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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," 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.

REPUBLIC v. BAGTAS, 116 SCRA 262 FACTS: On May 8, 1948, Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for one year for breeding purposes upon payment of a breeding fee of 10% of the book value of the bulls. After one year, the contract was renewed but only for one bull. Bagtas offered to buy the bulls at book value less depreciation, but the Bureau told him that he should either return the bulls or pay for their book value. Bagtas failed to pay the book value, so the

Republic filed an action with the CFI Manila to order the return of the bulls or the payment of the book value. Felicidad Bagtas, the surviving spouse and administratrix of the decedents estate, said that the two bulls have already been returned in 1952, and that the remaining one died of gunshot during a Huk raid. It was established that the two bulls were returned, thus, there is no more obligation on the part of Bagtas. With regards the bull not returned, Felicidad maintained that the obligation is extinguished since the contract is that of a commodatum and that the loss through fortuitous event should be borne by the owner. ISSUE: Whether or not the contract entered into between Bagtas and the Republic is that of commodatum making Bagtas not liable for the death of the bull. HELD: A contract of commodatum is essentially gratuitous. If the breeding fee be considered 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. Even if the contract be commodatum, still Bagtas 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 if he keeps it longer than the period stipulated or 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. The loan of one bull was renewed for another period of one year but Bagtas kept and used the bull more than one year where during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the deceased husband of Bagtas, the bulls had each an appraised book value. 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.


FACTS: The Republic of the Philippines (Republic) filed a complaint for escheat of certain unclaimed bank deposits balances under the provisions of Act No. 3936 against several banks, among them the First National City Bank of New York (FNCBNY). It is alleged that pursuant to Section 2 of said Act defendant banks forwarded to the Treasurer of the Philippines a statement of all the credits and deposits held by them in favor of persons known to be dead or who have not made further deposits or withdrawals during the period of 10 years or more. It was prayed that said credits and deposits be escheated to the Republic by ordering defendant banks to deposit them to its credit with the Treasurer of the Philippines.

FNCBNY claims that, while it admits that various savings deposits, pre-war inactive accounts, and sundry accounts contained in its report submitted to the Treasurer of the Philippines pursuant to Act No. 3936, totalling more than P100,000.00, which remained dormant for 10 years or more, are subject to escheat however, it has inadvertently included in said report certain items amounting to P18,589.89 which, properly speaking, are not credits or deposits within the contemplation of Act No. 3936. Hence, it prayed that said items be not included in the claim of plaintiff.

After hearing, CFI Manilla rendered judgment holding that cashier's is or manager's checks and demand drafts as those which defendant wants excluded from the complaint come within the purview of Act No. 3936, but not the telegraphic transfer payment which orders are of different category. Consequently, the complaint was dismissed with regard to the latter. A motion for reconsider was filed by defendant, and the court a quo changed its view and held that even said demand drafts do not come within the purview of said Act and so amended its decision accordingly. Plaintiff appealed.

ISSUE: Do demand draft and telegraphic orders come within the meaning of the term "credits" or "deposits" employed in Act No. 3936?

HELD: Section 1, Act No. 3936, provides:

Section 1. "Unclaimed balances" within the meaning of this Act shall include credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and interest thereon with banks, as hereinafter defined, in favor of any person unheard from for a period of ten years or more. Such unclaimed balances, together with the increase and proceeds thereof, shall be deposited with the Insular Treasure to the credit of the Government of the Philippine Islands to be as the Philippine Legislature may direct.

It would appear that the term "unclaimed balances" that are subject to escheat include credits or deposits money, or other evidence of indebtedness of any kind with banks, in favor of any person unheard from for a period of 10 years or more. And as correctly stated by the trial court, the term "credit" in its usual meaning is a sum credited on the books of a company to a person who appears to be entitled to it.

A demand draft is a bill of exchange payable on demand. Considered as a bill of exchange, a draft is said to be, like the former, an open letter of request from, and an order by, one person on another to pay a sum of money therein mentioned to a third person, on demand or at a future time therein specified. As a matter of fact, the term "draft" is often used, and is the common term, for all bills of exchange. And the words "draft" and "bill of exchange" are used indiscriminately.

