for loss of the things even if lossis due to f.e. If:

• If he keeps it longer than the periodstipulated . . .

• If the thing loaned has beendelivered with appraisal of itsvalue, unless there is a stipulationexempting the bailee from

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responsibility in case of a fortuitousevent;

◦ The original period of the loan was from 8May 1948 to 7 May 1949. The loan of one bullwas renewed for another period of one yearto end on 8 May 1950. But the appellant keptand used the bull until November 1953 whenduring a Huk raid it was killed by stray

bullets.◦ Also the bulls had an appraised value and it

was not stipulated that in case of loss of thebull due to fortuitous event the late husbandof the appellant would be exempt fromliability.

Quintos, Ansaldo v. Beck

• DEF was a tenant of the plaintiff and as suchoccupied the latter's house.

• In a novation of their contract of lease, PETgratuitously granted to the latter the use of thefurniture (heaters & electric lamps).

• The plaintiff later on sold the property to anotherparty; PET and this party notified the defendant of

the conveyance, giving him sixty days to vacatethe premises under one of the clauses of thecontract of lease. There after the plaintiffrequired the defendant to return all the furnituretransferred to him for them in the house wherethey were found.

• Communication by DEF: She may get some of thefurniture on the ground floor of the house but hewould not give up the gas heaters/electric lampsbecause he would use them until the expiration ofthe lease.

• PET refused to get the furniture in view of the factthat the defendant had declined to make deliveryof all of them.

• At the expiration of the lease, DEF deposited withthe Sheriff all the furniture belonging to theplaintiff.

• PET brought an action to compel the defendant toreturn her certain furniture which she lent him forhis use. COURT RULED THAT PLAINTIFF SHOULD→ REDEEM THE FURNITURE AT THE SHERIFF AT HEROWN EXPENSE.

Issue: WON defendant complied with his obligation to returnthe furniture upon the plaintiff's demand; whether the latteris bound to bear the deposit fees thereof, and whether she isentitled to the costs of litigation?Held: No.

Ratio:• The contract entered into between the parties is

one of commadatum, because under it the plaintiffgratuitously granted the use of the furniture to thedefendant, reserving for herself the ownershipthereof; by this contract the defendant boundhimself to return the furniture to the plaintiff,upon the latters demand.

•

The obligation voluntarily assumed by thedefendant to return the furniture upon theplaintiff's demand, means that he should return allof them to the plaintiff at the latter's residence orhouse. The defendant did not comply with thisobligation when he merely placed them at thedisposal of the plaintiff, retaining for his benefitthe three gas heaters and the four eletric lamps.

• As the defendant had voluntarily undertaken toreturn all the furniture to the plaintiff, upon thelatter's demand, the Court could not legallycompel her to bear the expenses occasioned by thedeposit of the furniture at the defendant's behest.The latter, as bailee, was not entitled to place thefurniture on deposit; nor was the plaintiff under a

duty to accept the offer to return the furniture,because the defendant wanted to retain the threegas heaters and the four electric lamps.

• The costs in both instances should be borne bythe defendant because the plaintiff is theprevailing party (section 487 of the Code of CivilProcedure). The defendant was the one whobreached the contract of commodatum, andwithout any reason he refused to return anddeliver all the furniture upon the plaintiff'sdemand. In these circumstances, it is just andequitable that he pay the legal expenses and otherjudicial costs which the plaintiff would not haveotherwise defrayed.

Saura Import v. DBP• PET applied to the RFC for an industrial loan of

P500,000.00 (250K for construction of building;240,000 to pay balance of the jute mill machinery& equipment; 9,100 as additional working capital)

• RFC passed Resolution No. 145 approving the loanapplication for P500,000.00, to be secured by afirst mortgage on the factory building to beconstructed, the land site thereof, and themachinery and equipment to be installed. Extraterms:◦ That the proceeds of the loan shall be utilized

exclusively for the following purposes namedin the application.

◦ That certain parties (including ChinaEngineers) shall sign the promissory notesjointly with the borrower-corporation;

• After learning about the resolution, Saura, Inc.wrote a letter to RFC, requesting a modification ofthe terms laid down by it, namely: that in lieu of

having China Engineers, Ltd. sign as co-maker onthe corresponding promissory notes, Saura, Inc.would put up a bond for P123,500.00, an amountequivalent to such subscription; and that anotherperson would substitute as a co-maker.

