A.

CONTRACT OF LOAN

SEVERINO JAYME and LEONARDA RAMOS V. JUAN D. SALVADOR ET AL.

December 29, 1930
FACTS:
Plaintiffs-Spouses Severino Jayme and Leonarda Ramos owed Presentation
Hofilena de Evangelista P14,381.13 with interest at 12 per cent per annum. The
payment is secured by mortgage upon realty covered by transfer certificate of title No.
2336. Upon being pressed for payment, they obtained a loan of P18,000 through Abaya
which led them to the defendant Juan Salvador. The loan amounted to P18,000 on
condition that the plaintiff’s realty should appear to have been sold to defendants for
P26,000.00 and the plaintiffs would purchase Lot No. 69-c of the Cadastre of Iloilo of
the defendants and the plaintiffs would appear as lessees of Supang estate at an
annual rate of P3,120.

The parties agreed on this condition although in reality, the conveyance of land is
not the real intention of the parties and the rental is in fact the interest at 12 per cent per
annum on the sum of P26,000 stated as the selling price of the said estate. The parties
also agreed that the plaintiffs may repurchase the estate by returning the principal
amount that they loaned plus interest. The defendants agreed to this and to the return of
the said lot no. 69-c.

The plaintiff spouses paid Presentacion Hofilena de Evangelista. The mortgage on

Supang estate was cancelled. A few days later, Severino asked defendant to increase
the loan but defendant said he has no money so he suggested that he should loan from
other people upon the security of lot 69-c which Severino obtained a Transfer Certificate
to his name. True enough, Severino obtained loans from Go Tiang Tin for a loan of
P600 and P320. He mortgaged the lot to him.

Defendants obtained the TCT of the Supang estate and they succeeded in
mortgaging the said property to the PNB in the amount of P20,000. When Severino had
the money to pay the defendants. In his mind, his debt to the defendant was only
P18,000.00 plus the interest amounting to P3,120 but to the defendant the sum due was
P29,320. Severino did not agree. Therefore, he filed a case.

ISSUE:
Whether or not the transactions entered by the parties constitute a loan.

HELD:
Yes. Plaintiffs did not intend to sell the Supang estate. The contracts they entered
into did not show the real intention of their transaction which is indeed a loan. This was
evidenced by the circumstances where Severino paid the land tax upon the Tansa lot,
according to him, with money furnished him, by the defendant Juan D. Salvador.
 That the Tansa Lot that was mortgaged to Go Tiang Tin was made because it was
suggested by the defendant himself. Defendant devised a way to substitute lot 69-c for
his other land located in Bamban, San Pedro, municipality of Buenavista, with an area
of 83.3156 hectares, to secure the payment of the yearly rental of said contract of lease.

The donation of the 25,000 sqm in Supang in favor of the municipality of Buenavista
was proven by evidence that this gift was an offer made by the plaintiffs in exchange of
the condition that the residential part of the municipality of Buenavista should be
transferred to the barrio of Supang, where said estate of the plaintiffs is situated. The
plaintiffs promised the municipality before May 22, 1928 that after the transactions with
the defendants, plaintifss will convey a part of the estate gratis as also the use of the
building of strong materials located thereon; and this donation and cession was
respected by the defendants, being the ones who executed Exhibits 7 and 8, in
compliance with a promise not made by them, but by the plaintiffs, this act of theirs
constituting an open acknowledgment of the fact that said estate belonged to said
plaintiffs.

In terms of the mortgage before the PNB, it must be respected because PNB is an
innocent creditor. The whole P20,000 must be noted because even if it true that the
loan they had with the defendants was only P18,000, between the plaintiffs and the
bank, the bank’s rights must be deemed preferential because it was innocent.
 POLO S. PANTALEON vs. AMERICAN EXPRESS INTERNATIONAL, INC.
May 8, 2009

Petitioner: Polo S. Pantaleon

Respondent: American Express Int’l, Inc.

Facts: During his family’s trip in Amsterdam, his wife’s purchase of jewelry, the
payment of which was through their credit card with the respondent bank, was
unreasonably delayed when the respondent did not timely approve or disapprove their
pending transactions.

Issue: W/N the respondent bank had committed a breach of its obligations to
Petitioner.

Ruling: Yes. The findings of the trial court amply established that the tardiness on the
part of respondent (American Express) in acting on petitioner’s purchase at Coster did
constitute culpable delay on its part in complying with its obligation to act promptly on
its customer’s purchase request, whether such action be favorable or unfavorable.

Notably, petitioner frames the obligation of respondent as "to approve or disapprove"

the purchase "in timely dispatch," and not "to approve the purchase instantaneously or
within seconds." Certainly, had respondent disapproved petitioner’s purchase "within
seconds" or within a timely manner, this particular action would have never seen the
light of day. Petitioner and his family would have returned to the bus without delay –
internally humiliated perhaps over the rejection of his card – yet spared the shame of
being held accountable by newly-made friends for making them miss the chance to
tour the city of Amsterdam.

FACTS:
Petitioner Polo Pantaleon and his family joined an escorted tour of Western
Europe which one of the destinations would be Amsterdam. In the Coster Diamond
House, Mrs. Pantaleon intended to purchase a diamond close enough in approximation
to a 2.5 karat diamond brilliant cut, along with a pendant and a chain, all of which
totaled USD 13,826.00.

Around 9:00AM, Pantaleon presented his AmEx credit card together with his
passport to the Coster sales clerk. After 10 minutes of waiting time, the store clerk
informed Pantaleon that his AmexCard had not yet been approved.

His son, who had already boarded the tour bus, soon returned to Coster and
informed his family that the entire tour group was waiting for them. Worried about further
inconveniencing the tour group, Pantaleon asked the store clerk to cancel the sale. The
store manager asked plaintiff to wait a few more minutes. After 15 minutes, the store
manager informed Pantaleon that respondent had demanded bank references.
Pantaleon supplied the names of his depositary banks, then instructed his daughter to
return to the bus and apologize to the tour group for the delay.

