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ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC v. HON. COURT OF

APPEALS, PRODUCERS BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF

CALOOCAN CITY, 260 SCRA 714, G.R. No. 103576 August 22, 1996

CLAIMS

ACME: opposed the foreclosure as it alleged that the 1984 loan was no longer covered by the

chattel mortgage of 1978. Acme is also asking for moral damages (worth P3 million) for the

groundless foreclosure done by Producers Bank.

RESPONDENT BANK: applied for an extra judicial foreclosure of the chattel mortgage, herein

before cited, with the Sheriff of Caloocan City, prompting petitioner corporation to forthwith file

an action for injunction, with damages and a prayer for a writ of preliminary injunction, before

the Regional Trial Court of Caloocan City.

ISSUEs: Would it be valid and effective to have a clause in a chattel mortgage that purports to

likewise extend its coverage to obligations yet to be contracted or incurred?

HELD: No. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-

incurred obligations so long as these future debts are accurately described, a chattel mortgage,

however, can only cover obligations existing at the time the mortgage is constituted. Although a

promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a

binding commitment that can be compelled upon, the security itself, however, does not come

into existence or arise until after a chattel mortgage agreement covering the newly contracted

debt is executed either by concluding a fresh chattel mortgage or by amending the old contract

conformably with the form prescribed by the Chattel Mortgage Law. Refusal on the part of the

borrower to execute the agreement so as to cover the after-incurred obligation can constitute an

act of default on the part of the borrower of the financing agreement whereon the promise is

written but, of course, the remedy of foreclosure can only cover the debts extant at the time of

constitution and during the life of the chattel mortgage sought to be foreclosed.

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FRANCISCO HERRERA, plaintiff-appellant, vs. PETROPHIL CORPORATION,

defendant-appellee, 146 SCRA 385, G.R. No. L-48349,December 29, 1986

CLAIMS

HERRERA:

1. that the lower court erred in the computation of the interest collected out of the rentals

paid for the first eight years;2. that such interest was excessive and violative of the Usury Law; and

3. that he had neither agreed to nor accepted the defendant-appellant's computation of

the total amount to be deducted for the eight years advance rentals.

4. The interest collected by defendant out of the rentals for the first eight years was

excessive and beyond that allowable by law, because the total interest on the said

amount is only P33,755.90 at P4,219.4880 per yearly rental; and considering that the

interest should be computed excluding the first year rental because at the time the

amount of P281, 199.20 was paid it was already due under the lease contract hence no

interest should be collected from the rental for the first year, the amount of

P29,536.42 only as the total interest should have been deducted by defendant fromthe sum of P281,299.20.

PETROPHIL CORP: 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.

RULING: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.

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BPI Investment Corp v. CA and ALS MANAGEMENT & DEVELOPMENT CORPORATION,

377 SCRA 117, G.R. no. 133632, February 15, 2002

CLAIMS:

BPI-IC: instituted foreclosure proceedings against ALS and Litonjua on the ground that they

failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984 amounting toP475,585.31.

In their petition to the SC, they contended that:

1. the Court of Appeals erred in ruling that because a simple loan is perfected upon the

delivery of the object of the contract, the loan contract in this case was perfected only

on September 13, 1982.

2. that a contract of loan is a consensual contract, and a loan contract is perfected at the

time the contract of mortgage is executed conformably with our ruling in Bonnevie v.

Court of Appeals, 125 SCRA 122. In the present case, the loan contract was perfected

on March 31, 1981, the date when the mortgage deed was executed, hence, the

amortization and interests on the loan should be computed from said date.

3. that while the documents showed that the loan was released only on August 1982, the

loan was actually released on March 31, 1981, when BPIIC issued a cancellation of

mortgage of Frank Roas loan. This finds support in the registration on March 31, 1981

of the Deed of Absolute Sale executed by Roa in favor of ALS, transferring the title of

the property to ALS, and ALS executing the Mortgage Deed in favor of BPIIC.

Moreover, petitioner claims, the delay in the release of the loan should be attributed to

private respondents. As BPIIC only agreed to extend a P500,000 loan, private

respondents were required to reduce Frank Roas loan below said amount. According

to petitioner, private respondents were only able to do so in August 1982.

ALS & LITONJUA:

1. that they were not in arrears in their payment, but in fact made an overpayment as of

June 30, 1984.

2. that they should not be made to pay amortization before the actual release of the

P500,000 loan in August and September 1982.

3. Further, out of the P500,000 loan, only the total amount of P464,351.77 was released

to private respondents.

4.

Hence, applying the effects of legal compensation, the balance of P35,648.23 shouldbe applied to the initial monthly amortization for the loan

In their comment to the petition of the BPI-IC, they:

1. Asserted that based on Article 1934 of the Civil Code,[4] a simple loan is perfected

upon the delivery of the object of the contract, hence a real contract. In this case,

even though the loan contract was signed on March 31, 1981, it was perfected only on

September 13, 1982, when the full loan was released to private respondents. They

submit that petitioner misread Bonnevie. To give meaning to Article 1934, according

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to private respondents, Bonnevie must be construed to mean that the contract to

extend the loan was perfected on March 31, 1981 but the contract of loan itself was

only perfected upon the delivery of the full loan to private respondents on September

13, 1982.

2. maintained that even granting, arguendo, that the loan contract was perfected on

March 31, 1981, and their payment did not start a month thereafter, still no default

took place. According to private respondents, a perfected loan agreement imposes

reciprocal obligations, where the obligation or promise of each party is theconsideration of the other party. In this case, the consideration for BPIIC in entering

into the loan contract is the promise of private respondents to pay the monthly

amortization. For the latter, it is the promise of BPIIC to deliver the money. In

reciprocal obligations, neither party incurs in delay if the other does not comply or is

not ready to comply in a proper manner with what is incumbent upon him. Therefore,

private respondents conclude, they did not incur in delay when they did not commence

paying the monthly amortization on May 1, 1981, as it was only on September 13,

1982 when petitioner fully complied with its obligation under the loan contract.

ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second

release of the loan?

HELD:

The obligation to pay commenced only on October 13, 1982, a month after the perfection of the

contract.

The contract of loan involves a reciprocal obligation, wherein the obligation or promise of each

party is the consideration for that of the other. It is a basic principle in reciprocal obligations

that neither party incurs in delay, if the other does not comply or is not ready to comply in a

proper manner with what is incumbent upon him. Consequently, petitioner could only demand

for the payment of the monthly amortization after September 13, 1982 for it was only then

when it complied with its obligation under the loan contract.

BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without

checking and correspondingly adjusting its records on the amount actually released and the date

when it was released. Such negligence resulted in damage for which an award of nominal

damages should be given.

SSS where we awarded attorneys fees because private respondents were compelled to litigate,

we sustain the award of P50,000 in favor of private respondents as attorneys fees.