PEOPLE vs. CONCEPCION, 44 Phil.

126

FACTS: Venancio Concepcion, President of the Philippine National Bank and a member of the Board thereof, authorized an extension of credit in favor of "Puno y Concepcion, S. en C. to the manager of the Aparri branch of the Philippine National Bank. "Puno y Concepcion, S. en C." was a co-partnership where Concepcion is a partner. Subsequently, Concepcion was charged and found guilty in the Court of First Instance of Cagayan with violation of section 35 of Act No. 2747. Section 35 of Act No. 2747 provides 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. Counsel for the defense argue that the documents of record do not prove that authority to make a loan was given, but only show the concession of a credit. They averred that the granting of a credit to the co-partnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, is not a "loan" within the meaning of section 35 of Act No. 2747.

ISSUE: Whether or not the granting of a credit of P300,000 to the co-partnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, a "loan" within the meaning of section 35 of Act No. 2747.

HELD: The Supreme Court ruled in the affirmative. The "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. A "loan" means the delivery by one party and the receipt by the other party of a given sum of money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit,"

CAROLYN M. GARCIA vs. RICA MARIE S. THIO, GR. No. 154878, March 16, 2007

FACTS: Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garccia a crossed check in the amount of $100,000.00 payable to the order of Marilou Santiago. Thereafter, Carolyn received from Rica payments of the sum due. In June 1995, Rica received another check in the amount of P500,000.00 from Carolyn and payable to the order of Marilou. Payments were made by Rica representing interests. There was failure to pay the principal amount hence a complaint for sum of money with damages was filed by Carolyn. Rica contended that she had no obligation to petitioner as it was Marilou who was indebted as she was merely asked to deliver the checks to the latter and that the check payments she issued were merely intended to accommodate Marilou. The RTC ruled in favor of Carolyn but the CA reversed on the ground that there was no contract between Rica and Carolyn as there is nothing in the record that shows that respondent received money from petitioner and that the checks received by respondent, being crossed, may not be encashed but only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself. ISSUE: Whether or not there was a contract of loan between petitioner and respondent.

HELD: There Court ruled in the affirmative. A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract. Art. 1934 of the Civil Code provides that 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 the delivery of the object of the contract. Upon delivery of the object 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. However, these checks were crossed and payable not to the order of respondent but to the order of a certain Marilou Santiago. The Supreme Court agrees with petitioner that delivery is the act by which the res or substance thereof is 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 amounts to Santiago. Hence, Rica is the debtor and not Marilou.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 154878 March 16, 2007

CAROLYN M. GARCIA, Petitioner, vs. RICA MARIE S. THIO, Respondent. DECISION CORONA, J.: Assailed in this petition for review on certiorari1 are the June 19, 2002 decision2 and August 20, 2002 resolution3of the Court of Appeals (CA) in CA-G.R. CV No. 56577 which set aside the February 28, 1997 decision of the Regional Trial Court (RTC) of Makati City, Branch 58. Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garcia a crossed check4 dated February 24, 1995 in the amount of US$100,000 payable to the order of a certain Marilou Santiago.5 Thereafter, petitioner received from respondent every month (specifically, on March 24, April 26, June 26 and July 26, all in 1995) the amount of US$3,0006 and P76,5007 on July 26,8 August 26, September 26 and October 26, 1995. In June 1995, respondent received from petitioner another crossed check9 dated June 29, 1995 in the amount ofP500,000, also payable to the order of Marilou Santiago.10 Consequently, petitioner received from respondent the amount of P20,000 every month on August 5, September 5, October 5 and November 5, 1995.11 According to petitioner, respondent failed to pay the principal amounts of the loans (US$100,000 and P500,000) when they fell due. Thus, on February 22, 1996, petitioner filed a complaint for sum of money and damages in the RTC of Makati City, Branch 58 against respondent, seeking to collect the sums of US$100,000, with interest thereon at 3% a month from October 26, 1995 and P500,000, with interest thereon at 4% a month from November 5, 1995, plus attorneys fees and actual damages.12 Petitioner alleged that on February 24, 1995, respondent borrowed from her the amount of US$100,000 with interest thereon at the rate of 3% per month, which loan would mature on October 26, 1995.13 The amount of this loan was covered by the first check. On June 29, 1995, respondent again borrowed the amount of P500,000 at an agreed monthly interest of 4%, the maturity date of which was on November 5, 1995.14 The amount of this loan was covered by the second check. For both loans, no promissory note was executed since petitioner and respondent were close friends at the time.15 Respondent paid the stipulated monthly interest for both loans but on their maturity dates, she failed to pay the principal amounts despite repeated demands.161awphi1.nt Respondent denied that she contracted the two loans with petitioner and countered that it was Marilou Santiago to whom petitioner lent the money. She claimed she was merely asked by

