case matrix for credit trans part 2; interest mutuum; bank deposits

Credit Transactions Case Matrix SY 2010-2011

CASE TITLE FACTS/ISSUES/(KEYWORDS) DECISIONS/DOCTRINES

Requisites for Recovery of Interest (Art. 1956)1. RADIOWEALTH

FINANCE COMPANY vs. Del Rosario; 335 SCRA 288 (2000)

RADIOWEALTH FINANCE COMPANY, petitioner, vs. Spouses VICENTE and MA. SUMILANG DEL ROSARIO, respondents.G.R. No. 138739. July 6, 2000PANGANIBAN, J.:

Facts:On March 2, 1991, Spouses Vicente and Maria Sumilang del Rosario (herein respondents), jointly and severally executed, signed and delivered in favor of Radiowealth Finance Company (herein petitioner), a Promissory Note for P138,948 payable in installments for 12 consecutive months. In the promissory note the date of the start of the monthly installments and when in each month such installment becomes due, were left blank. A late payment penalty charge of 2.5% per month shall be added to each unpaid installment from due date thereof until fully paid. An acceleration clause was likewise stipulated in the promissory note. In other words, in case of default in any installments or late payment charges thereon, the remaining unpaid and agreed late payment charges shall at once become due and demandable without need of notice or demand. Thereafter, spouses Del Rosario defaulted on the monthly installments. Despite repeated demands, they failed to pay their obligation under the promissory note. A complaint was filed for the collection of sum of money. It was likewise prayed for in the complaint that a 14% interest per annum should be charged from May 6, 1993 until fully paid. The trial court dismissed the complaint for failure of petitioner to substantiate it s claims. On appeal the CA reversed the decision of the lower court, hence this recourse.

Petitioners claim that spouses Del Rosario are liable for the

First Issue:The Court held that the contention of the respondents is untenable. The act of leaving blank space the due date of the first installment did not necessary mean that the debtors were allowed to pay as and when they could. If this was the intention of the parties, they should have so indicated in the promissory note. However, it did not reflect any such intention. While the specific date on which each installment would be due was left blank, the note clearly provided that each installment should be payable each month. Furthermore, it also provided for an acceleration clause and a late payment penalty, both of which showed the intention of the parties that the installment should be paid at a definite date. Had they intended that the debtors could pay as and when they could, there would have been no need for these two clauses.The installments had already become due and demandable is bolstered by the fact that respondents started paying installments on the promissory note. The obligation of the respondents had matured and they clearly defaulted when their checks bounced. Per the acceleration clause, the whole debt became due one month after the date of the note because the check representing their first installment bounced.

Second Issue:It was held that the 14% interest per annum prayed for by the petitioner in the complaint to be paid by the respondents has no legal basis. Payment of interest was not expressly stipulated in the promissory note. What stipulated in the Note is a late payment penalty of 2.5% monthly to be added to each unpaid installment until fully paid. Thus, the interest should be deemed included in such penalty.

Eppie D. Severino PSU School of Law



whole amount of the their debt and interest thereon, inasmuch as they defaulted on the monthly installments. It was contended, on the other hand, by the respondents that the installments were not yet due and demandable. They theorize that the action for immediate enforcement of their obligation is premature because its fulfillment is dependent on the sole will of the debtor. Hence, the proper court should first fix a period for payment, pursuant to Articles 1180 and 1197 of the Civil Code. Issues:Is the entire obligation of the respondents has become due and demandable upon their default on the monthly installments? Whether the interest prayed for by the petitioner is proper?

Relation between bank and depositor; Contract of Loan (Art. 1980)2. Banco De Oro- BANCO DE ORO-EPCI, INC.,* petitioner, Held:


http://www.lawphil.net/judjuris/juri2008/apr2008/gr_179901_2008.html#fnt*



EPCI vs. JAPRL Dev’t Corp., 551 SCRA 342 (2008)

vs.JAPRL DEVELOPMENT CORPORATION, RAPID FORMING CORPORATION and JOSE U. AROLLADO, respondents.G.R. No. 179901 April 14, 2008CORONA, J.:

Facts:After evaluating the financial statements of JAPRL Dev’t Corp., Banco de Oro (BDO) extended credit facilities to it amounting to P230,000,000. However, despite its seemingly strong financial position, JAPRL defaulted in the payment of four trust receipts soon after the approval of it loan. BDO later learned from the financial adviser of JAPRL, that the latter falsified and altered its financial statement by allegedly bloating its sales revenues to post a big income from operations for the concerned years to project itself as a viable investment. Because JAPRL ignored BDO’s demand for payment, the latter filed a complaint before RTC Makati for sum of money with an application for the issuance of writ of preliminary attachment on August 21, 2003. The application for preliminary attachment was denied but it issued an order for service of summon on JAPRL. Respondents moved to dismiss the complaint to an allegedly invalid of service of summons because the officer’s return stated that an “administrative assistant” had received the summons. The motion was denied by the trial court. JAPRL appealed the decision contending that the trial did not acquire jurisdiction over its person due to service of defective summons. The CA granted the petition of JAPRL. Hence, this petition for review on certiorari. BDO asserts that JAPRL maliciously evaded the service of summons to prevent the RTC of Makati to acquire jurisdiction over the person of the latter and employed bad faith to delay proceedings by cunningly exploiting procedural technicalities to avoid the payment of its obligations.

Yes.Respondents abused procedural technicalities (albeit unsuccessfully) for the sole purpose of preventing, or at least delaying, the collection of their legitimate obligations. Their reprehensible scheme impeded the speedy dispensation of justice. More importantly, however, considering the amount involved, respondents utterly disregarded the significance of a stable and efficient banking system to the national economy.

Banks are entities engaged in the lending of funds obtained through deposits from the public. They borrow the public's excess money (i.e., deposits) and lend out the same. Banks therefore redistribute wealth in the economy by channeling idle savings to profitable investments. Banks operate (and earn income) by extending credit facilities financed primarily by deposits from the public. They plough back the bulk of said deposits into the economy in the form of loans. Since banks deal with the public's money, their viability depends largely on their ability to return those deposits on demand. For this reason, banking is undeniably imbued with public interest.

Consequently, much importance is given to sound lending practices and good corporate governance. Protecting the integrity of the banking system has become, by large, the responsibility of banks. The role of the public, particularly individual borrower, has not been emphasized. Nevertheless, we are not unaware of the rampant and unscrupulous practice of obtaining loans without intending to pay the same.

In this case, petitioner alleged that JAPRL fraudulently altered and falsified its financial statements in order to obtain its credit facilities. Considering the amount of petitioner's exposure in JAPRL, justice and fairness dictate that the Makati RTC hear whether or not respondents indeed committed fraud in securing the credit accommodation. A finding of fraud will change the whole picture. In this event, petitioner can use the finding of fraud to move for the dismissal of the rehabilitation case in the Calamba RTC.The protective remedy of rehabilitation was never intended to be a refuge of a debtor guilty of fraud.




Issue:In employing bad faith, has JAPRL exploited procedural technicalities to avoid the payment of their obligations and ultimately disregarded the significance of a stable and efficient banking system to the national economy?

Bank Deposits are in the nature of irregular deposits (Art. 1980)3. Lucman vs.

Malawi 511 SCRA 268

MACLARING M. LUCMAN, in his capacity as the Manager of the LAND BANK OF THE PHILIPPINES, Marawi City, petitioner,

Held:First Issue:




(2006) vs.ALIMATAR MALAWI, ABDUL-KHAYER PANGCOGA, SALIMATAR SARIP, LOMALA CADAR, ALIRIBA S. MACARAMBON and ABDUL USMAN, respondents.G.R. No. 159794 December 19, 2006TINGA, J.:

Facts:The six respondents in this case filed a petition for mandamus against the branch manager, Maclaring Lucman, of LBP-Marawi Branch, alleging that they were deprived of their IRA for the 2nd and 3rd quarters of 1997. And that the same funds were released by the bank to third persons. The respondents were the incumbent barangay chairmen of the six barangays in Municipality of Pagayawan, Lanao del Sur. Elections of 12 May 1997 in such barangays resulted in failure of elections, thus the respondents remained in a holdover capacity. During the 2nd quarter of the 1997, LBP was selected as the government depository banks for the IRAs of said barangays. Being a new government depositary bank for the IRA funds, the authorized public officials had to open new accounts in behalf of their government units with the proper LBP branch from which they could withdraw the IRAs. The respondents, after the failed 1997 elections, attempted to open their respective barangays’ IRA account but were refused by the branch manager because respondents needed to show their individual certifications showing their right to continue serving as Barangay Chairmen and the requisite Municipal Accountant’s Advice giving them authority to withdraw IRA deposits. Later on, five other persons presented themselves before petitioner as the newly proclaimed Punong Barangays of the five barangays concerned, each of them presenting a certification of his election as Punong Barangay issued by the provincial director of the DILG-ARMM and another Certification issued by the Local Government

