Case Matrix For Credit Transacitons

Credit Transactions Case Matrix SY 2010-
2011
CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Money Market transaction is in the form of simple loan or mutuum
1. Allied ALLIED BANKING CORPORATION, PETITIONER, Held:
Banking VS. LIM SIO WAN, METROPOLITAN BANK AND Yes.
Corp. Vs. TRUST CO., AND PRODUCERS BANK, It was held that Allied is liable to Lim Sio Wan. Fundamental and
Lim Sio familiar is the doctrine that the relationship between a bank and a
Wan
RESPONDENTS.
(549 G.R. No. 133179, March 27, 2008 client is one of debtor-creditor. The Court gave the following statutory
SCRA VELASCO JR., J.: bases:
504;
2008) (Money market placements; pre-terminated without Articles 1953 and 1980 of the Civil Code provide:
the depositor’s authority; the Wan; Allied check in
payment for the proceeds of the Lim Sio Wan’s Art. 1953. A person who receives a loan of money or any other fungible
deposit was deposited in Metrobank for the account thing acquires the ownership thereof, and is bound to pay to the
of FCC as Producers Bank payment of its obligation creditor an equal amount of the same kind and quality.
to FCC)
Art. 1980. Fixed, savings, and current deposits of money in banks and
Facts: similar institutions shall be governed by the provisions concerning
On November 14, 1983, respondent Lim Sio Wan simple loan.
deposited with Allied a money market placement of
PhP 1,152,597.35 for a term of 31 days to mature on Thus, a bank deposit is in the nature of a simple loan or
December 15, 1983. mutuum and this includes a money market placement. A
money market is a market dealing in standardized short-term credit
On Dec. 5, 1983, a person claiming to be Lim Sio instruments (involving large amounts) where lenders and borrowers do
Wan called up an officer of Allied and instructed the not deal directly with each other but through a middle man or dealer in
latter to pre-terminate her money market placement, open market. In a money market transaction, the investor is a lender
and to issue manager’s check (MC) representing the who loans his money to a borrower through a middleman or dealer. In
proceeds of the placement and be given to one the case at bar, the money market transaction between the petitioner
Deborah Santos. Later, Santos arrived at the bank and the private respondent is in the nature of a loan. Lim Sio Wan, as
and accordingly the MC payable to Lim Sio Wan creditor of the bank for her money market placement, is entitled to
given to Ms. Santos. The check was cross-checked payment upon her request, or upon maturity of the placement, or until
“For Payee’s account only.” Thereafter, said check
the bank is released from its obligation as debtor. Until any such event,
was deposited in Metrobank (herein respondent) for
the obligation of Allied to Lim Sio Wan remains unextinguished.
the account of Filipinas Cement Corp. (FCC), with a
forged signature of Lim Sio Wan. This fact was later
on confirmed by Allied to Metrobank. From the factual findings of the trial and appellate courts that Lim Sio
Eppie D. Severino PSU School of Law