petitioner to give the crossed checks to Santiago.17 She issued the checks for P76,000 and P20,000 not as payment of interest but to accommodate petitioners request that respondent use her own checks instead of Santiagos.18 In a decision dated February 28, 1997, the RTC ruled in favor of petitioner.19 It found that respondent borrowed from petitioner the amounts of US$100,000 with monthly interest of 3% and P500,000 at a monthly interest of 4%:20 WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in favor of [petitioner], sentencing [respondent] to pay the former the amount of: 1. [US$100,000.00] or its peso equivalent with interest thereon at 3% per month from October 26, 1995 until fully paid; 2. P500,000.00 with interest thereon at 4% per month from November 5, 1995 until fully paid. 3. P100,000.00 as and for attorneys fees; and 4. P50,000.00 as and for actual damages. For lack of merit, [respondents] counterclaim is perforce dismissed. With costs against [respondent]. IT IS SO ORDERED.21 On appeal, the CA reversed the decision of the RTC and ruled that there was no contract of loan between the parties: A perusal of the record of the case shows that [petitioner] failed to substantiate her claim that [respondent] indeed borrowed money from her. There is nothing in the record that shows that [respondent] received money from [petitioner]. What is evident is the fact that [respondent] received a MetroBank [crossed] check dated February 24, 1995 in the sum of US$100,000.00, payable to the order of Marilou Santiago and a CityTrust [crossed] check dated June 29, 1995 in the amount of P500,000.00, again payable to the order of Marilou Santiago, both of which were issued by [petitioner]. The checks received by [respondent], being crossed, may not be encashed but only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself. It must be noted that crossing a check has the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only onceto one who has an account with the bank; (c) and the act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and delivery to the payee in contemplation of law since the latter is not the person who could take

the checks as a holder, i.e., as a payee or indorsee thereof, with intent to transfer title thereto. Neither could she be deemed as an agent of Marilou Santiago with respect to the checks because she was merely facilitating the transactions between the former and [petitioner]. With the foregoing circumstances, it may be fairly inferred that there were really no contracts of loan that existed between the parties. x x x (emphasis supplied)22 Hence this petition.23 As a rule, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. However, this case falls under one of the exceptions, i.e., when the factual findings of the CA (which held that there were no contracts of loan between petitioner and respondent) and the RTC (which held that there werecontracts of loan) are contradictory.24 The petition is impressed with merit. A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract.25 This is evident in Art. 1934 of the Civil Code which 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 the delivery of the object of the contract. (Emphasis supplied) Upon delivery of the object 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.26 It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable not to the order of respondent but to the order of a certain Marilou Santiago. Thus the main question to be answered is: who borrowed money from petitioner respondent or Santiago? Petitioner insists that it was upon respondents instruction that both checks were made payable to Santiago.27 She maintains that it was also upon respondents instruction that both checks were delivered to her (respondent) so that she could, in turn, deliver the same to Santiago.28 Furthermore, she argues that once respondent received the checks, the latter had possession and control of them such that she had the choice to either forward them to Santiago (who was already her debtor), to retain them or to return them to petitioner.29 We agree with petitioner. Delivery is the act by which the res or substance thereof is placed within the actual or constructive possession or control of another.30 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 amounts to Santiago. Several factors support this conclusion. First, respondent admitted that petitioner did not personally know Santiago.31 It was highly improbable that petitioner would grant two loans to a complete stranger without requiring as much as promissory notes or any written acknowledgment of the debt considering that the

