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Credit Transactions Doctrines 2012 ExamsAtty. Helen De Leon-Manzano

Ruiz v. Caneba

Where the court judgment which did not provide for interest is already final, there is no

reason to add interest in the judgment.Anent the Ruizes claim of interest asaforementioned, it has been held in the case of Santulan v. Fule, 133 SCRA 762

(1984) that where the court judgment which did not provide for interest is already final,

there is no reason to add interest in the judgment. Interest was not demanded by theRuizes when the case was pending before the lower court, hence, there is no reasonfor this Court to grant such claim. As ruled by this Court, such claim is groundless

since the decision and orders sought to be enforced do not direct the payment ofinterest and have long become final

Easter Shipping Lines v. CA

Rule of thumb for the court in awarding damages and interest:

When an obligation is breached, the contravenor can be held liable fordamages.When an obligation, regardless of its source, i.e., law, contracts, quasi-

contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for

damages. The provisions under Title XVIII on Damages of the Civil Code govern in

determining the measure of recoverable damages.

In a loan or forbearance of money, the interest due should be that stipulated inwriting, and in the absence thereof, the rate shall be 12% per annum.With regard particularly to an award of interest in the concept of actual and

compensatory damages, the rate of interest, as well as the accrual thereof, isimposed, as follows:

When the obligation is breached, and it consists in the payment of asum of money, i.e., a loan or forbearance of money, the interest due

should be that which may have been stipulated in writing.

Furthermore, the interest due shall itself earn legal interest from the timeit is judicially demanded.

In the absence of stipulation, the rate of interest shall be 12% perannum to be computed from default, i.e., from judicial or extrajudicial

demand under and subject to the provisions of Article 1169 of the CivilCode.

In case of other obligations, the interest on the amount of damages may beimposed at the discretion of the court at the rate of 6% per annum.

When an obligation, not constituting a loan or forbearance of money, isbreached, an interest on the amount of damages awarded may be imposedat the discretion of the court at the rate of 6% per annum.

No interest, however, shall be adjudged on unliquidated claims or damagesexcept when or until the demand can be established with reasonable

certainty.

Accordingly, where the demand is established with reasonable certainty, theinterest shall begin to run from the time the claim is made judicially orextrajudicially (Art. 1169, Civil Code) but

when such certainty cannot be so reasonably established at the time thedemand is made, the interest shall begin to run only from the date thejudgment of the court is made (at which time the quantification of damages

may be deemed to have been reasonably ascertained).

The actual base for the computation of legal interest shall, in any case, be onthe amount finally adjudged.

When the judgment of the court awarding a sum of money becomes final andexecutory, the rate of legal interest shall be 12% per annum from such finality

until its satisfaction, this interim period being deemed to be by then anequivalent to a forbearance of credit

Central Bank v. Morfe

Bank deposits are simple loans Where a suit for recovery of a bank deposit was filed after the bank has been

declared insolvent by the Central Bank, a judgment in favor of the depositor

cannot be considered a preferred credit under Article 22H(H)(b ) of the CivilCode.

o purpose in prohibiting the insolvent bank from doing business is toprevent some depositors from having an undue or fraudulentpreference over other creditors and depositors

A non-preferred credit cannot be raised to that category simply because adepositor, taking advantage of long interval of time between declaration of

insolvency and filing of judicial assistance, was able to secure a judgment forpayment of his deposit.

o Considering that the deposits in question, in their inception, werenot preferred credits, it does not seem logical and just that theyshould be raised to the category of preferred credits simply because

the depositors, taking advantage of the long interval between thedeclaration of insolvency and the filing of the petition for judicial

assistance and supervision, were able to secure judgments for thepay ment of their time deposits.

Banzon v. CA

General Rule that a guarantor must first pay the outstanding amounts beforeit can exact payment from the principal debtor; Since Associated had not

paid nor compelled private respondent to pay the bank, it had no right in lawor equity to execute judgment against the indemnitor

o Exception to the rule is 2071 which provides for situations wherethe guarantor can proceed to the principal before paying the

obligation.

Atok Finance v. CA


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The contract of loan executed between the parties is entirely different and discretefrom the deed of sale they entered into.

The annulment of the sale will not have an effect on the existence anddemandability of the loan. One who has received money as a loan is boundto pay to the creditor an equal amount of the same kind and quality.

Fact that the annulment of the sale will also result in the invalidity of the mortgage

does not have an effect on the validity and efficacy of the principal obligation.

