Digest

Olivia Navoa and Ernesto Navoa vs. C.A., Teresita Domdoma and Eduardo Domdoma
GR
No
59255
20December1995
Facts:
On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case with the
RTC for collection of various sums of money based on loans given by them to Olivia
Navoa. They cased was dismissed on the ground that there was no cause of action
and that the Domdomas do not have no capacity to sue. They appealed to the C.A.
and
was
granted
a
favourable
decision.
There were 6 instances in which the Domdomas gave Olivia Navoa a loan. The first
instance is when Teresita gave Olivia a diamond ring valued at 15,000.00 which was
secured by a PCIB check under the condition that if the ring was not returned within
15 days from August 15, 1977 the ring is considered sold. Teresita attempted to
deposit the check on November 1977 but the check was not honoured for lack of
funds. After this instance, there were other loans of various amounts that were
extended by Teresita to Olivia, loans which were secured by PCIB checks, which
were all dated to 1 month after the loan. All these checks were not honoured under
the
same
reason
as
the
first
loan.
Issue:
Was the decision of the RTC to dismiss the case due to having no cause of action
valid?
- NO, A cause of action is the fact or combination of facts which affords a party a
right
to
judicial
interference
in
his
behalf.
- For the first loan it is a fact, that the ring was considered sold to Olivia Navoa 15
days after August 15, 1977, and even then, Olivia Navoa failed to pay the price for
the ring when the payment was due (check issued was not honoured. Thus it is
confirmed
that
Teresitas
right
under
the
agreement
was
violated.
- As for the other loans extended by Teresita to Olivia, they were all secured by PCIB
checks. It can be inferred that since the checks were all dated to 1 month after the
loan, it follows that the loans are then payable 1 month after they were contracted,
and also these checks were dishonoured by the bank for lack of funds.
- Olivia and Ernesto Navoa failed to make good the checks that were issued as
payment for their obligations. Art 1169 of the Civil Code is explicit: those obliged to
deliver or to do something incur in delay from the time the obligee judicially or
extra-judicially demands from them the fulfilment of the obligations, the continuing
refusal of Olivia and Ernesto Navoa to comply with the demand of payment shows
the
existence
of
a
cause
of
action.
Held:
The petition is DENIED and the decision of the C.A. remanding the case to the RTC
for
trial
on
the
merits
is
affirmed.

Obligations
and
Contracts
terms:
Security- A means of ensuring the enforcement of an obligation or of protecting
some interest in property. It may be personal or property security.
Cause of Action- is the fact or combination of facts which affords a party a right to
judicial interference in his behalf. The requisites for a cause of action are: (a) a right
in favour of the plaintiff by whatever means and under whatever law it arises or
created, (b) an obligation on the part of the defendant to respect and not to violate
such right; and, (c) an act or omission on the part of the defendant constituting a
violation of the plaintiffs right or breach of the obligation of the defendant to the
plaintiff.
People v. Concepcion
G.R. No. 19190 (November 29, 1922)
FACTS:
Defendant authorized an extension of credit in favor of Concepcion, a copartnership. Defendants wife was a director of this co-partnership. Defendant was found guilty of
violating Sec. 35 of Act No. 2747 which says that The National Bank shall not, directly or indirectly,
grant loans to any of the members of the Board of Directors of the bank nor to agents of the branch
banks. This Section was in effect in 1919 but was repealed in Act No. 2938 approved on January
30, 1921.
ISSUE:
W/N Defendant can be convicted of violating Sections of Act No. 2747, which were repealed
by Act No. 2938.
HELD:
In the interpretation and construction, the primary rule is to ascertain and give effect to the
intention of the Legislature. Section 49 in relation to Sec. 25 of Act No. 2747 provides a punishment
for any person who shall violate any provisions of the Act. Defendant contends that the repeal of
these Sections by Act No. 2938 has served to take away basis for criminal prosecution. The Court
holds that where an act of the Legislature which penalizes an offense repeals a former act which
penalized the same offense, such repeal does not have the effect of thereafter depriving
the Courts of jurisdiction to try, convict and sentence offenders charged with violations of the old law.
HERRERA vs PETROPHIL CORP.
[G.R. No. L-48349, December 29, 1986]
CRUZ, J.
FACTS:

On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil Corp.,) entered into a
lease agreement, whereby the former leased to the latter a portion of his property for a period of 20yrs.

subject to the condition that monthly rentals should be paid and there should be an advance payment of
rentals for the first eight years of the contract, to which ESSO paid on December 31, 1969. However,
ESSO deducted the amount of 101, 010.73 as interest or discount for the eight years advance rental.