amounts involved were quite big. Respondent, on the other hand, already had transactions with Santiago at that time.32 Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both parties list of witnesses) testified that respondents plan was for petitioner to lend her money at a monthly interest rate of 3%, after which respondent would lend the same amount to Santiago at a higher rate of 5% and realize a profit of 2%.33 This explained why respondent instructed petitioner to make the checks payable to Santiago. Respondent has not shown any reason why Ruiz testimony should not be believed. Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of P76,000 each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the P500,000 loan, she also issued her own checks in the amount of P20,000 each for four months.34 According to respondent, she merely accommodated petitioners request for her to issue her own checks to cover the interest payments since petitioner was not personally acquainted with Santiago.35 She claimed, however, that Santiago would replace the checks with cash.36 Her explanation is simply incredible. It is difficult to believe that respondent would put herself in a position where she would be compelled to pay interest, from her own funds, for loans she allegedly did not contract. We declared in one case that: In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to be believed, it must not only proceed from the mouth of a credible witness, but must be credible in itself such as the common experience of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony except its conformity to our knowledge, observation, and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of juridical cognizance.37 Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner, who was listed as one of her (Santiagos) creditors.38 Last, respondent inexplicably never presented Santiago as a witness to corroborate her story.39 The presumption is that "evidence willfully suppressed would be adverse if produced."40 Respondent was not able to overturn this presumption. We hold that the CA committed reversible error when it ruled that respondent did not borrow the amounts of US$100,000 and P500,000 from petitioner. We instead agree with the ruling of the RTC making respondent liable for the principal amounts of the loans. We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the US$100,000 andP500,000 loans respectively. There was no written proof of the interest payable except for the verbal agreement that the loans would earn 3% and 4% interest per month. Article 1956 of the Civil Code provides that "[n]o interest shall be due unless it has been expressly stipulated in writing." Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to Article 2209 of the Civil Code. It is well-settled that: When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially

demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.41 Hence, respondent is liable for the payment of legal interest per annum to be computed from November 21, 1995, the date when she received petitioners demand letter.42 From the finality of the decision until it is fully paid, the amount due shall earn interest at 12% per annum, the interim period being deemed equivalent to a forbearance of credit.43 The award of actual damages in the amount of P50,000 and P100,000 attorneys fees is deleted since the RTC decision did not explain the factual bases for these damages. WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20, 2002 resolution of the Court of Appeals in CA-G.R. CV No. 56577 are REVERSED and SET ASIDE. The February 28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with the MODIFICATION that respondent is directed to pay petitioner the amounts of US$100,000 and P500,000 at 12% per annum interest from November 21, 1995 until the finality of the decision. The total amount due as of the date of finality will earn interest of 12% per annum until fully paid. The award of actual damages and attorneys fees is deleted. SO ORDERED.

SAURA IMPORT and EXPERT CO., INC., vs DBP [G.R. No. L-24968, April 27, 1972] MAKALINTAL, J.

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:

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 RFCs 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.

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 theconstruction 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

theamortization 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

SAURA IMPORT & EXPORT V DBP [GR No. L-24968 (APRIL 27, 1972)] Nature: Ponente: Makalintal Facts: Saura applied to the Rehabilitation Finance Corporation (RFC; now DBP) for an industrial loan of P500K to be used as follows: 250K for the construction of a factory building for the manufacture of jute sacks; 240,900 to pay the balance of the purchase price of the jute mill machinery and equipment; and 9,100 as additional working capital Jan. 7, 1954: Resolution No. 145. Approved loan application of P500K to be secured by a 1st mortgage on the bldg to be constructed and land with explicit provision on how proceeds were to be used (above); that Mr. & Mrs. Saura, Arellano, Caolboy, Estabillo and China Engineers shall sign promissory notes jointly with the corp; and that release shall be made at banks discretion subject to availability of funds and the bldgs construction progress Jan. 6: Saura wrote to RFC requesting that instead of having China Engineers sign as comaker on the promissory notes, Saura would put up a 123,500 bond instead (equal amount as that promised by China); Roca would substitute Arellano Resolution No. 736 designating members of the Board of Governors to re-examine aspects of the loan Saura informed RFC that China had again agreed to sign as a co-signer Loan documents were executed Resolution 3989-RFC decided to reduce the loan to 300K China cancelled its promissory note Saura informed RFC that China will at any time reinstate their signature as co-signer if RFC releases the 500K loan Resolution No. 9083 restored loan to 500K with conditions: (1) DARNR shall certify that the raw material needed are available in the immediate vicinity and that there is prospect of increased production to provide adequately for the requirements of the factory Saura wrote to RFC that according to the Bureau of Forestry, kenaf will not be available in sufficient quantity this year or probably even next year and asked for the proceeds to 67,586.09 for raw materials and labor RCF replied that Your statement that you will have to rely on the importation of jute and your request that we give you assurance that your company will be able to bring in sufficient jute materials as may be necessary for the operation of your factory wouldnt be in line with our principle in approving the loan Negotiations came to a standstill Deed of mortgage in favor of RFC was cancelled and was thereafter mortgaged to Prudential Bank (to secure its obligation-bought jute machinery) Saura failed to pay its obligation to Prudential, who then sued Saura 1964 (Almost 9 years after): Saura commenced action for damages alleging RFCs failure to release the proceeds approved RTC rendered decision in favor of Saura