2011

Wan did not authorize the release of her money market placement to
Few months prior to this occasion, FCC had made a Santos and the bank had been negligent in so doing, there is no
money market placement with Producers Bank question that the obligation of Allied to pay Lim Sio Wan had not been
amounting to P2M where Ms. Santos was the money extinguished. Art. 1240 of the Code states that "payment shall be
market trader for said account. Upon maturity of made to the person in whose favor the obligation has been constituted,
said placement, December 5, 1983, FCC demanded or his successor in interest, or any person authorized to receive it."
from said bank payment of proceeds thereof. This Payment made by the debtor to a wrong party does not extinguish the
was the same date on which Ms. Santos had received obligation as to the creditor, if there is no fault or negligence which can
from Allied the MC representing the proceeds of Ms. be imputed to the latter. Even when the debtor acted in utmost good
Lim’s pre-terminated placement. The MC was faith and by mistake as to the person of his creditor, or through error
deposited in the account of FCC maintained at induced by the fraud of a third person, the payment to one who is not
Metrobank, purportedly presenting the proceeds of in fact his creditor, or authorized to receive such payment, is void,
its placement with the Producers Bank. In other except as provided in Article 1241. Such payment does not
words, the Allied check was deposited with prejudice the creditor, and accrual of interest is not suspended
Metrobank in the account of FCC as Producers Bank’s
by it.
payment of its obligation to FCC.
Since there was no effective payment of Lim Sio Wan's money market
When Ms. Lim decided to withdraw said money
placement, the bank still has an obligation to pay her at six percent
market placement upon its maturity, Allied bank
(6%) interest from March 16, 1984 until the payment thereof.
informed her that upon her instructions, it was
already pre-terminated and the proceeds was
However, the decision of the CA was affirmed by the SC on the premise
already given to her on Dec. 5,1983. However, Ms.
that Allied should not be solely made liable to Lim Sio Wan. The
Lim denied this giving such instructions and
liability of the Allied is concurrent with that of the Metrobank, although
receiving the payment. But Allied refused to her,
not equally liable. The reason is that both bank have failed to exercise
claiming that the latter had authorized the pre-
proper diligence due from a financial institution. Allied is negligent in
termination of the placement and its subsequent
issuing the MC to Santos without first confirming with Lim Sio Wan if
release to Santos.
the latter had indeed authorized Santos to pre-terminate her
placement and to receive the proceeds thereof. Metrobank, as last
As a result, Ms. Lim filed a complaint against Allied to
indorser of the check, is likewise negligent when it indorsed the check
recover the proceeds of her money market
without first verifying the authenticity of Lim Sio Wan’s indorsement
placement. Later on, an amended complaint was
and when it accepted the check despite the fact that it was cross-
filed to include Metrobank as a party defendant. The
checked payable only to payee’s account.
RTC rendered its decision in favor of Ms. Lim ordering
Allied to pay the plaintiff. Allied appealed with the

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CA. But the latter affirming and modifying the
judgment of the RTC ordering Allied and Metrobank
to pay Ms. Lim Sio Wan on a 60:40 ratio,
respectively. Hence, this petition.
Issue:
Whether Allied should be made liable to Ms. Lim Sio
Wan despite the fact that it had already issued an
MC in the latter’s favor, and thus its obligation has
been extinguished.
Article 1956: No interest shall be due unless it has been expressly stipulated
2. Siga-an SEBASTIAN SIGA-AN, Petitioner, Held:
vs. vs. The decision of the appellate court is affirmed but reducing the amount
Villanuev ALICIA VILLANUEVA, Respondent. to be refunded and the amount of damages to be awarded to the
a (576 G.R. No. 173227 January 20, 2009 respondent.
SCRA
Chico-Nazario, J:
696;
2009) First Issue:
(Loan P540,000; But all in all paid to Siga-an a total Yes. The right to interest arises only by virtue of a contract or by virtue
amount of P1,200,000; Villanueva-business woman; of damages for delay or failure to pay the principal loan on which
Siga-an= comptroller Phil. Navy Office (PNO); interest is demanded. Interest is a compensation fixed by the parties
Proprietary of the interest charged despite the for the use or forbearance of money. This is referred to as monetary
absence of written agreement as to interest) interest. Interest may also be imposed by law or by courts as penalty
or indemnity for damages. This is called compensatory interest. Article
Facts: 1956 of the Civil Code, which refers to monetary interest, specifically
Alicia Villanueva is businesswoman who is engaged mandates that no interest shall be due unless it has been expressly
in supplying office materials and equipment to Phil. stipulated in writing. As can be gleaned from the foregoing provision,
Navy Office (PNO), wherein Mr. Sebastian Siga-an is payment of monetary interest is allowed only if: (1) there was an
the comptroller. Sometime in 1992, Ms. Villanueva express stipulation for the payment of interest; and (2) the agreement
was able to secure a loan from Mr. Siga-an for the payment of interest was reduced in writing. The concurrence of
amounting to P540,000, since she needed capital for the two conditions is required for the payment of monetary interest.
her business transactions with the PNO. The loan Thus, it was held that collection of interest without any stipulation
agreement was not reduced into writing and there therefor in writing is prohibited by law.