Thirty minutes minutes after the tour group was supposed to have left the store,
the store decided to release the items even without respondent’s approval of the
purchase. The spouses Pantaleon returned to the bus. It is alleged that their offers of
apology were met by their tourmates with stony silence. The tour group’s visible
irritation was aggravated when the tour guide announced that the city tour of
Amsterdam was to be canceled due to lack of remaining time.

After the star-crossed tour had ended, the Pantaleon family proceeded to the US
before returning to Manila. While in the US however, Pantaleon continued to use his
AmEx card, several times without hassle or delay, except with two other incidents
similar to the Amsterdam incident.

After coming back to Manila, Pantaleon demanded an apology for the

"inconvenience, humiliation and embarrassment he and his family thereby suffered" for
respondent’s refusal to provide credit authorization for the said purchases. In response,
respondent stated, among others, that the delay in authorizing the purchase from
Coster was attributable to the circumstance that the charged purchase of US
$13,826.00 "was out of the usual charge purchase pattern established" and refused to
accede to the demand for an apology. Petitioner then filed an action for damages with
the Makati RTC.

ISSUE:
Whether or not respondent, in connection with the aforementioned transactions,
had committed a breach of its obligations to Pantaleon.

RULING:
YES. Generally, the relationship between a credit card provider and its card
holders is that of creditor-debtor, with the card company as the creditor extending loans
and credit to the card holder, who as debtor is obliged to repay the creditor.

However, the Court held that the perspective in this case that the credit card
company is that of a debtor/obligor, insofar as it has the obligation to the customer as
creditor/obligee to act promptly on its purchases on credit, is not baseless.

The findings of the trial court amply established that the tardiness on the part of
respondent in acting on petitioner’s purchase at Coster did constitute culpable delay on
its part in complying with its obligation to act promptly on its customer’s purchase
request, whether such action be favorable or unfavorable.

Notwithstanding the popular notion that credit card purchases are approved
"within seconds," there really is no strict, legally determinative point of demarcation on
how long must it take for a credit card company to approve or disapprove a customer’s
purchase, much less one specifically contracted upon by the parties. Yet this is one of
those instances when "you’d know it when you’d see it," and one hour appears to be an
awfully long, patently unreasonable length of time to approve or disapprove a credit
card purchase. It is long enough time for the customer to walk to a bank a kilometer
away, withdraw money over the counter, and return to the store.

Notably, petitioner frames the obligation of respondent as "to approve or disapprove"

the purchase "in timely dispatch," and not "to approve the purchase instantaneously or
within seconds." Certainly, had respondent disapproved petitioner’s purchase "within
seconds" or within a timely manner, this particular action would have never seen the
light of day. Petitioner and his family would have returned to the bus without delay –
internally humiliated perhaps over the rejection of his card – yet spared the shame of
being held accountable by newly-made friends for making them miss the chance to tour
the city of Amsterdam.

We do not wish do dispute that respondent has the right, if not the obligation, to verify
whether the credit it is extending upon on a particular purchase was indeed contracted
by the cardholder, and that the cardholder is within his means to make such transaction.
The culpable failure of respondent herein is not the failure to timely approve petitioner’s
purchase, but the more elemental failure to timely act on the same, whether favorably or
unfavorably. Even assuming that respondent’s credit authorizers did not have sufficient
basis on hand to make a judgment, we see no reason why respondent could not have
promptly informed petitioner the reason for the delay, and duly advised him that
resolving the same could take some time. In that way, petitioner would have had
informed basis on whether or not to pursue the transaction at Coster, given the
attending circumstances. Instead, petitioner was left uncomfortably dangling in the chilly
autumn winds in a foreign land and soon forced to confront the wrath of foreign folk.
 ALLIED BANKING CORPORTATION V. LIM SIO WAN
MARCH 27, 20018
FACTS:
Respondent Lim Sio Wan deposited with petitioner Allied Banking Corporation a
money market placement of PhP 1,152,597.35 for a term of 31 days to mature on
December 15, 1983.

A person claiming to be Lim Sio Wan called up Cristina So, an officer of Allied,
and instructed the latter to pre-terminate Lim Sio Wan's money market placement, to
issue a manager's check representing the proceeds of the placement, and to give the
check to one Deborah Dee Santos who would pick up the check.

Subsequently, Santos arrived at the bank and signed the application form for a
manager's check to be issued. The bank issued Manager's Check for PhP
1,158,648.49, representing the proceeds of Lim Sio Wan's money market placement in
the name of Lim Sio Wan, as payee.

The check was cross-checked "For Payee's Account Only" and given to Santos.
Thereafter, the manager's check was deposited in the account of Filipinas Cement
Corporation (FCC) at respondent (Metrobank), with the forged signature of Lim Sio Wan
as indorser.

FCC had deposited a money market placement for PhP 2 million with respondent
Producers Bank. Santos was the money market trader assigned to handle FCC's
account.
When the placement matured, FCC demanded the payment of the proceeds of the
placement. Cristina So received the phone call instructing her to pre-terminate Lim Sio
Wan's placement, the manager's check in the name of Lim Sio Wan was deposited in
the account of FCC, purportedly representing the proceeds of FCC's money market
placement with Producers Bank. In other words, the Allied check was deposited with
Metrobank in the account of FCC as Producers Bank's payment of its obligation to FCC.

To clear the check and in compliance with the requirements of the Philippine
Clearing House Corporation (PCHC) Rules and Regulations, Metrobank stamped a
guaranty on the check, which reads: "All prior endorsements and/or lack of
endorsement guaranteed." The check was sent to Allied through the PCHC. Upon the
presentment of the check, Allied funded the check even without checking the
authenticity of Lim Sio Wan's purported indorsement. Thus, the amount on the face of
the check was credited to the account of FCC.