Issue/s: WON DBP is liable for damages for failure to fulfil its obligation Held: NO Ratio: There was indeed a perfected consensual contract under NCC1934

RFC entertained the loan application on the assumption that the factory to be constructed would utilize locally grown raw materials, principally kenaf The imposition of the conditions set out in Resolution No. 9038 was by no means a deviation from the terms of the agreement but a step in its implementation. No contradiction with Resolution No. 145 When Saura wrote to RFC asking that out of the loan agreed upon the sum of 67,585.09 be released for raw material and labor was a deviation from the terms laid down in Resolution No. 145. Saura was obviously in no position to comply with RFCs conditions. So instead of doing so, Saura asked that the mortgage be cancelled, which was done. The action thus taken by both parties was in the nature of mutual desistance which is a mode of extinguishing obligations.

Dispositive: Reversed. BPI INvestment Corp. vs. CA and ALS mgt.

Facts: Roa obtained a loan from AIDC, predecessor of BPI. He mortgaged his house and lot in New Alabang Village as security for the loan. Roa sold the prop to ALS and Litonjua, 350K cash + 500k-assumption of Roa's indebtedness w/ AIDC. March 1981, AIDC issued a new loan to ALS to be applied to Roa's debt w/same security. It was released August (update of Roa's arreages)-Sept (7K+ - what was left of loan after deducting Roas arreages) 1982. Amortization commenced May 1981 (as stipulated in the contract). June 1984, BPI instituted foreclosure proceedings against ALS for non-payment from May 1981-June 1984. Feb 1985, ALS and Litonjua filed a civil case for damages against BPI. They alleged they were not in arrears because a simple loan is perfected only upon the delivery of the object of the contract. Hence it was perfected only on Sept 1982, the date when BPI released the balance. So payment of monthly amortizations should commence only on Oct 1982 (despite the agreement that it shall commence May 1981). In fact, according ALS, there was overpayment. Also, ALS contends that a perfected loan agreement imposes reciprocal obligations, where the obligation or promise of each party is the consideration of the other party - so neither incurs in delay if the other is not ready to comply. In this case, ALS will not incur delay as long as the total loan is not yet released by BPI. BPI contends that contract of loan is a consensual contract, perfected at the time the contract of mortgage was executed - March 31, 1981 (under Bonnevie v CA). Also, that the loan was actually release on March 31, 1981 and delay in the release is attributable to ALS. Issue: WON the contract of loan is perfected despite non-delivery, if it was agreed upon Held: NO A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract. The contract in Bonnevie declared by this Court

as a perfected consensual contract falls under the first clause of A1934. It is an accepted promise to deliver something by way of simple loan. A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. The promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization. So 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, in computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting date is October 13, 1982 and not May 1, 1981. We can not properly declare BPIIC in bad faith because ALS made irregular payments, but, 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 to ALS and the date when it was released. So nominal damages 25K is awarded.

PANTALEON v AMERICAN EXPRESS INTERNATIONAL, INC Ponente: Tinga, J. Date: May 8, 2009

RATIO DECIDENDI: Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad faith.

