LOAN 6. Sps. Agner v.
BPI Family Savings Bank-
1. Spouses. Barrera vs. Spouses Lorenzo- Article
1956 of the Civil Code mandates that "(n)o
interest shall be due unless it has been expressly
stipulated in writing." To wit, there is no written
agreement between the parties that the loan will
continue to bear 5% monthly interest beyond the
agreed three-month period. Applying then the
above provision, monthly interest of 5%
corresponds only to the three-month period of the
loan, as agreed upon by the parties in writing.
Thereafter, the interest rate for the loan is 6% per
annum, as per No. BSP-MB Circular No. 799.
2. Sebastian Siga-an vs. Alicia Villanueva- Payment
of monetary interest is allowed only if: (1) there
was an express stipulation for the payment of
interest; and (2) the agreement for the payment
of interest was reduced in writing.
Respondent was under no duty to make such
payment because there was no express
stipulation in writing to that effect. There was no
binding relation between petitioner and
respondent as regards the payment of interest.
The payment was clearly a mistake. Since
petitioner received something when there was no
right to demand it, he has an obligation to return
it.
3. Spouses Juico vs. China Banking Corporation-
An escalation clause is void where the creditor
unilaterally determines and imposes an increase
in the stipulated rate of interest without the
express conformity of the debtor.
The escalation clause is still void because it
grants respondent the power to impose an
increased rate of interest without a written notice
to petitioners and their written consent. .
Compliance with these requisites is essential to
preserve the mutuality of contracts.
4. Toledo vs. Hyden- In view of Central Bank
Circular No. 905 s. 1982, which suspended the
Usury Law ceiling on interest effective January 1,
1983, parties to a loan agreement have wide
latitude to stipulate interest rates. Nevertheless,
such stipulated interest rates may be declared as
illegal if the same is unconscionable.
5. Spouses Mallari vs. Prudential Bank-
Jurisprudence establish that the 24% p.a.
stipulated interest rate was not considered
unconscionable, thus, the 23% p.a. interest rate
imposed on petitioners' loan in this case can by
no means be considered excessive or
unconscionable. As such, the Court ruled that the
borrowers cannot renege on their obligation to
comply with what is incumbent upon them under
the contract of loan as the said contract is the law
between the parties and they are bound by its
stipulations.
Stipulated interest rates of three percent (3%) per
month and higher are excessive, iniquitous,
unconscionable, and exorbitant.
While Central Bank Circular No. 905-82, which
took effect on January 1, 1983, effectively
removed the ceiling on interest rates for both
secured and unsecured loans, regardless of
maturity, nothing in the said circular could
possibly be read as granting complete discretion
to lenders to raise interest rates to levels which
would either enslave their borrowers or lead to a
hemorrhaging of their assets. Since the
stipulation on the interest rate is void for being
contrary to morals, if not against the law, it is as if
there was no express contract on said interest
rate; thus, the interest rate may be reduced as
reason and equity demand.
7. Sps. Andal vs. PNB- That the rate of interest was
subsequently declared illegal and
unconscionable does not entitle petitioners
spouses to stop payment of interest. It should be
emphasized that only the rate of interest was
declared void. The stipulation requiring petitioner
spouses to pay interest on their loan remains
valid and binding. They are, therefore, liable to
pay interest from the time they defaulted in
payment until their loan is fully paid.
Accordingly, pursuant to Circular No. 799, series
of 2013, issued by BSP effective 1 July 2013, the
rate of interest of 12% per annum on petitioners-
spouses’ obligation shall apply from 20 May 2011
– the date of default – until 30 June 2013 only.
From 1 July 2013 until fully paid, the legal rate of
6% per annum shall be applied to petitioners-
spouses’ unpaid obligation.
8. Republic of the Philippines vs. Arlene Soriano-
Just compensation due to the landowners for
their expropriated property amounted to an
effective forbearance on the part of the State. In
line with BSP-MB No. 799, effective July 1,
2013, the prevailing rate of interest for loans or
forbearance of money is six percent (6%) per
annum, in the absence of an express contract as
to such rate of interest.
