SECURITIES TRANSACTIONS Course Outline LOAN CIVIL CODE (NCC) ARTICLE 1933 1934 Article 1933.

.By the contract o !oan" one o the #art$e% &e!$'er% to another" e$ther %o(eth$n) not con%*(a+!e %o that the !atter (ay *%e the %a(e or a certa$n t$(e an& ret*rn $t" $n ,h$ch ca%e the contract $% ca!!e& a co((o&at*(- or (oney or other con%*(a+!e th$n)" *#on the con&$t$on that the %a(e a(o*nt o the %a(e .$n& an& /*a!$ty %ha!! +e #a$&" $n ,h$ch ca%e the contract $% %$(#!y ca!!e& a !oan or (*t**(0 Co((o&at*( $% e%%ent$a!!y )rat*$to*%0 1$(#!e !oan (ay +e )rat*$to*% or ,$th a %t$#*!at$on to #ay $ntere%t0 In co((o&at*( the +a$!or reta$n% the o,ner%h$# o the th$n) !oane&" ,h$!e $n %$(#!e !oan" o,ner%h$# #a%%e% to the +orro,er0 10 People v. Concepcion, 44 2h$!0 134" 50R0 No0 19196" No'e(+er 33" 193307BI1NAR (1o*rce8 htt#899,,,0%cr$+&0co(9&oc9:6;;39:<9Ca%e7D$)e%t7Cre&$t7E=5a(+et) FACTS Venanc$o Conce#c$on" 2re%$&ent o the 2h$!$##$ne Nat$ona! Ban. an& a (e(+er o the Boar& thereo " a*thor$>e& an e?ten%$on o cre&$t $n a'or o @2*no y Conce#c$on" 10 en C0 to the (ana)er o the A#arr$ +ranch o the 2h$!$##$ne Nat$ona! Ban.0 @2*no y Conce#c$on" 10 en C0 @ ,a% a co7#artner%h$# ,here Conce#c$on $% a #artner0 1*+%e/*ent!y" Conce#c$on ,a% char)e& an& o*n& )*$!ty $n the Co*rt o A$r%t In%tance o Ca)ayan ,$th '$o!at$on o %ect$on 3; o Act No03 < 4 < 0 1 e c t $ o n 3 ; o A c t N o 0 3 < 4 < # r o ' $ & e % t h a t t h e N a t $ o n a ! B a n . % h a ! ! n o t " & $ r e c t ! y o r $n&$rect!y" )rant !oan% to any o the (e(+er% o the +oar& o &$rector% o the +an. nor to a)ent% o the +ranch +an.%0 Co*n%e! or the &e en%e ar)*e that the &oc*(ent% o recor& &o not #ro'e that a*thor$ty to (a.e a !oan ,a% )$'en" +*t on!y %ho, the conce%%$on o a cre&$t0 They a'erre& that the )rant$n) o a cre&$t to the co7#artner%h$# @2*no y Conce#c$on" 10 en C0@ +y Venanc$o Conce#c$on" 2re%$&ent o the 2h$!$##$ne Nat$ona! Ban." $% not a @!oan@ ,$th$n the (ean$n) o %ect$on 3; o Act No0 3<4<0 ISSUE Bhether or not the )rant$n) o a cre&$t o 2366"666 to the co7#artner%h$# @2*no y Conce#c$on" 10 en C0@ +y Venanc$o Conce#c$on" 2re%$&ent o the 2h$!$##$ne Nat$ona! Ban." a @!oan@ ,$th$n the (ean$n) o %ect$on 3; o Act No0 3<4<0 !EL" CE1 The @cre&$t@ o an $n&$'$&*a! (ean% h$% a+$!$ty to +orro, (oney +y '$rt*e o the con $&ence or tr*%t re#o%e& +y a !en&er that he ,$!! #ay ,hat he (ay #ro($%e0 A @!oan@ (ean% the &e!$'ery +y one #arty an& the rece$#t +y the other #arty o a )$'en %*( o (oney" *#on an a)ree(ent" e?#re%% or $(#!$e&" to re#ay the %*( !oane&" ,$th or ,$tho*t $ntere%t0 The conce%%$on o a @cre&$t@ nece%%ar$!y $n'o!'e% the )rant$n) o @!oan%@ *# to the !$($t o the a(o*nt $?e& $n the @cre&$t0@ 30 De !o% 1anto% '0 Darra" 1; 2h$!0 14<" 50R0 No0 41;6" Ae+r*ary 16" 191607BOEBALE1 Aact%8 The 2!a$nt$ Ae!$? &e!o% 1anto% $!e& th$% %*$t a)a$n%t A)*%t$na Darra0 Darra ,a% the a&($n$%trat$? o the e%tate o D$(enea0 2!a$nt$ a!!e)e& that he o,ne& 16 1%t c!a%% cara+ao% ,h$ch he !ent to h$% ather7$n7!a, D$(enea to +e *%e& $n the an$(a!7#o,er ($!! ,$tho*t co(#en%at$on0 Th$% ,a% &one on the con&$t$on o the$r ret*rn a ter the ,or. at the !atterF% ($!! $% ter($nate&0 Bhen &e!o% 1anto% &e(an&e& the ret*rn o the an$(a!% D$(enea re *%e&" hence th$% %*$t0 Issue #$N t%e contr&cts is one o' & co((o)&tu( R*!$n)8 CE10 The cara+ao% ,ere )$'en on co((o&at*( a% the%e ,ere &e!$'ere& to +e *%e& +y &e en&ant0 G#on a$!*re o &e en&ant to ret*rn the catt!e *#on &e(an&" he $% *n&er the o+!$)at$on to $n&e(n$ y the #!a$nt$ +y #ay$n) h$( the$r 'a!*e0 1$nce the 4 cara+ao% ,ere not the #ro#erty o the &ecea%e& or o any o h$% &e%cen&ant%" $t $% the &*ty o the a&($n$%tratr$? o the e%tate to e$ther ret*rn the( or $n&e(n$ y the o,ner thereo o the$r 'a!*e0 Article 193*.An acce#te& #ro($%e to &e!$'er %o(eth$n) +y ,ay o co((o&at*( or %$(#!e !oan $% +$n&$n) *#on #art$e%"

+*t the co((o&at*( or %$(#!e !oan $t%e! %ha!! not +e #er ecte& *nt$! the &e!$'ery o the o+Hect o the contract 10 1a*ra I(#ort '0 DB2" 44 1CRA 44;" 50R0 No0 L73494:" A#r$! 3<:" 19<3072ABALAN 1o*rce8 htt#899!e?theor$ca0+!o)%#ot0co(936139639cre&$t7tran%act$on%7&$)e%t0ht(! F&cts 1a*ra a##!$e& to the Reha+$!$tat$on A$nance Cor#orat$on (RAC)" +e ore $t% con'er%$on $nto DB2" or an $n&*%tr$a! !oan to +e *%e& or con%tr*ct$on o actory +*$!&$n)" or #ay(ent o the +a!ance o the #*rcha%e #r$ce o the H*te (ach$nery an& e/*$#(ent an& a% a&&$t$ona! ,or.$n) ca#$ta!0 In Re%o!*t$on No014;" the !oan a##!$cat$on ,a% a##ro'e& to +e %ec*re& $r%t +y (ort)a)e on the actory +*$!&$n)%" the !an& %$te" an& (ach$nery an& e/*$#(ent to +e $n%ta!!e&0 The (ort)a)e ,a% re)$%tere& an& &oc*(ent% or the #ro($%%ory note ,ere e?ec*te&0 The cance!!at$on o the (ort)a)e ,a% re/*e%te& to (a.e ,ay or the re)$%trat$on o a (ort)a)e contract o'er the %a(e #ro#erty $n a'or o 2r*&ent$a! Ban. an& Tr*%t Co0" the !atter ha'$n) $%%*e& 1a*ra !etter o cre&$t or the re!ea%e o the H*te (ach$nery0 A% %ec*r$ty" 1a*ra e?ec*te a tr*%t rece$#t $n a'or o the 2r*&ent$a!0 Aor a$!*re o 1a*ra to #ay %a$& o+!$)at$on" 2r*&ent$a! %*e& 1a*ra0 A ter 9 year% a ter the (ort)a)e ,a% cance!!e&" 1a*ra %*e& RAc a!!e)$n) a$!*re to co(#!y ,$th t$t% o+!$)at$on% to re!ea%e the !oan #rocee&%" there+y #re'ente& $t ro( #ay$n) the o+!$)at$on to 2r*&ent$a! Ban.0 The tr$a! co*rt r*!e& $n a'or o 1a*ra" r*!$n) that there ,a% a #er ecte& contract +et,een the #art$e% a& that the RAC ,a% )*$!ty o +reach thereo 0 Issue Bhether or not there ,a% a #er ecte& contract +et,een the #art$e%0 !el) The Co*rt he!& $n the a $r(at$'e0 Art$c!e 1934 #ro'$&e%8 An acce#te& #ro($%e to &e!$'er %o(eth$n) +y ,ay o co((o&at*( or %$(#!e !oan $% +$n&$n) *#on the #art$e%" +*t the co((o&at*( or %$(#!e !oan $t%e! %ha!! not +e #er ecte& *nt$! &e!$'ery o the o+Hect o the contract0 There ,a% *n&o*+te&!y o er an& acce#tance $n the ca%e0 Bhen an a##!$cat$on or a !oan o (oney ,a% a##ro'e& +y re%o!*t$on o the re%#on&ent cor#orat$on an& the re%#on&$n) (ort)a)e ,a% e?ec*te& an& re)$%tere&" there ar$%e% a #er ecte& con%en%*a! contract0 30 Na)*$at '0 CA" 413 1CRA ;91" 50R0 No0 11:3<;" Octo+er 63" 366307AORTE1 Celestin&N&+ui&t v. CA, Auror& ,ue&no -.//30 "octrine !oan contract $% a rea! contract" not con%en%*a!" an&" a% %*ch" $% #er ecte& on!y *#on the &e!$'ery o the o+Hect o the contract F&cts A*rora a##!$e& or a !oan ,$th Ce!e%t$na $n the a(o*nt o 2366I Ce!e%t$na $%%*e& chec.% to A*rora +*t the or(er $n%tr*cte& her a)ent" R*+y R*e+en e!&t to ho!& the chec.% #en&$n) &e!$'ery o a&&$t$ona! co!!atera! ro( A*rora A*rora to %ec*re the !oan e?ec*te& a Dee& o Rea! E%tate Eort)a)e $n a'or o Na)*$at o A*rora $%%*e& #o%t&ate& chec. #aya+!e to Ce!e%t$na =o,e'er" the chec. or A*rora ,a% ne'er re!ea%e& +y R*+y or Ce!e%t$na Bhen Ce!e%t$na #re%ente& the chec. $%%*e& +y A*rora $t ,a% &$%honore& &*e to $n%* $c$ency o *n& A*rora $!e& ,$th the co*rt a Co(#!a$nt or Cance!!at$on o o Rea! E%tate Eort)a)e (REE) o RTC cance!!e& the REE #ON A*rora rece$'e& the !oan #rocee&% ,h$ch ,ere %*##o%e& to +e co'ere& +y chec.% $%%*e& +y Ce!e%t$na NOJ (O co*r%eJ An))*!an)na(anJ) !EL" The Co*rt o*n& that chec.% $%%*e& or $n&or%e& to A*rora K*eaLo ,ere ne'er enca%he& or &e#o%$te& to her acco*nt Ce!e%t$naNa)*$atF%(ere $%%*ance o chec.% not re%*!t $n #er ect$on o contract o !oan On!y a ter the chec.% ha'e #ro&*ce& the e ect o #ay(ent that the contract o !oan (ay +e &ee(e& #er ecte&0 Art0 1934 o the C$'$! Co&e #ro'$&e%8

An acce#te& #ro($%e to &e!$'er %o(eth$n) +y ,ay o co((o&at*( or %$(#!e !oan $% +$n&$n) *#on the #art$e%" +*t the co((o&at*( or %$(#!e !oan $t%e! %ha!! not +e #er ecte& *nt$! the &e!$'ery o the o+Hect o the contract The o+Hect o the contract $n th$% ca%e $% the !oan #rocee&% ,h$chA*rora K*eaLo ,o*!& enHoy on!y *#on the enca%h(ent o the chec.% %$)ne& or $n&or%e& +yCe!e%t$naNa)*$at0 I $n&ee& the chec.% ,ere enca%he& or &e#o%$te&" Ce!e%t$naNa)*$at ,o*!& ha'e certa$n!y #re%ente& the corre%#on&$n) &oc*(entary e'$&ence" %*ch a% the ret*rne& chec.% an& the #ert$nent +an. recor&%0 o 1$nce Na)*$at #re%ente& no %*ch #roo " $t o!!o,% that the chec.% ,ere not enca%he& or cre&$te& to K*eaLoF% acco*nt0 A(#!e e'$&ence that R*+y R*e+en e!&t $% a*thor$>e& a)ent o Na)*$at R*e+en e!&t to!& to ho!& chec.% or K*eano #en&$n) &e!$'ery o a&&$t$ona! co!!atera! o