QUICK FACTS: Petitioner purchased items when he was in the States using his AmEx credit card. During three particular instances, clearance of his purchase took too long and under those circumstances caused him moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation.

FACTS: Name of Offended party (petitioner): Polo S. Pantaleon Name of respondent: American Express International, Inc.

-The petitioner, lawyer Polo Pantaleon, his wife, daughter and son joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in October of 1991. -The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the second to the last day of the tour. As the group had arrived late in the city, they failed to engage in any sightseeing so they agreed that they would start early the next day to see the entire city before ending the tour. -The following day, the last day of the tour, the group arrived at the Coster Diamond House. The group had agreed that the visit to Coster should end by 9:30 a.m. to allow enough time to take in a guided city tour of Amsterdam. - While in the diamond house, led to the stores showroom to allow them to select items for purchase. Mrs. Pantaleon decided to buy a 2.5 karat diamond brilliant cut, and she found a diamond close enough in approximation. Mrs. Pantaleon also selected for purchase a pendant and a chain, all of which totaled U.S. $13,826.00. -Pantaleon presented his American Express credit card together with his passport to the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the tour group was slated to depart from the store. The sales clerk took the cards imprint, and asked Pantaleon to sign the charge slip. The charge purchase was then referred electronically to respondents Amsterdam office at 9:20 a.m.

-clearance took too long. At 9:40am, Pantaleon asked the store clerk to cancel the sale to avoid further delaying and inconveniencing the tour group. At around 10:00 a.m, 30 minutes after the tour group was supposed to have left the store, Coster decided to release the items even without respondents approval of the purchase. -due to the delay, the city tour of Amsterdam was to be canceled due to lack of remaining time. The spouses Pantaleon allegedly offered their apologies but were met by their tourmates with stony silence and visible irritation. Mrs. Pantaleon ended up weeping, while her husband had to take a tranquilizer to calm his nerves. -two instances similar to the Castor incident happened. purchased golf equipment amounting to US $1,475.00 using his AmEx card, but he cancelled his credit card purchase and borrowed money instead from a friend, after more than 30 minutes had transpired without the purchase having been approved. used the card to purchase childrens shoes worth $87.00 at a store in Boston, and it took 20 minutes before this transaction was approved by respondent. Petitioners: after coming back to Manila, sent a letter demanding an apology for the "inconvenience, humiliation and embarrassment he and his family thereby suffered" for respondents refusal to provide credit authorization for the aforementioned purchases. Respondent: refused to give an apology, sent a letter stating among others that the delay in authorizing the purchase from Coster was attributable to the circumstance that the charged purchase of US $13,826.00 "was out of the usual charge purchase pattern established." RTC: petitioner instituted an action for damages. Petitioner won. Court awarded P500,000.00 as moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorneys fees, and P85,233.01 as expenses of litigation. normal approval time for purchases was "a matter of seconds." Based on that standard, respondent had been in clear delay with respect to the three subject transactions. CA: reversed the award of damages in favor of Pantaleon, holding that respondent had not breached its obligations to petitioner. delay was not attended by bad faith, malice, or gross negligence. respondent "had exercised diligent efforts to effect the approval" of the purchases, which were "not in accordance with the charge pattern" petitioner had established for himself ISSUE: 1) WON has committed a breach of its obligations. 2) WON respondent is liable for damages. DECISION: Petition granted. CA decision set aside.

HELD: 1) There was a breach.

-Notwithstanding 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 customers purchase, much less one specifically contracted upon by the parties. Yet this is one of those instances when "youd know it when youd see it," and one hour appears to be an awfully long, patently unreasonable length of time to approve or disapprove a credit card purchase. -the respondent has the right, if not the obligation, to verify whether the credit it is extending upon on a particular purchase was indeed contracted by the cardholder, and that the cardholder is within his means to make such transaction. The culpable failure of respondent herein is not the failure to timely approve petitioners purchase, but the more elemental failure to timely act on the same, whether favorably or unfavorably. Respondent should have promptly informed petitioner the reason for the delay, and duly advised him that resolving the same could take some time so that petitioners will know WON to continue with the purchases