On August 20, 1970, ESSO informed Herrera that there had been a mistake in the computation of the
interest and paid an additional sum of 2,182.70; thus, it was reduced to 98, 828.03.

As such, Herrera sued ESSO for the sum of 98, 828.03, with interest, claiming that this had been
illegally deducted to him in violation of the Usury Law.

ESSO argued that amount deducted was not usurious interest but rather a discount given to it for paying
the rentals in advance. Judgment on the pleadings was rendered in favor of ESSO. Thus, the matter was
elevated to the SC for only questions of law was involve.

ISSUE: W/N the contract between the parties is one of loan or lease.
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 plaintiffappellant, 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.

To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be exacted
for the use of the money in excess of and in addition to interest allowed by law."

It has been held that the elements of usury are (1) a loan, express or implied; (2) an
understanding between the parties that the money lent shall or may be returned; that for
such loan a greater rate or interest that is allowed by law shall be paid, or agreed to be
paid, as the case may be; and (4) a corrupt intent to take more than the legal rate for the

use of money loaned. Unless these four things concur in every transaction, it is safe to affirm that no
case of usury can be declared.

Saura vs DBP
Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before its conversion to
DBP) for a loan of 500k secured by a first mortgage of the factory building to finance
for the construction of a jute mill factory and purchase of factory implements. RFC
accepted and approved the loan application subject to some conditions which Saura
admitted it could not comply with. Without having received the amount being loaned,
and sensing that it could not at anyway obtain the full amount of loan, Saura Inc. then
asked for cancellation of the mortgage which RFC also approved. Nine years after the
cancellation of the mortgage, Saura sued RFC for damages for its non-fulfillment of
obligations arguing that there was indeed a perfected consensual contract between
them.
Issue: Was there a perfected consensual contract?
Was there a real contract of loan which would warrant recovery of damages arising out
of breach of such contract?
Held: On the first issue, yes, there was indeed a perfected consensual contract, as
recognized in Article 1934 of the Civil Code. There was undoubtedly offer and
acceptance in this case: the application of Saura, Inc. for a loan of P500,000.00 was
approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. But this fact alone falls short of resolving the second issue and
the basic claim that the defendant failed to fulfill its obligation and the plaintiff is
therefore entitled to recover damages. The action thus taken by both partiesSaura's
request for cancellation and RFC's subsequent approval of such cancellationwas in the
nature of mutual desistance what Manresa terms "mutuo disenso" which is a mode
of extinguishing obligations. It is a concept derived from the principle that since mutual
agreement can create a contract, mutual disagreement by the parties can cause its
extinguishment. In view of such extinguishment, said perfected consensual contract to
deliver did not constitute a real contract of loan.

Credit Transactions Case Digest: BPI

Investment Corp V. CA (2002)
G.R. No. 133632 February 15, 2002
Lessons Applicable: Simple Loan

Laws Applicable:
Facts:

Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the

construction of a house on his lot in New Alabang Village, Muntinlupa.

He mortgaged the house and lot to AIDC as security for the loan.
1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio
Litonjua for P850K who paid P350K in cash and assumed the P500K indebtness of ROA with
AIDC.

AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate
of 20%/annum and service fee of 1%/annum on the outstanding balance payable within 10 years
through equal monthly amortization of P9,996.58 and penalty interest of 21%/annum/day from

the date the amortization becomes due and payable.