Thereafter, Lim Sio Wan deposited with Allied a second money market
placement to mature on January 9, 1984. On December 14, 1983, upon the maturity
date of the first money market placement, Lim Sio Wan went to Allied to withdraw it.
She was then informed that the placement had been pre-terminated upon her
instructions. She denied giving any instructions and receiving the proceeds thereof. She
desisted from further complaints when she was assured by the bank's manager that her
money would be recovered.
Lim Sio Wan, realizing that the promise that her money would be recovered would not
materialize, sent a demand letter to Allied asking for the payment of the first placement.
Allied refused to pay Lim Sio Wan, claiming that the latter had authorized the... pre-
termination of the placement and its subsequent release to Santos.
Consequently, Lim Sio Wan filed with the RTC a Complaint against Allied to recover the
proceeds of her first money market placement. The RTC ruled in favor of Lim Sio Wan
and ordered Allied Banking Corporation to pay plaintiff the amount of P1,158,648.49
plus 12% interest per annum from March 16, 1984 until fully paid;
Allied appealed to the CA, which in turn issued the assailed Decision on March 18,
1998, modifying the RTC Decision ordering and sentencing defendant-appellant Allied
Banking Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan
Bank and Trust Company forty (40%) of... the amount of P1,158,648.49 plus 12%
interest per annum

ISSUE:
Whether Allied Banking is liable to pay Lim Sio Wan

RULING:
YES. The Court held that Allied is liable to Lim Sio Wan. The court cited doctrine
that the relationship between a bank and a client is one of debtor-creditor. Articles 1953
and 1980 of the Civil Code provide:

Art. 1953. A person who receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay to the creditor an equal amount of
the same kind and quality.

Art. 1980. Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.

Thus, the Court ruled in a line of cases that a bank deposit is in the nature
of a simple loan or mutuum. Briefly, in Citibank, N.A. (Formerly First National City
Bank) v. Sabeniano, the Court ruled that a money market placement is a simple
loan or mutuum. Further, the Court defined a money market in Cebu International
Finance Corporation v. Court of Appeals, as follows:
[A] money market is a market dealing in standardized short-term credit instruments
(involving large amounts) where lenders and borrowers do not deal directly with each
other but through a middle man or dealer in open market. In a money market
transaction, the... investor is a lender who loans his money to a borrower through a
middleman or dealer.
Lim Sio Wan, as creditor of the bank for her money market placement, is entitled
to payment upon her request, or upon maturity of the placement, or until the bank is
released from its obligation as debtor. Until any such event, the obligation of Allied to
Lim Sio Wan remains unextinguished.
 Other causes of extinguishment of obligations, such as annulment,
rescission, fulfillment of a resolutory condition, and prescription, are governed
elsewhere in this Code.

From the factual findings of the trial and appellate courts that Lim Sio Wan did
not authorize the release of her money market placement to Santos and the bank had
been negligent in so doing, there is no question that the obligation of Allied to pay Lim
Sio Wan had not been extinguished.

Art. 1240 of the Code states that "payment shall be made to the person in whose
favor the obligation has been constituted, or his successor in interest, or any person
authorized to receive it." Since there was no effective payment of Lim Sio Wan's money
market placement, the bank still has an obligation to pay her at six percent (6%) interest
from March 16, 1984 until the payment thereof.
 LUCIA TAN vs. ARADOR VALDEHUEZA and REDICULO VALDEHUEZA
G.R. No. L-38745 August 6, 1975

FACTS:
Lucia Tan filed an action for declaration of ownership and recovery of possession
of the parcel of land described and consolidation of ownership of two portions of another
parcel of (unregistered) land described in the second cause of action of the complaint.
The case stemmed from two causes of action as alleged by Tan. In the first cause of
action, the parties admit the identity of the land which was the subject of an auction sale
in Misamis Occidental wherein Tan was the highest bidder. Due to the failure of
respondent to redeem the land, the Branch Sheriff executed an Absolute Deed of Sale
in favor the petitioner.

The second cause of action stemmed from another civil cases wherein
respondents alleged that they executed a Deed of Pacto de Retro Sale of an
unregistered parcel of land in favor of complainant. Respondents remained in
possession of the land despite the sale. The land taxes was likewise paid by them.
Notably, this was not registered in the Registry of Deeds. In 2002, petitioner instituted a
complaint for injunction thereby enjoining respondents from entering the land and
gathering nuts therein. This was later on dismissed by the court.
The lower court ruled in favor of Tan and ordered respondents to pay damages and
vacate the property. The trial court treated the registered deed of pacto de retro as an
equitable mortgage but considered the unregistered deed of pacto de retro "as a mere
case of simple loan, secured by the property thus sold under pacto de retro," on the
ground that no suit lies to foreclose an unregistered mortgage. It likewise awarded  legal
interest of 6% in favor of Tan.

ISSUES:
1. WON the unregistered deed of Pacto De Retro is a simple loan (NO); and
2. WON the award of interest is correct (NO)

RULING:
1. Under article 1875 of the Civil Code of 1889, registration was a necessary
requisite for the validity of a mortgage even as between the parties, but under
article 2125 of the new Civil Code (in effect since August 30, 1950), this is no
longer so. The Valdehuezas having remained in possession of the land and the
realty taxes having been paid by them, the contracts which purported to be pacto
de retro transactions are presumed to be equitable mortgages, whether
registered or not, there being no third parties involved.

2. The imposition of legal interest on the amounts subject of the equitable

mortgages, P1,200 and P300, respectively, is without legal basis, for, "No
interest shall be due unless it has been expressly stipulated in writing." (Article
1956, new Civil Code) Furthermore, the plaintiff did not pray for such interest; her
thesis was a consolidation of ownership, which was properly rejected, the
contracts being equitable mortgages.
 Spouses Toring v. Ganzon-Olan, G.R. No. 168782, October 10, 2008

