C-07
US v. Igpuara (1913)
1978
Permission to Use thing deposited • Effect of failure to claim at ounce or delay – will it convert
the agreement to a loan?
Igpuara was entrusted with the amount of P2,498 by Montilla and Veraguth. Without the
consent of Montilla and Veraguth however, Igpuara used the said amount for his own ends.
Thus, Igpuara was charged and convicted with estafa, for having swindled Juana Montilla and
Eugenio Veraguth out of P2,498 which he had taken as deposit from the former to be at the
latter’s disposal. Igpuara was sentenced to pay Juana Montilla P2,498.
Igpuara contended that the amount was not deposit for there was no certificate of deposit,
there was no transfer or delivery of the P2,498 and what transpired was a loan. If assuming that
it was deposit, this is negotiable.
WON it is necessary that there be transfer or delivery in order to constitute a deposit.
WON failure to demand or claim at ounce constitute CONSENT for Igpuara to USE the money
deposited.
No. Defendant drew up a document declaring that they remained in his possession. With the
understanding that he would, for it has no other purpose. The certificate of deposit in question
is not negotiable because only instruments payable to order are negotiable. Hence, this
instrument not being to order but to bearer, it is not negotiable.
As for the argument that the depositary may use or dispose oft he things deposited, the
depositor's consent is required thus, the rights and obligations of the depositary and of the
depositor shall cease and the rules and provisions applicable to commercial loans, commission,
or contract which took the place of the deposit shall be observed.
Igpuara however has shown no authorization whatsoever or the consent of the depositary for
using or disposing of the P2,498. That there was not demand on the same or the next day after
the certificate was signed, does not operate against the depositor, or signify anything except
the intention not to press it.
Failure to claim at once or delay for sometime in demanding restitution of the things deposited,
which was immediately due, does not imply such permission to use the thing deposited as
would convert the deposit into a loan.
Defendants obtained a loan from Plaintiff in the amount P50, 000.00. Plaintiff gave only the
amount of P47, 000.00 to the borrowers and retained P3, 000.00 as advance interest for 1
month at 6% per month.
Defendants obtained another loan from Defendant in the amount of P90, 000.00, payable in 2
months, at 6% interest per month. They executed a promissory note and received only P84,
000.00 out of the proceeds of the loan.
For the third time, Defendants secured from Plaintiff another loan in the amount of P300,
000.00, maturing in 1 month, and secured by a real estate mortgage. They executed a
promissory note in favor of the Plaintiff. However, only the sum of P275, 000.00, was given to
them out of the proceeds of the loan.
Upon maturity of the three promissory notes, Defendants failed to pay the indebtedness.
Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and sought from
Plaintiff another loan in the amount of P60, 000.00, bringing their indebtedness to a total of
P50,000.00. They executed another promissory note in favor of Plaintiff to pay the sum of P500,
000.00 with a 5.5% interest per month plus 2% service charge per annum, with an additional
amount of 1% per month as penalty charges.
On maturity of the loan, the Defendants failed to pay the indebtedness which prompt the
Plaintiffs to file with the RTC a complaint for collection of the full amount of the loan including
interests and other charges.
RTC ruled that although the Usury Law had been repealed, the interest charged on the loans
was unconscionable and “revolting to the conscience” and ordered the payment of the amount
of the first 3 loans with a 12% interest per annum and 1% per month as penalty.
On appeal, Plaintiff-appellants argued that the promissory note, which consolidated all the
unpaid loans of the defendants, is the law that governs the parties.
The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the Usury Law
has become legally inexistent with the promulgation by the Central Bank in 1982 of Circular No.
905, the lender and the borrower could agree on any interest that may be charged on the loan,
and ordered the Defendants to pay the Plaintiffs the sum of P500,000, plus 5.5% per month
interest and 2& service charge per annum , and 1% per month as penalty charges.
WON the stipulated 5.5% interest rate per month on the loan in the sum of P500, 000.00 is
usurious.
A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive,
iniquitous, unconscionable and exorbitant, but it cannot be considered “usurious” because
Central Bank Circular No. 905 has expressly removed the interest ceilings prescribed by the
Usury Law and that the Usury Law is now “legally inexistent.”
Doctrine: A CB Circular cannot repeal a law. Only a law can repeal another law.
Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury Law but
simply suspended the latter’s effectivity (Security Bank and Trust Co vs RTC). Usury has been
legally non-existent in our jurisdiction. Interest can now be charged as lender and borrower
may agree upon.
Law: Article 2227, Civil Code
The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a
penalty if they are iniquitous or unconscionable.
Note: While the Usury Law ceiling on interest rates was lifted by the CB Circular 905, nothing in
the said circular could possibly be read as granting carte blanche authority to lenders to raise
interest rates to levels which would either enslave their borrowers or lead to a haemorrhaging
of their assets (Almeda vs. CA, 256 SCRA 292 [1996]).