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was not stipulation as to the payment of interest for
the loan. Eventually, Ms. Villanueva was able to It appears that petitioner and respondent did not agree on the
render partial payment on the loan by issuing a payment of interest for the loan. Neither was there convincing proof of
check worth P500,000. Two months later, she again written agreement between the two regarding the payment of interest.
issued a check with an amount of P200,000 in favor Respondent testified that although she accepted petitioner’s offer of
of Mr. Siga-an, the latter claiming that the excess of loan amounting to P540,000.00, there was, nonetheless, no verbal or
P160,000 is to be applied as interest for the loan. written agreement for her to pay interest on the loan. As to the
However, not satisfied with the amount of interest promissory note that the petitioner had presented to show that there
that the Mr. Siga-an had collected from her, the was indeed an agreement as to the interest, it was held that such
former pestered her to pay additional interest and promissory note cannot be gainfully pertains to an express stipulation
threatened her that her transactions with the PNO of the interest or written agreement of the loan because the
would be blocked since he is the comptroller of said respondent was only tricked and coerced by the petitioner to write said
office and all said transactions were subject to his note.
approval. Because of such threat, she paid the
additional interest in cash and in checks. According Second Issue:
to her computation, she had paid a total amount of
P1.2M to Siga-an, inclusive of the principal and
interest. Doubtful of the propriety of the amount of The petitioner argues that solutio indebiti does not apply in this case,
interest which she paid Siga-an, she consulted her and therefore he has no obligation to return the excess amount paid by
lawyer. The latter told her that Mr. Siga-an could not the respondent. It was held that the payment was clearly a mistake
validly collect interest from her because of the and the respondent has an obligation to return it. The principle
absence of any agreement between her and her of solutio indebitiapplies where (1) a payment is made when there
creditor regarding payment of interest. By reason exists no binding relation between the payor, who has no duty to pay,
thereof, Ms. Villanueva sent a demand letter to Mr. and the person who received the payment; and (2) the payment is
Siga-an asking for the return of the excess of made through mistake, and not through liberality or some other cause.
P660,000. Despite receipt of the demand letter, It has been held that the principle of solutio indebiti applies in case of
Siga-an ignored her claim for reimbursement. Thus, erroneous payment of undue interest. Under Article 1960 of the Civil
Villanueva filed a complaint with the RTC for sum of Code, if the borrower of loan pays interest when there has been no
money, wherein said court rendered a decision in stipulation therefor, the provisions of the Civil Code
favor of Villanueva ordering Siga-an to refund the concerning solutio indebiti shall be applied. Hence, the respondent has
amount of P660,000 plus interest and to pay for the no duty to make the interest payment because there was no express
damages prayed for. Such decision was appealed to stipulation in writing to that effect.
the CA by Siga-an, but the appellate court affirmed
the decision of the in toto. Hence, this petition.

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Issues:
1. Whether the petitioner (Siga-an) is entitled to
a monetary interest on the loan granted to
respondent (Villanueva) in the absence of any
agreement as to the interest.
2. Whether solutio indebiti is applicable, hence
the amount paid by the respondent
representing interest on loan be refunded to
her.
Unilateral action to increase interest rates and successive increase thereof, a violation of Article 1308 and 1956 of the Civil Code,
respectively
3. PNB vs. PHILIPPINE NATIONAL BANK, petitioner, vs. Held:
CA; THE HON. COURT OF APPEALS and AMBROSIO The Court held in a negative. Those increases were null and void, for if
Ambrosi PADILLA, respondents. the Monetary Board itself was not authorized to make such changes
o Padilla G.R. No. 88880. April 30, 1991. oftener once a year, even less so may a bank, which is subordinate to
(196
Griño-Aquino, J: the Board. While the debtor did agree in the Deed of Real Estate
SCRA
536; Mortgage that the interest rate may be increased during the life of the
1991) Facts: contract "to such increase within the rate allowed by law, as the Board
In 1982, Ambrosio Padilla, herein private respondent, of Directors of the MORTGAGEE may prescribe" or "within the limits
applied for, and was granted by petitioner PNB, a allowed by law," no law was ever passed in July to November 1984
credit line of P321.8 million, secured by a real estate increasing the interest rates on loans or renewals thereof to 32%, 41%
mortgage, for a term of two years, with 18% interest and 48% per annum, and no documents were executed and delivered
per annum. Padilla executed in favor of the PNB a by the debtor to effectuate the increases. To unilaterally and