However, when there is no delay in the payment
of just compensation, deleting the imposition of
interest thereon for the same is justified. (In this
case, petitioner was able to deposit with the trial
court the amount representing the zonal value of
the property before its taking.)
9. Rolando De La Paz,* vs. L & J Development
Company- Estoppel cannot give validity to an act
that is prohibited by law or one that is against
public policy. Even if the payment of interest has
been reduced in writing, a 6% monthly interest
rate on a loan is unconscionable, regardless of
who between the parties proposed the rate.
 It has been ruled in a plethora of cases that
stipulated interest rates of 3% per month and
higher, are excessive, iniquitous, unconscionable
and exorbitant. Such stipulations are void for
being contrary to morals, if not against the law.
10. Sps. Albos, vs.Sps. Embisan- Article 1956 of the
New Civil Code, which refers to monetary
interest, provides that no interest shall be due
unless it has been expressly stipulated in writing.
The requirement does not only entail reducing in
writing the interest rate to be earned but also the
manner of earning the same, if it is to be
compounded.
Failure to specify the manner of earning interest,
however, shall not automatically render the
stipulation imposing the interest rate void.
Instead, in default of any stipulation on the
manner of earning interest, simple interest shall
accrue.
11. Land Bank of the Philippines vs. Oñate-The
unilateral offsetting of funds without legal
justification and the undocumented withdrawals
are tantamount to forbearance of money.
DEPOSIT
1. Associated Bank v. Tan- A bank generally
has a right of setoff. Article 1980 of the Civil
Code provides that "[f]ixed, savings, and
current deposits of money in banks and
similar institutions shall be governed by the
provisions concerning simple loan." Hence,
the relationship between banks and
depositors has been held to be that of creditor
and debtor.
Thus, legal compensation under Article 1278
of the Civil Code may take place "when all the
requisites mentioned in Article 1279 are
present: 1) That each one of the obligors be
bound principally, and that he be at the same
time a principal creditor of the other; (2) That
both debts consist in a sum of money, or if the
things due are consumable, they be of the
same kind, and also of the same quality if the
latter has been stated; (3) That the two debts
be due; (4) That they be liquidated and
demandable; (5) That over neither of them
there be any retention or controversy,
commenced by third persons and
communicated in due time to the debtor.
As to the manner by which the right must be
exercised, banks must exercise the highest
degree of diligence and high standards of
integrity and performance required of it, as a
business imbued with public interest.
2. BPI v. CA- A sole proprietorship has no
separate and distinct personality from the
owner. Consequently, the bank account of
the former and the personal account of the
latter may be treated as one and the same for
purposes of legal compensation.
3. Goyanko, Jr. vs. UCPB- The savings deposit
agreement is between the bank and the
depositor; by receiving the deposit, the bank
impliedly agrees to pay upon demand and
only upon the depositor’s order. The bank’s
duty is to its creditor-depositor and not to third
persons. Third persons who may have a right
to the money deposited, cannot hold the bank
responsible unless there is a court order or
garnishment.
4. Producers Bank of the Philippines vs. CA
and Vives- Consumable goods may be the
subject of commodatum if the purpose of the
contract is not the consumption of the object,
as when it is merely for exhibition. Thus, if
consumable goods are loaned only for
purposes of exhibition, or when the intention
of the parties is to lend consumable goods
and to have the very same goods returned at
the end of the period agreed upon, the loan is
a commodatum and not a mutuum.
The rule is that the intention of the parties
thereto shall be accorded primordial
consideration in determining the actual
character of a contract. In case of doubt, the
contemporaneous and subsequent acts of
the parties shall be considered in such
determination.
5. Sps. Serfino v. FEBTC- The contract
between the bank and depositor is not a
contract of deposit but a contract of loan
(Article 1980). Hence, Article 1988 (when
thing deposited may not be returned upon
demand of the depositor where it is judicially
attached or its return or removal is opposed
by a third person) of the Civil Code cannot be
applied as it applies only to a contract of
deposit.
6. MAKATI SHANGRI-LA HOTEL AND
RESORT, INC., vs. HARPER- Applying by
analogy Article 2000, Article 2001 and Article
2002 of the Civil Code (all of which concerned
the hotelkeepers’ degree of care and
responsibility as to the personal effects of
their guests), the Court hold that there is
much greater reason to apply the same if not
greater degree of care and responsibility
when the lives and personal safety of their
guests are involved.
