Carolyn M.

Garcia
-vs-
Rica Marie S. Thio
GR No. 154878, 16 March 2007

FACTS
Respondent Thio received from petitioner Garcia two crossed checks which amount to US$100,000 and
US$500,000, respectively, payable to the order of Marilou Santiago. According to petitioner, respondent failed to
pay the principal amounts of the loans when they fell due and so she filed a complaint for sum of money and
damages with the RTC. Respondent denied that she contracted the two loans and countered that it was Marilou
Satiago to whom petitioner lent the money. She claimed she was merely asked y petitioner to give the checks to
Santiago. She issued the checks for P76,000 and P20,000 not as payment of interest but to accommodate
petitioner’s request that respondent use her own checks instead of Santiago’s.

RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no contract of loan between the
parties.

ISSUE
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?

HELD
(1) The Court held in the affirmative. A loan is a real contract, not consensual, and as such I perfected
only upon the delivery of the object of the contract. Upon delivery of the contract of loan (in this case the money
received by the debtor when the checks were encashed) the debtor acquires ownership of such money or loan
proceeds and is bound to pay the creditor an equal amount. It is undisputed that the checks were delivered to
respondent.

(2) However, the checks were crossed and payable not to the order of the respondent but to the
order of a certain Marilou Santiago. Delivery is the act by which the res or substance is thereof placed within the
actual or constructive possession or control of another. Although respondent did not physically receive the
proceeds of the checks, these instruments were placed in her control and possession under an arrangement
whereby she actually re-lent the amount to Santiago.

Petition granted; judgment and resolution reversed and set aside.

FACTS:

 In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an industrial
loan of P500,000 to be used for the construction of a factory building, to pay the balance of the jute
mill machinery and equipment and as additional working capital. In Resolution No.145, the loan
application was approved to be secured first by mortgage on the factory buildings, the land site, and
machinery and equipment to be installed.
 The mortgage was registered and documents for the promissory note were executed. But
then, later on, was cancelled to make way for the registration of a mortgage contract over the same
property in favor of Prudential Bank and Trust Co., the latter having issued Saura letter of credit for
the release of the jute machinery. As security, Saura execute a trust receipt in favor of the Prudential.
For failure of Saura to pay said obligation, Prudential sued Saura.
 After almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the
latter to comply with its obligations to release the loan applied for and approved, thereby preventing
the plaintiff from completing or paying contractual commitments it had entered into, in connection
with its jute mill project.
 The trial court ruled in favor of Saura, ruling that there was a perfected contract between the
parties and that the RFC was guilty of breach thereof.
ISSUE: Whether or not there was a perfected contract between the parties. YES. There was indeed a perfected
consensual contract.

HELD:
·Article 1934 provides: An accepted promise to deliver something by way of commodatum or simple loan is binding
upon the parties, but the commodatum or simple loan itself shall not be perfected until delivery of the object of the
contract.
· There was undoubtedly offer and acceptance in the 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. The
defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.
· When an application for a loan of money was approved by resolution of the respondent corporation and the
responding mortgage was executed and registered, there arises a perfected consensual contract.
· However, it should be noted that RFC imposed two conditions (availability of raw materials and increased
production) when it restored the loan to the original amount of P500,000.00.
· Saura, Inc. obviously was in no position to comply with RFC’s conditions. So instead of doing so and insisting that
the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The action thus taken by
both parties was in the nature of mutual desistance which is a mode of extinguishing obligations. It is a
concept that derives from the principle that since mutual agreement can create a contract, mutual
disagreement by the parties can cause its extinguishment.
·WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.
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 Roa’s 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 attorney’s 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 attorney’s fees because private respondents were compelled to litigate, we sustain
the award of P50,000 in favor of private respondents as attorney’s fees
PANTALEON VS AMERICAN EXPRESS
Posted by kaye lee on 11:30 PM

G.R. No. 174269, May 8 2009 [Credit Transaction]

FACTS:

After the Amsterdam incident that happened involving the delay of American Express Card to approve his credit
card purchases worth US$13,826.00 at the Coster store, Pantaleon commenced a complaint for moral and
exemplary damages before the RTC against American Express. He said that he and his family experienced
inconvenience and humiliation due to the delays in credit authorization. RTC rendered a decision in favor of
Pantaleon. CA reversed the award of damages in favor of Pantaleon, holding that AmEx had not breached its
obligations to Pantaleon, as the purchase at Coster deviated from Pantaleon's established charge purchase
pattern.

ISSUE:

1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.

RULING:

1. Yes. The popular notion that credit card purchases are approved “within seconds,” there really is no strict,
legally determinative point of demarcation on how long must it take for a credit card company to approve or
disapprove a customer’s purchase, much less one specifically contracted upon by the parties. One hour appears to
be patently unreasonable length of time to approve or disapprove a credit card purchase.

