PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK), petitioner vs HON.
COURT OF APPEALS AND FRANKLIN VIVES, respondents.
G.R. NO. 115324 (397 SCRA 651) ; February 19, 2003
PRINCIPLES:
 Bailee in Commodatum acquires the use of the thing loaned but not its fruits.
 Consumable goods may be the subject of commodatum if the purpose of the contract is not the
consumption of the object, as when it is merely for exhibition.
 In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan,
ownership passes to the borrower.
 Intention of the parties thereto shall be accorded primordial consideration in determining the
actual character of a contract.
FACTS:
Sometime in 1979, private respondent FRANKLIN VIVES was asked by his neighbor and friend, ANGELES
SANCHEZ, to help her friend and townmate, Col ARTURO DORONILLA in incorporating his business (Sterela
Marketing and Services).
SANCHEZ asked VIVES to deposit in a bank a certain amount of money in the bank account of Sterela for
purposes of its incorporation. She assured private respondent that he could withdraw his money from the
said account within a month’s time. VIVES asked SANCHEZ to bring DORONILLA to their house so that they
could discuss SANCHEZ’s request.
VIVES, SANCHEZ, DORONILLA and a certain ESTRELLA DUMAGPI (Doronilla’s private secretary) met and
discussed the matter. Thereafter, relying on the assurances and representations of SANCHEZ and
DORONILLA, VIVES issued a check in the amount of Two Hundred Thousand Pesos (₱200,000.00). He
instructed his wife, INOCENCIA VIVES, to accompany DORONILLA and SANCHEZ in opening a savings
account in the name of Sterela in the BUENDIA, MAKATI BRANCH OF PRODUCERS BANK OF THE
PHILIPPINES. However, only SANCHEZ, MRS. VIVES and DUMAGPI went to the bank to deposit the check.
They had with them an authorization letter from DORONILLA authorizing SANCHEZ and her companions,
“in coordination with MR. RUFO ATIENZA” to open an account for Sterela Marketing Services. The
authorized signatories were MRS. VIVES and/or SANCHEZ. A passbook for Savings Account No. 10-1567
was thereafter issued to MRS. VIVES.
Subsequently, VIVES learned that Sterela was no longer holding office in the address previously given to
him. Alarmed, he and his wife went to the Bank to verify if their money was still intact. The bank manager
referred them to MR. RUFO ATIENZA, the assistant manager, who informed them that part of the money
in Savings Account No. 10-1567 had been withdrawn by DORONILLA and only ₱90,000.00 remained
therein. He likewise told them that MRS. VIVES could not withdraw said remaining amount because it had
to answer for some postdated checks issued by DORONILLA. According to ATIENZA, after MRS. VIVES and
SANCHEZ opened Savings Account No. 10-1567, DORONILLA opened Current Account No. 10-0320 for
Sterela and authorized the Bank to debit Savings Account No. 10-1567 for the amounts necessary to cover
overdrawings in Current Account No. 10-0320. In opening said current account, Sterela, through
DORONILLA, obtained a loan of ₱175,000.00 from the Bank. To cover payment thereof, DORONILLA issued
three postdated checks, all of which were dishonored. ATIENZA also said that DORONILLA could assign or
withdraw the money in Savings Account No. 10-1567 because he was the sole proprietor of Sterela.
On June 29, 1979, VIVES received a letter from DORONILLA, assuring him that his money was intact and
would be returned to him. he issued a postdated check for Two Hundred Twelve Thousand Pesos
(₱212,000.00) but was dishonored upon presentment thereof to the drawee bank. he asked to present
the same check on September 15, 1979 but was again dishonored.
VIVES referred the matter to a lawyer, who made a written demand upon DORONILLA, for the return of
his client’s money. He issued another check for ₱212,000.00 but the check was again dishonored for
insufficiency of funds.