March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with

the provision that the monthly amortization will commence on May 1, 1981
August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal

loan to P457,204.90.
September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what

was left of their loan after full payment of Roas loan

June 1984: BPIIC 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 to P475,585.31

August 13, 1984: Notice of sheriff's sale was published
February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that
they are not in arrears and instead they made an overpayment as of June 30, 1984 since the
P500K loan was only released September 13, 1982 which marked the start of the amortization
and since only P464,351.77 was released applying legal compensation the balance

of P35,648.23 should be applied to the monthly amortizations

RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and
Litonjua was only in the principal sum of P464,351.77 and awarding moral damages, exemplary

damages and attorneys fees for the publication

CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the
contract which is on September 13, 1982

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

HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages. The award of
moral and exemplary damages in favor of private respondents is DELETED, but the
award to them of attorneys fees in the amount of P50,000 is UPHELD. Additionally,
petitioner is ORDERED to pay private respondents P25,000 as nominal damages. Costs
against petitioner.

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

perfection of the contract

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

Central Bank vs CA

The banks asking for advance interest for the loan is improper
considering that the total loan hasnt been released. A person cant be
charged interest for nonexisting debt. The alleged discovery by the
bank of overvaluation of the loan collateral is not an issue. Since Island
Savings

Bank

failed

to

furnish

the

P63,000.00

balance

of

the

P80,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino

became unenforceable to such extent.
Facts: Island Savings Bank, upon favorable recommendation of its legal department,
approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for
the loan, executed on the same day a real estate mortgage over his 100-hectare land
located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000, repayable
in semi-annual installments for 3 yrs, with 12% annual interest. After the agreement, a mere
P17K partial release of the loan was made by the bank and Tolentino and his wife signed a
promissory note for the P17,000 at 12% annual interest payable w/in 3 yrs. An advance

interest was deducted fr the partial release but this prededucted interest was refunded to
Tolentino after being informed that there was no fund yet for the release of the P63K
balance.
Monetary Board of Central Bank, after finding that bank was suffering liquidity problems,
prohibited the bank fr making new loans and investments. And after the bank failed to
restore its solvency, the Central Bank prohibited Island Savings Bank from doing business
in the Philippines. Island Savings Bank in view of the non-payment of the P17K filed an
application for foreclosure of the real estate mortgage. Tolentino filed petition for specific
performance or rescission and damages with preliminary injunction, alleging that since the
bank failed to deliver P63K, he is entitled to specific performance and if not, to rescind the
real estate mortgage.

Issues: 1) Whether or not Tolentinos can collect from the bank for damages
2) Whether or not the mortgagor is liable to pay the amount covered by the
promissory note
3) Whether or not the real estate mortgage can be foreclosed
Held:
1) Whether or not Tolentinos can collect from the bank for damages
The loan agreement implied reciprocal obligations. When one party is willing and ready to
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real
estate mortgage, he signified willingness to pay. That time, the banks obligation to furnish
the P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank to
furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it
did not prohibit the bank fr releasing the balance of loans previously contracted. Insolvency
of debtor is not an excuse for non-fulfillment of obligation but is a breach of contract.
The banks asking for advance interest for the loan is improper considering that the total
loan hasnt been released. A person cant be charged interest for nonexisting debt. The
alleged discovery by the bank of overvaluation of the loan collateral is not an issue. The
bank officials should have been more responsible and the bank bears risk in case the