30 Th$o '0 5arc$a" ;1: 1CRA 433" 50R0 No0 1;4:<:" Earch 14" 366<07IGN5 FACTS Re%#on&ent Th$o rece$'e& ro( #et$t$oner 5arc$a t,o cro%%e& chec.% ,h$ch a(o*nt to G1M166"666 an& G1M;66"666" re%#ect$'e!y" #aya+!e to the or&er o Ear$!o* 1ant$a)o0 Accor&$n) to #et$t$oner" re%#on&ent a$!e& to #ay the #r$nc$#a! a(o*nt% o the !oan% ,hen they e!! &*e an& %o %he $!e& a co(#!a$nt or %*( o (oney an& &a(a)e% ,$th the RTC0 Re%#on&ent &en$e& that %he contracte& the t,o !oan% an& co*ntere& that $t ,a% Ear$!o* 1at$a)o to ,ho( #et$t$oner !ent the (oney0 1he c!a$(e& %he ,a% (ere!y a%.e& y #et$t$oner to )$'e the chec.% to 1ant$a)o0 1he $%%*e& the chec.% or 2<4"666 an& 236"666 not a% #ay(ent o $ntere%t +*t to acco((o&ate #et$t$onerF% re/*e%t that re%#on&ent *%e her o,n chec.% $n%tea& o 1ant$a)oF%0 RTC r*!e& $n a'or o #et$t$oner0 CA re'er%e& RTC an& r*!e& that there ,a% no contract o !oan +et,een the #art$e%0 ISSUE (1) Bhether or not there ,a% a contract o !oan +et,een #et$t$oner an& re%#on&ent0 (3) Bho +orro,e& (oney ro( #et$t$oner" the re%#on&ent or Ear$!o* 1ant$a)oN !EL" (1) The Co*rt he!& $n the a $r(at$'e0 A !oan $% a rea! contract" not con%en%*a!" an& a% %*ch I #er ecte& on!y *#on the &e!$'ery o the o+Hect o the contract0 G#on &e!$'ery o the contract o !oan ($n th$% ca%e the (oney rece$'e& +y the &e+tor ,hen the chec.% ,ere enca%he&) the &e+tor ac/*$re% o,ner%h$# o %*ch (oney or !oan #rocee&% an& $% +o*n& to #ay the cre&$tor an e/*a! a(o*nt0 It $% *n&$%#*te& that the chec.% ,ere &e!$'ere& to re%#on&ent0 (3) =o,e'er" the chec.% ,ere cro%%e& an& #aya+!e not to the or&er o the re%#on&ent +*t to the or&er o a certa$n Ear$!o* 1ant$a)o0 De!$'ery $% the act +y ,h$ch the res or %*+%tance $% thereo #!ace& ,$th$n the act*a! or con%tr*ct$'e #o%%e%%$on or contro! o another0 A!tho*)h re%#on&ent &$& not #hy%$ca!!y rece$'e the #rocee&% o the chec.%" the%e $n%tr*(ent% ,ere #!ace& $n her contro! an& #o%%e%%$on *n&er an arran)e(ent ,here+y %he act*a!!y re7!ent the a(o*nt to 1ant$a)o0 2et$t$on )rante&- H*&)(ent an& re%o!*t$on re'er%e& an& %et a%$&e0 CO11O"ATU1 NCC ARTICLE 194;719;3 Article 1932.The +a$!ee $n co((o&at*( ac/*$re% the *%e o the th$n) !oane& +*t not $t% r*$t%- $ any co(#en%at$on $% to +e #a$& +y h$( ,ho ac/*$re% the *%e" the contract cea%e% to +e a co((o&at*(0 10 Re#*+!$c '0 Ba)ta%" 4 1CRA 343" 50R0 No0 L71<4<4" Octo+er 3;" 194307( ro( net) Aact%8 ret*rne&0 Ba)ta% then ,rote a !etter to the D$rector o An$(a! In&*%try that he ,o*!& #ay the 'a!*e o the three Do%e Ba)ta% +orro,e& ro( the B*rea* o An$(a! In&*%try three +*!!% or a #er$o& o one year or +ree&$n) #*r#o%e% %*+Hect to a )o'ern(ent char)e o +ree&$n) ee o 16O o the +oo. 'a!*e o the +oo.%0 G#on the e?#$rat$on o the contract" Ba)ta% a%.e& or a rene,a! or another one year" ho,e'er" the 1ecretary o A)r$c*!t*re an& Nat*ra! Re%o*rce% a##ro'e& on!y the rene,a! or one +*!! an& other t,o +*!!% +e

+*!!% ,$th a &e&*ct$on o year!y &e#rec$at$on0 The D$rector a&'$%e& h$( that the 'a!*e cannot +e &e#rec$ate& an& a%.e& Ba)ta% to e$ther ret*rn the +*!!% or #ay the$r +oo. 'a!*e0 Ba)ta% ne$ther #a$& nor ret*rne& the +*!!%0 The Re#*+!$c then co((ence& an act$on a)a$n%t Ba)ta% or&er$n) h$( to ret*rn the +*!!% or #ay the$r +oo. 'a!*e0 A ter hear$n)" the tr$a! Co*rt r*!e& $n a'or o the Re#*+!$c" a% %*ch" the Re#*+!$c (o'e& e? #arte or a ,r$t o e?ec*t$on ,h$ch the co*rt )rante&0 Ae!$c$&a& Ba)ta%" the %*r'$'$n) %#o*%e an& a&($n$%trator o Ba)ta%F e%tate" ret*rne& the t,o +*!!% an& $!e& a (ot$on to /*a%h the ,r$t o e?ec*t$on %$nce one +*!! cannot +e ret*rne& or $t ,a% .$!!e& +y )*n%hot &*r$n) a =*. ra$&0 The Co*rt &en$e& her (ot$on hence" th$% a##ea! cert$ $e& +y the Co*rt o A##ea!% +eca*%e on!y /*e%t$on% o !a, are ra$%e&0 ISSUE8 BON the contract ,a% co((o&at*(-th*%" Ba)ta% +e he!& !$a+!e or $t% !o%% &*e to orce (aHe*re0 RULIN38 A contract o co((o&at*( $% e%%ent$a!!y )rat*$to*%0 1*#re(e Co*rt he!& that Ba)ta% ,a% !$a+!e or the !o%% o the +*!! e'en tho*)h $t ,a% ca*%e& +y a ort*$to*% e'ent0 I the contract ,a% one o !ea%e" then the 16O +ree&$n) char)e $% co(#en%at$on (rent) or the *%e o the +*!! an& Ba)ta%" a% !e%%ee" $% %*+Hect to the re%#on%$+$!$t$e% o a #o%%e%%or0 =e $% a!%o $n +a& a$th +eca*%e he cont$n*e& to #o%%e%% the +*!! e'en tho*)h the ter( o the contract ha% a!rea&y e?#$re&0 I the contract ,a% one o co((o&at*(" he $% %t$!! !$a+!e +eca*%e8 (1) he .e#t the +*!! !on)er than the #er$o& %t$#*!ate&- an& (3) the th$n) !oane& ha% +een &e!$'ere& ,$th a##ra$%a! o $t% 'a!*e (16O)0 No %t$#*!at$on that $n ca%e o !o%% o the +*!! &*e to ort*$to*% e'ent the !ate h*%+an& o the a##e!!ant ,o*!& +e e?e(#t ro( !$a+$!$ty0 The or$)$na! #er$o& o the !oan ,a% ro( : Eay 194: to < Eay 19490 The !oan o one +*!! ,a% rene,e& or another #er$o& o one year to en& on : Eay 19;60 B*t the a##e!!ant .e#t an& *%e& the +*!! *nt$! No'e(+er 19;3 ,hen &*r$n) a =*. ra$& $t ,a% .$!!e& +y %tray +*!!et%0 A*rther(ore" ,hen !ent an& &e!$'ere& to the &ecea%e& h*%+an& o the a##e!!ant the +*!!% ha& each an a##ra$%e& +oo. 'a!*e" to ,$th8 the 1$n&h$" at 21"1<4044" the Bha)nar$ at 21"3360;4 an& the 1ah$n$,a! at 2<440440 It ,a% not %t$#*!ate& that $n ca%e o !o%% o the +*!! &*e to ort*$to*% e'ent the !ate h*%+an& o the a##e!!ant ,o*!& +e e?e(#t ro( !$a+$!$ty0 Article 1934.Con%*(a+!e )oo&% (ay +e the %*+Hect o co((o&at*( $ the #*r#o%e o the contract $% not the con%*(#t$on o the o+Hect" a% ,hen $t $% (ere!y or e?h$+$t$on0 10 2ro&*cer% Ban. '0 CA" 39< 1CRA 4;1" 50R0 No0 11;334" Ae+r*ary 19" 366307( ro( net) F&cts PV$'e% (,$!! +e the cre&$tor $n th$% ca%e) ,a% a%.e& +y h$% r$en& 1anche> to he!# the!atterF% r$en&" Doron$!!a (,$!! +e the &e+tor $n th$% ca%e) $n $ncor#orat$n) Doron$!!aF%+*%$ne%% 1tre!a0 Th$% he!# +a%$ca!!y $n'o!'e& V$'e% &e#o%$t$n) a certa$n a(o*nt o (oney $n 1tre!aF% +an. acco*nt or #*r#o%e% o $ncor#orat$on (rat$ona!e8 Doron$!!a ha& to%ho, that he ha& %* $c$ent *n&% or $ncor#orat$on)0 Th$% a(o*nt %ha!! !ater +e ret*rne& to V$'e%0 PRe!y$n) on the a%%*rance% an& re#re%entat$on% o 1anche> an& Doron$!!a" V$'e% $%%*e& achec. o 2366"66 $n a'or o 1tre!a an& &e#o%$te& the %a(e $nto 1tre!aF% ne,!y7o#ene&+an. acco*nt (the #a%%+oo. ,a% )$'en to the ,$ e o V$'e% an& the #a%%+oo. ha& an$n%tr*ct$on that no ,$th&ra,a!%9&e#o%$t% ,$!! +e a!!o,e& *n!e%% the #a%%+oo. $%#re%ente&)0 PLater on" V$'e% !earne& that 1tre!a ,a% no !on)er ho!&$n) o $ce $n the a&&re%% #re'$o*%!y)$'en to h$(0 =e !ater o*n& o*t that the *n&% ha& a!rea&y +een ,$th&ra,n !ea'$n) on!ya +a!ance o 296"6660 The V$'e% %#o*%e% tr$e& to ,$th&ra, the a(o*nt" +*t $t ,a%*na+!e to %$nce the +a!ance ha& to an%,er or certa$n #o%t&ate& chec.% $%%*e& +yDoron$!!a0 PDoron$!!a (a&e 'ar$o*% ten&er% o chec. $n a'or o V$'e% $n or&er to #ay h$% &e+t0 A!! o ,h$ch ,ere &$%honore&0 P=ence" V$'e% $!e& an act$on or reco'ery o %*( a)a$n%t Doron$!!a" 1anche>" D*(a)#$an& 2ro&*cerF% Ban.0