VIVES instituted an action for recovery of sum of money in the RTC in Pasig, Metro Manila against
DORONILLA, DUMAGPI and SANCHEZ (who passed away on March 16, 1985 while the case was pending
before the trial court).
ISSUES:
1. Whether or not the contract between Vives and Doronilla is a mutuum and not a Commodatum.
2. Whether or not the transaction was onerous as Doronilla was obliged to pay interest.
HELD:
1. NO. It is a commodatum.
Article 1933 (the provision distinguishing between the two kinds of loans) provides that in commodatum,
the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the
borrower. It also seems to imply that if the subject of the contract is a consumable thing, such as money,
the contract would be mutuum. However, there are instances when a commodatum may have for its
object a consumable thing.
Article 1936 provides that consumable goods may be the subject of commodatum if the purpose of the
contract is not the consumption of the object, as when it is merely for exhibition. Thus, if consumable
goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend
consumable goods and to have the very same goods returned at the end of the period agreed upon, the
loan is a commodatum and not a mutuum.
As correctly pointed out by both the CA and the trial court, the evidence shows that private respondent
agreed to deposit his money in the savings account of Sterela specifically for the PURPOSE OF MAKING IT
APPEAR “THAT SAID FIRM HAD SUFFICIENT CAPITALIZATION FOR INCORPORATION, WITH THE PROMISE
THAT THE AMOUNT SHALL BE RETURNED WITHIN THIRTY (30) DAYS”.
Vives merely accommodated Doronilla by lending his money without consideration, as a favor to his good
friend, Sanchez. It was however clear to the parties to the transaction that the money would not be
removed from Sterela’s savings account and would be returned to private respondent after 30 days.
2. NO. The transaction was not onerous.
Doronilla’s attempts to return to Vives the amount of ₱200,000.00 which the latter deposited in Sterela’s
account together with an additional ₱12,000.00 (allegedly representing interest on the mutuum) did not
convert the transaction from a commodatum into a mutuum because such was not the intent of the
parties and because the ₱12,000.00 corresponds to the fruits of the lending.
Article 1935 expressly states that the bailee in commodatum acquires the use of the thing loaned but not
its fruits.
RULING:
WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals
are AFFIRMED.
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE VS. COURT OF APPEALS, HEIRS OF
EGMIDIO OCTAVIANO AND JUAN VALDEZ
G.R. NO. 80294-95 SEPTEMBER 21, 1988
PRINCIPLE: Civil Law; Credit Transactions; Commodatum; Property; Adverse Possession; Adverse Claim;
Acquisitive Prescription;
When petitioner borrowed the house of private respondents’ predecessors, and petitioner was allowed
its free use, private respondents became bailors in commodatum, and petitioner, the bailee.—Private
respondents were able to prove that their predecessors’ house was borrowed by petitioner Vicar after
the church and the convent were destroyed. They never asked for the return of the house, but when they
allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees’
failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the
part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse
claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of
petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title. Catholic Vicar Apostolic of the Mt. Prov. vs. Court of Appeals, 165
SCRA 515, Nos. L-80294-95 September 21, 1988
FACTS:
Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed an application for registration
of title over Lots 1, 2, 3, and 4, said Lots being the sites of the Catholic Church building, convents, high
school building, school gymnasium, school dormitories, social hall, stonewalls, etc. The Heirs of Valdez
and the Heirs of Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting
ownership and title thereto since their predecessors’ house was borrowed by petitioner Vicar after the
church and the convent were destroyed. After trial on the merits, the land registration court promulgated
its Decision confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.
The Heirs of Juan Valdez appealed the decision of the land registration court to the then Court of Appeals.
The Court of Appeals reversed the decision. Thereupon, the VICAR filed with the Supreme Court a petition
for review on certiorari of the decision of the Court of Appeals dismissing his application for registration
of Lots 2 and 3.
ISSUE:
Whether or not the failure to return the subject matter of commodatum constitutes an adverse
possession.