collateral turned out to be overvalued. Furthermore, this was not raised in the pleadings so
this issue cant be raised. The bank was in default and Tolentino may choose bet specific
performance or rescission w/ damages in either case. But considering that the bank is now
prohibited fr doing business, specific performance cannot be granted. Rescission is the only
remedy left, but the rescission shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note
The promissory note gave rise to Sulpicio M. Tolentinos reciprocal obligation to pay the
P17,000.00 loan when it falls due. His failure to pay the overdue amortizations under the
promissory note made him a party in default, hence not entitled to rescission (Article 1191 of
the Civil Code). If there is a right to rescind the promissory note, it shall belong to the
aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note
setting the date for payment of P17,000.00 within 3 years, he would be entitled to ask for
rescission of the entire loan because he cannot possibly be in default as there was no date
for him to perform his reciprocal obligation to pay. Since both parties were in default in the
performance of their respective reciprocal obligations, that is, Island Savings Bank failed to
comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply
with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are both
liable for damages.
3) Whether or not the real estate mortgage can be foreclosed
Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00
loan, the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such
extent. P63,000.00 is 78.75% of P80,000.00, hence the real estate mortgage covering 100
hectares is unenforceable to the extent of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25 hectares
is more than sufficient to secure a P17,000.00 debt.
Republic vs Bagtas
Laws Applicable: Commodatum
Lessons Applicable:
FACTS:

May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari,
of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding purposes subject to

a breeding fee of 10% of the book value of the bulls

May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one

bull was approved while the others are to be returned

March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of

the 3 bulls
October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly
depreciation to be approved by the Auditor General.

October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be
returned or their book value without deductions should be paid not later than October 31, 1950

which he was not able to do

December 20, 1950: An action at the CFI was commenced against Jose praying that he be
ordered to return the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee

of P199.62, both with interests, and costs

July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines, he could not return the animals nor pay their

value and prayed for the dismissal of the complaint.

RTC: granted the action
December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve

the writ outside Manila

December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October

23, 1951 and administratrix of his estate, was notified

January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26,
1952 evidenced by recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid
and prayed that the writ of execution be quashed and that a writ of preliminary injunction be
issued.

ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the
loss due to force majeure due to delay.
HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs

If contract was commodatum then Bureau of Animal Industry retained ownership or title to
the bull it should suffer its loss due to force majeure. A contract of commodatum is essentially
gratuitous. If the breeding fee be considered a compensation, then the contract would be a
lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the

responsibilities of a possessor in bad faith, because she had continued possession of the bull
after the expiry of the contract. And even if the contract be commodatum, still the appellant is

liable if he keeps it longer than the period stipulated

the estate of the late defendant is only liable for the sum of P859.63, the value of the bull
which has not been returned because it was killed while in the custody of the administratrix of his

estate
Special proceedings for the administration and settlement of the estate of the deceased Jose
V. Bagtas having been instituted in the CFI, the money judgment rendered in favor of the
appellee cannot be enforced by means of a writ of execution but must be presented to the
probate court for payment by the appellant, the administratrix appointed by the court.
Catholic Vicar vs. CA
Wednesday, April 30, 2014

Date: September 31, 1988

Facts:
- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with
the court an application for the registration of title over lots 1, 2, 3 and 4 situated in
Poblacion Central, Benguet, said lots being used as sites of the Catholic Church,
building, convents, high school building, school gymnasium, dormitories, social hall and
stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have
ownership over lots 1, 2 and 3. (2 separate civil cases)
- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3
and 4. Upon appeal by the private respondents (heirs), the decision of the lower court
was reversed. Title for lots 2 and 3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision
of the Court of Appeals dismissing his application for registration of Lots 2 and 3.
- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the
alleged ownership of the land in question (Lot 3) by their predecessor-in-interest,
Egmidio Octaviano; his written demand to Vicar for the return of the land to them; and
the reasonable rentals for the use of the land at P10,000 per month. On the other
hand, Vicar presented the Register of Deeds for the Province of Benguet, Atty. Sison,

who testified that the land in question is not covered by any title in the name of
Egmidio Octaviano or any of the heirs. Vicar dispensed with the testimony of Mons.
Brasseur when the heirs admitted that the witness if called to the witness stand, would
testify that Vicar has been in possession of Lot 3, for 75 years continuously and
peacefully and has constructed permanent structures thereon.

Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in
commodatum, a gratuitous loan for use.

Held: YES.

Private respondents were able to prove that their predecessors' house was borrowed
by petitioner Vicar after the church and the convent were destroyed. They never asked
for the return of the house, but when they allowed its free use, they became bailors in
commodatum and the petitioner the bailee.