PTC Q CA8 r*!e& $n a'or o V$'e%0 Issue$s (1)BON the tran%act$on $% a co((o&at*( or a (*t**(0 COEEODATGE0(3) BON the act that there $% an a&&$t$ona! 2 13"666 (a!!e)e&!y re#re%ent$n) $ntere%t) $nthe a(o*nt to +e ret*rne& to V$'e% con'ert% the tran%act$on ro( co((o&at*( to(*t**(0 NO0(3)BON 2ro&*cerF% Ban. $% %o!$&ar$!y !$a+!e to V$'e%" con%$&er$n) that $t ,a% not #r$'y tothe tran%act$on +et,een V$'e% an& Doron$!!a0 CE10 !el)$R&tio (1)The tran%act$on $% a co((o&at*(0 PCC 1933 (the #ro'$%$on &$%t$n)*$%h$n) +et,een the t,o .$n&% o !oan%) %ee( to $(#!ythat $ the %*+Hect o the contract $% a con%*((a+!e th$n)" %*ch a% (oney" the contract,o*!& +e a (*t**(0 =o,e'er" there are $n%tance% ,hen a co((o&at*( (ay ha'e or$t% o+Hect a con%*((a+!e th$n)0 1*ch can +e o*n& $n CC 1934 ,h$ch %tate% thatcon%*((a+!e )oo&% (ay +e the %*+Hect o co((o&at*( $ the #*r#o%e o the contract$% not the con%*(#t$on o the o+Hect" a% ,hen $t $% (ere!y or e?h$+$t$on0 In th$% ca%e"the $ntent$on o the #art$e% ,a% (ere!y or e?h$+$t$on0 V$'e% a)ree& to &e#o%$t h$% (oney$n 1tre!aF% acco*nt %#ec$ $ca!!y or #*r#o%e o (a.$n) $t a##ear that 1trea! ha& %* $c$entca#$ta!$>at$on or $ncor#orat$on" ,$th the #ro($%e that the a(o*nt %ho*!& +e ret*rne& Article 19*..The +a$!ee $% !$a+!e or the !o%% o the th$n)" e'en $ $t %ho*!& +e thro*)h a ort*$to*% e'ent8 (1) I he &e'ote% the th$n) to any #*r#o%e &$ erent ro( that or ,h$ch $t ha% +een !oane&(3) I he .ee#% $t !on)er than the #er$o& %t$#*!ate&" or a ter the acco(#!$%h(ent o the *%e or ,h$ch the co((o&at*( ha% +een con%t$t*te&(3) I the th$n) !oane& ha% +een &e!$'ere& ,$th a##ra$%a! o $t% 'a!*e" *n!e%% there $% a %t$#*!at$on e?e(#t$n) the +a$!ee ro( re%#on%$+$!$ty $n ca%e o a ort*$to*% e'ent(4) I he !en&% or !ea%e% the th$n) to a th$r& #er%on" ,ho $% not a (e(+er o h$% ho*%eho!&(;) I " +e$n) a+!e to %a'e e$ther the th$n) +orro,e& or h$% o,n th$n)" he cho%e to %a'e the !atter0 10 Re#*+!$c '0 Ba)ta%" 4 1CRA 343" 50R0 No0 L71<4<4" Octo+er 3;" 19430 7CA2 Aact%8 Ba)ta% +orro,e& ro( the B*rea* o An$(a! In&*%try three +*!!% or +ree&$n) #*r#o%e% %*+Hect to a 16O +ree&$n) ee o the +oo. 'a!*e o the +*!!%0 G#on the e?#$rat$on" the +orro,er a%.e& or a rene,a! or another #er$o& o one year0 =o,e'er" the 1ecretary o A)r$c*!t*re an& Nat*ra! Re%o*rce% a##ro'e& a rene,a! thereo o on!y one +*!! or another year an& re/*e%te& the ret*rn o the other t,o0 Ba)ta% ,rote to the D$rector o An$(a! In&*%try that he ,o*!& #ay the 'a!*e o the three +*!!%0 =e re$terate& h$% &e%$re to +*y the( at a 'a!*e ,$th a &e&*ct$on o year!y &e#rec$at$on to +e a##ro'e& +y the A*&$tor 5enera!0 The D$rector o An$(a! In&*%try a&'$%e& h$( that the +oo. 'a!*e o the three +*!!% co*!& not +e re&*ce& an& that they e$ther +e ret*rne& or the$r +oo. 'a!*e #a$&0 Ba)ta% a$!e& to #ay th*% an act$on ,a% $!e&0 Ba)ta%" an%,ere& that +eca*%e o the +a& #eace an& or&er %$t*at$on $n Ca)ayan Va!!ey" #art$c*!ar!y $n the +arr$o o Ba))ao" an& o the #en&$n) a##ea!" he co*!& not ret*rn the an$(a!% nor #ay the$r 'a!*e an& #raye& or the &$%($%%a! o the co(#!a$nt0 Tr$a! Co*rt r*!e& a)a$n%t Ba)ta%0 The %*r'$'$n) %#o*%e o the Ba)ta% $!e& a (ot$on a!!e)$n) that on the t,o +*!! 1$n&h$ an& Bha)nar$ ,ere ret*rne& to the B*rea* An$(a! o In&*%try on 19;3 an& that %o(et$(e $n 19;: the th$r& +*!!" the 1ah$n$,a!" &$e& ro( )*n%hot ,o*n& $n !$cte& &*r$n) a =*. ra$&0 The a##e!!ant conten&% that the 1ah$n$,a! +*!! ,a% acc$&enta!!y .$!!e& &*r$n) a ra$& ,here the an$(a! ,a% .e#t" an& that a% %*ch &eath ,a% &*e to orce (aHe*re %he $% re!$e'e& ro( the &*ty o ret*rn$n) the +*!! or #ay$n) $t% 'a!*e to the a##e!!ee0 I%%*e8 BON a##e!!ant Ba)ta% $n !$a+!e0 R*!$n)8 Ce%0 The content$on $% ,$tho*t (er$t0 The !oan +y the a##e!!ee to the !ate &e en&ant Do%e V0 Ba)ta% o the three +*!!% or +ree&$n) #*r#o%e% or a #er$o& o one year" !ater on rene,e& or another year a% re)ar&% one +*!!" ,a% %*+Hect to the #ay(ent +y the +orro,er o +ree&$n) ee o 16O o the +oo. 'a!*e o the +*!!%0

The a##e!!ant conten&% that the contract ,a% co((o&at*( an& that" or that rea%on" a% the a##e!!ee reta$ne& o,ner%h$# or t$t!e to the +*!! $t %ho*!& %* er $t% !o%% &*e to orce (aHe*re0 A contract o co((o&at*( $% e%%ent$a!!y )rat*$to*%0 I the +ree&$n) ee +e con%$&ere& a co(#en%at$on" then the contract ,o*!& +e a !ea%e o the +*!!0 Gn&er art$c!e 14<1 o the C$'$! Co&e the !e%%ee ,o*!& +e %*+Hect to the re%#on%$+$!$t$e% o a #o%%e%%or $n +a& a$th" +eca*%e %he ha& cont$n*e& #o%%e%%$on o the +*!! a ter the e?#$ry o the contract0 An& e'en $ the contract +e co((o&at*(" %t$!! the a##e!!ant $% !$a+!e" +eca*%e art$c!e 1943 o the C$'$! Co&e #ro'$&e% that a +a$!ee $n a contract o co((o&at*( R 0 0 0 $% !$a+!e or !o%% o the th$n)%" e'en $ $t %ho*!& +e thro*)h a ort*$to*% e'ent8 (3) I he .ee#% $t !on)er than the #er$o& %t$#*!ate& 0 0 0

(3) I the th$n) !oane& ha% +een &e!$'ere& ,$th a##ra$%a! o $t% 'a!*e" *n!e%% there $% a %t$#*!at$on e?e(#t$n) the +a$!ee ro( re%#on%$+$!$ty $n ca%e o a ort*$to*% e'entThe or$)$na! #er$o& o the !oan ,a% ro( : Eay 194: to < Eay 19490 The !oan o one +*!! ,a% rene,e& or another #er$o& o one year to en& on : Eay 19;60 B*t the a##e!!ant .e#t an& *%e& the +*!! *nt$! No'e(+er 19;3 ,hen &*r$n) a =*. ra$& $t ,a% .$!!e& +y %tray +*!!et%0 A*rther(ore" ,hen !ent an& &e!$'ere& to the &ecea%e& h*%+an& o the a##e!!ant the +*!!% ha& each an a##ra$%e& +oo. 'a!*e" to ,$th8 the 1$n&h$" at 21"1<4044" the Bha)nar$ at 21"3360;4 an& the 1ah$n$,a! at 2<440440 It ,a% not %t$#*!ate& that $n ca%e o !o%% o the +*!! &*e to ort*$to*% e'ent the !ate h*%+an& o the a##e!!ant ,o*!& +e e?e(#t ro( !$a+$!$ty0 Article 19*5 10 1in& v. P&scu&l, 3; 2h$!0 ;46" 50R0 No0 :331" Octo+er 14" 191307BI1NAR (c9o N$..$) Aact%8 Aranc$%co $% the o,ner o !an& an& he a!!o,e& h$% +rother" An&re%" to erect a ,areho*%e $n that !ot0 Both Aranc$%co an& An&re% &$e& an& the$r ch$!&ren +eca(e the$r re%#ect$'e he$r%8 E$na or Aranc$%co an& 2a%c*a! or An&re%0 2a%c*a! %o!& h$% %hare o the ,areho*%e an& !ot0 E$na o##o%e& +eca*%e the !ot $% her% +eca*%e her #re&ece%%or (Aranc$%co) ne'er #arte& ,$th $t% o,ner%h$# ,hen he !et An&re% con%tr*ct a ,areho*%e" hence" $t ,a% a contract o co((o&at*(0 I%%*e8 Bhat $% the nat*re o the contract +et,een Aranc$%co an& An&re%N R*!$n)8 The 1*#re(e Co*rt he!& that $t ,a% not a co((o&at*(0 It $% an e%%ent$a! eat*re o co((o&at*( that the *%e o the th$n) +e!on)$n) to another %ha!! +e or a certa$n #er$o&0 The #art$e% ne'er $?e& a &e $n$te #er$o& &*r$n) ,h$ch An&re% co*!& *%e the !ot an& a ter,ar&% ret*rn $t0 30 K*$nto% '0 Bec." 49 2h$!0 16:" 50R0 No0 44346" No'e(+er 3" 193907BOEBALE1 2!a$nt$ +ro*)ht th$% act$on to co(#e! the &e en&ant to ret*rn to her certa$n *rn$t*re ,h$ch %he !ent h$( or h$% *%e0 The &e en&ant ,a% a tenant o the #!a$nt$ an& a% %*ch occ*#$e& the !atterS% ho*%e on E0 =0 &e! 2$!ar %treet" No0 11<;0 On Dan*ary 14"1934" *#on the no'at$on o the contract o !ea%e +et,een the #!a$nt$ an& the &e en&ant" the or(er )rat*$to*%!y )rante& to the !atter the *%e o the *rn$t*re &e%cr$+e& $n the th$r& #ara)ra#h o the %t$#*!at$on o act%" %*+Hect to the con&$t$on that the &e en&ant ,o*!& ret*rn the( to the #!a$nt$ *#on the !atterS% &e(an&0 The #!a$nt$ %o!& the #ro#erty to Ear$a Lo#e> an& Ro%ar$o Lo#e> an& on1e#te(+er 14" 1934" the%e three not$ $e& the &e en&ant o the con'eyance" )$'$n) h$( %$?ty &ay% to 'acate the #re($%e% *n&er one o the c!a*%e% o the contract o !ea%e0 There a ter the #!a$nt$ re/*$re& the &e en&ant to ret*rn a!! the *rn$t*re tran% erre& to h$( or h$% *%e0 De en&ant re *%e& to ret*rn an& &e!$'er a!! the *rn$t*re *#on #!a$nt$ F% &e(an&0 The Co*rt o A$r%t In%tance o Ean$!a or&ere& that the &e en&ant ret*rn to her the three )a%heater% an& the o*r e!ectr$c !a(#% o*n& $n the #o%%e%%$on o the 1her$ o %a$& c$ty" that %he ca!! or the other *rn$t*re ro( the %a$& 1her$ o Ean$!a at her o,n e?#en%e" an& that the ee% ,h$ch the 1her$ (ay char)e or the &e#o%$t o the *rn$t*re +e #a$& #ro rata+y +oth #art$e%" ,$tho*t #rono*nce(ent a% to the co%t% 2!a$nt$ a##ea!e&