The fact that the annulment of the sale will also result in the invalidity of themortgage does not have an effect on the validity and efficacy of the principalobligation, for even an obligation that is unsupported by any security of thedebtor may also be enforced by means of an ordinary action.

Where a mortgage is not valid, as where it is executed by one who is not theowner of the property, or the consideration of the contract is simulated orfalse, the principal obligation which it guarantees is not thereby rendered null

and void. That obligation matures and becomes demandable in accordancewith the stipulations pertaining to it.

Only the right to foreclose the mortgage as a special remedy for satisfyingthe indebtedness is lost.

Actual or compensatory damages cannot be presumed but must be duly proved andso proved with a reasonable degree of certainty

Robles v. CAIn a real estate mortgage contract, it is essential that the mortgagor be the

absolute owner of the property to be mortgaged; otherwise, the mortgage isvoid.

In the present case, it is apparent that Hilario Robles was not the absolute owner ofthe entire subject property; and that the Rural Bank of Cardona, Inc., in not fully

ascertaining his title thereto, failed to observe due diligence and, as such, was amortgagee in bad faith.

The rule that persons dealing with registered lands can rely solely on the

certificate of title does not apply to banks.The bank should not have reliedsolely on the Deed of Sale purportedly showing that the ownership of the disputed

property had been transferred from Exequiel Ballena to the Robles spouses, or that ithad subsequently been declared in the name of Hilario. Because it was dealing with

unregistered land, and the circumstances surrounding the transaction between Hilarioand his fatherin-law Exequiel were suspicious, the bank should have exerted more

effort to fully determine the title of the Robleses. Rural Bank of Compostela v. Court ofAppeals invalidated a real estate mortgage after a finding that the bank had not been

in good faith. The Court explained: The rule that persons dealing with registeredlands can rely solely on the certificate of title does not apply to banks.

BA Finance Corporation v. CA

What is REPLEVIN?

Both a form of principal remedy and of a provisional relief. It may refer either to the action itself - to regain the possession of personal

chattels being wrongfully detained from the plaintiff by another.

Or to the provisional remedy - that would allow the plaintiff to retain thething during the pendency of the action and hold it pendente lite.

The action is primarily possessory in nature and generally determinesnothing more than the right of possession.

Replevin is so usually described as a mixed action, being partly in rem andpartly in personam

o In rem insofar as the recovery of specific property is concernedo In personam - as regards to damages involved.

Consequently, the person in possession of the property sought to bereplevied is ordinary the proper and only necessary party defendant,and the plaintiff is not required to so join as defendants other persons

claiming a right on the property but not in possession thereof.

Where the right of the plaintiff to the possession of the specificproperty is so conceded or evident, the action need only bemaintained against him who so possesses the property.

The defendant not being part of the chattel mortgage does not matter Assumption here is that the right to possess is undisputed

The mortgagee, upon the mortgagor's default, is constituted an attorney-in-fact of the mortgagor enabling such mortgagee to act for and in behalf of the

owner.

Accordingly, that the defendant is not privy to the chattel mortgage should beinconsequential.

By the fact that the object of replevin is traced to his possession, oneproperly can be a defendant in an action for replevin.

It is here assumed that the plaintiffs right to possess the thing is not orcannot be disputed.

If the right to possess of the plaintiff is disputed

The right of possession on the part of the plaintiff, or his authority to claimsuch possession or that of his principal, is put to great doubt (a contendingparty might contest the legal bases for plaintiffs cause of action or an

adverse and independent claim of ownership or right of possession is raisedby that party), it could become essential to have other persons involved

and accordingly impleaded for a complete determination andresolution of the controversy.

A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to thepossession of the property unless and until the mortgagor defaults and themortgagee thereupon seeks to foreclose thereon.

Since the mortgagee's right of possession is conditioned upon the actual factof default which itself may be controverted, the inclusion of other parties likethe debtor or the mortgagor himself, may be required in order to allow a full

and conclusive determination of the case.


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When the mortgagee seeks a replevin in order to effect the eventualforeclosure of the mortgage, it is not only the existence of, but also themortgagor's default on, the chattel mortgage that, among other things, can

properly uphold the right to replevin the property. The burden to establish avalid justification for that action lies with the plaintiff.

An adverse possessor, who is not the mortgagor, cannot just bedeprived of his possession, let alone be bound by the terms of thechattel mortgage contract, simply because the mortgagee brings up an

action for replevin.

