FACTS:

May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari,
of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding purposes subject to
a breeding fee of 10% of the book value of the bulls
May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one
bull was approved while the others are to be returned
March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of
the 3 bulls
October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly
depreciation to be approved by the Auditor General.
October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be
returned or their book value without deductions should be paid not later than October 31, 1950
which he was not able to do
December 20, 1950: An action at the CFI was commenced against Jose praying that he be
ordered to return the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee
of P199.62, both with interests, and costs
July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines, he could not return the animals nor pay their
value and prayed for the dismissal of the complaint.
RTC: granted the action
December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve
the writ outside Manila
December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October
23, 1951 and administratrix of his estate, was notified
January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26,
1952 evidenced by recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid
and prayed that the writ of execution be quashed and that a writ of preliminary injunction be
issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the
loss due to force majeure due to delay.

HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs
If contract was commodatum then Bureau of Animal Industry retained ownership or title to
the bull it should suffer its loss due to force majeure. A contract of commodatum is essentially
gratuitous. If the breeding fee be considered a compensation, then the contract would be a
lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the
responsibilities of a possessor in bad faith, because she had continued possession of the bull
after the expiry of the contract. And even if the contract be commodatum, still the appellant is
liable if he keeps it longer than the period stipulated
the estate of the late defendant is only liable for the sum of P859.63, the value of the bull
which has not been returned because it was killed while in the custody of the administratrix of his
estate
Special proceedings for the administration and settlement of the estate of the deceased Jose
V. Bagtas having been instituted in the CFI, the money judgment rendered in favor of the
appellee cannot be enforced by means of a writ of execution but must be presented to the
probate court for payment by the appellant, the administratrix appointed by the court.
Date: September 31, 1988

Facts:
- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with
the court an application for the registration of title over lots 1, 2, 3 and 4 situated in
Poblacion Central, Benguet, said lots being used as sites of the Catholic Church,
building, convents, high school building, school gymnasium, dormitories, social hall and
stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have
ownership over lots 1, 2 and 3. (2 separate civil cases)
- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3
and 4. Upon appeal by the private respondents (heirs), the decision of the lower court
was reversed. Title for lots 2 and 3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of
the Court of Appeals dismissing his application for registration of Lots 2 and 3.
- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the
alleged ownership of the land in question (Lot 3) by their predecessor-in-interest,
Egmidio Octaviano; his written demand to Vicar for the return of the land to them; and
the reasonable rentals for the use of the land at P10,000 per month. On the other hand,
Vicar presented the Register of Deeds for the Province of Benguet, Atty. Sison, who
testified that the land in question is not covered by any title in the name of Egmidio
Octaviano or any of the heirs. Vicar dispensed with the testimony of Mons. Brasseur
when the heirs admitted that the witness if called to the witness stand, would testify that
Vicar has been in possession of Lot 3, for 75 years continuously and peacefully and has
constructed permanent structures thereon.

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

Held: YES.

Private respondents were able to prove that their predecessors' house was borrowed by
petitioner Vicar after the church and the convent were destroyed. They never asked for
the return of the house, but when they allowed its free use, they became bailors in
commodatum and the petitioner the bailee.

The bailees' failure to return the subject matter of commodatum to the bailor did not
mean adverse possession on the part of the borrower. The bailee held in trust the
property subject matter of commodatum. The adverse claim of petitioner came only in
1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by
such adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title.

The Court of Appeals found that petitioner Vicar did not meet the requirement of 30
years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the
requirement of 10 years possession for ordinary acquisitive prescription because of the
absence of just title. The appellate court did not believe the findings of the trial court that
Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by
purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no
documentary evidence to support the same and the alleged purchases were never
mentioned in the application for registration.

Tolentino vs. Gonzalez Sy Chiam 50 Phil 558

Tolentino purchased land from Luzon Rice Mills for Php25,000 payable in three installments.
Tolentino defaulted on the balance so the owner sent a letter of demand to him. To pay, Tolentino
applied for loan from Gonzalez on condition that he would execute a pacto de retro sale on the
property in favor of Gonzalez. Upon maturation of loan, Tolentino defaulted so Gonzalez is
demanding recovery of the land. Tolentino contends that the pacto de retro sale is a mortgage and
not an absolute sale.

The Supreme Court held that upon its terms, the deed of pacto de retro sale is an absolute sale
with right of repurchase and not a mortgage. Thus, Gonzalez is the owner of the land and
Tolentino is only holding it as a tenant by virtue of a contract of lease.

**LOAN: A contract of loan signifies the giving of a sum of money, goods or

credits to another, with a promise to repay, but not a promise to return the
same thing. It has been defined as an advancement of money, goods, or
credits upon a contract or stipulation to repay, not to return, the thing loaned
at some future day in accordance with the terms of the contract. The
moment the contract is completed, the money, goods or chattels given
cease to be the property of the former owner and become the property of
the obligor to be used according to his own will, unless the contract itself
expressly provides for a special or specific use of the same. At all events, the
money, goods or chattels, the moment the contract is executed, cease to be
the property of the former owner and become the sole property of the
obligor.