HELD:
No. The bailees’ failure to return the subject matter of commodatum to the bailor did not mean adverse
possession on the part of the borrower. The bailee held in trust the property subject matter of
commodatum. Catholic Vicar was in possession as borrower in commodatum up to 1951, when it
repudiated the trust by declaring the properties in its name for taxation purposes. When he applied for
registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years.
Ordinary acquisitive prescription requires possession for ten years, but always with just title. Extraordinary
acquisitive prescription requires 30 years. The Court found that petitioner did not meet the requirement
of 30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement
of 10 years possession for ordinary acquisitive prescription because of the absence of just title. Private
respondents were able to prove that their predecessors’ house was borrowed by petitioner Vicar after
the church and the convent were destroyed. They never asked for the return of the house, but when they
allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees’
failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the
part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse
claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of
petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title.
COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE GUEVARRA, respondents.
G.R. No. 146364
June 3, 2004
PRINCIPLE: Civil Law; Credit Transactions; Commodatum; Property; Adverse Possession; Adverse Claim;
Acquisitive Prescription;
When petitioner borrowed the house of private respondents’ predecessors, and petitioner was allowed
its free use, private respondents became bailors in commodatum, and petitioner, the bailee.—Private
respondents were able to prove that their predecessors’ house was borrowed by petitioner Vicar after
the church and the convent were destroyed. They never asked for the return of the house, but when they
allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees’
failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the
part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse
claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of
petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title. Catholic Vicar Apostolic of the Mt. Prov. vs. Court of Appeals, 165
SCRA 515, Nos. L-80294-95 September 21, 1988
FACTS:
Petitioner Pajuyo paid P400 to a certain Pedro Perez for the rights over a lot, where Pajuyo subsequently
built a house. In 1985, Pajuyo and private respondent Guevarra executed a Kasunduan wherein Pajuyo
allowed Guevarra to live in the house for free, on the condition that Guevarra would maintain the
cleanliness and orderliness of the house. Guevarra promised that he would vacate the premises upon
Pajuyo’s demand.
In 1994, Pajuyo informed Guevarra of his need of the house and demanded that the latter vacate the
house. Guevarra refused. Pajuyo filed an ejectment case against Guevarra before the MTC.
Guevarra claimed that Pajuyo had no valid title over the lot since it is within the area set aside for
socialized housing. MTC rendered its decision in favor of Pajuyo, which was affirmed by RTC. (MTC and
RTC basically ruled that the Kasunduan created a legal tie akin to that of a landlord and tenant
relationship).
CA reversed the RTC decision, stating that the ejectment case is without legal basis since both Pajuyo and
Guevarra illegally occupied the said lot. CA further stated that both parties are in pari delicto; thus, the
court will leave them where they are. CA ruled that the Kasunduan is not a lease contract, but a
commodatum because the agreement is not for a price certain.
ISSUE: W/N the contractual relationship between Pajuyo and Guevarra was that of a commodatum.
HELD:
No. In a contract of commodatum, one of the parties delivers to another something not consumable so
that the latter may use the same for a certain time and return it. An essential feature of commodatum is
that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is
for a certain period. Thus, the bailor cannot demand the return of the thing loaned until after expiration
of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. If
the bailor should have urgent need of the thing, he may demand its return for temporary use. If the use
of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case
the contractual relation is called a precarium. Under the Civil Code, precarium is a kind of commodatum.
The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially
gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the
property in good condition. The imposition of this obligation makes the Kasunduan a contract different
from a commodatum. The effects of the Kasunduan are also different from that of a commodatum. Case
law on ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant
relationship where the withdrawal of permission would result in the termination of the lease. The tenant’s
withholding of the property would then be unlawful.
Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as
bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The
obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of
commission, administration and commodatum. These contracts certainly involve the obligation to deliver
or return the thing received.
Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter.