FACTS: In September 4, 1998, Toring obtained from respondents a loan amounting to P6,000,000 at
3% interest per month. It was secured by a mortgage on a parcel of land as evidenced by a Deed of
Real Estate Mortgage.
On September 23, 1998, the parties executed a Deed of Absolute Sale conveying the mortgaged
property in favor of respondents. Subsequently, respondents gave petitioners an exclusive option to
repurchase the land for P10,000,000 which was embodied in an Option to Buy. The Option to Buy
provided that if the option is exercised after December 5, 1998, the purchase price shall increase
at the rate of P300,000 or 3% of the purchase price every month until September 5, 1999 and
thereafter at the rate of P381,000 or 3.81% of the purchase price every month, with the fifth of every
month as the cut-off date for said increases.
On July 28, 2000, petitioners filed a Complaint for reformation of instruments, abuse of rights and
damages against respondents. At the pre-trial, the parties made the following stipulations: (1) the
principal amount of P10,000,000 has long become overdue; (2) no payment has been made; (3) the
parties had agreed on an equitable mortgage and not a sale. The parties limited the issues on the
amount of interest due and the time of payment of the entire obligation.
The RTC upheld the interest at 3.81% and ordered Spouses Toring to pay the sum of
P20,000,000.00. On appeal, the CA affirmed the decision. Hence, this petition.
Petitioners contend that they are not liable to pay interest as the stipulated monthly rates of 3% and
3.81% are unconscionable and that the Option to Buy did not mention any rate of interest chargeable
to the loan but rather, an escalation of the purchase price.
On the other hand, respondents maintain that petitioners are liable to pay interest based on the Deed
of Absolute Sale and Option to Buy. They assert that the P300,000 and P381,000 differences per
month represents the 3% or 3.81% interest to be charged on the loan. Further, it is not usurious since
Central Bank Circular No. 905-82 removed the ceiling on interest rates on secured and unsecured
loans.
ISSUE: Did the Court of Appeals err in sustaining the trial court's ruling upholding the 3% and 3.81%
stipulated monthly interest? - YES
RULING: In a loan or forbearance of money, according to the Civil Code, the interest due should be
that stipulated in writing, and in the absence thereof, the rate shall be 12% per annum. While the
parties are free to stipulate on the interest to be imposed on monetary obligations, the Court will
temper interest rates if they are unconscionable. Even if the Usury Law has been suspended, the
Court held that stipulated interest rates are illegal if they are unconscionable.
Based on the Deed of Real Estate mortgage, the parties agreed on an interest rate of 3% per month.
In the reformed instrument, the P300,000 and P381,000 successive increases stated therein
represent the monthly interest.
In this case, the Court of Appeals erred in sustaining the trial court's decision upholding the stipulated
interest of 3% and 3.81%. Thus, the Court reduced the stipulated interest rates to 1% per month, in
conformity with Ruiz v. Court of Appeals: “Nothing in the said circular [CB Circular No. 905, s. 1982]
grants lenders carte blanche authority to raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets.”
Thus, petitioners are bound to pay respondents the principal loan of P10,000,000, plus what we have
repeatedly held as the appropriate rate of interest of 1% per month, from December 6, 1998 until fully
paid.
 IRENE P. RELUCIO , vs. ZEIDA B. BRILLANTE-GARFIN and COURT OF APPEALS
GR NO. 76518 | 13 July 1990 | J. Feliciano
FACTS:
Brillante – Garfin filed a complaint for the specific performance with damages against Relucio
to compel the latter to execute in compliance with the Contract to Buy and Sell, a final deed in favor of
her over 2 residential subdivision lots in Naga City and construct the paved roads on the northern and
southern lots as well as the other necessary facilities. She alleged that she never incurred delay in
the payment of installments due and the stipulated 6% interest per annum on the outstanding balance
is null and void. Relucio resisted the complaint, maintaining that Brillante – Garfin is obliged to pay
the interest on the installment of the unpaid outstanding balance even if paid on their due dates per
schedule of the payments.
RTC RULING: 6% interest per annum payment should be returned by petitioner
CA RULING: Affirmed the RTC decision
ISSUE: 
1. Whether or not the petitioner may validly charge interest on installment payments,
notwithstanding that private respondent had been prompt in her monthly payments 
2. Whether or not petitioner’s cancellation was valid and effective
RULING: 
1. YES. Vendor and vendee are legally free to stipulate for the payment of either the cash price of
a subdivision lot or its installment price. Should the vendee opt to purchase a subdivision lot
via the installment payment system, he is in effect paying interest on the cash price, whether
the fact and rate of such interest payment is disclosed in the contract or not. The contract for
the purchase and sale of a piece of land on the installment payment system in the case at bar
is not only quite lawful; it also reflects a very wide spread usage or custom in our present day
commercial life. 
During the succeeding monthly payments, however, as the outstanding balance on the
principal gradually declined, the interest component (in absolute terms) correspondingly fell
while the component credited to the principal increased proportionately, thus amortizing the
balance of the principal purchase prize as that balance gradually declined. This explains
petitioner's theory of declining balance, which unfortunately was not appreciated by both the
trial and appellate courts.
2. NO. Despite private respondent's failure to fully pay the stipulated price of the two lots in
question, petitioner, however, could not validly rescind the contract not being lawfully entitled
to do so. Petitioner failed to rebut private respondents' allegations that the former had failed to
introduce required improvements in the subdivision; the former's bare allegation that the
improvements have already been donated to the city government was not accepted by the trial
court.
In this respect, the trial court was correct in holding that petitioner could not rescind the
contract. As the law vests upon the buyer the option to demand reimbursement of the total
amount paid, or to wait for further development of the subdivision, private respondent who
opted for the latter alternative by waiting for the proper development of the site, may not be
ousted from the subdivision.
STATE INVESTMENT HOUSE, INC. , petitioner, vs. THE HONORABLE COURT OF APPEALS,
HON. JUDGE PERLITA J. TRIA TIRONA, Presiding Judge of the Regional Trial Court of Quezon
City, Branch CII, and SPS. RAFAEL and REFUGIO AQUINO, respondents.
G.R. No. 90676             June 19, 1991
Doctrine:
Aquino spouses were held not to have been in delay, they were properly liable only for: (a) the
principal of the loan or P110,000.00; and (b) regular or monetary interest in the amount of seventeen
percent (17%) per annum. They were not liable for penalty or compensatory interest, fixed by the
promissory note
1. Spouses Rafael and Refugio Aquino in 1992 pledged certain shares of stock to petitioner in
order to secure a loan of PhP120,000.00.
2. Prior to the execution of the pledge, respondent spouses, as a form of accommodation to Sps
Jose and Marcelina Aquino, signed an agreement with petitioner for the latter’s purchase of
receivable amounting to PhP370,000.00
3. When it fell due, respondents paid the same with their own funds and party from the proceeds
and partly from the another loan which they also obtained from the petitioner.
4. When the new loan matured, State demanded payment and respondents expressed
willingness to pay, requesting that upon payment, the shares of stock pledged be released.
5. Petitioner State denied the request on the ground that the loan which it had extended to the
spouses Jose and Marcelina Aquino had remained unpaid.
6. Thereafter, Atty Salonga sent a Notice of Notarial Sale to respondents for the sale at a public
auction the shares of stock pledged to the State.
7. The respondent filed a case before the RTC that the foreclosure is illegal on the ground that
when the said loan fell due, they had been able and willing to pay the same, but petitioner had
insisted that respondents pay even the loan account of Jose and Marcelina Aquino which had
not been secured by the pledge.
RTC Actions and Ruling:
8. The trial court initially dismissed the complaint but upon motion for consideration, it set aside
it’s original decision and granted to immediately release the pledge and to deliver to
respondents the share of stock "upon payment of the loan.
CA Actions and Ruling:
9. Court of Appeals affirmed in toto the new decision of the trial court, holding that the loan
extended to Jose and Marcelina Aquino, having been executed prior to the pledge was not
covered by the pledge which secured only loans executed subsequently. During the payment
of loan to release the stocks, the parties came into disagreement as to the payment of interest
10. The RTC rendered the decision that the payment only of the principal amount purporting to
clarify the decision of Judge Fortun and ruling that petitioner State shall release respondents'
shares of stock upon payment by respondents of the principal of the loan n the amount
of P110,000.00, without interest, penalties and other charges.
In CA, the appeal of petitioner was dismissed.
Issue:
WON the interest should also be paid in order for the stocks be released? (NO)
Ruling:
1. We believe and so hold that since respondent Aquino spouses were held not to have been in
delay, they were properly liable only for: (a) the principal of the loan or P110,000.00; and (b)
regular or monetary interest in the amount of seventeen percent (17%) per annum. They were
not liable for penalty or compensatory interest, fixed by the promissory note in Account No.
IF-82-0904- AA at two percent (2%) per month or twenty four (24%) per annum.
2. The fact that the respondent Aquino spouses were not in default did not mean that they, as a
matter of law, were relieved from the payment not only of penalty or compensatory interest at
the rate of twenty-four percent (24%) per annum but also of regular or monetary interest of
seventeen percent (17%) per annum. The regular or monetary interest continued to accrue
under the terms of the relevant promissory note until actual payment is effected. The payment
of regular interest constitutes the price or cost of the use of money and thus, until the principal
sum due is returned to the creditor, regular interest continues to accrue since the debtor
continues to use such principal amount. The relevant rule is set out in Article 1256 of the Civil
Code.