Commodatum Defined

Art. 1933: By the contract of loan, one of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and return it, in which case the
contract is called a commodatum. xxx

- the bailee acquires the use of the thing loaned but not its fruits (Art. 1935), EXCEPT if the
parties stipulate use of fruits (Art. 1940)
PEOPLE vs. CONCEPCION, 44 Phil. 126FACTS:
Venancio Concepcion, President of the Philippine National Bank and a member of
theBoard thereof, authorized an extension of credit in favor of "Puno y Concepcion,
S. en C. to themanager of the Aparri branch of the Philippine National Bank. "Puno
y Concepcion, S. en C."was a co-partnership where Concepcion is a partner.
Subsequently, Concepcion was charged andfound guilty in the Court of First
Instance of Cagayan with violation of section 35 of Act No.2747. Section 35 of Act
No. 2747 provides that the National Bank shall not, directly or indirectly, grant loans
to any of the members of the board of directors of the bank nor to agentsof the
branch banks. Counsel for the defense argue that the documents of record do not
provethat authority to make a loan was given, but only show the concession of a
credit. They averredthat the granting of a credit to the co-partnership "Puno y
Concepcion, S. en C." by VenancioConcepcion, President of the Philippine National
Bank, is not a "loan" within the meaning of section 35 of Act No. 2747.
ISSUE:
Whether or not the granting of a credit of P300,000 to the co-partnership "Puno
yConcepcion, S. en C." by Venancio Concepcion, President of the Philippine National
Bank, a"loan" within the meaning of section 35 of Act No. 2747.
HELD:
The Supreme Court ruled in the affirmative. The "credit" of an individual means
hisability to borrow money by virtue of the confidence or trust reposed by a lender
that he will paywhat he may promise. A "loan" means the delivery by one party and
the receipt by the other party of a given sum of money, upon an agreement,
express or implied, to repay the sum loaned,with or without interest. The concession
of a "credit" necessarily involves the granting of "loans"up to the limit of the
amount fixed in the "credit,

usury
WILFREDO VERDEJO, petitioner,
vs.
THE HON. COURT OF APPEALS, HON. SOFRONIO G. SAYO, Presiding Judge,
RTC, Br. III, Pasay City, and HERMINIA PATINIO, ET AL., respondents.

PADILLA, J.:
Facts:

On 20 December 1984, the herein petitioner filed a complaint against the private
respondent Herminia Patinio and one John Doe before the Regional Trial Court of
Pasay City, for collection of a sum of money amounting to P60,500.00, which said
Herminia Patinio had allegedly borrowed from him but failed to pay when it became due,
notwithstanding demands.

In her answer, Herminia Patinio admitted having obtained loans from the petitioner but
claimed that the amount borrowed by her was very much less than the amount
demanded in the complaint, which amount she had already paid or settled, and that the
petitioner had exacted or charged interest on the loan ranging from 10% to 12% per
month, which is exorbitant and in gross violation of the Usury Law. Wherefore she
prayed that she be reimbursed the usurious interests charged and paid. She also asked
for damages, attorneys fee and costs of suit.

After trial court on 3 September 1986, the trial court rendered Judgment, as
follows:WHEREFORE, judgment is hereby rendered dismissing plaintiffs complaint for
lack of merit.

The petitioner filed a petition for certiorari before the Court of Appeals, to annul RTC
Order of 8 October 1986.The appellate court, however, as aforestated, dismissed the
petition in a Decision dated 28 November 1986. The petitioner filed a motion for
reconsideration of the decision, but his motion was denied in a Resolution dated 5
March 1987.

Issues:

Whether or not defendant defense claim for being charged usuriously is correct?

Held:

Article 1413. Interest in excess of the interest allowed by the usury laws may be
recovered by the debtor, with interest thereon from the date of the payments.

This Court has ruled in one case, that with the promulgation of Central Bank Circular
No. 905, series of 1982, usury has become legally inexistent as the lender and the
borrower can agree on any interest that may be charged on the loan. This Circular was
also given retroactive effect. But, whether or not this Circular should also be given
retroactive effect and applied in this case is yet to be determined by the appellate court
at the proper time.

The trial court merely added the amounts paid by the private respondent to the
petitioner and, thereafter, deducted therefrom the amounts given as loan to the private
respondent and considered the excess amount usurious, without apparently considering
the lawful interest that may be collected on said loans.

Only usurious interests may be reimbursed.

US vs. Diaz-Conde (42 Phil 766)

Facts:
On December 30, 1915, complainants Bartolome Oliveros and Engracia Lianco entered into a contract
with the defendants concerning a debt of P300. Oliveros and co. were obligated to pay five percent
interest per month within the first ten days of every month. On May 6, 1921, Vicente Diaz Conde and
Apolinaria R. De Conde were charged with violating the Usury Law in the Court of First Instance of the
city of Manila. They were found guilty, sentenced to pay a fine of P120 and in case of insolvency, to suffer
subsidiary imprisonment in accordance with the provisions of law. They took it to SC to plead.

Issues:
WoN the Usury Law has a retroactive effect in this case
WoN the law impaired the contract

Held and Ratio:

No. The Usury Law, a penal law, cannot become retroactive unless it is favorable to the person accused.
(Art. 21 and 22 Penal Code)
Yes. If a contract is legal at its inception, it cannot be rendered illegal by any subsequent legislation.

Decision: Judgment reversed, defendants acquitted.