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Credit Agreement, two (2) promissory notes in the successively increase the agreed rate of interest from 18% to 48%
amount of P900,000.00 each, and a Real Estate within a span of four months is a clear violation of PD 116 which limits
Mortgage Contract. The Promissory Notes, uniformly such changes to once every 12 months.
authorized the PNB to increase the stipulated 18%
interest per annum "within the limits allowed by The Court further held, the unilateral action of the PNB in increasing
law at any time depending on whatever policy the interest rate on the private respondent's loan, violated the
it [PNB] may mutuality of contracts ordained in Article 1308 of the Civil Code: "ART.
adopt in the future; Provided, that, the interest rate 1308. The contract must bind both contracting parties; its validity or
on the note shall be correspondingly decreased in compliance cannot be left to the will of one of them." A contract
the event that the applicable maximum interest rate containing a condition which makes its fulfillment dependent
is reduced by law or by the Monetary Board." exclusively upon the uncontrolled will of one of the contracting parties
is void. Likewise, the increases imposed by PNB contravene Art. 1956
However, two years thereafter, when the P1.8 million of the Civil Code which provides that no interest shall be due unless it
credit line has matured on July 4, 1984, PNB within has been expressly stipulated. Here, the debtor never agreed in
the period of only four months has increased the writing to pay the interest increases fixed by PNB beyond the 24% per
18% interest rate on the borrower’s loan obligation annum; hence, he is not bound to pay a higher rate than that.
three times: (a) to 32% in July 1984,; (b) to 41% in
October 1984; and (c) to 48% in November 1984. The petition for review was denied for lack of merit.
Several letters were sent by Padilla to PNB
requesting the latter to increase the interest rate
from 18% but to be fixed at 21% or 24% per annum.
However, PNB despite the objection of Padilla and
without authority from the Monetary Board still
effected such increases of interest rates within the
aforesaid intervening period. For this reason, Padilla
was compelled to file a complaint with the RTC
praying to declare that the unilateral increase of
interest rates by PNB is illegal and not valid nor
binding upon Padilla. It was also prayed that the
amount paid representing the excess interest be
reimbursed to him. But the complaint was dismissed
by the lower court because according to the latter
the increase of interests was properly made. Padilla
appealed to the CA. The appellate court reversed

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the decision of the RTC, hence this petition for
review.
Issue:
Whether PNB, within the term of the loan which it
granted to Padilla, may unilaterally change or
increase the interest rate stipulated therein at will
and as often as it pleased.
Judgment of court awarding a sum of money becomes final and executory; rate of interest: 12%
4. Int’l. INTERNATIONAL CONTAINER TERMINAL Held:
Containe SERVICES, INC., PETITIONER, VS. Yes. The CA did not commit any error in affirming the judgment of the
r FGU INSURANCE CORPORATION, RESPONDENT. lower court. The case of Eastern Shipping Lines, Inc. vs. CA is

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Terminal G.R. No. 161539, June 27, 2008 instructive. The Court in said case, inscribed the rule of thumb in the
Services AUSTRIA-MARTINEZ, J.: application of interest to imposed on obligations, regardless of their
vs. FGU source. Eastern emphasized beyond cavil that when the judgment of
Insuranc Facts: the court awarding a sum of money becomes final and executory, the
e Corp.
The liability of International Container Terminal rate of legal interest, regardless of whether the obligation involves a
(556
SCRA Services, Inc., (ICTSI), the petitioner in this case, loan or forbearance of money, shall be 12% per annum from such
174; arose from a lost shipment of "14 Cardboards 400 finality until its satisfaction, this interim period being deemed to be by
2008) kgs. of Silver Nitrate, shipped by Hapag-Lloyd AG then an equivalent to a forbearance of credit. The application of the
through the vessel Hannover Express from Hamburg, rule in the case at bar proper, thus, a rate of 12% per annum from the
Germany on July 10, 1994, with Manila, Philippines as finality of judgment until the full satisfaction thereof must be imposed
the port of discharge, and Republic Asahi Glass on the total amount of liability adjudged to FGU. It is clear that the
Corporation (RAGC) as consignee. Said shipment was interim period from the finality of judgment until the satisfaction of the
insured by FGU Insurance Corporation (FGU). When same is deemed equivalent to a forbearance of credit, hence, the
RAGC's customs broker, Desma Cargo Handlers, Inc., imposition of the aforesaid interest.
was claiming the shipment, petitioner, which was the
arrastre contractor, could not find it in its storage (Be it noted, however, that the facts of the case at bar did not indicate neither
area. At the request of petitioner, the NBI conducted the judgment of the RTC nor of the CA has become final and executory.)
an investigation. The AAREMA Marine and Cargo
Surveyors, Inc. also conducted an inquiry. Both found
that the shipment was lost while in the custody and
responsibility of petitioner.
As insurer, FGU (respondent) paid RAGC the amount