• RFC made another resolution (736) for thereexamination of all the aspects of the approvedloan.

• Later on, Saura wrote that China Engineers wouldagain be able to sign as a co-maker for the loan.

• Later on, the loan documents were executed: thepromissory note, with F.R. Halling, representingChina Engineers, Ltd., as one of the co-signers;and the corresponding deed of mortgage, whichwas duly registered on the following April 17.

• It appears, however, that despite the formalexecution of the loan agreement thereexamination contemplated in Resolution No. 736proceeded. In a meeting of the RFC Board ofGovernors on June 10, 1954, at which RamonSaura, President of Saura, Inc., was present, it wasdecided to reduce the loan from P500,000.00 toP300,000.00.

• The REP for China Engineer informed RFC that hiscompany no longer to of the loan and thereforeconsidered the same as cancelled as far as it wasconcerned.

• Saura, Inc. had written RFC requesting that theloan of P500,000.00 be granted. The request wasdenied by RFC, which added in its letter-reply thatit was "constrained to consider as cancelled theloan of P300,000.00 ... in view of a notification ...from the China Engineers Ltd., expressing theirdesire to consider the loan insofar as they areconcerned."

• Saura took exception to the cancellation andinformed RFC that China Engineers, Ltd. "will atany time reinstate their signature as co-signer ofthe note if RFC releases to us the P500,000.00originally approved by you.".

• Another resolution restoring the loan (500K) butwith the proviso that That the raw materials

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needed by the borrower-corporation to carry outits operation are available in the immediatevicinity; and That there is prospect of increasedproduction thereof to provide adequately for therequirements of the factory."

• Could not be done because circumstances thenwere not conducive to the proviso stated.

• Negotiations came to a halt and Saura, Inc. did not

pursue the matter further. Instead, it requestedRFC to cancel the mortgage, and so, on June 17,1955 RFC executed the corresponding deed ofcancellation and delivered it to Ramon F. Saurahimself as president of Saura, Inc.

• It appears that the cancellation was requested tomake way for the registration of a mortgagecontract, executed on August 6, 1954, over thesame property in favor of the Prudential Bank andTrust Co., under which contract Saura, Inc. had upto December 31 of the same year within which topay its obligation on the trust receipt heretoforementioned. It appears further that for failure topay the said obligation the Prudential Bank andTrust Co. sued Saura, Inc.

• 9 years after, Saura commenced suit against RESPfor the latter;s failure to comply with its obligationto release the proceeds of the loan applied for andapproved, thereby preventing the plaintiff fromcompleting or paying contractual commitments ithad entered into, in connection with its jute millproject. TC ruled: PERFECTED CONTRACT hence→ BREACH.

Issue: WON there was a perfected contract between theparties?Held: Yes.Ratio:

• ART. 1954. An accepted promise to deliversomething, by way of commodatum or simple loanis binding upon the parties, but the commodatum

or simple loan itself shall not be perferted untilthe delivery of the object of the contract.

• There was undoubtedly offer and acceptance inthis case: the application of Saura, Inc. for a loanof P500,000.00 was approved by resolution of thedefendant, and the corresponding mortgage wasexecuted and registered. But this fact alone fallsshort of resolving the basic claim that thedefendant failed to fulfill its obligation and theplaintiff is therefore entitled to recover damages.◦ Based on Saura's letter, there was a deviation

from the terms laid down in Resolution No.

145 and embodied in the mortgage contract,implying as it did a diversion of part of theproceeds of the loan to purposes other thanthose agreed upon.

• When RFC turned down the request in its letter ofJanuary 25, 1955 the negotiations which had beengoing on for the implementation of the agreementreached an impasse. Saura, Inc. obviously was in

no position to comply with RFC's conditions. Soinstead of doing so and insisting that the loan bereleased as agreed upon, Saura, Inc. asked thatthe mortgage be cancelled, which was done onJune 15, 1955. The action thus taken by bothparties was in the nature cf mutual desistance —

what Manresa terms "mutuo disenso" 1 — which is amode of extinguishing obligations. It is a conceptthat derives from the principle that since mutualagreement can create a contract, mutualdisagreement by the parties can cause its

extinguishment. 2

• The subsequent conduct of Saura, Inc. confirmsthis desistance. It did not protest against any

alleged breach of contract by RFC, or even pointout that the latter's stand was legally unjustified.Its request for cancellation of the mortgage carriedno reservation of whatever rights it believed itmight have against RFC for the latter's non-compliance.