HERRERA VS. PETRO PHIL CORP146 SCRA 385

Contract between the parties is one of lease and not of loan. It is clearly
denominated a"LEASEAGREEMENT." Nowhere in the contract is there any showing
that the parties intended a loanrather than a lease. The provision for the payment
of rentals in advance cannot beconstrued as are payment of a loan because there
was no grant or forbearance ofmoney as to constitute indebtedness on the part of
the lessor. On the contrary, thedefendant-appellee was discharging its obligation in
advance by paying the eight yearsrentals and it was for this advance payment that
it was getting a rebate or discount.There is no usury in this case because no money
was given by the defendant-appelleeto the plaintiff-appellant, nor did it allow him to
use its money already in hispossession. There was neither loan nor forbearance but
a mere discount which theplaintiff-appellant allowed the defendant-appellee to
deduct from the total payments becausethey were being made in advance for eight
years. The discount was in effect a reduction of the rentalswhich the lessor had the
right to determine, and any reduction thereof, by any amount, would notcontravene
the Usury Law
TOLENTINO(plaintiff-apellant) v GONZALES SY CHIAM (defendant-appellee) G.R. No.
26085 August 12, 1927 FACTS: 1. Before Nov 28, 1922, Severino
Tolentino and Potenciana Manio purchased Luzon Rice Mills, Inc., parcel of land in
Tarlac for P25,000.00 to be paid in three installments. a. First installment is P2,000
due on or before May 2, 1921 b. Second installment is P8,000 due on or before May
31, 1921 c. Third installment of P15,000 at 12% interest due on or before Nov 30,
1922 One of the conditions of the contract of purchase was that if Tolentino and
Manio failed to pay the balance of any of the installments on the date agreed upon,
the property bought would revert to the original owner. The first and second
installments were paid but the balance was paid on Dec 1, 1922 2. On Nov 7, 1922,
a representative of vendor of said property wrote Manio , notifying her that if the
balance of said indebtedness was not paid, they would recover the property with
damages for non compliance with the condition of the contract of purchase. 3.
Tolentino and Manio borrowed money from Benito Gonzales Sy Chiam to satisfy their
indebtedness to the vendor. 4. Gonzales agreed to loan the P17,500 upon condition
that they execute and deliver to him a pacto de retro of the property. 5. The
contract includes a contract of lease on the property whereby the lessees as
vendors apparently bind themselves to pay rent at the rate of P375 per month and
whereby "Default in the payment of the rent agreed for two consecutive months will
terminate this lease and will forfeit our right of repurchase, as though the term had
expired naturally" 6. Upon maturation of loan, Tolentino defaulted payment and
Gonzales demanded recovery of land. Tolentino s argument: that the pacto de
retro sale is a mortgage and not an absolute sale and that the rental price paid
during the period of the existence of the right to repurchase, or the sum of P375 per
month, based upon the value of the property, amounted to usury. ISSUE: WoN the
contract in question is a mortgage HELD: No. RATIO: The contract is a pacto de retro
and not a mortgage. There is not a word, a phrase, a sentence or a paragraph in the
entire record, which justifies this court in holding that the said contract of pacto de
retro is a mortgage and not a sale with the right to repurchase. The purpose of the
contract is expressed clearly that there can certainly be no doubt as to the purpose
of the Tolentino to sell the property in question, reserving the right only to
repurchase the same: Second. That is a condition of this sale that if in the course of
five (5) years from the 1st of December, 1922, we return to Don Benito Gonzales Sy
Chiam the above-mentioned price of seventeen thousand five hundred (P17,500),
Mr. Benito Gonzales Sy Chiam is forced to return the farm; but if it passes the above
mentioned term of five (5) years without exercising to the right of redemption that
we have saved ourselves, then this sale will be absolute and irrevocable. From the
foregoing, we are driven to the following conclusions: First, that the contract of
pacto de retro is an absolute sale of the property with the right to repurchase and
not a mortgage; and, second, that by virtue of the said contract the vendor became
the tenant of the purchaser, under the conditions mentioned in paragraph 3 of said
contact. When the vendor of property under a pacto de retro rents the property and
agrees to pay a rental value for the property during the period of his right to
repurchase, he thereby becomes a "tenant" and in all respects stands in the same
relation with the purchaser as a tenant under any other contract of lease. In the
present case the property in question was sold. It was an absolute sale with the
right only to repurchase. During the period of redemption the purchaser was the
absolute owner of the property. During the period of redemption the vendor was not
the owner of the property. During the period of redemption the vendor was a tenant
of the purchaser. During the period of redemption the relation which existed
between the vendor and the vendee was that of landlord and tenant. That relation
can only be terminated by a repurchase of the property by the vendor in accordance
with the terms of the said contract. The contract was one of rent. The contract was
not a loan, as that word is used in Act No. 2655. Loan v Rent as discussed under
Usury Law in relation to Act No. 2655 "An Act fixing rates of interest upon 'loans'
and declaring the effect of receiving or taking usurious rates." Usury, generally
speaking, may be defined as contracting for or receiving something in excess of the
amount allowed by law for the loan or forbearance of money the taking of more
interest for the use of money than the law allows. It will be noted that said statute
imposes a penalty upon a "loan" or forbearance of any money, goods, chattels or
credits, etc. The central idea of said statute is to prohibit a rate of interest on
"loans." A contract of "loan," is very different contract from that of "rent". A "loan,"
as that term is used in the statute, signifies the giving of a sum of money, goods or
credits to another, with a promise to repay, but not a promise to return the same
thing. To "loan," in general parlance, is to deliver to another for temporary use, on
condition that the thing or its equivalent be returned; or to deliver for temporary
use on condition that an equivalent in kind shall be returned with a compensation
for its use. The word "loan," however, as used in the statute, has a technical
meaning. It never means the return of the same thing. It means the return of an
equivalent only, but never the same thing loaned. A "loan" has been properly
defined as an advance payment of money, goods or credits upon a contract or
stipulation to repay, not to return, the thing loaned at some future day in
accordance with the terms of the contract. Under the contract of "loan," as used in
said statute, the moment the contract is completed the money, goods or chattels
given cease to be the property of the former owner and becomes the property of
the obligor to be used according to his own will, unless the contract itself expressly
provides for a special or specific use of the same. At all events, the money, goods or
chattels, the moment the contract is executed, cease to be the property of the
former owner and becomes the absolute property of the obligor. A contract of "loan"
differs materially from a contract of "rent." In a contract of "rent" the owner of the
property does not lose his ownership. He simply loses his control over the property
rented during the period of the contract. In a contract of "loan" the thing loaned
becomes the property of the obligor. In a contract of "rent" the thing still remains
the property of the lessor. He simply loses control of the same in a limited way
during the period of the contract of "rent" or lease. In a contract of "rent" the
relation between the contractors is that of landlord and tenant. In a contract of
"loan" of money, goods, chattels or credits, the relation between the parties is that
of obligor and obligee. "Rent" may be defined as the compensation either in money,
provisions, chattels, or labor, received by the owner of the soil from the occupant
thereof. It is defined as the return or compensation for the possession of some
corporeal inheritance, and is a profit issuing out of lands or tenements, in return for
their use. It is that, which is to paid for the use of land, whether in money, labor or
other thing agreed upon. A contract of "rent" is a contract by which one of the
parties delivers to the other some nonconsumable thing, in order that the latter
may use it during a certain period and return it to the former; whereas a contract of
"loan", as that word is used in the statute, signifies the delivery of money or other
consumable things upon condition of returning an equivalent amount of the same
kind or quantity, in which cases it is called merely a "loan." In the case of a contract
of "rent," under the civil law, it is called a "commodatum."

