Carmen Liwanag v.

CA and People
G.R. No. 114398 October 24, 1997
Facts:
Liwanag asked Isidora Rosales to join her and Thelma Tagbilaran in the business of buying and
selling cigarettes. Under their agreement, Rosales would give the money needed to buy
the cigarettes while Liwanag and Tabligan would act as her agents, with acorresponding 40%
commission to her if the goods are sold; otherwise the money would be returned to Rosales.
Rosales gave several cash advances amounting to 633,650. Money was misappropriated.
Rosales filed a complaint of estafa against them.
Issue:
1. WON the parties entered into a partnership agreement;
2. if in the negative, WON the transaction is a simple loan
Held:
1. No. Even assuming that a contract of partnership was indeed entered into by and between
the parties, when money or property have been received by a partner for a specific purpose and
he later misappropriated it, such partner is guilty of estafa.
2. No. In a contract of loan once the money is received by the debtor, ownership over the same
is transferred. Being the owner, the borrower can dispose of it for whatever purpose he may
deem proper.

Antonio Tan vs. Court of Appeals/CCP

GR No. 116285
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FACTS:
Petition for review.
TAN OBTAINED 2 LOANS, EACH FOR P2,000,000 FROM CCP.
Executed a promissory note in amount of P3,411,421.32; payable in 5
installments.
TAN failed to pay any installment on the said restructured loa.
In a letter, TAN requested and proposed to respondent CCP a mode of paying
the restructured loan
i. 20% of the principal amount of the loan upon the respondent giving its conformity to
his proposal
ii. Balance on the principal obligation payable 36 monthly installments until fully paid.
TAN requested for a moratorium on his loan obligation until the following year
allegedly due to a substantial deduction in the volume of his business and on account of the
peso devaluation.
i. No favorable response was made to said letters.
ii. CCP demanded full payment, within ten (10) days from receipt of said letter
P6,088,735.03.
CCP FILED COMPLAINT collection of a sum of money
TAN interposed the defense that he accommodated a friend who asked for help
to obtain a loan from CCP.
i. Claimed that cannot find the friend.
TAN filed a Manifestation wherein he proposed to settle his indebtedness to CCP
by down payment of P140,000.00 and to issue1 2 checks every beginning of the year to cover
installment payments for one year, and every year thereafter until the balance is fully paid.
i. CCP did not agree to the petitioners proposals and so the trial of the case ensued.
TRIAL COURT ORDERED TAN TO PAY CCP P7,996,314.67, representing defendants
outstanding account as of August 28, 1986, with the corresponding stipulated interest and
charges thereof, until fully paid, plus attorneys fees in an amount equivalent to 25% of said
outstanding account, plus P50,000.00, as exemplary damages, plus costs.
REASONS:
i. Reason of loan for accommodation of friend was not credible.
ii. Assuming, arguendo, that the TAN did not personally benefit from loan, he should
have filed a 3rd-party complaint against Wilson Lucmen
iii. 3 times the petitioner offered to settle his loan obligation with CCP.
iv. TAN may not avoid his liability to pay his obligation under the promissory note which
he must comply with in good faith.
v. TAN is estopped from denying his liability or loan obligation to the private respondent.
TAN APPEALED TO CA, asked for the reduction of the penalties and charges on his
loan obligation.
Judgment appealed from is hereby AFFIRMED.
No alleged partial or irregular performance.
However, the appellate court modified the decision of the trial court by deleting exemplary
damages because not proportionate to actual damage caused by the non-performance of the
contract
ISSUES:
WON there are contractual and legal bases for the imposition of the penalty, interest on the
penalty and attorneys fees.
TAN imputes error on CA in not fully eliminating attorney fees and in not reducing the penalties
considering that he made partial payments on the loan.
And if penalty is to be awarded, TAN asking for non-imposition of interest on the surcharges
because compounding of these are not included in promissory note.
No basis in law for the charging of interest on the surcharges for the reason that the New Civil
Code is devoid of any provision allowing the imposition of interest on surcharges.
WON interest may accrue on the penalty or compensatory interest without violating ART
1959: Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn

interest. However, the contracting parties may by stipulation capitalize the interest due and
unpaid, which as added principal, shall earn new interest.
TAN- No legal basis for the imposition of interest on the penalty charge for the reason that the
law only allows imposition of interest on monetary interest but not the charging of interest on
penalty. Penalties should not earn interest.
WON TAN can file reduction of penalty due to made partial payments.
Petitioner contends that reduction of the penalty is justifiable under ART 1229: The judge shall
equitably reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.
HELD
CA DECISION AFFIRMED with MODIFICATION in that the penalty charge of two percent (2%)
per month on the total amount due, compounded monthly, is hereby reduced to a straight twelve
percent (12%) per annum starting from August 28, 1986. With costs against the petitioner.
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WON there are contractual and legal bases for the imposition of the penalty, interest on
the penalty and attorneys fees. YES. WITH LEGAL BASES.
ART 1226: In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of non-compliance, if there is no
stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the
penalty or is guilty of fraud in the fulfillment of the obligation.
i. The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code.
CASE AT BAR: promissory note expressed the imposition of both interest and
penalties in case of default on the part of the petitioner in the payment of the subject
restructured loan.
PENALTY IN MANY FORMS:
i. If the parties stipulate penalty apart monetary interest, two are different and distinct
from each other and may be demanded separately.
ii. If stipulation about payment of an additional interest rate partakes of the nature of a
penalty clause which is sanctioned by law:
ART 2209: If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which
is six per cent per annum.
CASE AT BAR: Penalty charge of 2% per month began to accrue from the time of
default by the petitioner.
i. No doubt petitioner is liable for both the stipulated monetary interest and the
stipulated penalty charge.
PENALTY CHARGE = penalty or compensatory interest.

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WON interest may accrue on the penalty or compensatory interest without violating ART
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Penalty clauses can be in the form of penalty or compensatory interest.

i. Thus, the compounding of the penalty or compensatory interest is sanctioned by and
allowed pursuant to the above-quoted provision of Article 1959 of the New Civil Code
considering that:
There is an express stipulation in the promissory note (Exhibit A) permitting the compounding
of interest.
5th paragraph of the said promissory note provides that: Any interest which may be due if not
paid shall be added to the total amount when due and shall become part thereof, the whole
amount to bear interest at the maximum rate allowed by law..
Therefore, any penalty interest not paid, when due, shall earn the legal interest of twelve
percent (12%) per annum, in the absence of express stipulation on the specific rate of interest,
as in the case at bar.
ART 2212: Interest due shall earn legal interest from the time it is judicially
demanded, although the obligation may be silent upon this point.
CASE AT BAR: interest began to run on the penalty interest upon the filing of the
complaint in court by CCP.

i. Hence, the courts did not err in ruling that the petitioner is bound to pay the interest
on the total amount of the principal, the monetary interest and the penalty interest.
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WON TAN can file reduction of penalty due to made partial payments. YES. BUT NOT
10% REDUCTION AS SUGGESTED BY PETITIONER.
REDUCED TO 2% REDUCTION:
i. PARTIAL PAYMENTS showed his good faith despite difficulty in complying with his
loan obligation due to his financial problems.
However, we are not unmindful of the respondents long overdue deprivation of the use of its
money collectible.
The petitioner also imputes error on the part of the appellate court for not declaring the
suspension of the running of the interest during period when the CCP allegedly failed to assist
the petitioner in applying for relief from liability
Alleges that his obligation to pay the interest and surcharge should have been
suspended because the obligation to pay such interest and surcharge has become conditional
i. Dependent on a future and uncertain event which consists of whether the petitioners
request for condonation of interest and surcharge would be recommended by the Commission
on Audit.
Since the condition has not happened due to the private respondents reneging on its promise,
his liability to pay the interest and surcharge on the loan has not arisen.
COURT ANSWER:
i. Running of the interest and surcharge was not suspended.
ii. CCP correctly asserted that it was the primary responsibility of petitioner to inform the
Commission on Audit of his application for condonation of interest and surcharge.

Consolidated Bank vs CA, GR No. 114286, 19 April 2001, 356 SCRA 671

FACTS
Continental Cement Corp obtained from Consolidated Bank letter of credit used to purchased
500,000 liters of bunker fuel oil. Respondent Corporation made a marginal deposit to petitioner.
A trust receipt was executed by respondent corporation, with respondent Gregory Lim as
signatory. Claiming that respondents failed to turn over the goods or proceeds, petitioner filed a
complaint for sum of money before the RTC of Manila. In their answer, respondents aver that
the transaction was a simple loan and not a trust receipt one, and tht the amount claimed by
petitioner did not take into account payments already made by them. The court dismissed the
complaint, CA affirmed the same.
ISSUE
Whether or not the marginal deposit should not be deducted outright from the amount of the
letter of credit.
HELD
No. petitioner argues that the marginal deposit should be considered only after computing the
principal plus accrued interest and other charges. It could be onerous to compute interest and
other charges on the face value of the letter of credit which a bank issued, without first crediting
or setting off the marginal deposit which the borrower paid to it-compensation is proper and
should take effect by operation of law because the requisited in Art. 1279 are present and
should extinguish both debts to the concurrent amount. Unjust enrichment.