Ligutan v. CA• PET obtained a loan from Security Bank (120K).

PETs executed a promissory note bindingthemselves to pay the sum borrowed with:◦ an interest of 15.189%◦ a penalty of 5% every month on the

outstanding principal and interest in case ofdefault.

◦ 10% of the total amount due by way ofattorneys fees

• PET failed to pay despite several demands of theBank SO bank instituted a suit for recovery of thedue amount. TC decision, pay the principal with→ the corresponding interest, penalty charge, servicecharge and attorney's fees.

• CA: Deleted the 2% service charge.• MR to CA: PET for reduction of the penalty charge;

Bank for the interest to be computed from thetime of default CA (interest from the date of→ default; penalty from 5% to 3% per month)

Issue: WON the penalty/interest/rate of atty's fees may bereduced?Held: Reasonable. Will not be lowered.Ratio:

• Penalty Given the circumstances, not to mention→ the repeated acts of breach by petitioners of theircontractual obligation, the Court sees no cogentground to modify the ruling of the appellate

court..• Interest In any event, the interest stipulation,→

on its face, does not appear as being thatexcessive. The essence or rationale for thepayment of interest, quite often referred to ascost of money, is not exactly the same as that of asurcharge or a penalty. A penalty stipulation is notnecessarily preclusive of interest, if there is anagreement to that effect, the two being distinctconcepts which may separately be demanded.

• Atty's Fees Bearing in mind that the rate of→ attorneys fees has been agreed to by the partiesand intended to answer not only for litigationexpenses but also for collection efforts as well, theCourt, like the appellate court, deems the award

of 10% attorneys fees to be reasonable.Dispositive: Petition is DENIED.

Eastern Shipping LinesProducer's Bank of the Philippines v. CAGarcia v. Thio

• Thio received from petitioner Carolyn M. Garcia 2

crossed check4 dated February 24, 1995 in theamount of US$100,000 payable to the order of acertain Marilou Santiago and some cash amounts.

• RESP denied that she contracted the 2 loansclaiming that it was the Marilou Santiago namedtherein to whom the PET lent the money.

• RTC In favor of PET; Ordered RESP to pay.→

• CA: Reversed RTC; No contract of loan betweenthe parties.

Issue: Who borrowed the money-- Santiago or RESP? Whatinterest is due?Held: RESP.Ratio:

• Delivery is the act by which the res or substancethereof is placed within the actual or constructive

possession or control of another.30 Althoughrespondent did not physically receive the proceedsof the checks, these instruments were placed in

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her control and possession under an arrangementwhereby she actually re-lent the amounts toSantiago.

• Article 1956 of the Civil Code provides that "[n]ointerest shall be due unless it has been expresslystipulated in writing."◦ We do not, however, agree that respondent is

liable for the 3% and 4% monthly interest for

the US$100,000 and P500,000 loansrespectively. There was no written proof ofthe interest payable except for the verbalagreement that the loans would earn 3% and4% interest per month.

◦ When the obligation is breached, and itconsists in the payment of a sum of money,i.e., a loan or forbearance of money, theinterest due should be that which may havebeen stipulated in writing. Furthermore, theinterest due shall itself earn legal interestfrom the time it is judicially demanded. Inthe absence of stipulation, the rate ofinterest shall be 12% per annum to becomputed from default, i.e., from judicial or

extrajudicial demand under and subject tothe provisions of Article 1169 of the CivilCode.

◦ Hence, respondent is liable for the paymentof legal interest per annum to be computedfrom November 21, 1995, the date when she

received petitioner’s demand letter.42 Fromthe finality of the decision until it is fullypaid, the amount due shall earn interest at12% per annum, the interim period beingdeemed equivalent to a forbearance ofcredit.

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