3.   [i]f the obligation consists in the payment of a sum of money, and the debtor incurs in delay.
the indemnity for damages, there being no stimulation 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.
4. the appropriate measure for damages in case of delay in discharging an obligation consisting
of the payment of a sum or money, is the payment of penalty interest at the rate agreed upon;
and in the absence of a stipulation of a particular rate of penalty interest, then the payment of
additional interest at a rate equal to the regular monetary interest; and if no regular interest had
been agreed upon, then payment of legal interest or six percent (6%) per annum.
 Nacar v. Gallery Frames
Peralta, J.
Summary:
Facts:
Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey,
Jr. Nacar alleged that he was dismissed without cause by Gallery Frames in 1997. On
October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal
dismissal and awarded Nacar P158,919.92 in damages consisting of backwages and
separation pay.

Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court
affirmed the decision of the Labor Arbiter and the decision became final.

After the finality of the SC decision, Nacar filed a motion before the LA for
recomputation as he alleged that his backwages should be computed from the time of
his illegal dismissal (January 24, 1997) until the finality of the SC decision (May 27,
2002) with interest. The LA denied the motion as he ruled that the reckoning point of
the computation should only be from the time Nacar was illegally dismissed (January
24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the
said date should be the reckoning point because Nacar did not appeal hence as to
him, that decision became final and executory.

Issue: Whether or not appropriate interests may be claimed by the petitioner. YES

On the issue of award of interest in the form of actual or compensatory damages, the
SC held that the old case of Eastern Shipping Lines vs CA is already modified by the
promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796
which lowered the legal rate of interest from 12% to 6%. Specifically, the rules on
interest are now as follows:

1. Monetary Obligations ex. Loans: If stipulated in writing:

- shall run from date of judicial demand
- rate of interest shall be that amount stipulated
- If not stipulated in writing
- shall run from date of default (either failure to pay upon extra-judicial
demand or upon judicial demand whichever is appropriate and subject to
the provisions of Article 1169 of the Civil Code)
- rate of interest shall be 6% per annum

2. Non-Monetary Obligations (such as the case at bar)

- If already liquidated, rate of interest shall be 6% per annum, demandable
from date of judicial or extra-judicial demand (Art. 1169, Civil Code)
- If unliquidated, no interest
 Except: When later on established with certainty. Interest shall still be 6% per annum
demandable from the date of judgment because such on such date, it is already
deemed that the amount of damages is already ascertained.

3. Compounded Interest

- This is applicable to both monetary and non-monetary obligations

- 6% per annum computed against award of damages (interest) granted by
the court. To be computed from the date when the court’s decision
becomes final and executory until the award is fully satisfied by the losing
party.

4. The 6% per annum rate of legal interest shall be applied prospectively:

- Final and executory judgments awarding damages prior to July 1, 2013
shall apply the 12% rate;
- Final and executory judgments awarding damages on or after July 1, 2013
shall apply the 12% rate for unpaid obligations until June 30, 2013; unpaid
obligations with respect to said judgments on or after July 1, 2013 shall
still incur the 6% rate.

FACTS:

On October 15, 1998, the Labor Arbiter rendered a Decisionin favor of petitioner and
found that he was dismissed from employment without a valid or just cause. Thus,
petitioner was awarded backwages and separation pay in lieu of reinstatement in the
amount ofP158,919.92.

Respondents appealed to the NLRC, but it was dismissed for lack of merit. Accordingly,
the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for
reconsideration, but it was denied. Dissatisfied, respondents filed a Petition for Review
on Certiorari before the CA but it was likewise denied. Respondents then sought relief
before the Supreme Court. Finding no reversible error on the part of the CA, this Court
denied the petition in the Resolution dated April 17, 2002.