The culpable failure of AmEx herein is not the failure to timely approve petitioner’s purchase, but the more
elemental failure to timely act on the same, whether favorably or unfavorably. Even assuming that AmEx’s credit
authorizers did not have sufficient basis on hand to make a judgment, we see no reason why it could not have
promptly informed Pantaleon the reason for the delay, and duly advised him that resolving the same could take
some time.

2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx incurred delay, but because
the delay, for which culpability lies under Article 1170, led to the particular injuries under Article 2217 of the Civil
Code for which moral damages are remunerative. The somewhat unusual attending circumstances to the
purchase at Coster – that there was a deadline for the completion of that purchase by petitioner before any delay
would redound to the injury of his several traveling companions – gave rise to the moral shock, mental anguish,
serious anxiety, wounded feelings and social humiliation sustained by Pantaleon, as concluded by the RTC.
Producers Bank of the Philippines vs CA (2003)

Facts: Doronilla is in the process of incorporating his business and to comply with one of the requirements of
incorporation, he caused Vives’ to issue a check which was then deposited in Doronilla’s savings account. It was
agreed that Vives can withdraw his money in a month’s time. However, what Doronilla did was to open a current
account and instructed the bank to debit from the savings account and deposit it in his current account. So when
Vives checked the savings account, the money was gone.

Claims:

Petitioner:

1. The transaction between private respondent and Doronilla is a simple loan (mutuum) since all the
elements of amutuum are present: first, what was delivered by private respondent to Doronilla was
money, a consumable thing; and second, the transaction was onerous as Doronilla was obliged to
pay interest, as evidenced by the check issued by Doronilla in the amount of P212,000.00, or P12,000
more than what private respondent deposited in Sterela’s bank account.
2. Petitioner’s Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing Doronilla to
withdraw from the savings account of Sterela since the latter was the sole proprietor of said
company. Petitioner asserts that Doronilla’s May 8, 1979 letter addressed to the bank, authorizing
Mrs. Vives and Sanchez to open a savings account for Sterela, did not contain any authorization for
these two to withdraw from said account. Hence, the authority to withdraw therefrom remained
exclusively with Doronilla, who was the sole proprietor of Sterela, and who alone had legal title to
the savings account. Petitioner points out that no evidence other than the testimonies of private
respondent and Mrs. Vives was presented during trial to prove that private respondent deposited
his P200,000.00 in Sterela’s account for purposes of its incorporation. Hence, petitioner should not
be held liable for allowing Doronilla to withdraw from Sterela’s savings account.
3. The Court of Appeals erred in affirming the trial court’s decision since the findings of fact therein
were not accord with the evidence presented by petitioner during trial to prove that the transaction
between private respondent and Doronilla was a mutuum, and that it committed no wrong in
allowing Doronilla to withdraw from Sterela’s savings account .
4. Petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the
actual damages suffered by private respondent, and neither may it be held liable for moral and
exemplary damages as well as attorney’s fees.

Respondent:

1. the transaction between him and Doronilla is not a mutuum but an accommodation,[21]since he did not
actually part with the ownership of his P200,000.00 and in fact asked his wife to deposit said amount in
the account of Sterela so that a certification can be issued to the effect that Sterela had sufficient funds
for purposes of its incorporation but at the same time, he retained some degree of control over his
money through his wife who was made a signatory to the savings account and in whose possession the
savings account passbook was given.
2. The trial court did not err in finding that petitioner, Atienza’s employer, is liable for the return of his
money. He insists that Atienza, petitioner’s assistant manager, connived with Doronilla in defrauding
private respondent since it was Atienza who facilitated the opening of Sterela’s current account three
days after Mrs. Vives and Sanchez opened a savings account with petitioner for said company, as well as
the approval of the authority to debit Sterela’s savings account to cover any overdrawings in its current
account.

Issue/s: (1)WON the transaction is a commodatum or a mutuum. COMMODATUM.

(2) WON the fact that there is an additional P 12,000 (allegedly representing interest) inthe amount to be returned
to Vives converts the transaction from commodatum tomutuum. NO.
(3)WON Producer’s Bank is solidarily liable to Vives, considering that it was not privy tothe transaction between
Vives and Doronilla. YES.

Held/Ratio:

Supreme Court held that the contract is a commodatum. Although in a commodatum, the object is a non-
consumable thing, there are instances where a consumable thing may be the object of a commodatum, such as
when the purpose is not for consumption of the object but merely for exhibition (Art. 1936). Thus, if consumable
goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend consumable goods
and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and
not a mutuum.
Pajuyo vs CA
G.R. No. 146364 June 3, 2004
COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE GUEVARRA, respondents.