Hence, if a contract of loan with security does not stipulate the payment of interest
but provides for the delivery to the creditor by the debtor the real property
constituted as security for the payment thereof, in order that the creditor may
administer the same and avail himself of its fruits, without stating that said fruits
are to be applied to the payment of the interest, if any, and afterwards to that of the
principal of the credit, the credit shall be considered to be one of mortgage and not
of antichresis. (Legaspi and Salcedo vs. Celestial, 66 Phil. 372 [1983]; Alojado vs.
Lim Siongco, 51 Phil. 339 [1927]; Diego vs. Fernando, 109 Phil. 143 [1960]; Adrid vs.
Morga, 108 Phil. 927 [1960].) In a case, the court held the contract as one of
mortgage in view of the existence of three which are indicative of the contract of
mortgage: (1) The agreement that the full amount of the indebtedness must be
returned to the lenders before the borrowers could demand the return of the
property, which is contrary to an antichretic contract wherein the products of the
land should be applied to the interest and then to the principal; (2) the use of the
term mortgage in various parts of the contract; and (3) the agreement that the
lenders are not to pay rentals on the property in consideration of the fact that the
borrowers do not pay interest on the sum which they obtained as a loan. (Verzosa
vs. Bucag, [Unrep.] 97 Phil. 996 [1955].) ARTICLE 2133. The actual market value of
the fruits at the time of the application thereof to the interest and principal shall be
the measure of such application. (n) Purpose. The purpose of this provision is to
forestall the use of antichresis for purpose of usury. The interest in antichresis are
subject to the limitations laid down by the Usury law. Use of Actual Market Value
The foregoing rule will forestall the use of antichresis for purposes of USURY.
( Report of the Code Commission, p. 158 ) Interest must not be usurious. The
interest in antichresis must not violate the Usury law. ( Santa Rosa vs. Noble, 35
O.G. 2724) Measure of application of fruits to the interest and principal. The fruits of
the immovable which is the object of the antichresis must be appraised at their
actual market value at the time of the application. The foregoing rule will forestall
the use of antichresis for purposes of usury. (Report of the Code Commission, p.
158.)

Republic of the Philippines

SUPREME COURT
Manila
 EN BANC

G.R. No. 21995 September 29, 1924

ISIDRO S. VILLARUEL, plaintiff-appellee,

vs.
ALBINA ALVAYDA and her husband, BUENAVENTURA VICENCIO, defendants-appellants.

Ampig & Villa and Francisco & Lualhati for appellants.

F. Fernandez Yanson for appellee.

VILLAMOR, J.:

The complaint is upon two cause of action. The first is for the collection of a mortgage credit of
P46,000, plus P2,500 for expenses of litigation and attorney's fees; and the second, for the recovery
of the sum of P500, alleged to have been borrowed by the defendants from Messrs. Ledesma
Brothers for the account of the plaintiff.

The plaintiff prays that judgment be rendered against the defendants:

(a) For the payment of their mortgage debt with interest thereon, after deducting the P1,000
paid on July 30, 1921, and the P3,501.83 paid on the 29th day of August, 1922.

(b) For the payment of the P2,500 fixed for expenses of litigation and attorney's fees, and the
sum of P500 alleged in paragraph VI of the complaint, and the costs of the action.

(c) Ordering the sale of the property mortgaged, with the improvements thereon, should the
amount of the judgment not be satisfied within the period prescribed by the law, the proceeds
of the sale to be applied upon the payment of the amounts claimed, with interest thereon and
the costs.

(d) Directing the defendants, in the event that the proceeds of said sale are not sufficient to
cover the amounts claimed in the complaint, to pay the plaintiff such balance as, according to
the record, they may be personally liable for.

The defendants admit the execution of the deeds of mortgage Exhibits A, and B, as well as the
payments made on account of the debt, namely, P1,000 on July 30, 1921, and P3,501.83 on August
29, 1922; but they allege as a defense that the contract entered into with the plaintiff is usurious, on
account of the latter having collected an interest equivalent to 24 per centum; and as a counterclaim
they pray that the plaintiff be compelled to return to them the sum of P13,872, which he had
collected from them as interest, plus P3,000 for expenses of litigation and attorney's fees.

His Honor, the judge who tried this case, in a well reasoned decision, disposed of the first cause of
action (a) ordering the defendants Albina Alvayda and Buenaventura Vicencio to pay to plaintiff Isidro
S. Villaruel jointly the sum of P44,642.93 with interest thereon at 12 per centum from December 26,
1922, the date of the complaint, until full payment; (b) sentencing them also to pay the plaintiff the
sum of P2,500 as attorney's fees and expenses of litigation; (c) ordering that these payments be
made within the period of three (3) months, and that, if after said period the amount of the judgment
was not paid, the property mortgaged described in the deed Exhibit A be sold at public auction, the
proceeds of the sale to be applied upon the payment already mentioned. Upon the second cause of
action, the defendants were sentenced to pay the plaintiff the sum of P550 with legal interest thereon
from the filing of the complaint until full payment. As to the cross-complaint, the plaintiff was absolved
therefrom. As to the counterclaim, the plaintiff was likewise absolved from the same. The defendants
were sentenced to pay the costs.

The appellants complaint of the trial court not having held the contract in question to be usurious, nor
ordered the return to the defendants of the interest paid to the plaintiff, or the payment of the
expenses of litigation and attorney's fees.

An explanation of the items stated in Exhibits A and B is found in the following part of the judgment:

It appears from the testimony of the plaintiff and his Exhibit F (which the defendant
Buenaventura Vicencio admits having written personally, and which appears to have been
delivered by him to the plaintiff), that the amount paid on May 11, 1920, was P30,000, as
was also testified to by the defendant Vicencio himself; and in this sum of P30,000 was
included the interest for one year at 12 per cent, which is P3,600. It also appears that in
August, 1920, the P6,000 was paid by the plaintiff to the defendant, and thus the P39,600
stated in the deed Exhibit A was completed.

Subsequent to the deed Exhibit A the defendant Vicencio became indebted to the plaintiff in
several amounts, which are set out in detail in Exhibit F as follows:

Interest at 12 per cent on P6,000 from August, 1920, to May,

1921 P540.00

Paid in cash (January 13th) 580.00

Paid in cash (May 12th, 1921) 20.00

Commission on sale 84.28

Cash 50.00

Total 1,274.28

At the maturity of the deed Exhibit a in May, 1921, as the defendants asked
for an extension of one year and an increase of the credit, a liquidation was
made between the plaintiff and the defendant, and capitalizing all the sums
 due on the date, the following result was obtained:

Amount of the deed Exhibit A P39,600.00

Amounts subsequently due 1,274.28

40,874.28

Interest upon this sum a 12 per cent from May, 1921, to May,
1922 4,905.01

They made a total of 45,779.29

And to make it a round number there was added 220.71

To make exactly 46,000.00

which is the amount stated in the document Exhibit B, renewing the document Exhibit A.

With respect to the P220.71, the plaintiff advanced to the defendant the sum of P218,
as stated in Exhibit F, and the plaintiff testified, without contradiction, that he paid the
remaining P2.71 to the defendant Vicencio.

As to the sum of P46,000 stated in the deed of mortgage Exhibit B after charging the
proper interest and deducting the amounts paid by the said defendant, namely,
P1,000 on July 31, 1921, and P3,501.83 on August 29, 1922 (as appears in Exhibits
F and C, in paragraph V of the complaint, in the amended answer of the defendants
and in Exhibit E), with the reciprocal interest accruing upon these sums, it results that
in December 26, 1922, the date of the complaint, there was a debit balance of
P44,642.93. This constitutes the first cause of action of the complaint.

With reference to the second cause of action, it appears from Exhibit C that on
September 1, 1922, the defendant took the sum of P500 on account, the interest of
which does not appear to have been the subject of any stipulation.
 It also appears proven that in clause C of Exhibit B the sum of P2,500 was fixed as
attorney's fees and expenses of litigation should proceeding be instituted for the
foreclosure of the mortgage.

After studying the record, we are convinced that the findings of the trial court are supported
by the evidence.

The contention of the appellants that the appelle has collected from them double interest
upon the principal sum of P30,000 is groundless. According to the contract Exhibit A, the
principal of P30,000 should draw interest at the rate of 12 per centum per annum (from May
11, 1920, to the same date of May, 1921), that is, P3,600, which amount was by agreement
of the parties included in Exhibit A, like the P6,000 that the defendants may have
subsequently received, which they in fact received in the month of August, 1920. But it does
not appear that upon the original principal of P30,000 a new interest was ever charged at the
time of the liquidation of accounts that the contracting parties made on May 11, 1921, for the
extension of the period and the renewal of the mortgage Exhibit B, where the sum of
P46,000 is stated.

To obtain this last amount, the sum of P3,600 was taken into account, which is the interest of
the original principal of P30,000 at 12 per centum, and which instead of being paid by the
debtors was made a part of the principal debt then due. And we do not believe that there has
been any illegality in it, for, as was held in Government of the Philippine Islands vs. Schenkel
and Gonzales (43 Phil., 616), the interest due constitutes, from the moment it is due, a new
principal by agreement of the parties and the interest it earned should not be considered as
accruing upon the original debt.

In support of the contention of the appellants, Exhibit 1 was introduced, dated May 31, 1921,
written and signed by the appellee, regarding the sum of P5,520, the amount of the interest
of the principal of P465,000 stated in Exhibit B.

The trial court found it proven that the plaintiff executed and signed Exhibit 1 in order to
prevent the defendants from again being charged with the interest of the principal of P46,000
in the event of the death of said plaintiff and of his heirs, ignorant of the transaction, trying to
enforce the stipulation in the deed Exhibit B. We see in this error whatsoever justifying the
reversal of the judgment appealed from. If it were true that the defendants paid the plaintiff
on May 31, 1921, the sum of P5,520, as interest on the principal of P46,000, it cannot be
conceived how the defendant Vicencio, who drew the document Exhibit F containing the
liquidation, on July 31, 1921, that is to say, two months after Exhibit 1, has failed to include
therein the respectable sum of P5,520.

The judgment appealed from, being in accordance with law, must be, as is hereby, affirmed
with the costs against the appellants. So ordered.

Johnson, Street, Malcolm, Avancea, Ostrand and Romualdez, JJ., concur.

G.R. No. L-21440 April 30, 1966

SUN BROS. APPLIANCES, INC., plaintiff-appellant,

vs.
ANGEL AL. CALUNTAD, defendant-appellee.
Dominador A. Alafriz and Associates for plaintiff-appellant.
Eusebio V. Navarro for defendant-appellee.

BAUTISTA ANGELO, J.:

Plaintiff filed before the Municipal Court of Manila a complaint based on a conditional sale of one
G.E. Television Set, Model 21, Console 1960, Serial No. 652548, under the condition that the price
would be P3,440.00, the down payment P894.00, and it would be paid in monthly installments of
P142.00 each for eighteen (18) months. Defendant only paid the amount of P1,442.00, leaving a
balance of P1,988.00, which he failed to pay since March, 1961, for which reason plaintiff prayed
that if said balance is not paid, the property be returned to plaintiff.

Defendant denied owing said balance of P1,988.00 for he contends that what he bought from
plaintiff was a Philco Television Set, Model 21, with a value of P1,700.00, payable within ninety (90)
days, but that it was destroyed by plaintiff's technicians and so it was replaced with a G.E. set on a
cash basis, payable within ninety (90) days, the advance payment on the original set to be credited
on the second set. It was agreed that the true market value of the G.E. set would be P1,500.00 but
defendant made plaintiff sign a deed of sale for P3,440.00 thereby adding more than 150% to the
original price. It is alleged that plaintiff in effect entered into a usurious transaction under the guise of
a contract of sale.

Apparently, the case was elevated to the court of first instance because of the question of law
involved.

The allegation of usury made by defendant in his answer was not denied under oath by plaintiff and
so the court a quo considered said allegation as admitted under Section 1, Rule 9 of the Rules of
Court. Hence, the court a quo considered the transaction null and void and on that basis dismissed
the complaint. Plaintiff brought this case on appeal directly before this Court when its motion for
reconsideration was denied on the plea that the same merely involves questions of law.

Plaintiff in its complaint alleges that the transaction between the parties was a conditional sale the
terms thereof having been specified therein. Defendant in his answer admits that what he originally
bought from plaintiff was one Philco Television Set, Model 21, Console 1960, the terms of payment
having been specified in the contract of sale. Defendant admits that he failed to pay the purchase
price within the term of ninety (90) days agreed upon. 1wph1.t

It appears, therefore, that the transaction that took place between the parties was a conditional sale
based on an installment plan, and not a loan, so that the alleged increase in the price of the article
sold cannot be considered as a mere pretext to cover a usurious loan. It has been held that "The
increase of the price is not interest within the purview of the Usury Law, if the sale is made in good
faith and not a mere pretext to cover a usurious loan" (Manila Trading & Supply Co. vs. Tamaraw
Plantation Co., 47 Phil. 513). And elaborating on said case, this Court said:

x x x The increase of the price, when the sale is on credit, serves not only to cover the
expenses generally entailed by such transactions on credit, but also to encourage cash
sales, so useful to commerce. It is up to the purchaser to decide which price he prefers in
making the purchase. If he prefers to purchase for cash, he obtains a 5 per cent reduction of
the price; if, on the contrary, he prefers to buy on credit, he cannot complain of the increase
of the price demanded by the vendor.

In 27 R.C.L., p. 214, it is said: "On principle and authority, the owner of property, whether real
or personal, has a perfect right to name the price on which he is willing to sell, and to refuse
 to accede to any other. He may offer to sell at a designated price for cash or at a much
higher price on credit, and a credit sale will not constitute usury however great the difference
between the two prices, unless the buying and selling was a mere pretense." And in 39 Cyc.,
p. 927, it is also established that: "A vendor may well fix upon his property one price for cash
and another for credit, and the mere fact that the credit price exceeds the cost price by a
greater percentage than is permitted by the usury laws is a matter of concern to the parties
but not to the courts, barring evidence of bad faith. If the parties have acted in good faith
such a transaction is not a loan, and not usurious.