An Entry of Judgment was later issued certifying that the resolution became final and
executory on May 27, 2002. The case was, thereafter, referred back to the Labor Arbiter
for execution. Petitioner filed a Motion for Correct Computation, praying that his
backwages be computed from the date of his dismissal on January 24, 1997 up to the
finality of the Resolution of the Supreme Court on May 27, 2002. Upon recomputation,
the Computation and Examination Unit of the NLRC arrived at an updated amount in the
sum ofP471,320.31.

Respondents filed a Motion to Quash Writ of Execution, arguing, among other things,
that since the Labor Arbiter awarded separation pay ofP62,986.56 and limited
backwages ofP95,933.36, no more recomputation is required to be made of the said
awards. They claimed that after the decision becomes final and executory, the same
cannot be altered or amended anymore. LA denied the motion but the decision was
reversed by the NLRC on appeal.

Petitioner appealed to the CA but was denied, stating that since petitioner no longer
appealed the October 15, 1998 Decision of the Labor Arbiter, which already became
final and executory, a belated correction thereof is no longer allowed. The CA stated
that there is nothing left to be done except to enforce the said judgment. Consequently,
it can no longer be modified in any respect, except to correct clerical errors or mistakes.
Thus, petitioner filed this petition for review on certiorari.

ISSUE 1: Whether or not the re-computation made by the Labor Arbiter is correct.
- YES

ISSUE 2: (MAIN): Whether or not appropriate interests may be claimed by the

petitioner. - YES

RULING 1
The Supreme Court believes that the amount of 471,320.31 as damages is
correct. According to Article 279 of the Labor Code, reliefs in case of illegal dismissal
continue to add up until its full satisfaction. The original computation clearly includes
damages only up to the finality of the labor arbiter's decision. Therefore, the Supreme
Court approves the decision confirming that a re-computation is necessary. The labor
arbiter re-computed the award to include the separation pay and the back wages due up
to the finality of the decision that fully terminated the case on the merits.

RULING 2: (MAIN)

In this case, the Supreme Court laid down the guidelines for the imposition and
computation of legal interests. The guidelines in the Eastern Shipping Lines case were
accordingly modified to embody BSP MB Circular No. 799, as follows:

1. When an obligation, regardless of its source, i.e., law, contracts, quasi-

contracts, delicts or quasi-delicts, is breached, the contravener 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.

2. 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, is imposed,
as follows:

1. When the obligation is breached, and it consists in the payment of a sum

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 time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment 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 on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory
prior to July 1, 2013, shall not be disturbed and shall continue to be implemented
applying the rate of interest fixed therein.
International Container Terminal Services, Inc.
v. FGU Insurance Corporation
G.R. No. 161539, June 27, 2008. J. Austria Martinez
Petitioner: International Container Terminal Services, Inc.
Respondent: FGU Insurance Corporation
Summary: Petitioner International Container Terminal
Services Inc lost a shipment of “14 Cardboards 400kgs of
Pure Silver Nitrate” shipped from Germany to Manila. The
shipment was insured by FGU Insurance. When Republic
Asahi Glass Corporation, the consignee, was claiming the
shipment, petitioner could not find it in the storage area. The
NBI found that the shipment was lost while in the custody and
responsibility of petitioner. As insurer, FGU paid RAGC the
amount of P1,835,068.88 and sought reimbursement from
petitioner, but the latter refused. FGU filed a case for sum of
money. The RTC held petitioner liable and was ordered to pay
P1,875,068.88 with 12% interest per annum from January 3,
1995 until fully paid.
Ruling: The CA did not commit any error in applying the
guidelines set in Eastern Shipping Lines, Inc. vs. CA. The
interim period from the finality of judgment until the
satisfaction of the same is deemed equivalent to a
forbearance of credit, hence, the imposition of the 12%
interest.
Doctrine: When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest,
regardless of whether the obligation involves a loan or
forbearance of money, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed
to be by then an equivalent to a forbearance of credit.