R*!$n)8 The a##ea!e& H*&)(ent $% (o&$ $e& an& the &e en&ant $% or&ere& to ret*rn an& &e!$'er to the #!a$nt$ " $n the re%$&ence or ho*%e o the!atter" a!! the *rn$t*re &e%cr$+e& $n #ara)ra#h 3 o the %t$#*!at$on o act0 The e?#en%e% ,h$ch (ay +e occa%$one& +y the &e!$'ery to an& &e#o%$t o the *rn$t*re ,$th the 1her$ %ha!! +e or the acco*nt o the &e en&ant0 The &e en&ant %ha!! #ay the co%t% $n+oth $n%tance%0 1o or&ere& 30 2aH*yo '0 CA" 436 1CRA 493" 50R0 No0 144344" D*ne 3" 3664072ABALAN 1o*rce8 htt#899ant%!e)a!0+!o)%#ot0co(936119139&$)e%t%7cre&$t7tran%act$on%0ht(! F&cts 2aH*yo entr*%te& a ho*%e to 5*e'ara or the !atterS% *%e #ro'$&e& he %ho*!& ret*rn the %a(e *#on &e(an& an& ,$th the con&$t$on that 5*e'ara %ho*!& +e re%#on%$+!e o the (a$ntenance o the #ro#erty0 G#on &e(an& 5*e'ara re *%e& to ret*rn the #ro#erty to 2aH*yo0 The #et$t$oner then $!e& an eHect(ent ca%e a)a$n%t 5*e'ara ,$th the ETC ,ho r*!e& $n a'or o the #et$t$oner0 On a##ea! ,$th the CA" the a##e!!ate co*rt re'er%e& the H*&)(ent o the !o,er co*rt on the )ro*n& that +oth #art$e% are $!!e)a! %ett!er% on the #ro#erty th*% ha'e no !e)a! r$)ht %o that the Co*rt %ho*!& !ea'e the #re%ent %$t*at$on ,$th re%#ect to #o%%e%%$on o the #ro#erty a% $t $%" an& r*!$n) *rther that the contract*a! re!at$on%h$# o 2aH*yo an& 5*e'ara ,a% that o a co((o&at*(0 Issue I% the contract*a! re!at$on%h$# o 2aH*yo an& 5*e'ara that o a co((o&at*(N !el) No0 The Co*rt o A##ea!%F theory that the Ia%*n&*an $% one o co((o&at*( $% &e'o$& o (er$t0 In a contract o co((o&at*(" one o the #art$e% &e!$'er% to another %o(eth$n) not con%*(a+!e %o that the !atter (ay *%e the %a(e or a certa$n t$(e an& ret*rn $t0 An e%%ent$a! eat*re o co((o&at*( $% that $t $% )rat*$to*%0 Another eat*re o co((o&at*( $% that the *%e o the th$n) +e!on)$n) to another $% or a certa$n #er$o&0 Th*%" the +a$!or cannot &e(an& the ret*rn o the th$n) !oane& *nt$! a ter e?#$rat$on o the #er$o& %t$#*!ate&" or a ter acco(#!$%h(ent o the *%e or ,h$ch the co((o&at*( $% con%t$t*te&0 I the +a$!or %ho*!& ha'e *r)ent nee& o the th$n)" he (ay &e(an& $t% ret*rn or te(#orary *%e0 I the *%e o the th$n) $% (ere!y to!erate& +y the +a$!or" he can &e(an& the ret*rn o the th$n) at ,$!!" $n ,h$ch ca%e the contract*a! re!at$on $% ca!!e& a #recar$*(0 Gn&er the C$'$! Co&e" #recar$*( $% a .$n& o co((o&at*(0 The Ia%*n&*an re'ea!% that the acco((o&at$on accor&e& +y 2aH*yo to 5*e'arra ,a% not e%%ent$a!!y )rat*$to*%0 Bh$!e the Ia%*n&*an &$& not re/*$re 5*e'arra to #ay rent" $t o+!$)ate& h$( to (a$nta$n the #ro#erty $n )oo& con&$t$on0 The $(#o%$t$on o th$% o+!$)at$on (a.e% the Ia%*n&*an a contract &$ erent ro( a co((o&at*(0 The e ect% o the Ia%*n&*an are a!%o &$ erent ro( that o a co((o&at*(0 Ca%e !a, on eHect(ent ha% treate& re!at$on%h$# +a%e& on to!erance a% one that $% a.$n to a !an&!or&7tenant re!at$on%h$# ,here the ,$th&ra,a! o #er($%%$on ,o*!& re%*!t $n the ter($nat$on o the !ea%e0 The tenantF% ,$thho!&$n) o the #ro#erty ,o*!& then +e *n!a, *!0 SI1PLE LOAN NCC ARTICLE 19;371941 Article 1923. A #er%on ,ho rece$'e% a !oan o (oney or any other *n)$+!e th$n) ac/*$re% the o,ner%h$# thereo " an& $% +o*n& to #ay to the cre&$tor an e/*a! a(o*nt o the %a(e .$n& an& /*a!$ty0 10 Re#*+!$c '0 5r$Ha!&o" 1; 1CRA 4:1" 50R0 No0 L736346" Dece(+er 31" 194;07AORTE1 Repu6lic o' t%e P%ilippines v. 7ose 3ri8&l)o -19420 F&cts 19438 5r$Ha!&o o+ta$ne& ; %er$e% o !oan% ro( Ban. o Ta$,an $n Baco!o& C$ty $n the a(o*nt o 21"3:109< A% a %ec*r$ty or the !oan" 5r$Ha!&o e?ec*te& a chatte! (ort)a)e on the %tan&$n) cro#% on h$% !an&" =ac$en&a Ca(#*)a% 19448 A% there ,a% Bor!& Bar II" *n&er the #ro'$%$on $n the Tra&$n) ,$th the Ene(y Act8 o a%%et% o Ban. o Ta$,an ,ere tran% erre& to the G1 5o'Ft ,ho e'ent*a!!y tran% erre& the %a$& a%%et% to the Re#*+!$c o the 2h$!$##$ne% +y '$rt*e o Tran% er A)ree(ent The Re#*+!$c &e(an&e& #ay(ent ro( 5r$Ha!&o +*t the !atter a$!e& to #ay Bhen 5r$Ha!&o &$e&" h$% he$r%" the La)ta#on% ,ere %*+%t$t*te& a% a##e!!ant De en%e o the La)ta#on%8 chatte! (ort)a)e on the %tan&$n) cro#% on a !an& o,ne& +y h$( an& the%e cro#% ,ere !o%t or &e%troye& thro*)h ene(y act$on h$% o+!$)at$on to #ay the !oan% ,a% there+y e?t$n)*$%he& #ON T%e o6li+&tion to p&9 t%e lo&n :&s e;tin+uis%e)< = NO> !EL" The o+!$)at$on o the a##e!!ant *n&er the $'e #ro($%%ory note% ,a% not to &e!$'er a &eter($nate th$n) na(e!y" the cro#% to +e har'e%te& ro( h$% !an&" or the 'a!*e o the cro#% that ,o*!& +e har'e%te& ro( h$% !an&0 Rather" h$% o+!$)at$on ,a% to #ay a )ener$c th$n) R the a(o*nt o (oney re#re%ent$n) the tota! %*( o the $'e !oan%" ,$th $ntere%t0 The

tran%act$on +et,een the a##e!!ant an& the Ban. o Ta$,an" Lt&0 ,a% a %er$e% o $'e contract% o %$(#!e !oan o %*(% o (oney 5r$Ha!&oF% o+!$)at$on $% to &e!$'er a %*( o (oney R a c!ear ca%e o an o+!$)at$on to &e!$'er" a )ener$c th$n)0 Art$c!e 1343 o the C$'$! Co&e #ro'$&e%8 In an o+!$)at$on to &e!$'er a )ener$c th$n)" the !o%% or &e%tr*ct$on o anyth$n) o the %a(e .$n& &oe% not e?t$n)*$%h the o+!$)at$on0 The chatte! (ort)a)e on the cro#% )ro,$n) on a##e!!antS% !an& %$(#!y %too& a% a %ec*r$ty or the *! $!!(ent o a##e!!antS% o+!$)at$on co'ere& +y the $'e #ro($%%ory note%" an& the !o%% o the cro#% &$& not e?t$n)*$%h h$% o+!$)at$on to #ay" +eca*%e the acco*nt co*!& %t$!! +e #a$& ro( other %o*rce% a%$&e ro( the (ort)a)e& cro#%0

Article 1924. No $ntere%t %ha!! +e &*e *n!e%% $t ha% +een e?#re%%!y %t$#*!ate& $n ,r$t$n)0 10 Tan '0 Va!en>*e!a" 44 1CRA 41" 50R0 No0 L73:<4;" A*)*%t 4" 19<;07IGN5 Aact%8 De en&ant% here$n" Ara&or" Re&$c*!o" 2ac$ta" Conce#c$on an& Ro%ar$o" a!! %*rna(e& Va!&eh*e>a" are +rother% an& %$%ter%- the #arce! o !an& &e%cr$+e& $n the $r%t ca*%e o act$on ,a% the %*+Hect (atter o the #*+!$c a*ct$on %a!e ,here$n the #!a$nt$ ,a% the h$)he%t +$&&er an& a% %*ch a Cert$ $cate o 1a!e ,a% e?ec*te& $n a'or o LGCIA TAN the here$n #!a$nt$ 0 D*e to the a$!*re o &e en&ant Ara&or Va!&eh*e>a to re&ee( the %a$& !an& ,$th$n the #er$o& o one year a% +e$n) #ro'$&e& +y !a," an AB1OLGTE DEED OA 1ALE $n a'or o the #!a$nt$ LGCIA- that &e en&ant% ARADOR VALDE=GETA an& REDICGLO VALDE=GETA ha'e e?ec*te& t,o &oc*(ent% o DEED OA 2ACTO DE RETRO 1ALE $n a'or o the #!a$nt$ here$n" LGCIA TAN o t,o #ort$on% o a #arce! o !an& ,h$ch $% &e%cr$+e& $n the %econ& ca*%e o act$on ,$th the tota! a(o*nt o 21";66- that ro( the e?ec*t$on o the Dee& o 1a!e ,$th r$)ht to re#*rcha%e (ent$one& $n the %econ& ca*%e o act$on" &e en&ant% Ara&or Va!&eh*e>a an& Re&$c*!o Va!&eh*e>a re(a$ne& $n the #o%%e%%$on o the !an&0 A co(#!a$nt or $nH*nct$on $!e& +y Tan to enHo$n the Va!&eh*e>a% @ ro( enter$n) the #arce! o !an& an& )ather$n) the n*t% there$n 0000@ Th$% co(#!a$nt an& the co*nterc!a$( ,ere %*+%e/*ent!y &$%($%%e& or a$!*re o the #art$e% @to %ee. or the $((e&$ate tr$a! thereo " th*% e'$nc$n) !ac. o $ntere%t on the$r #art to #rocee& ,$th the ca%e0ro+!e% '$rt*a! !a, !$+rary The Dee& o 2acto &e Retro re erre& to ,a% not re)$%tere& $n the Re)$%try o Dee&%" ,h$!e the 3n& Dee& o 2acto &e Retro ,a% re)$%tere&0 I%%*e8 Bhether the tran%act$on% +et,een the #art$e% ,ere %$(#!e !oanN =e!&8 NO0 Gn&er art$c!e 1:<; o the C$'$! Co&e o 1::9" re)$%trat$on ,a% a nece%%ary re/*$%$te or the 'a!$&$ty o a (ort)a)e e'en a% +et,een the #art$e%" +*t *n&er art$c!e 313; o the ne, C$'$! Co&e ($n e ect %$nce A*)*%t 36"19;6)" th$% $% no !on)er %o0 The Va!&eh*e>a% ha'$n) re(a$ne& $n #o%%e%%$on o the !an& an& the rea!ty ta?e% ha'$n) +een #a$& +y the(" the contract% ,h$ch #*r#orte& to +e #acto &e retro tran%act$on% are #re%*(e& to +e e/*$ta+!e (ort)a)e%" ; ,hether re)$%tere& or not" there +e$n) no th$r& #art$e% $n'o!'e&0 30 Dar&en$! '0 1o!a%" <3 2h$! 434" 50R0 No0 4<:<4" D*!y 34" 194307( ro( net) Aact%8 An act$on or orec!o%*re o (ort)a)e0 1o!a% a)ree& to #ay $ntere%t on!y *# to the &ate o (at*r$ty0 The contract $% %$!ent a% to ,hether a ter the &ate o (at*r$ty" $n the e'ent o non7#ay(ent" the &e+tor ,o*!& cont$n*e to #ay $ntere%t0 I%%*e8I1 1o!a% +o*n& to #ay the %t$#*!ate& $ntere%t on!y *# to the &ate o (at*r$ty a% $?e& $n the #ro($%%ory note" or *# to the&ate #ay(ent $% e ecte&N =e!&8 It ,a% on!y *# to the &ate o (at*r$ty Intere%t %ha!! +e &*e on!y ,hen $t ha% +een e?#re%%!y %t$#*!ate&0 The co*rt (*%t not $(#o%e an o+!$)at$on that the #art$e% ha'e not cho%en to a)ree *#on0 The act o the (ort)a)ee o )rant$n) to the (ort)a)or on the &ee& o (ort)a)e an e?ten%$on o one year ro( the &ate o (at*r$ty to (a.e the #ay(ent ,$tho*t (a.$n) any (ent$on o any $ntere%t ,h$ch the (ort)a)or %ho*!& #ay &*r$n) the a&&$t$ona! 30 Ar$a% '0 1an D$e)o" ;36 1CRA 344" 50R0 No0 1;;333" A#r$! 3" 366<07( ro( net)