Guevarra should know that there must be honor even between squatters. Guevarra freely entered into
the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it. The
Kasunduan binds Guevarra.
The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to
physical possession of the contested property. The Kasunduan is the undeniable evidence of Guevarra’s
recognition of Pajuyo’s better right of physical possession. Guevarra is clearly a possessor in bad faith. The
absence of a contract would not yield a different result, as there would still be an implied promise to
vacate.
G.R. No. L-48349 December 29, 1986
FRANCISCO HERRERA, plaintiff-appellant,
vs.
PETROPHIL CORPORATION, defendant-appellee.
PRINCIPLE:
Civil Law; Lease Contracts; Provision for a discount not unusual in lease contracts; Validity of lease
contracts; Agreements have the force of law between the parties.—The provision for a discount is not
unusual in lease contracts. As to its validity, it is settled that the parties may establish such stipulations,
clauses, terms and condition as they may want to include; and as long as such agreements are not contrary
to law, morals, good customs, public policy or public order, they shall have the force of law between them.
Same; Same; Usury Law; No usury where there was no money given by defendant to plaintiff, nor did it
allow him to use its money already in his possession, and there was neither loan nor forbearance but a
mere discount—There is no usury in this case because no money was given by the defendant-appellee to
the plaintiff-appellant, nor did it allow him to use its money already in his possession. There was neither
loan nor forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee
to deduct from the total payments because they were being made in advance for eight years. The discount
was in effect a reduction of the rentals which the lessor had the right to determine, and any reduction
thereof, by any amount, would not contravene the Usury law.
Difference between a discount and a loan or forbearance.—The difference between a discount and a loan
or forbearance is that the former does not have to be repaid. The loan or forbearance is subject to
repayment and is therefore governed by the laws on usury.
Requirements to constitute usury; Elements of usury.—To constitute usury, "there must be loan or
forbearance; the loan must be of money or something circulating as money; it must be repayable
absolutely and in all events; and something must be exacted for the use of the money in excess of and in
addition to interest allowed by law." It has been held that the elements of usury are (1) a loan, express or
implied; (2) an understanding between the parties that the money lent shall or may be returned; (3) that
for such loan a greater rate or interest that is allowed by law shall be paid, or agreed to be paid, as the
case may be; and (4) a corrupt intent to take more than the legal rate for the use of money loaned. Unless
these four things concur in every transaction, it is safe to affirm that no case of usury can be declared.
Contracts are to be interpreted according to their literal meaning and should not be interpreted beyond
their obvious intendment—The above computation appears to be too much technical mumbo-jumbo and
could not have been the intention of the parties to the transaction. Had it been so, then it should have
been clearly stipulated in the contract. Contracts should be interpreted according to their literal meaning
and should not be interpreted beyond their obvious intendment.
Facts:
On December 5, 1969, a "Lease Agreement" was entered into by the plaintiff-appellant and ESSO
Standard Eastern. Inc., (substituted by Petrophil Corporation) for twenty (20) years with a
condition that monthly rentals should be paid and there should be advance payment of rentals for
the first eight years of the said contract. Pursuant to the said contract, defendant-appellee paid the
advance rentals for the first eight years, subtracting the amount of P101,010.73, the amount it
computed as constituting the interest or discount for the first eight years, in the total sum
P180,288.47. On August 20, 1970, the defendant-appellee, explained that there had been a mistake
in computation, paid to the appellant the additional sum of P2,182.70, thereby reducing the
deducted amount to only P98,828.03.
On October 14, 1974, the plaintiff-appellant sued the defendant-appellee for the sum of
P98,828.03, with interest, claiming this had been illegally deducted from him in violation of the
Usury Law. The defendant-appellee argued that the amount deducted was not usurious interest but
a given to it for paying the rentals in advance for eight years.
Issue: WON the defendant-appelle violated the usury law.
