G.R. No.

L-48349 December 29, 1986

FRANCISCO HERRERA
vs.
PETROPHIL CORPORATION

Facts:

On December 5, 1969, the plaintiff-appellant and ESSO Standard Eastern. Inc., (later
substituted by Petrophil Corporation) entered into a "Lease Agreement" whereby the former leased
to the latter a portion of his property for a period of twenty (20) years from said date.

On December 31, 1969, pursuant to the said contract, the defendant-appellee paid to the
plaintfff-appellant advance rentals for the first eight years, subtracting therefrom the amount of
P101,010.73, the amount it computed as constituting the interest or discount for the first eight years,
in the total sum P180,288.47. On August 20, 1970, the defendant-appellee, explaining that there had
been a mistake in computation, paid to the appellant the additional sum of P2,182.70, thereby
reducing the deducted amount to only P98,828.03.

On October 14, 1974, the plaintiff-appellant sued the defendant-appellee for the sum of
P98,828.03, with interest, claiming this had been illegally deducted from him in violation of the Usury
Law. Defendant-appellee argued that the amount deducted was not usurious interest but a given to
it for paying the rentals in advance for eight years. Judgment on the pleadings was rendered for the
defendant.

Plaintiff-appellant now prays for a reversal of that judgment, insisting that such interest was
excessive and violative of the Usury Law. The defendant maintains that the correct amount of the
discount is P98,828.03 and that the same is not excessive and above that allowed by law.

Issue: Whether the Usury Law is applicable to the lease agreement between the parties

Ruling:

No. As its title plainly indicates, the contract between the parties is one of lease and not of
loan. It is clearly denominated a "LEASE AGREEMENT." Nowhere in the contract is there any showing
that the parties intended a loan rather than a lease. The provision for the payment of rentals in
advance cannot be construed as a repayment of a loan because there was no grant or forbearance of
money as to constitute an indebtedness on the part of the lessor. On the contrary, the defendant-
appellee was discharging its obligation in advance by paying the eight years rentals, and it was for
this advance payment that it was getting a rebate or discount.

There is no usury in this case because no money was given by the defendant-appellee to the
plaintiff-appellant, nor did it allow him to use its money already in his possession. There was neither
loan nor forbearance but a mere discount which the plaintiff-appellant allowed the defendant-
appellee to deduct from the total payments because they were being made in advance for eight years.
The discount was in effect a reduction of the rentals which the lessor had the right to determine, and
any reduction thereof, by any amount, would not contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on
usury.

G.R. No. 133179 March 27, 2008

ALLIED BANKING CORPORATION,
vs.
LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK,

Facts:
On November 14, 1983, respondent Lim Sio Wan deposited with petitioner Allied Banking
Corporation (Allied) a money market placement of PhP 1,152,597.35. On December 5, 1983, a person
claiming to be Lim Sio Wan called up Cristina So, an officer of Allied, and instructed the latter to pre-
terminate Lim Sio Wan’s money market placement, to issue a managers check representing the
proceeds of the placement, and to give the check to one Deborah Dee Santos who would pick up the
check. Later, Santos arrived at the bank. The bank issued Managers Check for PhP 1,158,648.49, in
the name of Lim Sio Wan, as payee. The check was given to Santos.
Thereafter, the manager’s check was deposited in the account of Filipinas Cement
Corporation (FCC) at respondent Metropolitan Bank and Trust Co. (Metrobank), with the forged
signature of Lim Sio Wan as endorser.
Metrobank stamped a guaranty on the check. The check was sent to Allied. Allied funded the
check even without checking the authenticity of Lim Sio Wan’s purported endorsement. Thus, the
amount on the face of the check was credited to the account of FCC.
On December 14, 1983, upon the maturity date of the money market placement, Lim Sio Wan
went to Allied to withdraw it. She was then informed that the placement had been pre-terminated
upon her instructions. She denied giving any instructions and receiving the proceeds
thereof. On January 24, 1984, Lim Sio Wan, sent a demand letter to Allied asking for the payment of
the money market placement. Allied refused to pay Lim Sio Wan, claiming that the latter had
authorized the pre-termination of the placement and its subsequent release to Santos.
Consequently, Lim Sio Wan filed with the RTC a Complaint against Allied to recover the
proceeds of her money market placement. Allied filed a third party complaint against Metrobank
and Santos. In turn, Metrobank filed a fourth party complaint against FCC. FCC for its part filed a fifth
party complaint against Producers Bank. Summonses were duly served upon all the parties except
for Santos, who was no longer connected with Producers Bank.
On May 15, 1984, Allied informed Metrobank that the signature on the check was forged.
Thus, Metrobank withheld the amount represented by the check from FCC. Later on, Metrobank
agreed to release the amount to FCC after the latter executed an Undertaking, promising to indemnify
Metrobank in case it was made to reimburse the amount.
 The RTC ruled against Allied and the latter was ordered to pay the plaintiff. Allied
appealed to the CA. CA modified RTC’s decision. CA ordered Allied to pay sixty (60%) percent and
defendant-appellee Metropolitan Bank and Trust Company forty (40%) of the amount of
P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid.
Hence, Allied filed the instant petition.
Issue: Whether or not CA erred in ordering Allied and Metrobank to pay 60:40 ratio for their
liabilities
Ruling:
No. We find that Allied is liable to Lim Sio Wan. Lim Sio Wan, as creditor of the bank for her
money market placement, is entitled to payment upon her request, or upon maturity of the
placement, or until the bank is released from its obligation as debtor. Until any such event, the
obligation of Allied to Lim Sio Wan remains unextinguished.
Since there was no effective payment of Lim Sio Wans money market placement, the bank
still has an obligation to pay her at six percent (6%) interest from March 16, 1984 until the payment
thereof.
We cannot, however, say outright that Allied is solely liable to Lim Sio Wan. The liability of
Allied is concurrent with that of Metrobank as the last indorser of the check. Given the relative
participation of Allied and Metrobank to the instant case, both banks cannot be adjudged as equally
liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank, as ruled by the CA, must be
upheld.
 G.R. No. L-38745 August 6, 1975

LUCIA TAN vs. ARADOR VALDEHUEZA and REDICULO VALDEHUEZA

Facts:

The case stemmed from an action instituted by Lucia Tan against Arador Valdehueza and
Rediculo Valdehueza for a declaration of ownership and recovery of possession of the parcel of land
described in the first cause of action of the complaint, and consolidation of ownership of two portions
of another parcel of land described in the second cause of action of the complaint, allegedly sold to
the plaintiff in two separate deeds of pacto de retro.

The parcel of land described in the first cause of action was the subject matter of the public
auction sale held on May 6, 1955 at the Capitol Building in Oroquieta, Misamis Occidental, wherein
Lucia Tan was the highest bidder. Due to the failure of defendant Arador Valdehueza to redeem the
said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was then
the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA
TAN.

On July 24, 1957, Tan filed a civil case, a complaint for injunction against the Valdehuezas, to
enjoin them from entering the above-described parcel of land. The complaint and the counterclaim
were subsequently dismissed. The Valdehuezas appealed to the lower court alleging that it erred in
making a finding on the second cause of action that the transactions between the parties were simple
loan, instead, it should be declared as equitable mortgage.

Issue: Whether the lower court erred in finding that the transactions between the parties were a
simple loan

Ruling:

Yes.The trial court treated the registered deed of pacto de retro as an equitable mortgage but
considered the unregistered deed of pacto de retro "as a mere case of simple loan, secured by the
property thus sold under pacto de retro," on the ground that no suit lies to foreclose an unregistered
mortgage. It would appear that the trial judge had not updated himself on law and jurisprudence; he
cited, in support of his ruling, article 1875 of the old Civil Code and decisions of this Court circa 1910
and 1912.

The Valdehuezas having remained in possession of the land and the realty taxes having been
paid by them, the contracts which purported to be pacto de retro transactions are presumed to be
equitable mortgages,5 whether registered or not, there being no third parties involved.
 G.R. No. 168782 October 10, 2008
SPOUSES JOVENAL TORING and CECILIA ESCALONA-TORING
vs.
SPOUSES ROSALIE GANZON-OLAN and GILBERT OLAN, and ROWENA OLAN
Facts:
On September 4, 1998, petitioner Jovenal Toring obtained from respondents a loan
amounting to P6,000,000 at 3% interest per month. The loan was secured by a mortgage on a parcel
of land covered by Transfer Certificate of Title No. T-27418,[4] as evidenced by a Deed of Real Estate
Mortgage[5] dated September 8, 1998.
On September 23, 1998, the parties executed a Deed of Absolute Sale[6] conveying the
mortgaged property in favor of respondents. Subsequently, respondents gave petitioners an
exclusive option to repurchase the land for P10,000,000. This was embodied in a document
denominated as an Option to Buy[7] dated September 28, 1998. On this same document, respondents
acknowledged receipt of a total sum of P10,000,000 as consideration for the purchase of the
land.[8] The Option to Buy provided that if the option is exercised after December 5, 1998, the
purchase price shall increase at the rate of P300,000 or 3% of the purchase price every month until
September 5, 1999 and thereafter at the rate of P381,000 or 3.81% of the purchase price every
month, with the fifth of every month as the cut-off date for said increases.[9]
On July 28, 2000, petitioners filed a Complaint[10] docketed as Civil Case No. 00-137 for
reformation of instruments, abuse of rights and damages against respondents. Petitioners prayed
that the Deed of Absolute Sale dated September 23, 1998 and Option to Buy dated September 28,
1998, be treated as an equitable mortgage instead of a sale.
The RTC favoured the defendants since the loan is not denied, directing spouses [p]laintiffs
JOVENAL TORING and CECILIA ESCALONA TORING, to pay the sum of TWENTY MILLION
PESOS within one month from receipt of this decision.
Petitioners appealed, contending that the trial court erred in awarding interest. The Court of
Appeals affirmed the trial courts ruling. The petitioners filed a motion for reconsideration but was
denied. Hence, this petition.
Issue: Whether the Court of Appeals err in sustaining the trial courts ruling upholding the 3% and
3.81% stipulated monthly interest?
Ruling:
Yes. In our view, the Court of Appeals erred in sustaining the trial courts decision upholding
the stipulated interest of 3% and 3.81%. Thus, we are unanimous now in our ruling to reduce the
above stipulated interest rates to 1% per month, in conformity with our ruling in Ruiz v. Court of
Appeals.[25] For as well stressed in that case:
Nothing in the said circular [CB Circular No. 905, s. 1982] grants lenders carte blanche authority to
raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of
their assets.
Undeniably, in the present case, petitioners failed to pay the principal loan on its maturity and upon
demand by respondents, as well as the interest payments thereafter.Indeed, petitioners cannot turn
their backs on their obligation; they have to comply with what is incumbent upon them. All other
claims for damages having been waived by the parties, petitioners are bound to pay respondents the
principal loan of P10,000,000, plus what we have repeatedly held as the appropriate rate of interest
of 1% per month, from December 6, 1998[26] until fully paid.

[G.R. No. 32471. December 29, 1930.]

SEVERINO JAYME and LEONARDA RAMOS v. JUAN D. SALVADOR ET AL.,

Facts:

The plaintiff spouses owed Presentation Hofileña de Evangelista P14,381.13, with interest
at 12 per cent per annum, payment of which was secured by a mortgage upon the realty covered by
transfer certificate of title No. 2336. Upon being pressed for payment, said plaintiffs, went to the
defendant herein, Juan D. Salvador, from whom they obtained a loan of P18,000 on condition that
their realty referred to above should appear to have been sold to the defendants for P26,000, the
plaintiffs would purchase of the defendants lot No. 69-C of the cadastre of Iloilo for P8,000, and said
plaintiffs would further appear as lessees of said Supang estate at an annual rental of P3,120,
although in reality such conveyance of the land was not the real intention of the parties and the
aforesaid rental of P3,120 was no such rent, but the interest thus cloaked, at 12 per cent per annum
on the sum of P26,000 stated as the selling price of the said estate.

It was agreed between the parties that the plaintiffs could repurchase said estate by
returning the principal loaned and the interest thereon, and for this purpose the option was
executed, the defendants agreeing to accept the return of said lot No. 69-C.

The amount of P26,000 was represented in these transactions by two checks, one for P18,000 and
the other for P8,000. The plaintiff Severino Jayme, upon receipt of the check, then paid his debt to
Presentacion Hofileña de Evangelista, and in consequence, the mortgage upon said Supang estate
was cancelled.

A few days later, the plaintiff Severino Jayme asked the defendant Juan D. Salvador to increase the
loan. The latter answered he had no money, and suggested that he secure a loan from somebody
else upon the security of lot 69-C, for which reason Severino Jayme obtained a transfer certificate to
said lot in his name, and mortgaged it to Go Tiang Tin for a loan of P600, and another of P320 in
favor of said Severino Jayme (Exhibits 4 and 5). These loans were later paid, the mortgage upon lot
No. 69-C being cancelled (Exhibit CC).

Having obtained the transfer certificate of title No. 6212, the defendants succeeded in obtaining a
loan of P20,000 from the Philippine National Bank, mortgaging said estate.

Some months later, having obtained the loan of P22,000 from Vicente Lopez, the plaintiff offered to
pay the defendant Juan D. Salvador his debt of P18,000, plus the interest amounting to P3,120. Said
defendant refused to accept it. As the latter would not admit said claim, he brought this action,
depositing with the clerk of the court below the amount of P6,240 on May 22, 1928, representing
the rental for two years.

To prove the first six errors, the defendants contend that the plaintiffs voluntarily and definitely
entered into the aforementioned contracts.

The defendants contend that inasmuch as the plaintiffs read all said contracts and with full
knowledge of the contents and conditions thereof signed Exhibits D and E, which are deeds of final
sale, as well as Exhibit F, which is a contract of lease, we must take these documents literally, since
they are set forth in clear terms and leave no room for doubt as to the intention of the contracting
parties.

Issue: Whether or not the transactions between the plaintiffs and defendants constitute a loan

Ruling:

Yes. After examining the record, we have reached the conclusion that the transactions
alluded to between the plaintiffs and the defendants constitute a loan of P18,000 granted by the
latter to the former with interest at 12 per cent per annum. We agree with the court below, that the
plaintiffs did not intend to sell their Supang estate. It is true that the plaintiffs were aware of the
contents of the contracts, but the preponderance of the evidence shows that they signed them
knowing that said contracts did not express their real intention, and if they did so notwithstanding
this, it was due to the urgent necessity of obtaining funds. Therefore article 1282 of the Civil Code
and those cognate thereto cannot be applied to the case before us, where it sufficiently appears that
what the parties really intended was different from what appears in said contracts.

Plaintiff Severino Jayme paid the land tax upon the Tansa lot, according to him, with money
furnished him, by the defendant Juan D. Salvador.

This latter is one of the most salient facts showing that the real intention of both parties in
executing the principal contracts referred to heretofore, was that of a loan granted by the
defendants to the plaintiffs in the amount of P18,000 with interest thereon at 12 per cent per
annum, secured by a mortgage on said estate situated in Supang. Among these circumstances may
be mentioned the assessed value of the land, which, even taking that of P19,920 in May, 1928, is
already greater than the P18,000 received by the plaintiffs. The fact that upon the same date were
executed the sale of the said Supang estate (Exhibit D), the option in favor of the plaintiffs to
repurchase said estate (Exhibit G), the lease of said estate in favor of said plaintiffs (Exhibit F), and
the transfer of the lot in Tansa (Exhibit E), in exchange of the endorsement or return to the
defendant Salvador of his check for P8,000 (Exhibit 2), taken together with the remainder of the
circumstances of the case, corroborate and strengthen the conclusion set forth above.