A contract of simple loan was entered into with

A contract of simple loan was entered into with security
arrangement agreed upon by the parties which is not one of
those mentioned above.
Q: The parties in a contract of loan of money agreed
that the yearly interest rate is 12% and it can be
increased if there is a law that would authorize the
increase of interest rates. Suppose OB, the lender,
would increase by 5% the rate of interest to be paid
by TY, the borrower, without a law authorizing such
increase, would OB’s action be just and valid? Why?
Has TY have a remedy against the imposition of the rate
increase? Explain. (2001, 2004 BAR)
A: OB's action is not just and valid. The debtor cannot be
required to pay the increase in interest there being no law
authorizing it, as stipulated in the contract of loan.
Increasing the rate in the absence of such law violates the
principle of mutuality of contractsunder Art. 1308 .
DEPOSIT (1997, 1998 BAR)
Q: In order to secure a bank loan, XYZ Corporation
surrendered its deposit certificate, with a maturity date
of 01 September 1997 to the bank. The corporation
defaulted on the due repayment of the loan,
prompting the bank to encash the deposit certificate.
XYZ Corporation questioned the above action taken
by the bank as being a case of pactum commissorium.
The bank disagrees. What is your opinion? (1997 BAR)
A: There is no pactum commissorium here. Deposits of
money in banks and similar institutions are governed by
the provisions on simple loans (Art. 1980). The relationship
between the depositor and a bank is one of creditor and
debtor. Basically this is a matter of compensation as all
the elements of compensation are present in this case (BPI v.
CA, G.R. No. 104612, May 10, 1994).
Q: X, who has a savings deposit with Y Bank in the sum
of P1, 000, 000.00 incurs a loan obligation with the said
Bank in the sum of P800 000.00 which has become due.
When X tries to withdraw his deposit, Y Bank allows
only P200, 000.00 to be withdrawn, less service
charges, claiming that compensation has extinguished
its obligation under the savings account to the
concurrent amount of X’s debt. X contends that
compensation is improper when one of the debts, as
here, arises from a contract of deposit. Assuming that
the promissory note signed by X to evidence the loan
does not provide for compensation between said loan
and his savings deposit, who is correct? (1998 BAR)
A: Y Bank is correct. Art. 1287, Civil Code, does not apply.
All the requisites of Art. 1279, Civil Code are present. In the
case of Gullas v. PNB (62 Phil. 519 ), The Supreme Court held:
“The Civil Code contains provisions regarding
compensation (set off) and deposit. These portions of
Philippine Law provide that compensation shall take place
when two persons are reciprocally creditor and debtor of
each other. In this connection, it has been held that the
relation existing between a depositor and a bank is that of
creditor and debtor. xxx As a general rule, a bank has a right
of set off of the deposits in its hands for the payment of any
indebted ness to it on the part of a depositor.” Hence,
compensation took place between the mutual obligations of
X and Y Bank.