Held:
There is no usury in this case because no money was given by the defendant-appellee to the
plaintiff-appellant, nor did it allow him to use its money already in his possession. There was
neither loan nor forbearance but a mere discount which the plaintiff-appellant allowed the
defendant-appellee to deduct from the total payments because they were being made in advance
for eight years. The discount was in effect a reduction of the rentals which the lessor had the right
to determine, and any reduction thereof, by any amount, would not contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on
usury.
To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be
exacted for the use of the money in excess of and in addition to interest allowed by law."
the elements of usury are (1) a loan, express or implied; (2) an understanding between the parties
that the money lent shall or may be returned; that for such loan a greater rate or interest that is
allowed by law shall be paid, or agreed to be paid, as the case may be; and (4) a corrupt intent to
take more than the legal rate for the use of money loaned. Unless these four things concur in every
transaction, it is safe to affirm that no case of usury can be declared.
G.R. No. 192986
January 15, 2013
ADVOCATES FOR TRUTH IN LENDING, INC. and EDUARDO B. OLAGUER, Petitioners,
vs.
BANGKO SENTRAL MONETARY BOARD, represented by its Chairman, GOVERNOR
ARMANDO M. TETANGCO, JR., and its incumbent members: JUANITA D. AMATONG,
ALFREDO C. ANTONIO, PETER FA VILA, NELLY F. VILLAFUERTE, IGNACIO R. BUNYE and
CESAR V. PURISIMA, Respondents.
PRINCIPLES:
Usury Law; Central Bank (CB) Circular No. 905; Central Bank (CB) Circular No. 905 did not repeal nor in anyway
amend the Usury Law but simply suspended the latter’s effectivity; that a Central Bank (CB) Circular cannot
repeal a law, for only a law can repeal another law; that by virtue of CB Circular No. 905, the Usury Law has
been rendered ineffective; and Usury Law has been legally non-existent in our jurisdiction.—The power of the
CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long been recognized and upheld in
many cases. As the Court explained in the landmark case of Medel v. CA, 299 SCRA 481 (1998), citing several
cases, CB Circular No. 905 “did not repeal nor in anyway amend the Usury Law but simply suspended the latter’s
effectivity”; that “a [CB] Circular cannot repeal a law, [for] only a law can repeal another law”; that “by virtue
of CB Circular No. 905, the Usury Law has been rendered ineffective”; and “Usury has been legally non-existent
in our jurisdiction. Interest can now be charged as lender and borrower may agree upon.”
Same; Section 109 of R.A. No. 265 covered only loans extended by banks, whereas under Section 1-a of the
Usury Law, as amended, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) may prescribe the maximum
rate or rates of interest for all loans or renewals thereof or the forebearance of any money, goods or credits,
including those for loans of low priority such as consumer loans, as well as such loans made by pawnshops,
finance companies and similar credit institutions.—A closer perusal shows that Section 109 of R.A. No. 265
covered only loans extended by banks, whereas under Section 1-a of the Usury Law, as amended, the BSP-MB
may prescribe the maximum rate or rates of interest for all loans or renewals thereof or the forbearance of
any money, goods or credits, including those for loans of low priority such as consumer loans, as well as such
loans made by pawnshops, finance companies and similar credit institutions. It even authorizes the BSP-MB to
prescribe different maximum rate or rates for different types of borrowings, including deposits and deposit
substitutes, or loans of financial intermediaries. Act No. 2655, an earlier law, is much broader in scope, whereas
R.A. No. 265, now R.A. No. 7653, merely supplemented it as it concerns loans by banks and other financial
institutions. Had R.A. No. 7653 been intended to repeal Section 1-a of Act No. 2655, it would have so stated in
unequivocal terms.
