Case Digest for Credit Transactions

CASE DIGEST FOR CREDIT TRANSACTIONS Eastern Shipping v CA and Mercantile Insurance Co. Facts: 1. Two fiber drums containing riboflavin were shipped form Japan by SS Eastern Comet owned by pet Eastern Shipping under a bill of lading 2. It was insured uner resp’s insurance policy 3. It was discharged under the cutody of Metro Port service but the latter excepted to one drum which was in bad order 4. Allied Brokerage Corp received the shipment from Metroport with one drum opened and without a seal 5. Allied Banking then delivered it to consignee’s warehouse. 6. The latter excepted to one drum with spillages and the rest of the conents were adulterated 7. Resp Mercantile Insurance claimed indemnity for the losses and damages sustained by the consignee worth 19K, which, it says is due to the fault and negligence of Eastern Shipping 8. ES refused to pay 9. MI was compelled to pay damages to the consignee under the marine policy 10. ES, Metroport and Allied Brokerage all denied liability. ES contends the shipment was in good order when it was turned over to Metroport. 11. The issues presented in the appellate court are as follows: a. W/N loss or damage was sustained b. W/N it was sustained while in the custody of ES c. W/N ES should be held liable 12. CA’s ruling: a. Yes. Shipment was shipped in a good condition as evidenced by the bill of lading and comm’l invoice. But when the same was delivered to Metroport, the latetr excepted to one drum which was damaged. b. According to the Marine Cargo Survey Report, one of the drums was in damaged consition. It shows, therefore that while in the successive custodies of ES, MS, AB, the shipment was in a damaged condition. When withdrew by AB from MS, one of the drums were opened. And when the drums were received by consignee, one of them was opened and the contents adulterated c. ES, MS shall be joint and severally liable for the 19K damage. ES shall be liable for not more than $500 per case or the CIF value of the loss, while MS must be liable to the extent of the actual invoice value of each package, pursuant to management contract. With interest rate at 12% per annum from date of filing of the complaint. AB is dismissed.

13. Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo, explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should be from the date of the decision.'"

Issues: 1. Joint and several liability of ES and MS 2. Reckoning of 12% per annum interest from the date of filing of the claim rather than from the date of the decision and only at a rate of 6% per annum, since it is unliquidated Ruling: 1. Liability. Both the carrier and the arrastre operator have the obligation to deliver the shimpment in good condition to the consignee. It is presumed that CC are negligent whenever loss or damage of goods is sustained. Not disputed. Exceptions unavailing 2. Interests. a. Rule is that, absent any stipulation, the legal rate of interest shall be imposed from the date of demand, judi or EJ. But interest can only be recovered from liquidated claims or damages or those that can be definitely ascertained, assessed and determined by courts after proof. In action for damages, for injury to persons, loss of property or other actions not involving any loan, much less forbearances of any money, goods or credits, legal interest is 6% per annum (2209). b. Central Bank Circular No. 416: Rate of interest for the loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve (12%) percent per annum from default from jud or EJ demand c. Another instance was established in Nakpil and Sons vs. Court of Appeals whereby 12% per annum was imposed as a rate allowed in judgment, whereby no interest is actually imposed but a sum was fixed in the judgment. Delay in payment of such amount upon finality of judgment will cause imposition of interest d. In this case, interest is 6% from the date of decision of lower court. 12% from finality.

Sanchez v Buenviaje Facts: 1. Alejo Sanchez sued Teodoro Sanchez and Leonor Santilles in the Municipal Court of Bato, Camarines Sur, for the recovery of P2,000.00 which the latter had promised to pay in two notes 2. Said notes also contained stipulations for interest at the rate of 10% per month 3. The Municipal Court rendered judgment ordering Teodoro Sanchez only to pay to Alejo Sanchez P2,000.00 plus interest thereon at the legal rate from the filing of the complaint. 4. On appeal, CFI Camarines Sur asked Teodoro to pay double the cost of suit 5. In his petition for review, Teodoro claims that in a loan with usurious interest both the loan and the usurious interest are void. Ruling: The Usury Law (Act No. 2655), by its letter and spirit, does not deprive the lender of his right to recover of the borrower the money actually loaned this only in the case that the interest collected is usurious. The law, as it is now, does not provide for the forfeiture of the capital in favor of the debtor in usurious contract. In Briones vs. Cammayo, Chief Justice Concepcion and now Chief Justice Fernando concurred with Justice Castro who opined that both loan and usurious interest are void. However, it must be emphasized that eight other justices maintained that only the usurious interest is void but not the principal obligation. The creditor has no right of action for the recovery of the stipulated interest although he may sue for the recovery of the principal loaned.