2) YES. -Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad faith, and the court should find that under the circumstances, such damages are due. -in this case, there was bad faith and unjustified neglect of respondent, attributable in particular to the "dilly-dallying" of respondents Manila credit authorizer, Edgardo Jaurique. This, to the Courts mind, amounts to a wanton and deliberate refusal to comply with its contractual obligations, or at least abuse of its rights, under the contract. -The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it alleges to have consumed more than one hour to simply go over plaintiffs past credit history with defendant, his payment record and his credit and bank references, when all such data are already stored and readily available from its computer and the fact that there were no delinquencies in the plaintiffs account -It should be emphasized that the reason why petitioner is entitled to damages is not simply because respondent 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. In this case, it was sufficiently shown that the incident gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation to the petitioner. Amount should be commensurate to the loss or injury suffered. Petitioners original prayer for P5,000,000.00 for moral damages is excessive under the circumstances, and the amount awarded by the trial court of P500,000.00 in moral damages more seemly.1avvphi1

-Likewise, we deem exemplary damages available under the circumstances, and the amount of P300,000.00 appropriate. There is similarly no cause though to disturb the determined award of P100,000.00 as attorneys fees, and P85,233.01 as expenses of litigation.

.R. No. 115324. February 19, 2003] PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK) vs. HON. COURT OF APPEALS AND FRANKLIN VIVES FACTS: Franklin Vives was asked by his neighbor and friend Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in incorporating his business, the Sterela Marketing and Services (Sterela for brevity). Sanchez asked F. Vives to deposit in a bank a P200,000.00 in the bank account of Sterela for purposes of its incorporation. She assured private respondent that he could withdraw his money from said account within a months time. Private respondent instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in opening a savings account in the name of Sterela in the Producers Bank of the Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to deposit the check. They had with them an authorization letter from Doronilla authorizing Sanchez and her companions, in coordination with Mr. Rufo Atienza, to open an account for Sterela Marketing Services in the amount of P200,000.00. In opening the account, the authorized signatories were Inocencia Vives and/or Angeles Sanchez. A passbook for Savings Account No. 101567 was thereafter issued to Mrs. Vives. Subsequently, private respondent learned that Sterela was no longer holding office in the address previously given to him. They then went to the Bank to verify if their money was still intact. The bank manager referred them to Mr. Rufo Atienza, the assistant manager, who informed them that part of the money in Savings Account No. 10-1567 had been withdrawn by Doronilla, and that only P90,000.00 remained therein and told them that Mrs. Vives could not withdraw said remaining amount because it had to answer for some postdated checks issued by Doronilla. According to Atienza, after Mrs. Vives and Sanchez opened Savings Account No. 101567, Doronilla opened Current Account No. 10-0320 for Sterela and authorized the Bank to debit Savings Account No. 10-1567 for the amounts necessary to cover overdrawings in Current Account No. 10-0320. Private respondent tried to get in touch with Doronilla through Sanchez. Doronilla issued a postdated check for P212,000.00 in favor of private respondent. However, upon presentment thereof the check was dishonored. Private respondent instituted an action for recovery of sum of money and criminal case in the RTC against Doronilla, Sanchez, Dumagpi and petitioner. The RTC promulgated its Decision in Civil Case rendered defendants liable jointly and severally the amount of P200,000.00, moral damages, exemplary damages, attorneys fees, the costs of the suit. The appellate court affirmed in toto the decision of the RTC. It likewise denied with finality petitioners motion for reconsideration. Hence, this present petition.

ISSUE: WHETHER THE TRANSACTION BETWEEN THE DEFENDANT DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT ACCOMMODATION. RULING: A circumspect examination of the records reveals that the transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of loans in this wise: By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. Commodatum is essentially gratuitous.Simple loan may be gratuitous or with a stipulation to pay interest.In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower. The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as money, the contract would be a mutuum. However, there are some instances where a commodatum may have for its object a consumable thing. Article 1936 of the Civil Code provides: Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. 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. The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract. In case of doubt, the contemporaneous and subsequent acts of the parties shall be considered in such determination. As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private respondent agreed to deposit his money in the savings account of Sterela specifically for the purpose of making it appear that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within thirty (30) days. Private respondent merely accommodated Doronilla by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not be removed from Sterelas savings account and would be returned to private respondent after thirty (30) days.