On < Dec 1996" Bo+$e Ro%e Ar$a% an& Dr0 A!ora 1an7D$e)o 1$%on entere& $nto a EOA o'er Ar$a%F#ro#erty EOA con%$&erat$on $% 3E 1$%on ha% 4 (onth% ro( the &ate o contractF% e?ec*t$on to not$ y Ar$a% o her $ntent$on to #*rcha%e the #ro#erty ,$th the $(#ro'e(ent% at 404E 2r$or to th$% 4 (onth #er$o&" Ar$a% (ay %t$!! o er the #ro#erty to other #er%on%" #ro'$&e& that 3E %ha!! +e #a$& to 1$%on $nc!*&$n) $ntere%t +a%e& on #re'a$!$n) co(#o*n&e& +an. $ntere%t U a(o*nt o %a!e $n e?ce%% o <E V%ho*!& the #ro#erty +e %o!& at a #r$ce )reater than <EW In ca%e Ar$a% ha% no other +*yer ,$th$n 4 (onth% ro( the contractF% e?ec*t$on" no $ntere%t %ha!! +e char)e& +y 1$%on on the 3E In the e'ent that on the 4th (onth" 1$%on ,o*!& &ec$&e not to #*rcha%e the #ro#erty" Ar$a% ha% 4 (onth% to #ay 3E (a(o*nt %ha!! earn co(#o*n&e& +an. $ntere%t or the !a%t 4 (onth% on!y) 3E treate& a% a !oan an& the #ro#erty con%$&ere& a% the %ec*r$ty or the (ort)a)e G#on not$ce o $ntent$on to #*rcha%e" 1$%on ha% 4 (onth% to #ay the +a!ance o 304E (404E !e%% 3E EOA con%$&erat$on) Ar$a% rece$'e& ro( 1$%on 3E (3E $n ca%h- 1E #o%t7&ate& chec. &ate& Ae+r*ary 3:" 1996" $n%tea& o 1991" ,h$ch ren&ere& the chec. %ta!e)0 Ar$a% )a'e 1$%on the TCT an& the Dee& o A+%o!*te 1a!e o'er the #ro#erty0 1$%on &ec$&e& not to #*rcha%e the #ro#erty" %o %henot$ $e& Ar$a% thro*)h a !etter &ate& Earch 36" 1991 VAr$a% rece$'e& $t on!y on D*ne 11" 1991W"an& 1$%on re($n&e& Ar$a% o the$r a)ree(ent that the 3E 1$%on #a$& %ho*!& +e con%$&ere& a% a !oan #aya+!e ,$th$n 4 (onth%0 Ar$a% a$!e& to #ay th$% a(o*nt0 1$%on $!e& a co(#!a$nt or %*( o (oney ,$th #re!$($nary attach(ent0 1$%on a'erre& that Ar$a% tr$e& to &e#r$'e her o the %ec*r$ty or the !oan +y (a.$n) a a!%e re#ort o the !o%% o her o,nerF% co#y o TCT" e?ec*t$n) an a $&a'$t o !o%% an& +y $!$n) a #et$t$onV1W or the $%%*ance o a ne, o,nerF% &*#!$cate co#y0 RTC $%%*e& a ,r$t o #re!$($nary attach(ent *#on the $!$n) o a 3E +on&0 RTC o*n& that Ar$a% ,a% *n&er o+!$)at$on to #ay 1$%on 3E ,$th co(#o*n&e& $ntere%t #*r%*ant to the$r EOA0 RTC or&ere& Ar$a% to #ay 1$%on8 3E U 33O ann*a! $ntere%t +e)$nn$n) Dece(+er <" 1991 *nt$! *!!y #a$& <6. re#re%ent$n) #re($*(% #a$& +y 1$%on on the attach(ent +on& ,$th !e)a! $ntere%t co*nte& ro( the &ate o th$% &ec$%$on *nt$! *!!y #a$& 166. (ora!" correct$'e" e?e(#!ary &a(a)e% V!$a+!e or (ora! &a(a)e% +eca*%e o Ar$a%F ra*&*!ent %che(eW 166. attorneyF% ee% U co%t o !$t$)at$on CA a $r(e& RTC ,$th (o&$ $cat$onR33O re&*ce& to 3;O0 CA %a$& that there ,a% no +a%$% or Ar$a% to %ay that the $ntere%t %ho*!& +e char)e& or 4 (onth% on!y0 It %a$& that a !oan a!,ay% +ear% $ntere%t- other,$%e" $t $% not a !oan0 The $ntere%t %ho*!& co((ence on D*ne <" 1991 *nt$! *!!y #a$&" ,$th co(#o*n&e& +an. $ntere%t #re'a$!$n) at the t$(e VD*ne 1991W the 3E ,a% con%$&ere& a% a !oan (a% cert$ $e& +y the +an.)0 ISSUES ? !OL"IN3 Rat$o on!y &$%c*%%e% to#$c o INTERE1T (a% #er %y!!a+*%) BON co(#o*n&e& +an. $ntere%t %ho*!& +e !$($te& to 4 (onth% a% conta$ne& $n the EOA0 NO BON 1$%on $% ent$t!e& to (ora! &a(a)e%0 CE1 BON the )rant o attorneyF% ee% $% #ro#er" e'en $ not (ent$one& $n the +o&y o the &ec$%$on0 NO CA co(($tte& no error $n a,ar&$n) an ann*a! 3;O $ntere%t on the 3E e'en +eyon& the 47(onth %t$#*!ate& #er$o&0 In th$% ca%e" the #hra%e or the !a%t %$? (onth% on!y %ho*!& +e ta.en $n the conte?t o the ent$re a)ree(ent0 1C note% that the a)ree(ent %#ea.% o t,o (3) #er$o&% o 4 (onth% each (%ee AACT1R,or&% $n +o!& Q *n&er!$ne)0 No $ntere%t ,$!! +e char)e& or the 1%t 47(onth #er$o& V,h$!e 1$%on ,a% (a.$n) *# her ($n&W" +*t on!y or the 3n& 47(onth #er$o& a ter 1$%on &ec$&e& not to +*y the #ro#erty0 There $% noth$n) $n the EOA that %*))e%t% that $ntere%t ,$!! +e char)e& or 4 (onth% on!y e'en $ $t ta.e% ore'er or Ar$a% to #ay the !oan0 The #ay(ent o re)*!ar $ntere%t con%t$t*te% the #r$ce or co%t o the *%e o (oney" an& *nt$! the #r$nc$#a! %*( &*e $% ret*rne& to the cre&$tor" re)*!ar $ntere%t cont$n*e% to accr*e %$nce the &e+tor cont$n*e% to *%e %*ch #r$nc$#a! a(o*nt0 Aor a &e+tor to cont$n*e $n #o%%e%%$on o the #r$nc$#a! o the !oan an& to cont$n*e to *%e the %a(e a ter (at*r$ty o the !oan ,$tho*t #ay(ent o the (onetary $ntere%t con%t$t*te% *nH*%t enr$ch(ent on the #art o the &e+tor at the e?#en%e o the cre&$tor0 CA "ECISION AN" RESOLUTION AFFIR1E" #IT! 1O"IFICATIONRA,ar& o attorneyF% ee% &e!ete& 40 Ar,oo& In&*%tr$e% '0 D0E0 Con%*nH$" 394 1CRA 11" 50R0 No0 1433<<" Dece(+er 11" 366307CA2 2et$t$oner an& re%#on&ent" a% o,ner an& contractor" re%#ect$'e!y" entere& $nto an a)ree(ent or the con%tr*ct$on o #et$t$onerS% Be%t,oo& Con&o($n$*(0 The contract #r$ce or the con&o($n$*( #roHect a))re)ate& 2360: E0 De%#$te the co(#!et$on" the a(o*nt o 2943 I re(a$ne& *n#a$& +y #et$t$oner0 Re#eate& &e(an&% +y re%#on&ent or #et$t$oner to #ay ,ent *nhee&e& th*% a c$'$! ca%e ,a% $!e& or reco'ery an& or &a(a)e%0 Tr$a! Co*rt r*!e& $n a'or o the re%#on&ent contractor a%.$n) the #et$t$oner to #ay the +a!ance o the contract #r$ce ,$th 3O (onth!y $ntere%t0

On a##ea!" #et$t$oner o##o%e the $(#o%$t$on o 3O #er (onth0 CA *#he!& the &ec$%$on o the TC" ,h$ch o*n& +a%$% on the a)ree(ent ,here $t %t$#*!ate% that non #ay(ent ,$th$n 1; &ay% or ,$!! $nc*r a 3O (onth!y $ntere%t0 2et$t$oner ar)*e% that a!tho*)h the A)ree(ent conta$ne& a #ro'$%$on ,$th re)ar& to the $ntere%t" th$% #ro'$%$on ,a% not (ent$one& +y the tr$a! co*rt $n a,ar&$n) $ntere%t $n the &$%#o%$t$'e #ort$on0 Th$% #ro'$%$on o the A)ree(ent &oe% not a##!y to the c!a$( o re%#on&ent +*t re er% to the @(onth!y #ro)re%% +$!!$n)%0@ The a(o*nt o 2943"4340<: $% not a @(onth!y #ro)re%% +$!!$n)@ an& %ho*!& not there ore +e %*+Hect to $ntere%t0 I%%*e8 BON $%%*e #et$t$oner %ho*!& #ay 3O (onth!y $ntere%t0 R*!$n)8 Ce%0 The A)ree(ent or the contract +et,een the #art$e% $% the or(a! e?#re%%$on o the #art$e%F r$)ht%" &*t$e% an& o+!$)at$on%0 It $% the +e%t e'$&ence o the $ntent$on o the #art$e%0 It (*%t +e note& that the A)ree(ent #ro'$&e& the contractor" re%#on&ent $n th$% ca%e" t,o o#t$on% $n ca%e o &e!ay $n (onth!y #ay(ent%" to ,$t8 a) %*%#en& ,or. on the #roHect *nt$! #ay(ent $% re($tte& +y the o,ner or +) cont$n*e the ,or. +*t the o,ner %ha!! +e re/*$re& to #ay $ntere%t at a rate o t,o #ercent (3O) #er (onth or a ract$on thereo 0 E'$&ent!y" re%#on&ent cho%e the !atter o#t$on" a% the con&o($n$*( #roHect ,a% $n act a!rea&y co(#!ete&0 The #ay(ent o the 3O (onth!y $ntere%t" there ore" cannot +e Hett$%one& o'er+oar&0 Aacta !e)e( ac*nt $nter #arte%0 Ne$ther can #et$t$oner $(#*)n the A)ree(ent to ,h$ch $t ,$!!$n)!y )a'e $t% con%ent0 Aro( the (o(ent #et$t$oner )a'e $t% con%ent" $t ,a% +o*n& not on!y to *! $!! ,hat ,a% e?#re%%!y %t$#*!ate& $n the A)ree(ent +*t a!%o a!! the con%e/*ence% ,h$ch" accor&$n) to the$r nat*re" (ay +e $n .ee#$n) ,$th )oo& a$th" *%a)e an& !a,0 E'en %*##o%$n) that #et$t$oner ha% a &$ erent &e $n$t$on o @(onth!y #ro)re%% +$!!$n)%"@ $t (*%t nonethe!e%% +e $nter#rete& $n a'or o here$n re%#on&ent +eca*%e Art$c!e 4063 o the A)ree(ent" ,h$ch )$'e% re%#on&ent the o#t$on% $n ca%e o #et$t$onerF% &e a*!t $n #ay(ent" ,a% o+'$o*%!y %t$#*!ate& or re%#on&entF% +ene $t0 Th*%" re%#on&ent correct!y conten&% that the a(o*nt c!a$(e&" ,h$ch $% #art o the contract #r$ce" ,o*!& not ha'e acc*(*!ate& ha& #et$t$oner +een &$!$)ent $n the (onth!y #ay(ent o the ,or. acco(#!$%he& +y re%#on&ent0 ;0 Soncu9& v. A@&rr&+&, 4; 2h$!0 43;" 50R0 No0 43;<9" D*ne 14" 193:07BI1NAR Aact%8 By rea%on o the #rocee&$n)% ha& $n ca%e No0 114:9 o the Co*rt o A$r%t In%tance o Ean$!a" ent$t!e& @Te%tate E%tate o the Decea%e& D*an A>arra)a y 5a!'e>@" the &e en&ant% %*rna(e& A>arra)a +eca(e $n&e+te& to Attorney Leo&e)ar$o A>arra)a" ,ho re#re%ente& the( $n %a$& ca%e" or attorneyS% ee%" ,h$ch on Octo+er 31" 1919 the co*rt" ,h$ch too. co)n$>ance o the ca%e" $?e& at 23"666 (E?h$+$t B)0 The &e en&ant% A>arra)a ha& #re'$o*%!y a)ree& a(on) the(%e!'e% to #ay Attorney Leo&e)ar$o A>arra)a attorneyS% ee% $n the (anner %et o*t $n E?h$+$t A" ,h$ch they e?ec*te& on Dan*ary 36" 1919 an& a##ro'e& +y the co*rt on A*)*%t 39" o the %a(e year0 (E?h$+$t C0) The #ert$nent #art o the a ore%a$& E?h$+$t A rea&% a% o!!o,%8 o The #art$e% a!%o a)ree that the #arce!% o !an& !ocate& $n Bay7an)" Ne, Ba%h$n)ton" Ca#$>" 20 I0" ,h$ch are en*(erate& $n the $n'entory o th$% #art$t$on a% No%0 :1" :3 an& :3" are %#ec$a!!y (ort)a)e& an& %*+Hect to the #ay(ent o the ee% o %a$& attorney o the te%tate e%tate" ,h$ch ee% %ha!! +e $?e& +y the co*rt" an& %a$& attorney (ay ho!& %a$& !an&% *n&er no o+!$)at$on to #ay any rent *nt$! h$% ee% %ha!! ha'e +een *!!y #a$&8 Provided, however" that $ " at the en& o the #er$o& o $'e year% ro( the &ate o the a##ro'a! o th$% #roHect o #art$t$on" %a$& #art$e% %ha!! not ha'e +een a+!e to #ay $n *!! the ee% o %a$& attorney" then %a$& #arce!% o !an&" No%0 :1" :3 an& :3" !ocate& $n Bay7an)" %ha!! +e &e $n$te!y a&H*&$cate& to %a$& attorney" Er0 Leo&e)ar$o A>arra)a" a% h$% #ro#erty" $n #ay(ent o h$% ee%" an& a!! %*(% ,h$ch he (ay ha'e rece$'e& ro( t$(e to t$(e ro( the $ntere%te& #art$e% $n the%e te%tate #rocee&$n)%" ,$th$n the %a$& #er$o&" %ha!! +e ret*rne& to %a$& #art$e%8 Provided, further" that $n ca%e %a$& $ntere%te& #art$e% $n the te%tate #rocee&$n)% %ha!! +e a+!e to #ay $n *!! the ee% o the attorney or the e%tate +e ore the e?#$rat$on o %a$& #er$o& o $'e year%" then %a$& #arce!% o !an& %$t*ate& $n Bay7an) %ha!! cont$n*e $n the #o%%e%%$on o %a$& attorney or an a&&$t$ona! #er$o& o three year% ro( the &ate o the !a%t #ay(ent $n the e'ent that %a$& attorney (ay ha'e .e#t !$'e%toc. $n %a$& !an&%0 On D*ne 9" 1936" ,h$ch ,a% !on) +e ore the e?#$rat$on o the #er$o& o $'e year% ,$th$n ,h$ch the &e en&ant% A>arra)a ,ere +o*n& to #ay Attorney Leo&e)ar$o A>arra)a h$% ee%" ,h$ch ha& +een $?e& at 23"666" %a$& attorney &ec$&e& to %e!! an& &$& %e!! to the Do%*e 1onc*ya h$% cre&$t a)a$n%t the &e en&ant% or the %*( o 23";66 ,$th a!! the r$)ht% $nherent there$n $n accor&ance ,$th the a)ree(ent% an& %t$#*!at$on% a##ear$n) $n %a$& &oc*(ent0

Bhen the 1onc*ya +eca(e the cre&$tor o the &e en&ant% A>arra)a +y '$rt*e o the %a!e an& ce%%$on ,h$ch Attorney A>arra)a ha& (a&e $n h$% a'or o the r$)ht% ,h$ch %a$& attorney ha& *n&er E?h$+$t A" he a!!o,e& the &e en&ant% an e?ten%$on o a e, year% o'er the $'e year% ,$th $n ,h$ch they ,o*!& ha'e to #ay h$( h$% cre&$t" or *# to Ae+r*ary 14" 1934" +*t ,$th the e?#re%% con&$t$on that they ,o*!& #ay h$( $ntere%t at the rate o 13 #er cent #er ann*(" ro( A*)*%t 36" 19340 Th$% ter( ,a% !ater e?ten&e& to A#r$! 34" 1934 on the re/*e%t o the &e en&ant%" +*t a!%o ,$th the con&$t$on that they ,o*!& #ay the #!a$nt$ the %a(e $ntere%t o 13 #er cent0 The #!a$nt$ )rante& another e?ten%$on to e?#$re on Octo+er 31" 193:" +*t %*+Hect to the con&$t$on that $n%tea& o %e'en tho*%an& an& o&& #e%o%" ,h$ch *n&o*+te&!y re erre& to the $ntere%t o 13 #er cent #er ann*( char)e& the &e en&ant%" they %ho*!& #ay h$( 213"6660 In %a$& t,o a(o*nt% o 2<"666 an& 213"666 the %*( o 24"666 ,h$ch the #!a$nt$ ha& )$'en to the &e en&ant Doa/*$n A>arra)a an& ,h$ch ,$!! +e &ea!t ,$th *rther $n &eta$!" ,a% $nc!*&e&0 A%$&e ro( the a+o'e tran%act$on% +et,een the 1onc*ya an& the &e en&ant% A>arra)a" one o the !atter" Doa/*$n A>arra)a" e?ec*te& $n a'or o the or(er" the &ee& &ate& Octo+er 14" 1933" +y ,h$ch he %o!& to the #!a$nt$ " or the %*( o 24"666" h$% #ort$on o the $nher$tance $n the te%tate e%tate o the !ate D*an A>arra)a y 5a!'e>" con%$%t$n) o an *n&$'$&e& tract o !an& conta$n$n) an e%t$(ate& area o 43 hectare% an& !ocate& $n Bay7an) Ch$co" Ne, Ba%h$n)ton" Ca#$>0 It $% *rther %tate& there$n that the #er$o& o re&e(#t$on ,o*!& +e $'e year% to +e co*nte& ro( Ae+r*ary 14" 1931" ,h$ch ,a% !ater e?ten&e& to A#r$! 34" 19340 In )rant$n) h$( th$% e?ten%$on" the #!a$nt$ $(#o%e& on Doa/*$n A>arra)a the con&$t$on that he %ho*!& #ay h$( $ntere%t at the rate o 13 #er cent ro( the e?#$rat$on o the $r%t ter( (E?h$+$t E- #ar0 III o the %econ& a(en&e& co(#!a$nt o #!a$nt$ - an& #a)e ; o the +r$e o the #!a$nt$ a% a##e!!ant)0 A %econ& e?ten%$on ,a% *rther )rante&" +*t *n&er the con&$t$on that he %ho*!&" to)ether ,$th h$% +rother%" #ay the #!a$nt$ $n%tea& o %e'en tho*%an& an& o&& #e%o%" re#re%ent$n) the $ntere%t re erre& to $n the #rece&$n) #ara)ra#h" $n ,h$ch the 23"666 (ent$one& $n E?h$+$t A ,ere $nc!*&e&" 213"6660

I%%*e8

1) Ba% the contract entere& $nto +y7the A>arra)a +rother%" the &e en&ant% here$n" ,$th Attorney Leo&e)ar$o
A>arra)a ro( ,ho( the #!a$nt$ &er$'e& h$% r$)ht" a %a!e ,$th pacto de retro" or an a%%$)n(ent $n #ay(ent o a &e+t" or ,a% $t an ant$chre%$% #arta.$n) o the nat*re o ,hat ,a% anc$ent!y .no,n a% pacto comisorio" or a (ort)a)e" or ,a% $t (ere!y a !oan ,$th rea! e%tate %ec*r$tyN 2) Ba% the contract e?ec*te& +y the &e en&ant Doa/*$n A>arra)a" on the one han&" an& the #!a$nt$ " on the other" e(+o&$e& $n E?h$+$t E" a %a!e ,$th pacto de retro or %$(#!y a !oan ,$th rea! e%tate %ec*r$tyN

R*!$n)8

1) Bhen 1onc*ya e?ten&e& the #er$o& to Ae+r*ary 14" 1934 ,$th$n ,h$ch the &e en&ant% A>arra)a co*!& #ay h$( h$%
cre&$t" +*t $(#o%e& on the( the con&$t$on that they #ay h$( 13 #er cent ann*a! $ntere%t ro( A*)*%t 36" 1934 on the #r$nc$#a! o 23"666 an& )a'e the( another e?ten%$on *# to A#r$! 34" 1934" *n&er the %a(e con&$t$on% a% re)ar& $ntere%t ,hat #erha#% co*!& ha'e +een con%$&ere& a% a ant$chre%$% or pacto comisorio R not an a%%$)n(ent $n #ay(ent o a &e+t" or a %a!e ,$th pacto de retro +eca*%e there $% noth$n) to $n&$cate that %*ch ,a% the $ntent$on o the &e en&ant% A>arra)a or" at !ea%t" that they +o*n& the(%e!'e% to &e!$'er the !an& $n /*e%t$on to the #!a$nt$ an& that the !atter %ho*!& #ay the( the 'a!*e thereo - an& +eca*%e there ,a% ,hat (ay +e con%$&ere& the re%o!*tory con&$t$on o $'e year% R ,a% con'erte& $nto a %$(#!e !oan +y the &ec$%$'e c$rc*(%tance that #!a$nt$ cho%e to co!!ect therea ter" an& the o+!$)or% a)ree& to #ay h$(" 13 #er cent ann*a! $ntere%t0 It $% on!y $n contract% o !oan" ,$th or ,$tho*t )*aranty" that $ntere%t (ay +e &e(an&e& 3) Con%$&er$n) the 'ar$o*% no'at$on% ,h$ch" a% ha% +een %a$&" ha& ta.en #!ace an& ha& +een e?ten&e& not on!y to the A>arra)a +rother% ,$th re%#ect to the$r o+!$)at$on o 23"666 or 23"<66" +*t a!%o to the &e en&ant Doa/*$n A>arra)a a% re)ar& h$% #er%ona! &e+t o 24"6660 Be (*%t not !o%e %$)ht o the act that the 1onc*ya ne'er con%$&ere& the contract entere& $nto +y h$( ,$th Doa/*$n A>arra)a a%" %tr$ct!y %#ea.$n)" a %a!e ,$th pacto de retro0 An& $ he ha& e'er con%$&ere& $t a% %*ch" $t $%" ne'erthe!e%%" tr*e that he no'ate& $t on Ae+r*ary 14" 1934" con%$&er$n) $t ro( the t$(e on a% a %$(#!e !oan" $na%(*ch a% on that &ate he +e)an to char)e the %a$& &e en&ant 13 #er cent ann*a! $ntere%t ,$th the !atterS% a%%ent an& con $r($ty0

40 Roya! 1h$ t Aactory '0 Co" 94 2h$!0 994" 50R0 No0 L74313" Eay 14" 19;407BOEBALE1 1o*rce8htt#899,,,0%cr$+&0co(9&oc913644<9149%ectran%7&$)e%t Aact%8 1. The #art$e% entere& $nto a contract ,here$n $t $% %t$#*!ate& that 3;6 #a$r% o +a!!et %hoe% ,$!! +e %o!& +y Co an& that Co ha& 9 &ay% ro( &e!$'ery o the %hoe% to (a.e h$% cho$ce o 3 a!ternat$'e%8 a)con%$&er the %a!e or the %hoe% c!o%e& at a !at rate"or +) ret*rn the re(a$n$n) *n%o!& one% to Roya!0 2. Co a$!e& to ret*rn the *n%o!& #a$r% a ter 9 &ay% an& act*a!!y +e)an (a.$n) #art$a! #ay(ent% on acco*nt o the #*rcha%e #r$ce a)ree& *#on0 3. Co then conten&e& that there ,a% (ere!y a con%$)n(ent o the )oo&% an& he ,ante& to ret*rn the *n%o!& %hoe%0 Roya! re *%e& conten&$n) that $t ,a% an o*tr$)ht %a!e0

I%%*e%BoN the %a!e ,a% an o*tr$)ht %a!e 9 or (ere con%$)n(ent BoN Co $% +o*n& +y the $ntere%t %t$#*!ate& $n the $n'o$ce0 R*!$n)8 10 OGTRI5=T 1ALE oCo acce#te& the $n'o$ce o the +a!!et %hoe%an& he e'en note& &o,n $n h$% o,nhan&,r$t$n) the #art$a! #ay(ent% that he(a&e0 oI the %a!e ha% +een on con%$)n(ent" a%t$#*!at$on a% to the #er$o& o t$(e or theret*rn o the *n%o!& %hoe% %ho*!& ha'e+een (a&e" ho,e'er" th$% ,a% not &one 30 NOT BOGND BC T=E INTERE1T o=e &$& not %$)n the $n'o$ce %!$# the%t$#*!ate& $ntere%t ,a% 36O" hence" not+$n&$n) o=o,e'er" he $% +o*n& +y the !e)a! $ntere%t o 4O X=ence" Co ,a% or&ere& to #ay the +a!ance o the#*rcha%e #r$ce or the +a!!et %hoe% U !e)a! $ntere%t <0 O'er%ea% Ban. '0 Cor&ero" 113 1CRA 363" 50R0 No0 L733;:3" Earch 36" 19:3072ABALAN F&cts Cor&ero o#ene& a one7year t$(e &e#o%$t ,$th O'er%ea% Ban. o Ean$!a $n the a(o*nt o 2:6I ,$th $ntere%t at the rate o 4O #er ann*(0 D*e to the &$%tre%%e& $nanc$a! con&$t$on o the +an." $t ,a% *na+!e to #ay Cor&ero h$% %a$& t$(e &e#o%$t an& $t% $ntere%t Cor&ero $n%t$t*te& an act$on at the CAI The +an. ra$%e& a% %#ec$a! &e en%e $t% %tate o $n%o!'ency CAI r*!e% $n a'or o Cor&ero0 CA a $r(%0 There ,ere certa$n %*#er'en$n) e'ent% re)ar&$n) the #r$nc$#a! a(o*nt0 It t*rn% o*t that Cor&eroF% +rother an& atty7$n7 act" a!rea&y rece$'e& 216I ro( 2DIC0 A!%o" the +rother a!rea&y rece$'e& the %*( o 2<3":460 1o the #r$nc$#a! c!a$( o re%#on&ent ,a% a!rea&y %at$% $e&0 The on!y $%%*e re(a$n$n) ,a% the $ntere%t

Issue I% the re%#on&ent ent$t!e& to the $ntere%t on h$% t$(e &e#o%$t &*r$n) the #er$o& that #et$t$oner ,a% c!o%e&N No !el) A +an. %ho*!& #ay %t$#*!ate& $ntere%t on (oney &e#o%$te& $ $t ,a% a+!e to )enerate *n&% to co'er the #ay(ent o %*ch $ntere%t0 B*t th$% o+!$)at$on to #ay $ntere%t on the &e#o%$t cea%e% ro( the (o(ent ,hen the Centra! Ban. or&ere& the %*#%#en%$on o O'er%ea% Ban.F% o#erat$on%0 Bhat ena+!e% a +an. to #ay %t$#*!ate& $ntere%t on (oney &e#o%$te& ,$th $t $% that thr* the other a%#ect% o $t% o#erat$on" $t $% a+!e to )enerate *n&% to co'er the #ay(ent o %*ch $ntere%t ($n act$'$t$e% %*ch a% !en&$n) (oney" en)a)$n) $n $nternat$ona! tran%act$on%" ac/*$r$n) orec!o%e& (ort)a)e& #ro#ert$e% or the$r #rocee&% an& other +an.$n) an& $nanc$n) act$'$t$e%" ro( ,h$ch $t can &er$'e $nco(e) Con%e/*ent!y" $t %ho*!& +e &ee(e& rea& $nto e'ery contract o &e#o%$t ,$th a +an. that the o+!$)at$on to #ay $ntere%t on the &e#o%$t cea%e% the (o(ent the o#erat$on o the +an. $% co(#!ete!y %*%#en&e& +y the &*!y con%t$t*te& a*thor$ty" the Centra! Ban.0 2arenthet$ca!!yYthe %a(e or(*!a that e?e(#t% #et$t$oner ro( the #ay(ent o $ntere%t to $t% &e#o%$tor% &*r$n) the ,ho!e #er$o& o act*a! %to##a)e o $t% o#erat$on% +y or&er% o the Centra! Ban.Y %ho*!& +e" a% a (atter o con%$%tency" a##!$ca+!e or o!!o,e& $n re%#ect to a!! other o+!$)at$on% o #et$t$oner ,h$ch co*!& not +e #a$& &*r$n) the #er$o& o $t% act*a! co(#!ete c!o%*re0 :0 Ra(o% '0 Centra! Ban." 13< 1CRA 4:;" 50R0 No0 L7393;3" D*!y 33" 19:;07AORTE1 E(erito R&(os v. Centr&l A&nB, Co((erci&l A&nB o' 1&nil& -19C20 F&cts The Centra! Ban. $!e& a Eot$on or Recon%$&erat$on on the Dec$%$on o the Co*rt ho!&$n) that Co((erc$a! Ban. o Ean$!a $% not !$a+!e or $ntere%t on the !oan% an& a&'ance% ro( the Centra! Ban.

The Co*rt re$terate& the Ta#$a R*!$n) (16; 1CRA 49" D*ne 11" 19:1)" the Co*rt he!& that @the o+!$)at$on to #ay $ntere%t on the &e#o%$t cea%e% the (o(ent the o#erat$on o the +an. $% co(#!ete!y %*%#en&e& +y the &*!y con%t$t*te& a*thor$ty" the Centra! Ban. E?e(#t a!%o ro( #ay$n) $ntere%t to &e#o%$ter%8 the %a(e or(*!a that e?e(#t% #et$t$oner ro( the #ay(ent o $ntere%t to $t% &e#o%$tor% &*r$n) the ,ho!e #er$o& o act*a! %to##a)e o $t% o#erat$on% +y or&er% o the Centra! Ban.

#ON Co((erc$a! Ban. $% !$a+!e or $ntere%t" &*r$n) the #er$o& o the +an.S% orc$+!e c!o%*re" on !oan% an& a&'ance% (a&e +y re%#on&ent Centra! Ban. NOJ !EL" re%#on&ent Centra! Ban. ,hen ca!!e& *#on to &ea! ,$th co((erc$a! +an.% an& e?ten& to the( e(er)ency !oan% an& a&'ance%" &ea!% ,$th the( not a% an or&$nary cre&$tor en)a)e& $n +*%$ne%%" +*t a% the *!t$(ate (onetary a*thor$ty o )o'ern(ent char)e& ,$th the %*#er'$%$on an& #re%er'at$on o the +an.$n) %y%te(0

90 L$na) '0 111" 1;3 1CRA 33:" 50R0 No0 L73336;" A*)*%t 31" 19:<07IGN5 Aact%8 De en&ant% here$n" Ara&or" Re&$c*!o" 2ac$ta" Conce#c$on an& Ro%ar$o" a!! %*rna(e& Va!&eh*e>a" are +rother% an& %$%ter%- the #arce! o !an& &e%cr$+e& $n the $r%t ca*%e o act$on ,a% the %*+Hect (atter o the #*+!$c a*ct$on %a!e ,here$n the #!a$nt$ ,a% the h$)he%t +$&&er an& a% %*ch a Cert$ $cate o 1a!e ,a% e?ec*te& $n a'or o LGCIA TAN the here$n #!a$nt$ 0 D*e to the a$!*re o &e en&ant Ara&or Va!&eh*e>a to re&ee( the %a$& !an& ,$th$n the #er$o& o one year a% +e$n) #ro'$&e& +y !a," an AB1OLGTE DEED OA 1ALE $n a'or o the #!a$nt$ LGCIA- that &e en&ant% ARADOR VALDE=GETA an& REDICGLO VALDE=GETA ha'e e?ec*te& t,o &oc*(ent% o DEED OA 2ACTO DE RETRO 1ALE $n a'or o the #!a$nt$ here$n" LGCIA TAN o t,o #ort$on% o a #arce! o !an& ,h$ch $% &e%cr$+e& $n the %econ& ca*%e o act$on ,$th the tota! a(o*nt o 21";66- that ro( the e?ec*t$on o the Dee& o 1a!e ,$th r$)ht to re#*rcha%e (ent$one& $n the %econ& ca*%e o act$on" &e en&ant% Ara&or Va!&eh*e>a an& Re&$c*!o Va!&eh*e>a re(a$ne& $n the #o%%e%%$on o the !an&0 A co(#!a$nt or $nH*nct$on $!e& +y Tan to enHo$n the Va!&eh*e>a% @ ro( enter$n) the #arce! o !an& an& )ather$n) the n*t% there$n 0000@ Th$% co(#!a$nt an& the co*nterc!a$( ,ere %*+%e/*ent!y &$%($%%e& or a$!*re o the #art$e% @to %ee. or the $((e&$ate tr$a! thereo " th*% e'$nc$n) !ac. o $ntere%t on the$r #art to #rocee& ,$th the ca%e0ro+!e% '$rt*a! !a, !$+rary The Dee& o 2acto &e Retro re erre& to ,a% not re)$%tere& $n the Re)$%try o Dee&%" ,h$!e the 3n& Dee& o 2acto &e Retro ,a% re)$%tere&0 I%%*e8 Bhether the tran%act$on% +et,een the #art$e% ,ere %$(#!e !oanN =e!&8 NO0 Gn&er art$c!e 1:<; o the C$'$! Co&e o 1::9" re)$%trat$on ,a% a nece%%ary re/*$%$te or the 'a!$&$ty o a (ort)a)e e'en a% +et,een the #art$e%" +*t *n&er art$c!e 313; o the ne, C$'$! Co&e ($n e ect %$nce A*)*%t 36"19;6)" th$% $% no !on)er %o0 The Va!&eh*e>a% ha'$n) re(a$ne& $n #o%%e%%$on o the !an& an& the rea!ty ta?e% ha'$n) +een #a$& +y the(" the contract% ,h$ch #*r#orte& to +e #acto &e retro tran%act$on% are #re%*(e& to +e e/*$ta+!e (ort)a)e%" ; ,hether re)$%tere& or not" there +e$n) no th$r& #art$e% $n'o!'e&0 Article 1925. Contract% an& %t$#*!at$on%" *n&er any c!oa. or &e'$ce ,hate'er" $nten&e& to c$rc*('ent the !a,% a)a$n%t *%*ry %ha!! +e 'o$&0 The +orro,er (ay reco'er $n accor&ance ,$th the !a,% on *%*ry0 10 An)e! Do%e Bareho*%e '0 Che!&a" 33 1CRA 119" 50R0 No0 L73;<64" A#r$! 34" 194:07( ro( net) AACT18 2!a$nt$ cor#orat$on $!e& %*$t $n the Co*rt o A$r%t In%tance o Ean$!a on Eay 39" 1944 a)a$n%t the #artner%h$# Che!&a Enter#r$%e% an& Da'$& 1yH*eco" $t% ca#$ta!$%t #artner" or reco'ery o a!!e)e& *n#a$& !oan% $n the tota! a(o*nt o 236"::6066" ,$th !e)a! $ntere%t ro( the $!$n) o the co(#!a$nt" #!*% attorneyS% ee% o 2;"6660660 A!!e)$n) that #o%t &ate& chec.% $%%*e& +y &e en&ant% to #ay %a$& acco*nt ,ere &$%honore&" that &e en&ant%S $n&*%tr$a! #artner" Che!!ara( I0 Eoh$nan$" ha& !e t the co*ntry" an& that &e en&ant% ha'e re(o'e& or

&$%#o%e& o the$r #ro#erty" or are a+o*t to &o %o" ,$th $ntent to &e ra*& the$r cre&$tor%" #re!$($nary attach(ent ,a% a!%o %o*)ht0 An%,er$n)" &e en&ant% a'erre& that they o+ta$ne& o*r !oan% ro( #!a$nt$ $n the tota! a(o*nt o 234";66066" o ,h$ch 2;"436066 ha& +een #a$&" !ea'$n) a +a!ance o 236"::6066- that #!a$nt$ char)e& an& &e&*cte& ro( the !oan *%*r$o*% $ntere%t% thereon" at rate% o 3O an& 30;O #er (onth" an&" con%e/*ent!y" #!a$nt$ ha% no ca*%e o act$on a)a$n%t &e en&ant% an& %ho*!& not +e #er($tte& to reco'er *n&er the !a,0 A co*nterc!a$( or 23"666066 attorneyS% ee% ,a% $nter#o%e&0 2!a$nt$ $!e& on D*ne 3;" 1944 an an%,er to the co*nterc!a$(" %#ec$ $ca!!y &eny$n) *n&er oath the a!!e)at$on% o *%*ry0 I11GE8 In a !oan ,$th *%*r$o*% $ntere%t" (ay the cre&$tor reco'er the #r$nc$#a! o the !oanN RGLIN58 5reat re!$ance $% (a&e +y a##e!!ant% on Art0 1411 o the Ne, C$'$! Co&e ,h$ch %tate%8 Art0 14110 Bhen the n*!!$ty #rocee&% ro( the $!!e)a!$ty o the ca*%e or o+Hect o the contract" an& the act con%t$t*te% cr$($na! o en%e" +oth #art$e% +e$n) $n #ar$ &e!$cto" they %ha!! ha'e no act$on a)a$n%t each other" an& +oth %ha!! +e #ro%ec*te&0 Eoreo'er" the #ro'$%$on% o the 2ena! Co&e re!at$'e to the &$%#o%a! o e ect% or $n%tr*(ent% o a cr$(e %ha!! +e a##!$ca+!e to the th$n)% or the #r$ce o the contract0 Th$% r*!e %ha!! +e a##!$ca+!e ,hen on!y one o the #art$e% $% )*$!ty- +*t the $nnocent one (ay c!a$( ,hat he ha% )$'en" an& %ha!! not +e +o*n& to co(#!y ,$th h$% #ro($%e0 The 1*#re(e Co*rt &o not a)ree ,$th %*ch rea%on$n)0 Art$c!e 1411 o the Ne, C$'$! Co&e $% not ne,- $t $% the %a(e a% Art$c!e 136; o the O!& C$'$! Co&e0 There ore" %a$& #ro'$%$on $% no ,arrant or &e#art$n) ro( #re'$o*% $nter#retat$on that" a% #ro'$&e& $n the G%*ry La, (Act No0 34;;" a% a(en&e&)" a !oan ,$th *%*r$o*% $ntere%t $% not tota!!y 'o$& on!y a% to the $ntere%t0 Tr*e" a% %tate& $n Art$c!e 1411 o the Ne, C$'$! Co&e" the r*!e o #ar$ &e!$cto a##!$e% ,here a contractS% n*!!$ty #rocee&% ro( $!!e)a!$ty o the ca*%e or o+Hect o %a$& contract0 =o,e'er" a##e!!ant% a$! to con%$&er that a contract o !oan ,$th *%*r$o*% $ntere%t con%$%t% o #r$nc$#a! an& acce%%ory %t$#*!at$on%- the #r$nc$#a! one $% to #ay the &e+tthe acce%%ory %t$#*!at$on $% to #ay $ntere%t thereon0 An& %a$& t,o %t$#*!at$on% are &$'$%$+!e $n the %en%e that the or(er can %t$!! %tan& ,$tho*t the !atter0 Art$c!e 13<3" C$'$! Co&e" atte%t% to th$%8 @The ren*nc$at$on o the #r$nc$#a! &e+t %ha!! e?t$n)*$%h the acce%%ory o+!$)at$on%- +*t the ,a$'er o the !atter %ha!! !ea'e the or(er $n orce0@ Article 1929. B$tho*t #reH*&$ce to the #ro'$%$on% o art$c!e 3313" $ntere%t &*e an& *n#a$& %ha!! not earn $ntere%t0 =o,e'er" the contract$n) #art$e% (ay +y %t$#*!at$on ca#$ta!$>e the $ntere%t &*e an& *n#a$&" ,h$ch a% a&&e& #r$nc$#a!" %ha!! earn ne,

