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 resps 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 consignees 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. CAs ruling:
a. Yes. Shipment was shipped in a good condition as evidenced by the bill of lading and
comml 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, attys 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 pets loss of interest
income, attorney's fees and incidentals
c. The claim of resp of the application of Usury Laws 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. Resps entered into a threshing paddy business
2. 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
3. They issued receipts to pet for 2,003 cavanes and a half of paddy (1898)
4. 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
5. He asked that the interest be imposed from the time his counsel demanded the resp for payment
6. CFI: Pay pet 2,754.81, the value of 2,003 cavanes of paddy at the rate of 11 reales the cavan and 6
percent interest on said sum reckoned from time of demand
7. Resp alleged that the receipts are credit papers (532) and according to (950) the action shall be filed until
July 1901
8. Prescription of personal property by uninterrupted loss of possession for six years. 1955 says
Issues:
1. Nature of transaction
2. Prescriptive period
3. Validity of trial courts 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. 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
2. 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)
3. 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 courts 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 resps 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, attys fees and costs
6. Resp:
a. bidding was conducted in violation of rules and regulations of pet
b. buyers 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 attys 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 attys fees
9. Tizon appealled. Reproduced his answers
10. Pet moved to strike out Suretys 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 principals 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 non-
appealing parties. EXC when the judgment cant be reversed w/o affecting the rights of his co-
debtors 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 cross-
claim v De Leon
4. Order was to pay principal amt, 1% interest/mo and 300 attys 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 WWIs bond expires at the date of PNs 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