FACTS:

Petitioner Pajuyo paid P400 to a certain Pedro Perez for the rights over a lot, where Pajuyo subsequently built a
house. In 1985, Pajuyo and private respondent Guevarra executed a Kasunduan wherein Pajuyo allowed Guevarra
to live in the house for free, on the condition that Guevarra would maintain the cleanliness and orderliness of the
house. Guevarra promised that he would vacate the premises upon Pajuyo’s demand.

In 1994, Pajuyo informed Guevarra of his need of the house and demanded that the latter vacate the house.
Guevarra refused. Pajuyo filed an ejectment case against Guevarra before the MTC.

Guevarra claimed that Pajuyo had no valid title over the lot since it is within the area set aside for socialized
housing. MTC rendered its decision in favor of Pajuyo, which was affirmed by RTC. (MTC and RTC basically ruled
that the Kasunduan created a legal tie akin to that of a landlord and tenant relationship).

CA reversed the RTC decision, stating that the ejectment case is without legal basis since both Pajuyo and
Guevarra illegally occupied the said lot. CA further stated that both parties are in pari delicto; thus, the court will
leave them where they are. CA ruled that the Kasunduan is not a lease contract, but a commodatum because the
agreement is not for a price certain.

ISSUE: W/N the contractual relationship between Pajuyo and Guevarra was that of a commodatum NO

HELD:

In a contract of commodatum, one of the parties delivers to another something not consumable so that the
latter may use the same for a certain time and return it. An essential feature of commodatum is that it is
gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain
period. Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period
stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have
urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely tolerated
by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a
precarium. Under the Civil Code, precarium is a kind of commodatum.

The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous.
While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in good
condition. The imposition of this obligation makes the Kasunduan a contract different from a commodatum. The
effects of the Kasunduan are also different from that of a commodatum. Case law on ejectment has treated
relationship based on tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of
permission would result in the termination of the lease. The tenant’s withholding of the property would then be
unlawful.

Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee
would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation to deliver or
to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and
commodatum.70 These contracts certainly involve the obligation to deliver or return the thing received.

Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter. Guevarra
should know that there must be honor even between squatters. Guevarra freely entered into the Kasunduan.
Guevarra cannot now impugn the Kasunduan after he had benefited from it. The Kasunduan binds Guevarra.

The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to physical
possession of the contested property. The Kasunduan is the undeniable evidence of Guevarra’s recognition of
Pajuyo’s better right of physical possession. Guevarra is clearly a possessor in bad faith. The absence of a contract
would not yield a different result, as there would still be an implied promise to vacate.
Republic v. Bagtas

Facts: Bagtas borrowed three bulls from the Bureau of Animal Industry for one year for breeding purposes subject
to payment of breeding fee of 10% of book value of the bull. Upon expiration, Bagtas asked for renewal. The
renewal was granted only to one bull. Bagtas offered to buy the bulls at its book value less depreciation but the
Bureau refused. The Bureau said that Bagtas should either return or buy it at book value. Bagtas proved that he
already returned two of the bulls, and the other bull died during a Huk raid, hence, obligation already
extinguished. He claims that the contract is a commodatum hence, loss through fortuitous event should be borne
by the owner.

Issue: WON Bagtas is liable for the death of the bull.

Held: Yes. Commodatum is essentially gratuitous. However, in this case, there is a 10% charge. If this is
considered compensation, then the case at bar is a lease. Lessee is liable as possessor in bad faith because the
period already lapsed.

Even if this is a commodatum, Bagtas is still liable because the fortuitous event happened when he held the bull
and the period stipulated already expired and he is liable because the thing loaned was delivered with appraisal of
value and there was no contrary stipulation regarding his liability in case there is a fortuitous event.
QUINTOS VS BECK 69 PHIL 108

Facts: Quintos and Beck entered into a contract of lease, whereby the latter occupied the former’s house. On Jan
14, 1936, the contract of lease was novated, wherein the QUintos gratuitously granted to Beck the use of the
furniture, subject to the condition that Beck should return the furnitures to Quintos upon demand. Thereafter,
Quintos sold the property to Maria and Rosario Lopez. Beck was notified of the conveyance and given him 60 days
to vacate the premises. IN addition, Quintos required Beck to return all the furniture. Beck refused to return 3 gas
heaters and 4 electric lamps since he would use them until the lease was due to expire. Quintos refused to get the
furniture since Beck had declined to return all of them. Beck deposited all the furniture belonging to QUintos to
the sheriff.

ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos when it deposited the
furnitures to the sheriff.

RULING: The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this
contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand (clause 7 of
the contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code). The obligation voluntarily assumed
by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to
the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely
placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four eletric
lamps.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand,
the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the
defendant's behest. The latter, as bailee, was nt entitled to place the furniture on deposit; nor was the plaintiff
under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas
heaters and the four electric lamps.