Defendant's contention that the failure of plaintiff to specifically deny under oath the allegation of
usury in his answer constitutes an implied admission of usury is untenable. If it is alleged that
defendant entered into a contract of loan with plaintiff in which the latter collected a usurious interest
there is need to deny the transaction under oath, and if no oath is taken the only thing admitted is
the allegation that the interest is usurious and not that the contract entered into is a loan. The nature
of the transaction is not admitted. The fact that what is alleged is that the transaction was a loan
under the guise of a conditional contract of sale and that by increasing its price by 150% the
consideration became usurious, such is not deemed admitted by the mere failure to deny the answer
under oath. This transaction must still be proven before usury can be invoked in the light of the
following ruling of this Court:

It may, of course, be held in general that only that for which the law requires an oath is
deemed admitted, should no oath be taken. If it is alleged in the complaint that the
defendant, whether an individual or a corporation, has entered into a contract of loan with the
plaintiff, there is no need for a sworn answer. But if it be added that on this loan the
defendant has collected usurious interest, that is, interest in excess of the rate fixed by the
law, then there is need of an oath. In that case, if no oath is taken to the answer, the only
thing admitted is the allegation that the interest charged is usurious, not that the contract
entered into is a loan, which is something that must be proved independently of the
admission, especially when, as in the one in question, this allegation is disputed.

The intervenor Hilarion Soriano not only alleges that the plaintiff charged, and that he paid
him, usurious interest, but also that the contract they made, under the guise of a sale subject
to repurchase, according to its terms, was in reality a contract of loan herein usurious interest
was stipulated and collected. He should therefore have shown by competent evidence that
contract was really a loan. But, not only is there not a scintilla of evidence to this effect, but,
on the contrary, the evidence of record, which is the contract itself, shows conclusively that it
was a sale subject to repurchase. Wherefore, as the plaintiff and the intervenor did not enter
into a contract of loan by virtue of which usurious interest could be collected, and as the
contract entered into between them was a sale upon which usurious interest could not be
collected, the admission established by the law that such interest was in fact collected, does
not exist. The law cannot presume an absurdity. In order that this admission of the collection
of usurious interest may be invoked, it is necessary first to establish the contract by virtue of
which interest could be collected. (Lo Bun Chay vs. Paulino, 54 Phil. 144, 147-148.)

The contract entered into between the parties being a conditional sale, the increase in price over the
cash price cannot be considered interest, and so the dismissal of the case by the court a quo is not
justified.

Wherefore, the decision appealed from is reversed. The case is remanded to the lower court for
further proceedings, without pronouncement as to costs.
Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Regala, Makalintal, Bengzon, J.P., Zaldivar and
Sanchez, JJ., concur.
Dizon, J., concurs in the result.

G.R. No. L-1927 May 31, 1949

CRISTOBAL ROO,
petitioner, vs.
JOSE L. GOMEZ, ET AL.,
respondents.
*Usurious Transactions #6 (round 2)STATEMENT OF FACTS:
On October 5, 1944, Cristobal Roo received as a loan fromJose L. Gomez P4,000.00
in Japanese fiat money (mickey mouse money). The contractof loan is under the
condition that said loan
will not earn interest
and that it will be paid
in the currency then prevailing
one year after the execution of the contract. After ayear, a collection suit was filed
by respondent Gomez against petitioner Rono to collect
the latters debt. Subsequently, t
he trial court ruled in favor of Gomez. The courtordered Rono to pay the respondent
an amount of P4,000.00 in Philippine currencywhich was then the prevailing
currency at the time of payment. Contending suchdecision, Rono insists that the
contract taken in favor of respondent is contrary to law,public order and good
morals
since his loan then of P4,000.00 mickey mouse money
is equivalent only to P100.00 of the Philippine currency which is the prevailing
currencyat the time of payment.

CONTENTION OF THE PETITIONER:

Roo asserts that the decision of the trial courtruling in favor of respondent is
contrary to the Usury law, because on the basis ofcalculations by Government
experts he only received the equivalent of P100 Philippinepesos and now he is
required to give four thousand pesos or interest greatly in excessof the lawful rates.

CONTENTION OF THE RESPONDENT:

That both parties agreed that the loanedamount of
P4,000.00 mickey mouse money be paid in the currency prevailing by theend of
one year. The civil cod
e supports such agreement when it says "obligationsarising from contracts shall
have the force of law between the contracting parties andmust be performed in
accordance with their stipulations" (Article 1091).
RESOLUTION OF SC:
The SC ruled that that the contract between the parties is an aleatoty contract.The
eventual gain of Gomez is not

interest

within the meaning of the Usury law.In the first place, Rono is not paying an interest.
Such is evidenced by the fact that in hispromissory note, he
indicated that the money loaned will not earn any interest.
Furthermore, both parties clearly agreed at the time of the execution of thecontract
that the loaned money (
P4,000.00 mickey mouse
) will
be paid in the currency
prevailing by the end of the s
tipulated period of one year.
The devaluation of the Mickey mouse money is due to an event unforseable byany
man; that the increased intrinsic value and purchasing power of the current
moneyis consequence of an event (change of currency) which at the time of the
contractneither party knew would certainly happen within the period of one year.
However, bothparties subjected their rights and obligations to that contingency.
Thus, the contract inquestion is legal and obligatory and is not subject to the
operation of the Usury law.
Facts:

Private respondents Judy Amor, Jane Gamil, minor Gian Carlo Amor, represented
byhis ather,
Atty! "#en Amor, and, minor Carlo $enite%, represented by his mother,
Josephine $enite%, &led #ith the Re'ional (rial Court )$ranch5*+, orso'on, orso'on,
a complaint
-*.
or
dama'es a'ainst petitioner due to thelatters ailure
to honor their con&rmed
tic/ets!