From the records of the case, it appears that the shares of the barangays in the IRA had already been remitted by the Department of Budget and Management (DBM) to the LBP Marawi Branch where they were kept in the accounts opened in the names of the barangays.

By virtue of the deposits, there exists between the barangays as depositors and LBP a creditor-debtor relationship. Fixed, savings, and current deposits of money in banks and similar institutions are governed by the provisions concerning simple loan. In other words, the barangays are the lenders while the bank is the borrower.

Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans (Art. 1980, Civil Code). Current and savings deposits are loans to a bank because it can use the same. The respondents here, in making deposits that earn interest with the LBP was in reality a creditor of said bank and not a depositor. LBP was in turn a debtor of the repondents. Failure of the Bank to honor the deposit is failure to pay its obligation as a debtor and not a breach of trust arising from a depository's failure to return the subject matter of the deposit. The relationship being contractual in nature, mandamus is therefore not an available remedy since mandamus does not lie to enforce the performance of contractual obligations.

Second Issue:No. The IRA funds for which the bank accounts were created belong to the barangays headed by respondents. The barangays are the only lawful recipients of these funds. Consequently, any transaction or claim involving these funds can be done only through the proper authorization from the barangays as juridical entities. The determination, therefore, of whether or not the IRA funds were unlawfully withheld or improperly released to third persons can only be determined if the barangays participated as parties to this action. These questions cannot be resolved with finality without the involvement of the barangays. After all, these controversies involve funds rightfully belonging to the barangays. Hence, the barangays are indispensable parties in this case.

Clearly, this case was not initiated by the barangays themselves. Neither did the




Operations Officer attesting, among others, to the revocation of the certification previously issued to respondents. Without verifying the authenticity of the certifications presented by these third persons, petitioner proceeded to release the IRA funds for the 2nd and 3rd quarters of 1997 to them.

As a result, the respondents filed a petition for Mandamus with Application for Preliminary Injunction before the RTC of Lanao del Sur to compel the petitioner to allow them to open and maintain deposit accounts covering the IRAs of their respective barangays and to withdraw therefrom. The lower court rendered a decision ordering Lucman to pay respondents the IRAs of their respective barangays by virtue of their holdover capacity and had a perfect right to continue performing the duties and functions of their positions including the withdrawal of funds of their respective barangays. On appeal, the CA affirmed the lower court’s decision, hence this present petition.

Issues:1. What is the cause of action alleged in the initiatory

pleading filed by the respondents before the trial court?

2. Are the barangay chairmen has a legal personality to bring the suit?

barangay chairmen file the suit in representation of their respective barangays. Nothing from the records shows otherwise. On this score alone, the case in the lower court should have been dismissed. Even if the barangays themselves had filed the case, still it would not prosper. The case involves government funds and as such, any release therefrom can only be done in accordance with the prevailing rules and procedures.

4. Guingona, Jr., vs. City Fiscal of Manila128 SCRA 577(1984)

TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS, petitioners, vs.THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. LOTA and CLEMENT DAVID,




respondents. G.R. No. L-60033 April 4, 1984MAKASIAR, Actg. C.J.

Deposits are governed by the provisions of mutuum or simple loan (Arts. 1956 and 1980)5. Overseas Bank

of Manila vs. CA; Tapia(105 SCRA 49)1981

THE OVERSEAS BANK OF MANILA, petitioners, vs.COURT OF APPEALS and TONY D. TAPIA, in his capacity as Attorney-in-Fact of ENRIQUETA MICHEL DE CHAMPOURCIN respondents. G.R. No. L-49353 June 11, 1981 BARREDO, J.:


case matrix for credit trans part 2; interest mutuum; bank deposits

Documents