DBP v. NLRC

Art. 110 of the Labor Code cannot be invoked absent a formal declaration ofbankruptcy or liquidation order. Under the new law, even mortgage creditsare subordinate to workers claim. R.A. No. 6715, however, took effect only

on March 21, 1989. The amendment cannot therefore be retroactivelyapplied to nor can it affect the mortgage credit which was secured by the

petitioner several years prior to its effectivity. To give Art. 110 retroactiveeffect would be to wipe out the mortgage in DBPs favor and expose it to a

risk which it sought to protect itself against by requiring a collateral in theform of real property.

DBP v. CA

An assignment to guarantee an obligation is in effect a mortgage A condition in a deed of assignment providing for the appointment of the

assignee as attorney-in-fact with authority, among other things, to sell or

otherwise dispose of real rights, in case of default by the assignor, and toapply the proceeds to the payment of the loan does not constitute pactum

commissorium.

An assignment to guarantee an obligation is virtually a mortgage and not anabsolute conveyance of title which confers ownership on the assignee

Philippine Veterans Bank v. Monillas

Settled in this jurisdiction is the doctrine that a prior registration of a lien creates a

preferencethe subsequent annotation of an adverse claim cannot defeat the rightsof the mortgagee, or the purchaser at the auction sale whose rights were derived from

a prior mortgage validly registered.

prior registered mortgage of PVB and the foreclosure proceedingsalready conducted prevail over respondents subsequent annotation ofthe notices of lis pendenson the titles to the property.

PVB is an innocent mortgagee for value.

When the lots were mortgaged to it by Ireneo, the titles thereto were inthe latters name, and they showed neither vice nor infirmity.

In accepting the mortgage, petitioner was not required to make anyfurther investigation of the titles to the properties being given as security,and could rely entirely on what is stated in the aforesaid titles.

The public interest in upholding the indefeasibility of a certificate of title,as evidence of the lawful ownership of the land or of any encumbrancethereon, protects a buyer or mortgagee who, in good faith, relied upon

what appears on the face of the certificate of title.

Laches, being a doctrine in equity, cannot be invoked to resist the enforcement of a

legal right; Since foreclosure sale retroacts to the date of the registration of themortgage, it no longer matters that the annotation of the sheriffs certificate of saleand the affidavit of consolidation of ownership was made subsequent to the

annotation of the notice of lis pendens

only registered the Sheriffs certificate of sale after the lapse of almost 15years, because, as already discussed, it registered its prior mortgage and

had already foreclosed on the same

Guanco v. Antolo

Rep. Act No. 7939, the provincial sheriff is mandated to post a notice ofthe foreclosure of the real estate mortgage in at least three of the mostconspicuous public places not only in the municipality but also in the

barrio where the land mortgaged is situated during the 60-day periodimmediately preceding the public auction

o The foreclosure of mortgages covering loans granted by rural banksshall be exempt from the publication in newspapers now requiredby law where the total amount of the loan, including interests due

and unpaid, does not exceed three thousand pesos. It shall besufficient publication in such cases if the notices of foreclosure are

posted in at least three of the most conspicuous public places in themunicipality and barrio where the land mortgaged is situated during

the period of sixty days immediately preceding the public auction.Proof of publication as required herein shall be accomplished by

affidavit of the sheriff or officer conducting the foreclosure sale andshall be attached with the records of the case

o a deviation from the statutory requirements for such notice rendersthe foreclosure sale at least voidable.

o The absence of such notice has been held as sufficient cause toinvalidate the foreclosure and auction sale

o failure to publish notice of auction sale as required by the statuteconstitutes a jurisdictional defect which invalidates the sale.

Pascual v. Universal Motors

Foreclosure of chattel mortgage precludes any further action against the debtor and

his guarantor

Main doctrine: 1484 bars the right to recover any deficiency from the


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purchaser after the foreclosure of the chattel mortgage and not arecourse to the additional security put up by a third party to guarantee

the purchasers performance of his obligation.

(T)o sustain appellants argument is to overlook the fact that if the guarantorshould be compelled to pay the balance of the purchase price, the guarantor

will in turn be entitled to recover what she has paid from the debtor vendee(Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be

made to bear the payment of the balance of the price, despite the earlier

foreclosure of the chattel mortgage given by him. Thus, the protection given

by Article 1484 would be indirectly subverted, and public policy overturned.

International Harvester v. Medina

o Issue: WON IHMI is engaged in financing transactions covered by RA5980? - NO

Financing transaction that is regulated by RA 5980 involves the buying,discounting, or factoring of promissory notes and sales on credit or

installments.o Evidently, the financing transaction that is regulated by R.A. 5980

involves the buying, discounting, or factoring of promissory notesand sales on credit or installment.

o IHMI did not purchase from itself the Retail Notes Analysisexecuted by Medina. IHMI only extended credit to Medina by

allowing him to pay for the 24 truck engines in installment. Whilethe increased price of the sale included a financing charge, that

charge was simply another name for the interest to be paid by theinstallment buyer (Medina) on the deferred payment of the

purchase price of the vehicles sold and delivered to him by IHMI.