Facts:
 This case concerns the liability of petitioner International Container Terminal Services, Inc.
which arose from a lost shipment of "14 Cardboards 400 kgs. of Silver Nitrate 63.53 FCT
Analytically Pure (purity 99.98 PCT)," shipped by Hapag-Lloyd AG through the vessel
Hannover Express from Hamburg, Germany, with Manila, Philippines as the port of discharge,
and Republic Asahi Glass Corporation (RAGC) as consignee.
 Said shipment was insured by FGU Insurance. When RAGC's customs broker, Desma Cargo
Handlers, Inc., was claiming the shipment, petitioner, which was the arrastre contractor, could
not find it in its storage area.
 At the behest of petitioner, the NBI conducted an investigation. The AAREMA Marine and
Cargo Surveyors, Inc. also conducted an inquiry. Both found that the shipment was lost while
in the custody and responsibility of petitioner.
 As insurer, FGU paid RAGC the amount of P1,835,068.88 on January 3, 1995. In turn, FGU
sought reimbursement from petitioner, but the latter refused. This constrained FGU to file with
the RTC of Manila Civil Case No. 95-73532 for a sum of money.
  RTC: held petitioner Intarnational liable and ordered to pay FGU Insurance the following sums:
(1) P1,875,068.88 with 12% interest per annum from January 3, 1995 until fully paid;
(2) P50,000.00 as attorney's fees; and (3) P10,000.00 as litigation expenses.
 CA: Affirmed the RTC Decision. Hence, the present petition.
Issue: WON the CA erred in affirming the award of 12% interest despite the fact that the obligation
purportedly breached does not constitute a loan of forbearance of money and despite the clear
guidelines set in Eastern Shipping Lines, Inc. vs. CA. (NO)
Ruling: The CA did not commit any error in applying the guidelines set in Eastern Shipping Lines,
Inc. vs. CA.
Petitioner questions the imposition of a 12% interest rate, instead of 6%, on its adjudged liability. The
ruling in Prudential Guarantee and Assurance Inc. v. Trans-Asia Shipping Lines, Inc. is instructive, to
wit:
This Court in Eastern Shipping Lines, Inc. v. Court of Appeals, inscribed the rule of thumb in the
application of interest to be imposed on obligations, regardless of their source. Eastern emphasized
beyond cavil that when the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, regardless of whether the obligation involves a loan or
forbearance of money, shall be 12% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit.
We find application of the rule in the case at bar proper, thus, a rate of 12% per annum from the
finality of judgment until the full satisfaction thereof must be imposed on the total amount of liability
adjudged to PRUDENTIAL. It is clear that the interim period from the finality of judgment until the
satisfaction of the same is deemed equivalent to a forbearance of credit, hence, the imposition
of the aforesaid interest.
WHEREFORE, the petition is DENIED. The Decision dated October 22, 2003 and Resolution dated
January 8, 2004 of the Court of Appeals are AFFIRMED, with the modification that the award in the
RTC Decision dated July 1, 1999 should be P1,835,068.88 instead of P1,875,068.88.
FIRST METRO INVESTMENT CORPORATION vs. ESTE DEL SOL MOUNTAIN
RESERVE, INC
Facts:
1. FMIC granted Este del Sol a loan of P7,385,500.00 to finance the construction and
development of the Este del Sol Mountain Reserve.
2. Under the terms of the Loan Agreement, the proceeds of the loan were to be
released on staggered basis. Interest on the loan was pegged at sixteen (16%) percent
per annum based on the diminishing balance.
3. In case of default, an acceleration clause was, among others, provided and the
amount due was made subject to a twenty (20%) percent one-time penalty on the
amount due and such amount shall bear interest at the highest rate permitted by law
from the date of default until full payment thereof
● plus liquidated damages at the rate of two (2%) percent per month compounded
quarterly on the unpaid balance and accrued interests together with all the
penalties, fees, expenses or charges thereon until the unpaid balance is fully
paid, plus attorneys fees equivalent to twenty-five (25%) percent of the sum
sought to be recovered, which in no case shall be less than Twenty Thousand
Pesos (P20,000.00) if the services of a lawyer were hired.
4. In accordance with the terms of the Loan Agreement, respondent Este del Sol
executed several documents  as security for payment, among them, (a) a Real Estate
Mortgage over two (2) parcels of land being utilized as the site of its development
project; and (b) individual Continuing Suretyship agreements.
5. Este del Sol failed to meet the schedule of repayment in accordance with a revised
Schedule of Amortization. It appeared to have incurred a total obligation of
P12,679,630.98.
6. Accordingly, FMIC caused the extrajudicial foreclosure of the real estate
mortgage.  At the public auction, FMIC was the highest bidder of the mortgaged
properties.
7. The remaining balance of P5,811,369.25 was applied to interests and penalty
charges and partly against the principal, thereby leaving a balance of P6,863,297.73 on
the principal amount of the loan.
8. Failing to secure from the individual respondents the payment of the alleged
deficiency balance, FMIC instituted the instant collection suit against the respondents to
collect the alleged deficiency balance of P6,863,297.73 plus interest thereon at 21%
percent per annum from June 24, 1980 until fully paid, and 25% percent thereof as and
for attorneys fees and costs.
9. The RTC ruled in favour of FMIC.
10. The CA found and declared that the fees provided for in the Underwriting and
Consultancy Agreements were mere subterfuges to camouflage the excessively
usurious interest charged by FMIC on the loan of Este del Sol; and that the stipulated
penalties, liquidated damages and attorney’s fees were excessive, iniquitous,
unconscionable and revolting to the conscience, and declared that in lieu thereof, the
stipulated one time twenty (20%) percent penalty on the amount due and ten (10%)
percent of the amount due as attorney’s fees would be reasonable and suffice to
compensate petitioner FMIC for those items.
Issue:
Whether or not the underwriting and consultancy agreements are mere subterfuges to
camouflage the usurious interest charged by the petitioner and thus, excessive,
iniquitous and unconscionable and revolting to the conscience.

Ruling:

Yes. Although there was a written instrument evidencing the contact between the
parties, the form of the contract is not conclusive for the law will not permit a usurious
loan to hide itself behind a legal form. If from a construction of the whole transaction it
becomes apparent that there exists a corrupt intention to violate the Usury Law, the
courts should and will permit no scheme, however ingenious, to becloud the crime of
usury.

Art. 1957. Contracts and stipulations, under any cloak or device whatever, intended to
circumvent the laws against usury shall be void. An apparently lawful loan is usurious
when it is intended that additional compensation for the loan be disguised by an
ostensibly unrelated contract providing for payment by the borrower for the lenders
services which are of little value or which are not in fact to be rendered, such as in the
instant case, where:

a. The Underwriting and Consultancy Agreements which were executed simultaneously

were set to mature or shall remain effective during the same period of time.

b. The Underwriting Agreement, a condition precedent to extend the loan, is part and
parcel of the Loan Agreement.

c. Este del Sol was billed by FMIC P1,330,000.00 as consultancy fee despite the
provision in the Consultancy Agreement which only provides for P332,500.00 per
annum.

d. The Underwriting, Supervision and Consultancy fees were billed by FMIC to Este del
Sol on the same occasion of the first partial release of the loan. It is from this first partial
release of the loan that the said corresponding bills for Underwriting, Supervision and
Consultancy fees were deducted and apparently paid, thus, reverting back to FMIC the
total amount of P1,730,000.00 as part of the amount loaned to respondent Este del Sol.

In usurious loans, the entire obligation does not become void because of an agreement
for usurious interest; the unpaid principal debt still stands and remains valid but the
stipulation as to the usurious interest is void, consequently, the debt is to be considered
without stipulation as to the interest.

In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the
principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal.
The illegality lies only as to the prestation to pay the stipulated interest; hence, being
separable, the latter only should be deemed void, since it is the only one that is illegal.