of P1,835,068.88 on January 3, 1995. In turn, FGU
sought reimbursement from petitioner, but the latter
refused. This constrained FGU to file with the RTC of
Manila a civil action for a sum of money.
After trial, the RTC rendered its decision finding

petitioner liable. The said court ordered the
petitioner to pay FGU the amount of P1,875, 068.88
with 12% interest per annum from January 3, 1995
until fully paid. Attorney’s fees and other litigation
expenses were likewise adjudged against the

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petitioner.
Petitioner appealed to the (CA), which, in the
assailed decision, affirmed the RTC Decision. A
motion for reconsideration was filed which the CA
denied. Hence, the present petition for review on
certiorari questioning the propriety of the imposition
of 12% interest despite the fact that the obligation
purportedly breached does not constitute a loan of
forbearance of money.
Issue:
Whether the imposition of 12% interest on an
obligation that does not constitute a loan of
forbearance of money is proper.

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Interest accruing from unpaid interest; Where the court’s judgment which did not provide for the payment of interest has already become
final,
No interest may be awarded.
5. Solid SOLIDBANK CORPORATION, petitioner, Held:
Bank vs. First issue:
Corp. vs. COURT OF APPEALS and PRUDENTIAL The Court held that the imposition of interest by the sheriff of 12%
CA GUARANTEE AND ASSURANCE, INC., interest on the liability of Prudential is void. It is a settled general
(379
respondents. principle that a writ of execution must conform substantially to every
SCRA
159; G.R. No. 138131 March 12, 2002 essential particular of the judgment promulgated. Execution not in
2002) YNARES-SANTIAGO, J.: harmony with the judgment is bereft of validity. It must conform, more
particularly, to that ordained or decreed in the dispositive portion of
Facts: the decision.
This case originated from a civil case involving Corollary thereto, it must be stressed that a judgment which has
Solidbank Corp., as plaintiff (herein petitioner) vs. acquired finality becomes immutable and unalterable, and hence may
Wear Me Garments, the Go Family, Leonila Cui and no longer be modified in any respect except only to correct clerical
Prudential Guarantee as defendants (the latter as errors or mistakes — all the issues between the parties being deemed
herein private respondent). The defendants in said resolved and laid to rest.
case obtained several credit accommodations from
Solidbank and assigned to it as additional collateral In the case at bar, the dispositive portion of the decision subject of the
two fire insurance policies issued separately by assailed order and writ of execution specifically limited the liability of
Prudential and Oriental. The assets covered by these private respondent to the following: 1) P5 million, representing the
policies were subsequently foreclosed and acquired extent of the insurance coverage assigned to petitioner; 2) 10%
by Solidbank, but before they could be removed from attorney's fees; and 3) the cost of suit. Clearly, no mention was made
the factory, a fire broke out and destroyed them. as to the payment of interest. If the trial court intended to impose
Thus, on July 27, 1995, the RTC of Manila issued a interest on the amount adjudged against private respondent, it would
decision declaring, among others, the Prudential and have expressly so stated, but it did not. Hence, it cannot, in the
Oriental are held jointly and severally liable to execution of the July 27, 1995 decision, modify the same by ordering
Solidbank to the extent of the respective insurance private respondent to pay interest. Accordingly, the July 9, 1998 Writ of
coverages assigned to the latter. There was no Execution, imposing interest on the amount for which private
mention in the dispositive portion of the said decision respondent was held liable, as well as the Order dated August 18,

2011

as regards the interest. The said decision became 1998, sustaining the computation and imposition by the sheriff of a
final and executory on February 23, 1998. 12% interest on the subject liability, are void.
On July 10, 1998, upon motion of the petitioner Second issue:

(Solidbank), the trial court issued a writ of execution The Court find merit in the third issue raised by petitioner. The interest
and pursuant therewith, a demand letter was sent to imposed by the respondent court on the amount refundable to private
Prudential which contain the amount of collectible respondent in excess of P9,210,666.66, is in the concept of damages
from the latter. The total assessment of which must have factual and legal basis. As no justification was given
P9,210,666.66 includes the following: (a) the sum by the respondent court, the award of interest cannot be affirmed.
insured: P5,000,000; (b) interest at 12%p.a., for 2024 Moreover, it would be iniquitous to hold petitioner liable for the errors
days: P3,373,333.33; and (c) 10% attorney’s fees: committed by the trial court and the sheriffs concerned in the
P837,333.33. However, before Prudential raised the execution of the decision. Hence, the interest imposed by respondent
issue to the CA, it paid the total execution amount to Court of Appeals should be deleted.
Solidbank, subject to the final determination of its
liability under the decision of the lower court.
Prudential filed a motion to correct the writ of
execution and asking the lower court to delete the
imposition of the interest and other charges, saying
that it was only liable for the sum insured and
attorney’s fees; and that it should be refunded the
excess. However, the motion was denied by the
lower court. Prudential filed a petition for review
with the CA which granted such petition and set
aside the assailed Order and Writ of Execution issued
by the trial court. Included in the appellate court’s
decision is an order whereby Solidbank is ordered to
refund the excess paid by Prudential, plus interest
thereon. Hence, the instant petition.
Issues:
1. Whether the imposition of interest in the writ
of execution against Prudential is proper
despite the absence of provision in the
dispositive portion of the lower court’s

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decision as regards the payment of interest.
2. Whether the imposition of interest on the
amount to be refunded by Solidbank is
proper.
Usurious contracts declared void; form of contract not conclusive; contract void only as to interest involved; determination of interest
payable in kind
6. Briones AURELIO G. BRIONES, plaintiff-appellee, Held:1
vs. vs. The Court held in the affirmative insofar as the principal loan is
Cammay PRIMITIVO P. CAMMAYO, ET AL., defendants- concerned. In other words, the loan is valid but the interest thereon is
o (41 appellants.
SCRA usurious. It has been declared by the Court in several cases that, in
Carlos J. Antiporda for plaintiff-appellee.
404; any event, the debtor in a usurious contract of loan should pay the
1971) Manuel A. Cammayo for defendants-appellants.
G.R. No. L-23559 October 4, 1971 creditor the amount of which he justly owes him. Although a usurious
DIZON, J.: contract is void and the creditor has no right of action to recover the
interest in excess of the lawful rate, this does not mean that the debtor
Facts: may keep the principal received by him as loan – thus unjustly
Aurelio G. Briones filed an action in the Municipal enriching himself to the damage of the creditor. In simple loan with
Court of Manila against Primitivo Cammayo, et.al., to
1
Castro, Fernando, and Concepcion, JJ., dissenting: In a contract which is tainted with usury, that is, with a stipulation (whether written or unwritten) to pay usurious interest, the
prestation to pay such interest is an integral part of the cause of the contract. It is also the controlling cause, for a usurer lends his money not just to have it returned but indeed,
to acquire in coordinate gain. Article 1957, which declares the contract itself – not merely the stipulation to pay usurious interest –void, necessarily regards the prestation to pay
usurious interest as an integral part of the cause, making it illegal.

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recover from them, jointly and severally, the amount stipulation of usurious interest, the prestation of the debtor to pay the
of P1,500, plus damages, attorney’s fees and costs of principal debt, which is the cause of the contract (Article 1350, Civil
suit. Defendants executed a real estate mortgage as Code), is not illegal. The illegality lies only as to the prestation to pay
security for the loan of P1,200 given to Primitivo
the stipulated interest; hence, being separable, the latter only should
Cammayo upon the usurious agreement that
defendant will pay Briones. The latter reserved and be deemed void, since it is the only one that is illegal.
secured himself, out of the alleged loan of P1,500,
the amount of P300 as interest for one year. Insofar as the interest is concerned, the plaintiff in the present case,
Although the mortgage contract was executed for can only recover the principal of the loan from Primitivo, with interest
securing the payment of P1,500 for a period of one thereon at the legal rate of 6% per annum from the date of the filing of
year, without interest, the truth and the real fact is the complaint.
that Briones delivered to the Primitivo only the sum
of P1,200 and withheld the sum of P300 which was
intended as advance interest for one year. On
account of said loan of P1,200, Primitivo paid to his
creditor during the period from Oct. 1955 to July
1956 the total sum of P330, which the latter, illegally
and unlawfully refused to acknowledge as partial
payment of the loan but considered the payment as
an interest of the said loan for an extension of
another term of one year. It was interposed by the
defendant that the plaintiff, by taking and receiving
interest in excess of what is allowed by law,
committed a flagrant violation of the Usury Law. The
MTC rendered judgment sentencing Primitivo and his
co-defendants to pay Briones the sum of P1,500 with
interest at the legal rate from Feb. 22, 1962. This
decision was assailed by the defendants upon
appeal. However, the CA affirmed said decision but
reducing the amount to be paid by the defendants
deleting the usurious interest of P120 including
attorney’s fees of P200. The defendant in this
present appeal claim that the decision of the trial
court and of the appellate court is erroneous in

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sentencing them to pay the principal of the loan
considering that the same is tainted with usury.
Issue:
1. In a loan with usurious interest, may the
creditor recover the principal of the loan?
Usury Law is not repealed nor amended by CB Circular No. 905; merely suspended its effectivity;
Nevertheless, courts may reduce the interest rate if it finds that the interest agreed upon is iniquitous or unconscionable.
7. Medel, LETICIA Y. MEDEL DR. RAFAEL MEDEL and Held:
etal., vs. SERVANDO FRANCO, petitioners, Insofar as the first issue is concerned, it was held that CB Circular No.
CA, etal. vs. 905 did not repeal nor in anyway amend the Usury Law but simply
(G.R. No. COURT OF APPEALS, SPOUSES VERONICA R. suspended its effectivity. The interest charged could not be said

2011

131662 GONZALES and DANILO G. GONZALES, JR., “usurious,” as the petitioners argue, because the Court has
27 Nov. doing lending business under the trade name consistently held that the above circular has expressly removed the
1998) and style "GONZALES CREDIT interest ceilings prescribed by the Usury and that the said law is now
ENTERPRISES", respondents. legally inexistent in this jurisdiction. Interest can now be charged as
G.R. No. 131622. November 27, 1998 lender and borrower may agree upon.
PARDO, J.:
Nevertheless, in response to the second issue that needs to be
Facts: resolved, it was held that the interest of 5.5% per month, or 66% per
Servando and Leticia, married to Dr. Rafael Medel annum, stipulated upon by the parties in the promissory note
(petitioners) obtained several loans on various dates iniquitous or unconscionable, and hence contrary to morals (“contra
covering the period Nov 7, 1985 to July 11, 1986 bonos mores”), if not against the law. The stipulation is void. The
from Veronica Gonzales (respondents) who was courts shall reduce equitably the interest rate and liquidated damages,
engaged in money lending business. Two promissory whether intended as a penalty or as an indemnity it they are iniquitous
notes were executed to evidence the loans and each or unconscionable.
of the promissory notes contain the same terms and
condition that each of the loan shall be subject to an The SC reversed and set aside the decision of the CA and thereby
interest rate of 6% per month, payable in two affirming and reviving the judgment of the lower court.
months. The proceeds received by the petitioner
from each of the loan were net of the interest due.
The last loan that petitioners obtained on June 11
1986 amounting to P300,000 was secured with a real
estate mortgage where the property mortgaged
belonged to Leticia Yaptinchay. Petitioners failed to
pay all of the loans including interests upon their
respective maturity. Thus, on July 23, 1986
petitioners consolidated all of their unpaid loans
totaling P440,000 and added another loan of
P60,000, bringing their indebtedness to P500,000. A
promissory note was executed in favor of Veronica
which stipulated that the loan will be payable in
August 23, 1986 and that it shall be subject to an
interest rate of 5.5% per month plus 2% service p.a.
until fully paid. Upon maturity of the promissory
note, the borrowers failed to pay the indebtedness of

2011

P500,000, plus interests and penalties. Thus,
Veronica was compelled to file a complaint before
the RTC for collection of the full amount of the loan
including interests and other charges. The lower
court declared that although the Usury Law had been
repealed, the interest charged on the loan was
unconscionable and therefore should be reduced to
12% per annum pursuant to provision of the Civil
Code. Upon appeal, Veronica argued that the 12%
interest per annum on loans is applicable only in the
absence of stipulation on interest rate, but not when
the parties agreed thereon. The CA sustained
Veronica’s contention. Hence, this present petition
for review on certiorari.
Issues:
Whether the Usury Law is still effective or has it been
repealed by CB Circular 905.
Whether the stipulated interest rate of 5.5% per
month on loan is usurious and therefore considered
void.