Usury Law; Interest Rates; Stipulations authorizing iniquitous or unconscionable interests have been invariably
struck down for being contrary to morals, if not against the law; In a usurious loan with mortgage, the right to
foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to
pay the debt due. The debt due is considered as without the stipulated excessive interest, and the legal interest
of 12% per annum will be added in place of the excessive interest formerly imposed.—It is settled that nothing
in CB Circular No. 905 grants lenders a carte blanche authority to raise interest rates to levels which will either
enslave their borrowers or lead to a hemorrhaging of their assets. As held in Castro v. Tan, 605 SCRA 231 (2009):
The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily
assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of
property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the
human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as
one that may be sustained within the sphere of public or private morals. Stipulations authorizing iniquitous or
unconscionable interests have been invariably struck down for being contrary to morals, if not against the law.
Indeed, under Article 1409 of the Civil Code, these contracts are deemed inexistent and void ab initio, and
therefore cannot be ratified, nor may the right to set up their illegality as a defense be waived. Nonetheless,
the nullity of the stipulation of usurious interest does not affect the lender’s right to recover the principal of a
loan, nor affect the other terms thereof. Thus, in a usurious loan with mortgage, the right to foreclose the
mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay the debt
due. The debt due is considered as without the stipulated excessive interest, and a legal interest of 12% per
annum will be added in place of the excessive interest formerly imposed.
Facts:
Advocates for Truth in Lending, Inc. (AFTIL) is a non-profit, non-stock corporation organized to engage in
pro bono concerns and activities relating to money lending issues. It was incorporated in July 9, 2010, and
a month later, it filed this petition, joined by its founder and president, Eduardo Olaguer, suing as a taxpayer
and a citizen.
History of Central Bank’s power to fix max interest rates
1. R.A. No. 265, which is created the Central Bank on June 15, 19481. R.A. No. 265, which is created
the Central Bank on June 15, 1948, empowered the CB-MB to set the maximum interest rates
which banks may charge for all types of loans and other credit operations.
2. The Usury Law was amended by P.D. 1684 giving the CB-MB authority to prescribe different
maximum rates of interest which may be imposed for a loan or renewal thereof of the forbearance
of any money, goods or credits, provided that the changes are affected gradually and announced
in advance. Section 1-a of Act No. 2655 now reads:
3. In its Resolution No. 2224 dated December 3, 1982, the CB-MB issued CB Circular No. 905, Series
of 1982, effective on January 1, 1983. It removed the ceilings on interest rates on loans or
forbearance of any money, goods or credits: Sec. 1. The rate of interest, including commissions,
premiums, fees and other fees charges, on loan or forbearance of any money be charged or
collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed
under or pursuant to the Usury law, as amended.
4. R.A. No. 7653 establishing the BSP (Bangko Sentral ng Pilipinas) to replace CB:
Sec. 135. Repealing Clause – except as may be provided for in Sections 46 and 132 of this Act,
Republic Act No. 265, as amended, the provisions of any other law, special charters, rule or
regulation issued pursuant to said Republic Act No. 265, as amended, or parts thereof, which may
be inconsistent with the provisions of this Act are hereby repealed. President Decree No. 1792 is
likewise repealed.
Issues:
1. Whether under R.A. No. 265 and/or P.D. No. 1684, the CB-MB had the statutory or constitutional
authority to prescribe the maximum rates of interest for all kinds of credit transactions and
forbearance of money, goods or credit beyond the limits prescribed in the Usury Law;
2. If so, whether the CB-MB exceeded its authority when it issued CB Circular No. 905, which removed
all interest ceilings and thus suspended Act No. 2655 as regards usurious interest rates;
3. Whether under R.A. No. 7653, the new BSP-MB may continue to enforce CB Circular No. 905.
Held:
Petition for certiorari is DISMISSED.
1. CB-MB has the statutory or constitutional authority to prescribe the max rates of interest for all
kinds of credit transactions and forbearance of money, goods or credit beyond the limits prescribed
in the Usury Law both under RA 265 and PD 1684
2. The CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular No. 905.
The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long
been recognized and upheld in many cases. As the Court explained in the landmark case of Medel
v. CA, citing several cases, CB Circular No. 905 “ did not repeal nor in anyway amend the Usury
Law but simply suspended the latter’s effectivity”.