$ntere%t 10 C* GnH$en) '0 Ea+a!acat" ;4 2h$!0 9<4" 50R0 No0 33;44" Octo+er 64" 1936072ERET Facts: Cu Unjieng e Hijos loaned Mabalacat 163 k, for securit , Mabalacat !ortgaged its "ro"ert . Mabalacat failed to "a , but Cu Unjieng e#tended t$e "a !ent. Cu Unjieng filed a case against Mabalacat for foreclosure of "ro"ert and "a !ent of attorne %s fees. &t also clai!s interest o'er interest. Mabalacat insisted t$at t$e agree!ent for t$e e#tension of t$e ti!e of "a !ent $ad t$e effect of abrogating t$e sti"ulation of t$e original contract (it$ res"ect to t$e acceleration of t$e !aturit of t$e debt b non) co!"liance (it$ t$e ter!s of t$e !ortgage. *$e issue related on t$is case is t$e interest o'er interest. &ssue: +o, Cu)Unjieng is entitled to interest o'er interest. -uling: &t is (ell settled t$at, under article 11./ of t$e Ci'il Code, as (ell as under section 0 of t$e Usur 1a( 23ct ,o. 2600), t$e "arties !a sti"ulate t$at interest s$all be co!"ounded4 and rests for t$e co!"utation of co!"ound interest can certainl be !ade !ont$l , as (ell as 5uarterl , se!iannuall , or annuall . 6ut in t$e absence of e#"ress sti"ulation for t$e accu!ulation of co!"ound interest, no interest can be collected u"on interest until t$e debt is judiciall clai!ed, and t$en t$e rate at ($ic$ interest u"on accrued interest !ust be co!"uted is fi#ed at 6 "er cent "er annu!. &n t$is case, t$ere (as no co!"ound interest in t$e agree!ent. 30 Da'$& '0 CA" 314 1CRA <16" 199907CA2 Aact%8 RTC D*&)e D$a>" $%%*e& a ,r$t o attach(ent o'er rea! #ro#ert$e% co'ere& +y TCT No%0 :6<1: an& 163:9 o #r$'ate re%#on&ent%0 In h$% Dec$%$on" D*&)e D$a> or&ere& re%#on&ent A a+!e to #ay #et$t$oner 244";I #!*% $ntere%t0 D*&)e D$a> $%%*e& an Or&er a(en&$n) %a$& Dec$%$on" %o that the !e)a! rate o $ntere%t %ho*!& +e co(#*te& ro( Dan*ary 4" 1944" $n%tea& o ro( D*!y 34" 19<40 Re%#on&ent A a+!e a##ea!e& to the CA an& then to the 1C0 Both co*rt% &en$e& the a##ea!0 G#on #et$t$onerF% (ot$on" re%#on&ent D*&)e $%%*e& an Br$t o E?ec*t$on +y '$rt*e o ,h$ch re%#on&ent 1her$ 2eLa con&*cte& a #*+!$c a*ct$on0 1her$ 2eLa $n or(e& the #et$t$oner that the tota! a(o*nt o the H*&)(ent $% 23<6"9460;30 The a(o*nt $nc!*&e& a co(#*tat$on o %$(#!e $ntere%t0 2et$t$oner" ho,e'er" c!a$(e& that the H*&)(ent a,ar& %ho*!& +e 23"63<"33:0;6" +eca*%e the a(o*nt &*e o*)ht to +e +a%e& on co(#o*n&e& $ntere%t0 A!tho*)h the a*ct$one& #ro#ert$e% ,ere %o!& to the #et$t$oner" 1her$ 2eLa &$& not $%%*e the Cert$ $cate o 1a!e +eca*%e there ,a% an e?ce%% $n the +$& #r$ce $n the a(o*nt o 23"941";3404<" ,h$ch the #et$t$oner a$!e& to #ay &e%#$te not$ce0 Th$% e?ce%% ,a% co(#*te& +y the 1her$ on the +a%$% o #et$t$onerF% +$& #r$ce o 23"63<"33:0;6 ($n*% the a(o*nt o 23<6"9460;3 co(#*te& $n the H*&)(ent a,ar&0 2et$t$oner $!e& a Eot$on #ray$n) or an or&er &$rect$n) re%#on&ent 1her$ 2eLa to e?ec*te a cert$ $cate o %a!e0 Re%#on&ent D*&)e &en$e&0 It ,a% !$.e,$%e &en$e& on a##ea! +y the CA ,h$ch r*!e& that the recor& %ho,% no %t$#*!ate& $ntere%t0 I%%*e8 BON the $ntere%t %ho*!& +e co(#o*n&e&0 R*!$n)%8 No0 2et$t$oner $n%$%t% that $n co(#*t$n) the $ntere%t &*e o the 244";66066" $ntere%t %ho*!& +e co(#*te& at 4O on the #r$nc$#a! %*( o 244";66066 #*r%*ant to Art$c!e 3369 an& then $ntere%t on the !e)a! $ntere%t %ho*!& a!%o +e co(#*te& $n accor&ance ,$th the !an)*a)e o Art$c!e 3313 o the C$'$! Co&e0V4W In h$% '$e," %a$& art$c!e (eant co(#o*n& $ntere%t0 =o,e'er" th$% Co*rt ha% a!rea&y $nter#rete& Art$c!e 3313" an& &e $ne& the %tan&ar&% or $t% a##!$cat$on $n 2h$!$##$ne A(er$can Acc$&ent In%*rance '%0 A!ore%0 A% there$n he!&" Art$c!e 3313 conte(#!ate% the #re%ence o %t$#*!ate& or con'ent$ona! $ntere%t ,h$ch ha% accr*e& ,hen &e(an& ,a% H*&$c$a!!y (a&e0 In ca%e% ,here no $ntere%t ha& +een %t$#*!ate& +y the #art$e%" a% $n the ca%e o 2h$!$##$ne A(er$can Acc$&ent In%*rance" no accr*e& con'ent$ona! $ntere%t co*!& *rther earn $ntere%t *#on H*&$c$a! &e(an&0 In the %a$& ca%e" ,e *rther he!& that ,hen the H*&)(ent %o*)ht to +e e?ec*te& or&ere& the #ay(ent o %$(#!e !e)a!

$ntere%t on!y an& %a$& noth$n) a+o*t #ay(ent o co(#o*n& $ntere%t" +*t the re%#on&ent H*&)e or&er% #ay(ent o co(#o*n& $ntere%t" then" he )oe% +eyon& the con $ne% o a H*&)(ent ,h$ch ha& +eco(e $na!0 Article 194/. I the +orro,er #ay% $ntere%t ,hen there ha% +een no %t$#*!at$on there or" the #ro'$%$on% o th$% Co&e concern$n) %o!*t$o $n&e+$t$" or nat*ra! o+!$)at$on%" %ha!! +e a##!$e&" a% the ca%e (ay +e0 10 Ve!e> '0 Ba+arra" <3 2h$!0 436" 50R0 No0 4:3:9" D*!y 3<" 194307BI1NAR Dele@ v. A&l@&rr& 1o*rce8 htt#%899,,,0)oo)!e0co(0#h9*r!N%aZtQrctZHQ/ZQe%rcZ%Q%o*rceZ,e+Qc&Z1Qca&ZrHaQ'e&Z6CC%KAHAAQ*r!Zhtt# O3AO3AO3A?a0y$()0co(O3A./O3A)ro*#%O3A334:3449O3A3346:34;1O3Ana(eO3A1ECTRAN1 O3BDI5E1T0&oc?Qe$ZR3'LG#'KLo*y.)[[$I5CA,Q*%)ZAAKHCNEt$R4Nc..)I5.$9(B3#5*'LI6C=KQ%$)3Z[yLe,+\B R+;#%=9yAh+;T,Q+'(Z+'0;:1:<1<:"&0&5I0 AACT18 2!a$nt$ Ve!e> $!e& a co(#!a$nt or the ret*rn o #arce!% o !an& %o!& +y De en&ant to 2!a$nt$ F% h*%+an&0 1he *rther a!!e)e& that &e en&ant% ha& re(a$ne& $n #o%%e%%$on o %a$& !an& *n&er Contract o Lea%e +*t or o'er 3 year% &e en&ant% ha& not #a$& the a)ree& renta!%0 De en&ant a!!e)e& that the rea! a)ree(ent ,a% a !oan %ec*re& +y a (ort)a)e o tho%e !an&%0 Tr$a! co*rt o*n& that the #ay(ent% (a&e +y &e en&ant% ,ere not (a&e +y ,ay o $ntere%t +*t a% #ay(ent% or the #r$nc$#a!0 De en&ant o'er#a$& there ore 2!a$nt$ %ho*!& ret*rn e?ce%%0 I11GE8 Bhether #ay(ent% ,ere $nten&e& to +e a##!$e& to the #r$nc$#a! OR ,ere con%$&ere& a% rent%" $ntere%t%N =ELD8 2ay(ent% ,ere NOT rent%" $ntere%t% Ner$ too. #o%%e%%$on o !an& an& co!!ecte& r*$t%0 The cre&$tor ha'$n) enHoye& the +ene $c$a! *%e o the !an&% &e!$'ere& a% %ec*r$ty or the !oan" $t a##ear% to ha'e +een the $ntent$on o the #art$e% that the cre&$tor %ho*!& +e co(#en%ate& there+y0 Tho*)h rece$#t%" #ay(ent% are ca!!e& rent%" they ,ere #re#are& +y Ner$ (2F% h*%+an&) an& 2!a$nt$ " an& &e en&ant% $n the$r $)norance &$& not !oo. $nto the ,or&$n)" +e$n) (ere!y %at$% $e& that they ,ere #roo % o #ay(ent0 The !$a+$!$ty o #!a$nt$ to ret*rn the e?ce%% #ay(ent% $% $n .ee#$n) ,$th Art$c!e 1:9; (O!& C$'$! Co&e) ,h$ch #ro'$&e% that" ,hen %o(eth$n) $% rece$'e& ,h$ch there $% no r$)ht to co!!ect" an& ,h$ch +y ($%ta.e ha% +een *n&*!y &e!$'ere&" the o+!$)at$on to re%tore $t ar$%e%0 The 3 re/*$%$te% are #re%ent8 1) There $% no r$)ht to co!!ect the%e e?ce%% %*(%- an& 3) the a(o*nt% ha'e +een #a$& thro*)h ($%ta.e +y &e en&ant%0 1*ch ($%ta.e $% %ho,n +y the act that the$r contract% ne'er $nten&e& that e$ther rent% or $ntere%t %ho*!& +e #a$&" an& +y the *rther act that ,hen the%e #ay(ent% ,ere (a&e" they ,ere $nten&e& +y &e en&ant% to +e a##!$e& to the #r$nc$#a!" +*t they o'er#a$& the a(o*nt% !oane& to the(0