First Metro vs Este del Sol,, GR No. 141811, 15 November 2001, 369 SCRA 99

FACTS
FMIC granted Este del Sol a loan to finance a sports/resort complex in Montalban, Rizal.
Under the agreement, the interest was 16% pa based on the diminishing balance. In case of
default, an acceleration clause was provided and the amount due is subject to 20% one-time
penalty on the amount due and such amount shall bear interest at the highest rate permitted by
law. respondent executed a REM, individual continuing suretyship and an underwriting
agreement whereby FMIC shall underwrite the public offering of one P120,000 common shares
of respondents capital stock for one-time underwriting fee of P200,000. For failure to pay its
obligation, FMIC caused the foreclosure of the REM. At the public auction, FIC was the highest
bidder. Petitioner filed to collect for alleged deficiency balance against respondents since it
failed to collect from the sureties, plus interest at 21% pa. the trial court ruled in favor of FMIC.
Respondents appealed before the CA which held that the fees provided for in the Underwriting
and Consultacy Agreements were mere subterfuges to camouflage the excessively usurious
interest charged. The CA ordered FMIC to reimburse petitioner representing what is ue to
petitioner and what is due to respondent.
ISSUE
Whether or not the interests are lawful
HELD
No. an apparently lawful loan is usurious when it is intended that additional
compensation for the loan be disguised by an ostensibly unrelated contract for the payment by
the borrower for the lenders services which re of little value or which are not in fact to be
rendered. Article 1957 clearly provides: contracts and stipulations, under any cloak or device
whatever, intended to circumvent the law agaistn usury shall be void. The borrower may recover
in accordance with the laws on usury.

Medel vs Court of Appeals, 299 SCRA 481; GR No. 131622, November 27, 1998, digested
Facts: Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2
months and executed a promissory note. Plaintiff gave only the amount of P47, 000.00 to the
borrowers and retained P3, 000.00 as advance interest for 1 month at 6% per month.
Defendants obtained another loan from Defendant in the amount of P90, 000.00, payable in 2
months, at 6% interest per month. They executed a promissory note to evidence the loan and
received only P84, 000.00 out of the proceeds of the loan.
For the third time, Defendants secured from Plaintiff another loan in the amount of P300,
000.00, maturing in 1 month, and secured by a real estate mortgage. They executed a
promissory note in favor of the Plaintiff. However, only the sum of P275, 000.00, was given to
them out of the proceeds of the loan. Upon maturity of the three promissory notes, Defendants
failed to pay the indebtedness.
Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and sought from
Plaintiff another loan in the amount of P60, 000.00, bringing their indebtedness to a total of
P50,000.00. They executed another promissory note in favor of Plaintiff to pay the sum of P500,
000.00 with a 5.5% interest per month plus 2% service charge per annum, with an additional
amount of 1% per month as penalty charges.
On maturity of the loan, the Defendants failed to pay the indebtedness which prompt the
Plaintiffs to file with the RTC a complaint for collection of the full amount of the loan including
interests and other charges. Declaring that the due execution and genuineness of the four
promissory notes has been duly proved, the RTC ruled that although the Usury Law had
been repealed, the interest charged on the loans was unconscionable and revolting to the
conscience and ordered the payment of the amount of the first 3 loans with a 12% interest per
annum and 1% per month as penalty.
On appeal, Plaintiff-appellants argued that the promissory note, which consolidated all the
unpaid loans of the defendants, is the law that governs the parties. The Court of Appeals ruled
in favor of the Plaintiff-appellants on the ground that the Usury Law has become legally
inexistent with the promulgation by the Central Bank in 1982 of Circular No. 905, the lender and
the borrower could agree on any interest that may be charged on the loan, and ordered the
Defendants to pay the Plaintiffs the sum of P500,000, plus 5.5% per month interest and 2&
service charge per annum , and 1% per month as penalty charges.
Defendants filed the present case via petition for review on certiorari.
Issue: WON the stipulated 5.5% interest rate per month on the loan in the sum of P500, 000.00
is usurious.
Held: No. A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive,
iniquitous, unconscionable and exorbitant, but it cannot be considered usurious because
Central Bank Circular No. 905 has expressly removed the interest ceilings prescribed by the
Usury Law and that the Usury Law is now legally inexistent.
Doctrine: A CB Circular cannot repeal a law. Only a law can repeal another law. Jurisprudence
provides that CB Circular did not repeal nor in a way amend the Usury Law but simply
suspended the latters effectivity (Security Bank and Trust Co vs RTC). Usury has been legally
non-existent in our jurisdiction. Interest can now be charged as lender and borrower may agree
upon.
Law: Article 2227, Civil Code

The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a
penalty if they are iniquitous or unconscionable.