On the other hand, a bill of exchange within the meaning of our Negotiable Instruments Law (Act No. 2031) does not operate as an assignment of funds in the hands of the drawee who is not liable on the instrument until he accepts it. This is the clear import of Section 127. It says: "A bill of exchange of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereon and the drawee is not liable on the bill unless and until he accepts the same." In other words, in order that a drawee may be liable on the draft and then become obligated to the payee it is necessary that he first accepts the same. In fact, our law requires that with regard to drafts or bills of exchange there is need that they be presented either for acceptance or for payment within a reasonable time after their issuance or after their last negotiation thereof as the case may be (Section 71, Act 2031). Failure to make such presentment will discharge the drawer from liability or to the extent of the loss caused by the delay (Section 186, ibid.)

Since it is admitted that the demand drafts herein involved have not been presented either for acceptance or for payment, the inevitable consequence is that the appellee bank never had any chance of accepting or rejecting them. Verily, appellee bank never became a debtor of the payee concerned and as such the aforesaid drafts cannot be considered as credits subject to escheat within the meaning of the law.

But a demand draft is very different from a cashier's or manager's cheek, contrary to appellant's pretense, for it has been held that the latter is a primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. A demand draft is not of the same category as a cashier's check which should come within the purview of the law.

However, it is different with regard to telegraphic payment order . It is said that as the transaction is for the establishment of a telegraphic or cable transfer the agreement to remit creates a contractual obligation a has been termed a purchase and sale transaction. The purchaser of a telegraphic transfer upon making payment completes the transaction insofar as he is concerned, though insofar as the remitting bank is concerned the contract is executory until the credit is established.

The court agree with the following comment of the Solicitor General: "This is so because the drawer bank was already paid the value of the telegraphic transfer payment order. In the particular cases under consideration it appears in the books of the defendant bank that the amounts represented by the telegraphic payment orders appear in the names of the respective payees. If the latter choose to demand payment of their telegraphic transfers at the time the same was (were) received by the defendant bank, there could be no question that this bank would have to pay them. Now, the question is, if the payees decide to have their money remain for sometime in the defendant bank, can the latter maintain that the ownership of said telegraphic payment orders is now with the drawer bank? The latter was already paid the value of the telegraphic payment orders otherwise it would not have transmitted the same to the defendant bank. Hence, it is absurd to say that the drawer banks are still the owners of said telegraphic payment orders."

Decision of the trial court is hereby is modified in the sense that the items specifically referred to and listed under paragraph 3 of appellee bank's answer representing telegraphic transfer payment orders should be escheated in favor of the Republic of the Philippines.

Bonnevie V. CA (1983) Lessons Applicable: Simple Loan Laws Applicable: Facts: December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of P75K fromPhilippine Bank of Commerce (PBC) by mortgaging their property December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is payable to PBC and P25K is payable to Spouses Lanzano. April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to PBC

May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with Assumption ofMortgage to his brother, intervenor Raoul Bonnevie June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale was published January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank of Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 as well as the extrajudicial foreclosure made on September 4, 1968. CFI: Dismissed the complaint with costs against the Bonnevies CA: Affirmed ISSUE: W/N the forclosure on the mortgage is validly executed.

HELD: YES. CA affirmed A contract of loan being a consensual contract is perfected at the same time the contract of mortgagewas executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution. Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption period expired on September 3, 1969. It was not until September 29, 1969 that Honesto Bonnevie first wrote respondent and offered to redeem the property. loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, the loan was already six months overdue. Payment of interest on July 12, 1968 does not make the earlier act of PBC inequitous nor does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the discretion of the bank.

Central Bank of the Philippines v. CA, 139 SCRA 46 (1985) Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank did not release the whole amount but only a portion thereof. Later, the Bank experienced liquidity problems and the Monetary Board of Central Bank prohibited it from making new loans and much later, from doing business in the Philippines. Thereafter, the Acting Superintendent of Central Bank took charge of its assets. Upon expiration of the loan term, the Bank filed extrajudicial foreclosure of the mortgage. Was there a perfected contract of loan when only a portion of the amount was delivered? The Supreme Court held that there was only partial delivery. As such, the contract is deemed perfect only in so far as what has been delivered. The mortgage cannot be entirely foreclosed, except for up to the amount of the actual amount released, but the Bank can recover the interest of the partial loan. Tolentino cannot anymore demand the remaining amount of the loan from the Bank because he defaulted on his payment. His liability offsets the liability of the Bank to him.