The bailees' failure to return the subject matter of commodatum to the bailor did not
mean adverse possession on the part of the borrower. The bailee held in trust the
property subject matter of commodatum. The adverse claim of petitioner came only in
1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by
such adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title.

The Court of Appeals found that petitioner Vicar did not meet the requirement of 30
years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the
requirement of 10 years possession for ordinary acquisitive prescription because of the
absence of just title. The appellate court did not believe the findings of the trial court
that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by
purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no

documentary evidence to support the same and the alleged purchases were never
mentioned in the application for registration.
Quintos vs Beck
Facts: B e c k t h e a p p e l l e e w a s a t e n a n t f o r t h e a p p e l l a n t Q u i n t o s a n d
A n s a l d o . T h e a p p e l l a n t s gratuitously allowed appellee the use of their furniture
with the clause that they be returned upon demand. When plaintiffs-appellant sold
the property in which defendant-appellee was currently r e s i d i n g , t h e p l a i n t i f f s
ordered the return of the furniture. Defendant only returned some of
t h e furniture, and later on deposited the furniture to the sheriff.
The court of first instance ruled that the expenses be shared by the
p a r t i e s p r o - r a t a , a n d t h a t they parties are to pay their respective legal fees.
Issues: D i d t h e t r i a l c o u r t e r r i n t h e i r c o n c l u s i o n t h a t
t h e p l a i n t i f f f a i l e d t o c o m p l y w i t h h e r obligation to get the furniture when
offered to her? YES. The contract entered into between the parties is one
of commadatum , because under it the plaintiff gratuitously granted the use of
the f u r n i t u r e t o t h e d e f e n d a n t , r e s e r v i n g f o r h e r s e l f t h e o w n e r s h i p t h e r e o f
by this contract the defendant bound himself to return the furniture to the
p l a i n t i f f , u p o n t h e l a t t e r s d e m a n d , t o b e delivered at her residence or house.
Is the plaintiff legally bound to bear the expenses occasion by the deposit of the
furniture?
NO. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon t
he l a t t e r ' s d e m a n d . T h e d e f e n d a n t w a s n o t e n t i t l e d t o p l a c e t h e f u r n i t u r e
o n d e p o s i t n o r w a s t h e plaintiff under a duty to accept the offer to return the furniture.
Is the plaintiff entitled to the value of the furniture? NO. The defendant has neither
agreed to nor a d m i t t e d t h e c o r r e c t n e s s o f t h e s a i d v a l u e . S h o u l d t h e
d e f e n d a n t f a i l t o d e l i v e r s o m e o f t h e furniture, the value thereof should be
latter determined by the trial Court through evidence which the parties may desire to
present.Should the cost be borne by the defendant? YES (section 487 of the Code of
Civil Procedure). The defendant was the one who breached the contract of
commodatum.
Consolidated Bank vs CA, GR No. 114286, 19 April 2001, 356 SCRA 671
FACTS
Continental Cement Corp obtained from Consolidated Bank letter of credit used to purchased 500,000
liters of bunker fuel oil. Respondent Corporation made a marginal deposit to petitioner. A trust receipt was
executed by respondent corporation, with respondent Gregory Lim as signatory. Claiming that
respondents failed to turn over the goods or proceeds, petitioner filed a complaint for sum of money
before the RTC of Manila. In their answer, respondents aver that the transaction was a simple loan and
not a trust receipt one, and tht the amount claimed by petitioner did not take into account payments
already made by them. The court dismissed the complaint, CA affirmed the same.

ISSUE
Whether or not the marginal deposit should not be deducted outright from the amount of the letter of
credit.
HELD
No. petitioner argues that the marginal deposit should be considered only after computing the principal
plus accrued interest and other charges. It could be onerous to compute interest and other charges on the
face value of the letter of credit which a bank issued, without first crediting or setting off the marginal
deposit which the borrower paid to it-compensation is proper and should take effect by operation of law
because the requisited in Art. 1279 are present and should extinguish both debts to the concurrent
amount. Unjust enrichment.