Law v Olympic Sawmill Facts: 1. On or about September 7, 1957, plaintiff loaned P10K, w/o interest, to defendant partnership and defendant Elino Lee Chi, as the managing partner. 2. The loan became ultimately due on January 31, 1960, but was not paid on that date, with the debtors asking for an extension of three months, or up to April 30, 1960. 3. The parties executed another loan doc extending the payment of credit up to April 30. 4. The debt was, however, increased by 6K to answer for the legal interest, atty’s fees and other costs 5. A collection case was filed against resp but the latter only agreed to pay 10K. Not the additional 6K, which they allege as constituting usurious interests 6. RTC issued writs of attachment on the properties of defendat and ordered the def to pay 10K plus 6K by way of liquidated damages with legal interests on both amounts Ruling: RTC decision is affirmed: a. Under 1354, the agreement of parties are presumed lawful unless proven otherwise. b. The award of liquidated damages is lawful since this represents pet’s loss of interest income, attorney's fees and incidentals c. The claim of resp of the application of Usury Law’s provision providing that the allegation of usury that was not denied under oath amounts to admission is untenable since it refers to suits when the defendant is the one who is alleged to have violated the usury law. That is not the case at bar because the one who is being sued is the one who alleges violation of the usury law. And said law has already benn declared legally inexistent

Baron v David Facts:

Delgado v Bonnevie Facts: 1. 2.

3. 4. 5. 6. 7. 8.

Resps entered into a threshing paddy business Pet delivered them paddy to be returned as rice with this agreement a. 10 cents to be paid to resp per cavan b. to have returned in the rice one-half the amount received as paddy They issued receipts to pet for 2,003 cavanes and a half of paddy (1898) In 1909, pet demanded in the CFI Camarines the return of the 2003 cavans of rice or the payment of 3 pesos per cavan with 6% interest per annum He asked that the interest be imposed from the time his counsel demanded the resp for payment CFI: Pay pet 2,754.81, the value of 2,003 ½ cavanes of paddy at the rate of 11 reales the cavan and 6 percent interest on said sum reckoned from time of demand Resp alleged that the receipts are credit papers (532) and according to (950) the action shall be filed until July 1901 Prescription of personal property by uninterrupted loss of possession for six years. 1955 says

Issues: 1. 2. 3.

Nature of transaction Prescriptive period Validity of trial court’s judgment on payment

Ruling: Preliminary Issue: 950 of the Code of Commerce sets the prescriptive period of actions based on bills of exchange, drafts, notes, checks, securities, dividends, coupons, and the amounts of the amortization of obligations issued in accordance with said code to three years after they have fallen due. But the receipts in this case are not drafts payable to order but are mere promises to pay or mere docs evidencing receipt of the paddy. Purpose is industrial not mercantile exchange. It is a hire of services w/o mercantile character 1. 2.

3.

Deposit. Although it was converted to hire of service for threshing of paddy, but after the service was done, the rice remained a deposit and nothing has relieved the resp of their oblig as depositary No prescription if the thing is deposited because prescription must always be in the concept of an owner, uniterrupted, peaceful and public. Depositary only holds the deposit in trust for the depositor. There was no authorization to use the deposited fungible thing so it is not a loan. The applicable provisions are those on hire of services where the thing entrusted must be returned after the operation and payment of compensation. Prescriptive period is 15 years for claim of things leased, personal action (1964) Affirmed because the thing itself was already extinguished and its price has taken its place. Interest shall run only from the time of the trial court’s judgment because that was the only time the price to be paid became certain

De Cortes v Venturanza Facts:

Severino v Severino Facts: 1. Pet filed an action for recovering a of sum of money from resp and his guarantor amounting to 20K 2. Judgment was rendered ordering resp to pay pet but a writ of execution be issued first against the prop pf the resp and if no prop was found to be able to cover the amt of debt, then the guiarantor should also be liable 3. The root of the debt was a compromise agreement entered into by the heirs of Melecio Severino where resp bnound himself to pay 100K to pet and Felicitas Villanueva. 4. It is to bepaid by 40K upon the execution of the compromise agreement 5. However, nothing was paid to pet 6. At the time of execution of the compromise agreement, the status of pet as daughter of Melecio was still pending so the payment of amount owing her was suspended 7. The guarantor appealled saying he received nothing by affixing his signature as a guarantor so no consideration on the contract as to him Ruling: Guarantor is wrong. The compromise agreement and the dismissal of the case is the consideration as his principal the consideration to the principal is deemed as the same ocnsideration to the guarantor