REPUBLIC vs. BAGTAS Summary: Pending execution of judgment, one of three bulls borrowed by Bagtas (deceased as of the time of the case) from the government was killed during a Huk Raid. Administratrix of Bagtas estate contends that liability to return bull or pay for its value has been extinguished due to fortuitous event. SC ruled in favor of government. Bailee in a contract of commodatum may still be liable for loss of the things even if it should be through a fortuitous event under Article 1942. PADILLA, J.: 1. Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry three bulls for a period of one year for breeding purposes subject to a government charge of breeding fee of 10% of the book value of the bulls. 2. Upon the expiration of the contract, the borrower asked for a renewal for another period of one year. The Secretary of Agriculture and Natural Resources approved a renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and requested the return of the other two. 3. Jose V. Bagtas wrote to the Director of Animal Industry that he would pay the value of the three bulls. He reiterated his desire to buy them at a value with a deduction of yearly depreciation. 4. The Director of Animal Industry advised him that the book value of the three bulls could not be reduced and that they either be returned or their book value paid. 5. Jose V. Bagtas failed to pay the book value of the three bulls or to return them. 6. Original Action: The Republic filed an action against Bagtas praying that he be ordered to return the three bulls loaned to him or to pay their book value in the total sum of P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with interests, and costs; and that other just and equitable relief be granted in (civil No. 12818). 7. Bagtas Defense: a. bad peace and order situation in Cagayan Valley b. he has a pending appeal with the Secretary of Agriculture and Natural Resources and the President of the Philippines from the refusal by the Director of Animal Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8% from the date of acquisition, to which depreciation the Auditor General did not object 8. Trial Court: Ruled in favor of Republic. Bagtas ordered to pay pay the sum of P3,625.09 the total value of the three bulls plus the breeding fees in the amount of P626.17 with interest on both sums of (at) the legal rate from the filing of this complaint and costs. 9. Pending execution of judgment, Bagtas died and his wife, the administratrix of his estate, filed a motion alleging that: a. the two bulls Sindhi and Bhagnari were returned by his son to the Bureau of Animal Industry in Nueva Vizcaya b. third bull died from gunshot wound inflicted during a Huk raid and that such death was due to force majeure she is relieved from the duty of returning the bull or paying for its value 10. Also prayed that the writ of execution be quashed but this was denied by the Court hence the appeal. Held: Contention is without merit. Ruled in favor of Republic.

The appellant contends that the contract was commodatum and that, for that reason, as the appellee 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, because article 1942 of the Civil Code provides that a bailee in a contract of commodatum . . . is liable for loss of the things, even if it should be through a fortuitous event:(2) If he keeps it longer than the period stipulated . . .1 (3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event;2

Recall: The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for another period of one year to end on 8 May 1950. But the appellant kept and used the bull until November 1953 when during a Huk raid it was killed by stray bullets. 2 Recall: When lent and delivered to the deceased husband of the appellant the bulls had each an appraised book value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

QUINTOS vs. BECK, 69 Phil 108 FACTS: Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos house. Quintos granted Beck the use of the furniture found on the leased house, among these were three gas heaters and 4 electric lamps, subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. Quintos sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the conveyance. Beck informed Quintos that the latter can get the furniture at the ground floor of the house, however, at a later date, Beck told Quintos that he will return only the other furniture but not the gas heaters and the electric lamps as he is to return them only after the expiration of the lease contract. When the lease contract expires, Beck deposited the furniture to the sheriffs warehouse. Quintos refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. Consequently, Quintos brought an action to compel Beck to return her certain furniture which she lent him for his use. The trial court ruled in favour of Beck holding that Quintos failed to comply with her obligation to get the furniture when they were offered to her. On appeal of the case, the Court of First Instance of Manila affirmed the lower courts decision. Hence, this petition.

ISSUE: Whether or not the trial court erred in ruling that Quintos failed to comply with her obligation to get the furniture when they were offered to her. HELD: The contract entered into between the parties is one of commadatum. 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. 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 electric lamps. The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her obligation to get the furniture when they were offered to her.