"n 0ay 1, 2311, Judy #ith Gian, Jane and minor Carlo $enite%, nephe# o Judy and
Jane, arrived at the Le'aspi Airport at :6 a!m! or
PR 271! Carlo $enite% #as
supposed to use the con&rmed tic/et o a certain 8ra! 9mily Chua!
-5.
(hey #ere accompanied by Atty! "#en Amor and the latters cousin, alvador Gon
%ales #ho ell
in line at the chec/in counter #ith our
persons ahead o him and
three persons behind him
-.
#hile plainti; Judy #ent to the o<ce o the station mana'er to re=uest that minor
plainti; Carlo $enite% be allo#ed to use the tic/et o8ra!
Chua!
-7.
>hile #aitin' or
his turn, Gon%ales #as as/ed by Lloyd Fo?as, the chec/in cler/ on
duty, toapproach the counter! Fo?as #rote somethin' on the tic/ets #hich Gon%ales
later readas late chec/in 7:65

9ven thou'h they clearly arrived on time, they #ere not allo#ed to board the plane!
Later on it #as ound
out that there #as over boo/in' and that nonrevenue
passen'ers #ere allo#ed to board the plane!

(hey tried to ride the bus but the bus had already let or
manila!

(hey decided to return to the airport or

an aternoon
@i'ht, the @i'ht #as
subse=uently cancelled due to aircrat malunction!R(C:

R(C rendered ?ud'ment upholdin' the evidence presented by private respondents!

ote: that the R(C believed the testimony o the complainants that they indeed
arrived on time, and that the reason as to #hy they #ere not allo#ed to board the
plane #as that other nonrevenue passen'ers too/ their place! )nonrevenue
passen'er #as not de&ned in the case+CA:

A<rmed the R(C rulin'C:

WHEREFORE
, #e a<rm the decision o the Court o Appeals

Ang gusto kasi mangyari ng PAL dito is that there be another determinationas to the
aspect of determining facts of the case.

PAL insists that the reason why the compainants

were not aowed
to boardthe pane

was that these passengers checked in ate.

Accordin' to PAL the &ndin's o the R(C is 'rounded entirely on speculations, surmises
or con?ectures! Bence, eception da# ito sa 'eneral rule that &ndin's o acts
o the
appellate court is bindin' upon the sc

Case digestKorean Airlines v. CAFacts:Juanito Lapuz was contracted for employment

in Saudi Arabia through Pan Pacific Recruiting Services, Inc. He was supposed to
leave via Korean Airlines, but was initially listed as a chance passenger. According
to Lapuz, he was allowed to check in and was cleared for departure. When he was
on the stairs going to the airplane, a KAL officer pointed at him and shouted, Down!
Down! and he was barred from taking the flight. When he asked for another
booking, his ticket was cancelled. He was unable to report for work and so he lost
his employment. KAL alleged that the agent of Pan Pacificwas informed that there
are 2 seats possibly available. He gave priority to Perico, while the other seat was
won by Lapuz through lottery. But because only 1 seat became available, it was
given to Perico. The trial court adjudged KAL liable for damages. The decision was
affirmed by the Court of Appeals, with modification on the damages awarded.Issues:
(1) Whether there is already a contract of carriage between KAL and Lapuz to hold
KAL liable for breach of contract(2) Whether moral and exemplary damages should
be awarded, and to what extentHeld:(1) The status of Lapuz as standby passenger
was changed to that of a confirmed passenger when his name was entered in the
passenger manifest of KAL for its Flight No. KE 903. His clearance through
immigration and customs clearly shows that he had indeed been confirmed as a
passenger of KAL in that flight. KAL thus committed a breach of the contract of
carriage between them when it failed to bring Lapuz to his destination. A contract to
transport passengers is different in kind and degree from any other contractual
relation. The business of the carrier is mainly with the traveling public. It invites
people to avail themselves of the comforts and advantages it offers. The contract of
air carriage generates a relation attended with a public duty. Passengers have the
right to be treated by the carrier's employees with kindness, respect, courtesy and
due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is that any
discourteous conduct on the part of these employees toward a passenger gives the
latter an action for damages against the carrier. The breach of contract was
aggravated in this case when, instead of courteously informing Lapuz of his being a
"wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing
at him, thus causing him embarrassment and public humiliation. The evidence
presented by Lapuz shows that he had indeed checked in at the departure counter,
passed through customs and immigration, boarded the shuttle bus and proceeded
to the ramp of KAL's aircraft. In fact, his baggage had already been loaded in KAL's
aircraft, to be flown with him to Jeddah. The contract of carriage between him and
KAL had already been perfected when he was summarily and insolently prevented
from boarding the aircraft.(2) The Court of Appeals granted moral and exemplary
damages because:a. The findings of the court a quo that the defendant-appellant
has committed breach of contract of carriage in bad faith and in wanton, disregard
of plaintiff-appellant's rights as passenger laid the basis and justification of an
award for moral damages.b. In the instant case, we find that defendant-appellant
Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it "bumped off" plaintiff-appellant on November 8, 1980, and in
addition treated him rudely and arrogantly as a "patay gutom na contract worker
fighting Korean Air Lines," which clearly shows malice and bad faith, thus entitling
plaintiff-appellant to moral damages.c. Considering that the plaintiff-appellant's
entitlement to moral damages has been fully established by oral and documentary
evidence, exemplary damages may be awarded. In fact, exemplary damages may
be awarded, even though not so expressly pleaded in the complaint. By the same
token, to provide an example for the public good, an award of exemplary damages
is also proper.A review of the record of this case shows that the injury suffered by
Lapuz is not so serious or extensive as to warrant an award of P1.5 million. The
assessment of P100,000 as moral and exemplary damages in his favor is, in our
view, reasonable and realistic.