2011
Although the effectivity of the Usury Law is suspended, Court may be warranted to declare the interest illegal if it finds that such interest is
unconscionable
8. Castro SPS. ISAGANI CASTRO and DIOSDADA CASTRO, Held:
vs. Tan vs.
(G.R. No. ANGELINA DE LEON TAN, SPS. CONCEPCION T.
168980
The Court finds that the petition lacks merit. It was held that while the
CLEMENTE and ALEXANDER C. CLEMENTE, SPS. Court agreed with petitioners that parties to a loan agreement have
24 Nov.
2009)
ELIZABETH T. CARPIO and ALVIN CARPIO, SPS. wide latitude to stipulate on any interest rate in view of the CB No. 905
MARIE ROSE T. SOLIMAN and ARVIN SOLIMAN which suspended the Usury Law ceiling on interest effective, it is also
and JULIUS AMIEL TAN, Respondents. worth stressing that interest rates whenever unconscionable may still
G.R. No. 168940 November 24, 2009 be declared illegal. There is certainly nothing in said circular which
grants lenders complete discretion (carte blanche) to raise interest
DEL CASTILLO, J.: rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets. In this case, the 5% monthly interest
Facts: rate, of 60% per annum, compounded monthly, stipulated in the
On February 17, 1994, Angelina de Leon Tan and her Kasulatan is excessive, iniquitous, unconscionable and exorbitant,
husband Ruben Tan were able to obtain a loan contrary to morals, and the law. It is void ab initio for being violative of
amounting to P30,000 from Sps. Isagani and Art. 13062 of the Civil Code. Therefore, it is more consonant with
Diosdada Castro. The loan was secured with a real justice that the Court upheld the decision of the CA in equitably
property mortgage which consisted of residential lot reducing the subject interest rate to the legal interest of 12% per
2
Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.

2011

owned by Sps. Tan. A Kasulatan ng Sanglaan ng
Lupa at Bahay (Kasulatan) was executed in favor of annum which is deemed fair and reasonable.
Sps. Castro under which the spouses Tan undertook
to pay the mortgage debt within 6 months or until
August 17, 1994, with an interest rate of 5% per
month, compounded monthly. Unfortunately, the
husband of Angelina Tan died and she was left with
the responsibility of paying the loan. In short, she
failed to pay the loan upon maturity. However, she
offered to pay spouses Castro the principal amount
of P30,000 plus a portion of the interest but the
creditor refused and instead demanded payment of
the total accumulated sum of P359,000. Sps. Castro
instituted an extra-judicial foreclosure of mortgage.
They emerged as the sole bidder and the redemption
period expired without the property being redeemed.
Respondent Tan, et.al., filed a Complaint for

Nullification of Mortgage and Foreclosure and/or
Partial Rescission of Documents and Damages before
the RTC of Malolos, Bulacan. They alleged, inter alia,
that the interest rate imposed on the principal
amount of P30,000.00 is unconscionable. The trail
court ruled in favor of the respondent and reduced
the interest rate to 12% per annum. This decision
was appealed to the CA, but the latter affirmed said
decision. Hence, this present petition.
Issue:
Whether the interest rate agreed upon by the parties
in the Kasulatan is valid since the Bangko Sentral has
removed the ceiling on the rate of interest the
parties may stipulate.

2011

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Credit Transactions Case Matrix SY 2010-

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

As insurer, FGU (respondent) paid RAGC the amount

After trial, the RTC rendered its decision finding

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

On July 10, 1998, upon motion of the petitioner Second issue:

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Respondent Tan, et.al., filed a Complaint for

Eppie D. Severino PSU School of Law

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Eppie D. Severino PSU School of Law

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