Thus, according to the Court, by lifting the interest ceiling, CB Circular No. 905 merely upheld the
parties’ freedom of contract to agree freely on the rate of interest. It cited Art. 1306 of the New Civil
Code, under which the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
3. The BSP-MB has authority to enforce CB Circular No. 905.
Moreover, the rule is settled that repeals by implication are not favored, because laws are
presumed to be passed with deliberation and full knowledge of all laws existing pertaining to the
subject. An implied repeal is predicated upon the condition that a substantial conflict or repugnancy
is found between the new and prior laws unless irreconcilable inconsistency and repugnancy exists
in the terms of the new and old laws. We find no such conflict between the provisions of Act 2655
and RA NO. 7653.
The lifting of the ceilings for interest rates does not authorize stipulations charging
excessive, unconscionable, and iniquitous interest.
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:
The 12% per annum rate under CB Circular No. 416 shall apply only to loans or
forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance
of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies “when
the transaction involves the payment of indemnities in the concept of damage arising from the
breach or a delay in the performance of obligations in general with the application of both rates
reckoned from the time the complaint was filed until the amount is fully paid. In either instance, the
reckoning period for the commencement of the running of the legal interest shall be subject to the
condition that the courts are vested with discretion, depending on the equities of each case, on the
award of interest.”
BSP circular 799 series of 2013
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
PRINCIPLES:
Interests in the Concept of Actual and Compensatory Damages; In a loan or forbearance of money, the interest
due should be that stipulated in writing, 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, 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 12% 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.
In case of other obligations, the interest on the amount of damages may be imposed at the discretion of the
court at the rate of 6% per annum.—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.
When the judgment of the court awarding a sum of money becomes final and executory, 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 an equivalent to a forbearance of credit.—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 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:
G.R. No. 189871
August 13, 2013
DARIO NACAR, PETITIONER,
vs.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS
PRINCIPLES:
Interest Rates; In the absence of an express stipulation as to the rate of interest that would govern the parties,
the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in
judgments shall no longer be twelve percent (12%) per annum — as reflected in the case of Eastern Shipping
Lines vs. Court of Appeals, 234 SCRA 78 (1994), and Subsection X305.1 of the Manual of Regulations for Banks
and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions,
before its amendment by BSP-MB Circular No. 799 — but will now be six percent (6%) per annum effective July
1, 2013.—In the absence of an express stipulation as to the rate of interest that would govern the parties, the
rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments
shall no longer be twelve percent (12%) per annum — as reflected in the case of Eastern Shipping Lines, Inc. v.
Court of Appeals, 234 SCRA 78 (1994) and Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions,
before its amendment by BSP-MB Circular No. 799 — but will now be six percent (6%) per annum effective July
1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not
retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30,
2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest
when applicable.
Monetary Board; The Bangko Sentral ng Pilipinas-Monetary Board may prescribe the maximum rate or rates of
interest for all loans or renewals thereof or the forbearance of any money, goods or credits, including those for
loans of low priority such as consumer loans, as well as such loans made by pawnshops, finance companies and
similar credit institutions.—In the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v.
Bangko Sentral Monetary Board, 688 SCRA 530 (2013), this Court affirmed the authority of the BSP-MB to set
interest rates and to issue and enforce Circulars when it ruled that “the BSP-MB may prescribe the maximum
rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods or credits,
including those for loans of low priority such as consumer loans, as well as such loans made by pawnshops,
finance companies and similar credit institutions. It even authorizes the BSP-MB to prescribe different
maximum rate or rates for different types of borrowings, including deposits and deposit substitutes, or loans
of financial intermediaries.”
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; 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.—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.
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.—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.
When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, shall be 6% per annum from such finality until its satisfaction.—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.
Facts: