SIMPLE LOAN OR MUTUUM

ROYAL SHIRT FACTORY, INC. v CO

FACTS:
-

The parties entered into a contract wherein it is stipulated that 350

pairs of ballet shoes will be sold by Co and that Co had 9 days from
delivery of the shoes to make his choice of 2 alternatives: a) consider
the sale for the shoes closed at a flat rate, or b) return the remaining
unsold ones to Royal.
Co failed to return the unsold pairs after 9 days and actually began
making partial payments on account of the purchase price agreed
upon.
Co then contended that there was merely a consignment of the goods
and he wanted to return the unsold shoes. Royal refused contending
that it was an outright sale.

ISSUE: WoN the sale was an outright sale / WoN Co is bound by the interest
stipulated in the invoice.
SC: YES! / NO!
-

OUTRIGHT SALE
o Co accepted the invoice of the ballet shoes and he even noted
down in his own handwriting the partial payments that he made.
o If the sale has been on consignment, a stipulation as to the
period of time for the return of the unsold shoes should have
been made, however, this was not done
NOT BOUND BY THE INTEREST
o He did not sign the invoice slip the stipulated interest was 20%,
hence, not binding
o However, he is bound by the legal interest of 6%
Hence, Co was ordered to pay the balance of the purchase price for
the ballet shoes + legal interest

USURY LAW
EASTERN SHIPPING v CA
FACTS:
-

2 Fiber drums of Riboflavin were shipped from Japan for delivery

vessel owned by Eastern Shipping (P) and that the shipment was
insured by Mercantile Insurance (R)
Upon arrival in Manila, it was discharged unto the custody of Metro
Port, which it stated in its survey that 1 drum was in bad order.
It was then received by Allied Brokerage wherein it stated in its survey
that one drum was opened and without seal
Allied then delivered it to the consignees W/H, which it excepted that 1
drum contained spillages while the rest was adulterated/fake
R then filed claims against P for the losses sustained by the consignee
(which R subrogated).

LC ruled in favor of R and ordered P to pay damages, however, it failed

to state when the interest rate should commence from date of filing of
complaint at 12% or from date of judgment of TC at 6%

ISSUE: When should the interest rate commence and at what rate
SC: 6% from the date of decision and 12% from date of finality of judgment
until payment
-

This case laid down the rules on the interest rates:

A) when an obligation regardless of its source, is breached, the
contravenor can be held liable for damages
B) with regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as the
accrual thereof, shall be as follows:
If it consists of payment of money (loan/forbearance)
o Interest due imposed = as stipulated in writing and the
o Interest due = earn legal interest from the time it is judicially
demanded
o No stipulation = 12% per annum from date of default
(judicial/extra judicial)
If it is not loan/forbearance
o Interest on amount of damages = imposed by discretion of court
at 6%
o No interest shall be ordered on unliquidated claims/damages
until demand can be established with reasonable certainty
o When demand is established with reasonable certainty, interest
shall begin to run from the time the claim is made
(judicially/extrajudicially)
o But if it cannot be reasonably established at the time demand
was made = interest to run from date of judgment of the court
If judgment becomes Final and Executory
o Rate of legal interest = 12%
o From finality to satisfaction
o Why? It is already considered as forbearance

PNB v CA
FACTS:
-

Province of Isabela issued several checks drawn against its account

with PNB (P) in favor of Ibarrola (R), as payments for the purchase of
medicines.
The checks were delivered to Rs agents who turned them over to R,
except 23 checks amounting to P98k.
Due to failure to receive full amount, R filed case against P
LC, CA and SC ordered PNB to pay however, all 3 courts failed to
specify the legal rate of interest 6% or 12%

ISSUE: WoN the rate to be used is 6%

SC: YES!

This case does not involve a loan, forbearance of money or judgment

involving a loan or forbearance of money as it arose from a contract of
sale whereby R did not receive full payment for her merchandise.
When an obligation arises from a contract of purchase and sale and
not from a contract of loan or mutuum, the applicable rate is 6% per
annum as provided in Art. 2209 of the NCC
6% from filing of complaint until full payment before finality of judgment
12% from finality of judgment

WAREHOUSE RECEIPTS LAW

YHT REALTY CORPORATION v CA
FACTS:
McLoughlin (R) is an Australian businessman-philanthropist, who used to stay
at Sheraton Hotel during his trips in the Philippines. He met Brunhilda Tan
(Tan), who accompanied him around and introduced him to important people.
Tan was able to convince R to transfer for Sheraton to Tropicana, where the
other petitioners were employed.
R rented a safety deposit box at Tropicana. The safety deposit box could only
be opened through the use of 2 keys 1 for the management and the other
for R. R placed several thousands of dollars and other valuable things. Later,
he found out that a certain amount of his dollars and some pieces of jewelry
were missing. Ps employees admitted that Tan was able to open the said
deposit box, that Tan stole the assigned key to R while the latter was sleeping
and that they allowed Tan to open the safety deposit box because they
thought she was Rs wife.
R insisted that P should assume responsibility for the loss that R suffered, but
P refused to accept responsibility relying on the conditions for renting the
safety deposit box, wherein it states that P is released and hold free and
blameless for any liability arising for any loss in the contents of the safety
deposit box, for whatever cause.
ISSUE: WoN the undertaking for the renting of safety deposit box is valid
SC: NO!
-