Thus, the nullity of the stipulation on the usurious interest does not affect the lenders
right to receive back the principal amount of the loan. With respect to the debtor, the
amount paid as interest under a usurious agreement is recoverable by him, since the
payment is deemed to have been made under restraint, rather than voluntarily.
United Coconut Planters Bank v. Sps Beluso
FACTS:
UCPB granted the Sps Beluso a Promissory Notes Line under a Credit Agreement
with limit of P1.2M. In addition to the promissory notes, the Belusos executed a real
estate mortgage over some land in Roxas as additional security. The Belusos availed
of 3 promissory notes amounting to P2mil, which were renewed several times. UCPB
applied interest rates on the promissory notes ranging from 18% to 34%.

RULING:
The interest rate provisions in the case at bar are illegal not only because of the
provisions of the Civil Code on mutuality of contracts, but also, as shall be discussed
later, because they violate the Truth in Lending Act. Not disclosing the true finance
charges in connection with the extensions of credit is, furthermore, a form of
deception which we cannot countenance. It is against the policy of the State as stated
in the Truth in Lending Act.

DOCTRINE:
PNB v. CA: In order that obligations arising from contracts may have the force of law
between the parties, there must be mutuality between the parties based on their
essential equality. A contract containing a condition which makes its fulfillment
dependent exclusively upon the uncontrolled will of one of the contracting parties, is
void

Facts:
1. UCPB granted the Spouses Beluso a Promissory Notes Line under a Credit
Agreement whereby the Belusos could avail a credit up to a max amount of
P1,200,000 for a term ending on April 30, 1997. In addition to the promissory
notes, Respondents executed a real estate mortgage over some land in Roxas
as additional security.
a. Their Credit Agreement was amended to increase the amount of the
Promissory Notes Line to P2.3M (total of 5 PN). The term was also
amended and extended to Feb 23, 1998.
2. Spouses Belusos availed of 3 promissory notes amounting to Php 2 Million,
which were renewed several times.
3. By April 30, 1997, the payment of the principal plus interest of the last 2 notes
was debited form their account with UCPB (both added up to P1.3 MILLION).
4. Later, a loan of P1.3MILLION was still released to them under a promissory note
whose due date was Feb 28, 1998. (meaning their loan was still an even
P2MILLION).
5. To completely avail of the P2.35MILLION credit line, they executed 2 more
promissory notes amounting to P350k. However, they allege that the notes were
never released to them so they claim that their debt is still only Php 2 Million
 6. UCPB applied interest rates on the promissory notes ranging from 18% to 34%,
from 1996 to Feb 1998, the Belusos paid P763,692.
a. From Feb 1998 to June 1998, UCPB charged them interests and
penalties. The Belusos failed to make any payment on these.
b. Sept 1998, UCPB demanded pay P2.93 Million PLUS 25% atty fees.
Belusos did not pay.
c. Dec 1998, UCPB foreclosed on the Belusos’ mortgaged properties. (by
that time already ballooned to P3.7 Million)
7. RTC: interest rate provided in the promissory notes are void. Imposed fine of
P26k for violating the Truth in Lending Act.
8. CA: affirmed because the rates were determined solely by the UCPB.
Issues:
1. Whether or not interest rate stipulated was void
2. Whether or not Spouses Beluso are subject to 12% interest and compounding
interest stipulations even if declared amount by UCPB was excessive Whether or
not foreclosure was void. NO
RULING:
1. Yes, stipulated interest rate is void because it contravenes on the principle of
mutuality of contracts and it violates the Truth in lending Act.

The provision stating that the interest shall be at the “rate indicative of DBD retail
rate or as determined by the Branch Head” is indeed dependent solely on the will
of petitioner UCPB. Under such provision, petitioner UCPB has two choices on
what the interest rate shall be: (1) a rate indicative of the DBD retail rate; or (2) a
rate as determined by the Branch Head. As UCPB is given this choice, the rate
should be categorically determinable in both choices. If either of these two
choices presents an opportunity for UCPB to fix the rate at will, the bank can
easily choose such an option, thus making the entire interest rate provision
violative of the principle of mutuality of contracts.

In addition, the promissory notes, the copies of which were presented to the
spouses Beluso after execution, are not sufficient notification from UCPB. As
earlier discussed, the interest rate provision therein does not
sufficiently indicate with particularity the interest rate to be applied to the loan
covered by said promissory notes which is required in Truth in Lending Act

2. Yes. Default commences upon judicial or extrajudicial demand. The

excess amount in such a demand does not nullify the demand itself, which is
valid with respect to the proper amount. There being a valid demand on the part
of UCPB, albeit excessive, the spouses Beluso are considered in default with
respect to the proper amount and, therefore, the interests and the
penalties began to run at that point. As regards the award of 12% legal interest in
favor of petitioner, the RTC actually recognized that said legal interest should be
 imposed, thus: “There being no valid stipulation as to interest, the legal rate of
interest shall be charged.”[27] It seems that the RTC inadvertently overlooked its
non-inclusion in its computation. It must likewise uphold the contract stipulation
providing the compounding of interest. The provisions in the Credit Agreement
and in the promissory notes providing for the compounding of interest were
neither nullified by the RTC or the Court of Appeals, nor assailed by the
spouses Beluso in their petition with the RTC. The compounding of
interests has furthermore been declared by this Court to be legal.

3. No. The foreclosure proceedings are valid since there was a valid demand
made by UCPB upon the spouses Beluso. Despite being excessive, the spouses
Beluso are considered in default with respect to the proper amount of their
obligation to UCPB and, thus, the property they mortgaged to secure such
amounts may be foreclosed. Consequently, proceeds of the foreclosure sale
should be applied to the extent of the amounts to which UCPB is rightfully
entitled

Dispositive: CA decision modified.

Belusos liable for:
o P2.35 mil
o Penalty 12% per annum from date of demand
o Compounded legal interest rate 12% per annum from date of demand
Following amounts to be deducted from Belusos’ liability:
o Payments made: P763k. (payments to be applied to the date of actual payment
of the following in order:
 Penalty charges
 Interest
 Principal
 Outstanding balance
o Penalty of P26k under the Act (amt deducted from liability of Belusos on Feb
1999 in the following order:
 Penalty
 Interest
 Principal
 Outstanding balance
 Foreclosure of mortgage valid
o Amounts which the RTC/CA ordered the Belusos to pay is deducted from the
proceeds of the foreclosure sale