7. YHT REALTY CORPORATION v. THE
COURT OF APPEALS - The hotel business
like the common carrier's business is imbued
with public interest. Catering to the public,
hotelkeepers are bound to provide not only
lodging for hotel guests and security to their
persons and belongings. The twin duty
constitutes the essence of the business. The
law in turn does not allow such duty to the
 public to be negated or diluted by any
contrary stipulation. (On whether hotels may
evade liability for the loss of items left with it
for safekeeping by its guests, by having
guests execute written waivers holding the
establishment or its employees free from
blame for such loss.)
GUARANTY
1. PCIC v. Petroleum Distributors- The surety’s
obligation is not an original and direct one for the
performance of his own act, but merely accessory
or collateral to the obligation contracted by the
principal. Nevertheless, although the contract of
a surety is in essence secondary only to a valid
principal obligation, his liability to the creditor or
promisee of the principal is said to be direct,
primary and absolute; in other words, he is
directly and equally bound with the principal.
A surety is released from its obligation when there
is a material alteration of the principal contract in
connection with which the bond is given, such as
a change which imposes a new obligation on the
promising party, or which takes away some
obligation already imposed, or one which
changes the legal effect of the original contract
and not merely its form. The touchtone for
contrariety would be an irreconcilable
incompatibility between the old and the new
obligations.
2. Gateway v. Asianbank- Art. 2054 enunciates the
rule that the obligation of a guarantor may be less,
but cannot be more than the obligation of the
principal debtor. The rule, however, cannot
plausibly be stretched to mean that a guarantor
or surety is freed from liability as such guarantor
or surety in the event the principal debtor
becomes insolvent or is unable to pay the
obligation. This interpretation would defeat the
very essence of a suretyship contract which, by
definition, refers to an agreement whereunder
one person, the surety, engages to be
answerable for the debt, default, or miscarriage of
another known as the principal.
3. Bank of Commerce v. Flores- A continuing
guaranty is a recognized exception to the rule that
an action to foreclose a mortgage must be limited
to the amount mentioned in the mortgage
contract. Under Article 2053 of the Civil Code, a
guaranty may be given to secure even future
debts, the amount of which may not be known at
the time the guaranty is executed. This is the
basis for contracts denominated as a continuing
guaranty or suretyship. It covers all transactions,
including those arising in the future, which are
within the description or contemplation of the
contract of guaranty, until the expiration or
termination thereof.
4. Lim v. Security Corp- By executing a continuing
surety agreement, the principal places itself in a
position to enter into the projected series of
transactions with its creditor; with such suretyship
agreement, where there would be no need to
execute a separate surety contract or bond for
each financing or credit accommodation
extended to the principal debtor.
5. Aglibot v. Santia- Aglibot is an accommodation
party and therefore liable to Santia. The facts
present a clear situation where Aglibot, as the
manager of PLCC, agreed to accommodate its
loan to Santia by issuing her own post-dated
checks in payment thereof.
The relation between an accommodation party
and the party accommodated is, in effect, one of
principal and surety — the accommodation party
being the surety. It is a settled rule that a surety
is bound equally and absolutely with the principal
and is deemed an original promisor and debtor
from the beginning. The liability is immediate and
direct and also unconditional to a holder for value.
6. Bitanga v. Pyramid- It is axiomatic that the liability
of the guarantor arises when the insolvency or
inability of the debtor to pay the amount of debt is
proven by the return of the writ of execution that
had not been unsatisfied. It must be stressed that
despite having been served a demand letter at his
office, petitioner still failed to point out to the
respondent properties of Macrogen Realty
sufficient to cover its debt as required under
Article 2060 of the Civil Code. Such failure on
petitioner’s part forecloses his right to set up the
defense of excussion.
7. Sps. Ong v. PCIB- The benefit of excussion is not
available to the surety as he is principally liable
for the payment of the debt. A surety is directly,
equally and absolutely bound with the principal
debto for the payment of the debt and is deemed
as an original promissor and debtor from the
beginning.