GPH v Tizon Facts: 1. In a bidding by Bureau of Supply Coordination of the Department of General Services for trucks and ramps resp’s company won the bid, giving a bond of 10K 2. Surety issued a bond in favor of pet 3. Resp failed to deliver the equipment causing pet to purchase from the 2nd lowest bidder, incurring damages of up to P2,975 4. Despite repeated demands, resp refused to pay the amount 5. Pet filed for recovery with legal int, atty’s fees and costs 6. Resp: a. bidding was conducted in violation of rules and regulations of pet b. buyer’s order and notice of acceptance of bid were not sent – no binding contract c. Bond answers only for legal transactions 7. Surety: a. He did not refuse to pay but he was given a notice by resp no to settle any claim bec he is not liable to pet b. If he would be held liable, resp should reimburse him with 12% interest plus atty’s fees 8. RTC ordered to resp to pay pet the P2,975 and for resp to reimburse Surety whatever he pays to pet plus P100 atty’s fees 9. Tizon appealled. Reproduced his answers 10. Pet moved to strike out Surety’s answer and remand the case to City Court as regards the Surety 11. Surety opposed a. Though he did not appeal, the obli is so dependent on that of the principal debtor, that the Surety is considered in law as being the same party in relation to whatever is adjudged, touching the obligation of its co-defendant b. Bec of the principal’s cross-claim, he should be included in the appeal Issues: 1. W/N appeal by one of the parties sued as jointly and severally liable inures to the benefit of the latter

Ruling: 1. General rule: When only one party is appealing, it does not necessitate a reversal as to nonappealing parties. EXC when the judgment can’t be reversed w/o affecting the rights of his codebtors or their rights inseparable In the contract at bar, the Surety bound itself, jointly and severally, with the principal obligor to pay pet any loss or damage the latter may suffer, not exceeding P10K in case of delay and/or default in the execution of the contract. Although the defendants bound themselves in solidum,

the liability of the Surety under its bond would arise only if its co-defendant, the principal obligor, should fail to comply with the contract. Judgment When Some Defendants Answer and Others make Default.—When a complaint states a common cause of action against several defendants, some of whom answer, and the others fail to do so, the court shall try the case against all upon the answer thus filed and render judgment upon the evidence presented. The same procedure applies when a common cause of action is pleaded in a counterclaim, cross-claim and third-party claim.

Ongsiako v Worldwide Insurance/ Worldwide Insurance v De Leon Facts: 1. De Leon in favor of Ongsiako executed PNs P1,200 payable in 90 days, 1% per month interest 2. De Leon and WWI executed a bond binding themselves to pay JaS on maturity 3. Failed to pay. Action was brought. De Leon defaulted in answering. Surety answered with crossclaim v De Leon 4. Order was to pay principal amt, 1% interest/mo and 300 atty’s fees. Execution shall not issue vs WWI until a return is made by sheriff after execution vs De Leon and that the latter shall reimburse WWI for whatever the latter may be bound to pay 5. Surety bond states that WWI’s bond expires at the date of PN’s maturity 6. After maturity, surety was notified but no payment was made 7. Surety contends he cannot be liable until all the properties of De Leon are exhausted Ruling: 1. The stipulation inserted by the surety relieving itself from liability upon the maturity of the contratct nullifies the contract of suretyship he entered into. Court finds no justification for the present appeal and considers it frivolous and unnecessary. For this appellant should be made to pay treble costs.

Radio Corp v Roa Facts: 1. The defendant Jesus R. Roa became indebted to the Philippine Theatrical Enterprises, Inc., in the sum of P28,400 payable in seventy-one equal monthly installments at the rate of P400 a month commencing thirty days after December 11, 1931, with five days grace monthly until complete payment of said sum. 2. PTE assigned all its rights to pet 3. There is an acceleration clause on the contract upon payment on any of the installments after which the whole amount shall be due 4. The prin dr was given extension for one installment w/o the knowledge and consent of the guarantors Issue: Should the guarantors be released of the guaranty as to the whole amount of debt? Ruling: ART. 1851. An extension grated to the debtor by the creditor, without the consent of the guarantor, extinguishes the latter's liability. Case: if a surety is liable for different payments, such as installments of rent, or upon a series of promissory notes, an extension of time as to one or more will not affect the liability of the surety for the others. Applies only when what is accelerated are the subsequent installments, not the whole amount Not potestative, only foreclosure is potestative Consideration is presumed to exist