Art. 2003 hotel keeper cannot free himself from responsibility by

posting notices to the effect that he is not liable for the articles brought
by any guest. Any stipulation whereby the responsibility of the
hotelkeeper in Art. 1998-2001 is suppressed or diminished is void.
o This is an expression of public policy, since hotel business is
imbued with public interest
o Catering to the public, hotelkeepers are bound to provide not
only lodging for hotel guests but also security to their persons
and belongings.
the undertaking is in contravention of Art. 2003 since it allows P to be
released from liability arising from any loss in the contents and/or use
of the safety deposit box for any cause whatsoever.

P was guilty of negligence in allowing another person to open the box

without the consent of R.

PNB v PRODUCERS WAREHOUSE ASSOCIATION

FACTS:
-

PNB (P) is a bank in PH, Producers Warehouse Association (D) is a

domestic corporation doing general warehouse business and Phil.
Fiber and Produce Company (Fiber) is another domestic corporation.
D and Fiber entered into a written contract, wherein Fiber would act as
the general manager of the business of D and that Fiber would
exercise a general and complete supervision over the management of
the business of D.
Nov and Dec 1918 D issued negotiable quedans to Fiber for 15k++
piculs of Copra, which the terms states that
o D agreed to deliver that amount of copra to Fiber or its order
o D will deliver the packages noted therein upon the surrender of
the warrant to D
o No transfer of interest/ownership will be recognized unless
registered in the books of D
o The words negotiable warrant were printed in red ink in the
quedan
Fiber then arranged for overdraft with P for P1M and to secure it, the
subject quedans were endorsed in blank and delivered by Fiber to P,
which became the owner and holder thereof.
P later on requested D the delivery of copra described in the quedans,
however, D refused to comply despite repeated requests of P, stating
that it could not be delivered since the goods mentioned are not in the
warehouse.
D stated that the quedans were invalid and wrongfully issued and that
the copra was not in its warehouse
LC ruled in favor of D

ISSUE: WoN the quedans were validly negotiated to P

SC: YES!
-

The quedans have legal force and effect

o They were duly executed by Wicks, as treasurer and Torres as
warehouseman, for and in behalf of D.
o The said quedans were endorsed in blank and physical
possession was delivered to P as collateral security for the
overdraft of Fiber Company and
o That the quedans were in negotiable form.
D cannot now deny the existence of the quedans

PNB v SAYO, JR.

FACTS
-

Noahs Ark Sugar Refinery (Noahs) issued several warehouse receipts

(quedans), which were negotiated to Rosa, RNS and St. Therese
(vendees), which were again negotiated to Luis and Cresencia, which
they (Luis and Cresencia) endorsed to PNB as security for 2 loan
agreements.
o Transfer of quedans Noahs Rosa, RNS and St. Therese
Luis and Cresencia PNB
Luis and Cresencia failed to pay their loans hence PNB demanded
delivery of sugar stocks, however, Noahs Ark refused, alleging
ownership thereof.
Noahs Ark contended that the agreement made by them with the
vendees was stopped since the bank dishonored the payments made
by the vendees to Noahs Ark. As such, the vendees and the endorsers
of the quedans never acquired ownership thereof.
Noahs Ark claimed for warehousemans lien for the storage of the
goods.
LC granted lien
PNB appealed

ISSUE: WoN PNB is entitled to the stocks of sugar as the endorsee of the
quedans, without paying the lien
SC: YES
-

While PNB is entitled to the stocks of sugar as the endorsee of the

quedans, delivery to it shall be effected only upon payment of the
storage fees.
The warehouseman is entitled to the warehousemans lien that
attaches to the goods invokable against anyone who claims a right of
possession thereon.
However, in this case, the lien was lost when R refused to deliver the
goods, which were not anchored to a valid excuse (i.e. non satisfaction
of W/Hman Lien) but on an adverse claim of ownership.
The loss of W/H Mans lien does not necessarily mean the
extinguishment of the obligation to pay the W/H fees and charges
which continues to be a personal liability of the owners, PNB in this
case. However, such fees and charges have ceased to accrue from the
date of the rejection by Noahs Ark to heed the lawful demand for the
release of the goods.