Use of the words finance charge, financing or finance operation in thedocuments prepared and letters sent by IHMI to Medina was in compliance

with RA 3765 (Truth in Lending Act).o The use of the words finance charge, financing or finance

operation in the documents prepared, and letters sent, by IHMI to

Medina, was in compliance with R.A. 3765 (Truth in Lending Act)which requires a creditor (or seller) to fully disclose to the

debtor (or buyer) the true cost of credit with a view ofpreventing the uninformed use of credit to the detriment of the

national economy.

IHMI transaction with Medina differs from a financing transaction under RA5980.

o IHMI correctly pointed out that its transaction with Medina differsfrom a financing transaction under R.A. 5980, in that there wereonly two parties in its transaction with Medina, namely: IHMI and

Medina, while in a financing transaction under R.A. 3765, there

are three (3) parties involved, namely: (1) the installmentbuyer, (2) the seller, and (3) the financing company .

The buyer executes a note or notes for the unpaid balanceof the price of the thing purchased by him on installment.

The seller assigns the notes or discounts them with afinancing company which is subrogated in the place of the

seller, as creditor of the installment buyer.

Transaction between IHMI and Medina did not involve any discounting,factoring or assignment of IHMIs credit against Medina to a financecompany

o The transaction was bilateral, not trilateral.o No financing company stepped into the shoes of IHMI as assignee

or purchaser of IHMIs credit against Medina. Medina himself, not afinancing company, paid IHMI for the truck engines. Medina made

his installment payments or amortizations to IHMI, not to a financingcompany.

State Investment v. Citibank

A foreign corporation licitly doing business in the Philippines, which is a

defendant in a civil suit, may not be considered a non-resident within the scope

of the legal corporation authorizing attachment against a defendant notresiding in the Philippine Islands.

o This Court itself has already had occasion to hold that a foreign corporationlicitly doing business in the Philippines, which is a defendant in a civil suit,may not be considered a non-residentwithin the scope of the legal provision

authorizing attachment against a defendant not residing in the Philippine

Islands;o in other words, a preliminary attachment may not be applied for and granted

solely on the asserted fact that the defendant is a foreign corporation

authorized to do business in the Philippinesand is consequently andnecessarily, a party who resides out of the Philippines.

o Parenthetically, if it may not be considered as a party not residing in thePhilippines, or as a party who resides out of the country, then, logically, it

must be considered a party who does reside in the Philippines, who is aresident of the country

o Be this as it may, this Court pointed out that: x x Our laws and jurisprudenceindicate a purpose to assimilate foreign corporations, duly licensed to do

business here, to the status of domestic corporations.o We think it would be entirely out of line with this policy should we make a

discrimination against a foreign corporation, like the petitioner, and subjectits property to the harsh writ of seizure by attachment when it has complied

not only with every requirement of law made specially of foreigncorporations, but in addition with every requirement of law made of domestic

corporations. xx.


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The law grants to a juridical person as well as to natural persons the power to petitionfor the adjudication of bankruptcy of any natural or judicial, provided it is a resident

corporation.o Neither can the Court accept the theory that the omission by the banks in

their petition for involuntary insolvency of an explicit and categoricalstatement that they are residents of the Philippine Islands, is fatal to their

cause.o In truth, in light of the concept of resident foreign corporations just

expounded, when they alleged in that petition that they are foreign banking

corporations, licensed to do business in the Philippines, and actually doingbusiness in this country through branch offices or agencies, they were ineffect stating athat they are resident foreign corporations in the Philippines.

o There is, of course, as petitioners argue, no substantive law explicitlygranting foreign banks the power to petition for the adjudication of a

Philippine corporation as a bankrupt.o This is inconsequential, for neither is there any legal provision expressly

giving domestic banksthe same power, although their capacity to petition forinsolvency can scarcely be disputed and is not in truth disputed by

petitioners.o The law plainly grants to a juridical person, whether it be a bank or not

or it be a foreign or domestic corporation, as to natural persons aswell, such a power to petition for the adjudication of bankruptcy of any

person, natural or juridical, provided that it is a resident corporationand joins at least two other residents in presenting the petition to the

Bankruptcy Court.

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