Atty.

Vic Byron Fernandez

Credit Transactions
Mina vs Pascual

Facts: Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired during
his lifetime, on March 12, 1874, a lot.

Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the said lot,
embracing 14 meters of its frontage by 11 meters of its depth.

Francisco Fontanilla, the former owner of the lot, being dead, the herein plaintiffs, Alejandro Mina, et al.,
were recognized without discussion as his heirs.

Andres Fontanilla, the former owner of the warehouse, also having died, the children of Ruperta Pascual
were recognized, though it is not said how, and consequently are entitled to the said building, or rather, as
Ruperta Pascual herself stated, to only six-sevenths of one-half of it, the other half belonging, as it
appears, to the plaintiffs themselves, and the remaining one-seventh of the first one-half to the children of
one of the plaintiffs, Elena de Villanueva.

Ruperta Pascual, as the guardian of her minor children, the herein defendants,
petitioned the Curt of First Instance of Ilocos Norte for authorization to sell "the six-
sevenths of the one-half of the warehouse, of 14 by 11 meters, together with its lot.
The warehouse, together with the lot on which it stands, was sold to Cu Joco, the
other defendant in this case
Issue: WoN there exist a contract of commodatum
Held: although both litigating parties may have agreed in their idea of the
commodatum, on account of its not being, as indeed it is not, a question of fact but
of law
Contracts are not to be interpreted in conformity with the name that the parties
thereto agree to give them, but must be construed, duly considering their
constitutive elements, as they are defined and denominated by law.
By the contract of loan, one of the parties delivers to the other, either anything not
perishable, in order that the latter may use it during the certain period and return it
to the former, in which case it is called commodatum
It is, therefore, an essential feature of the commodatum that the use of
the thing belonging to another shall BE for a certain period. Francisco
Fontanilla did not fix any definite period or time during which Andres Fontanilla
could have the use of the lot whereon the latter was to erect a stone warehouse of
considerable value, and so it is that for the past thirty years of the lot has been
used by both Andres and his successors in interest.
It would seem that the Supreme Court failed to consider the possibility of a contract
of precardium between Francisco and Andres. Precardium is a kind of commodatum

Kitem Duque Kadatuan Jr. 1 | Page

wherein the bailor may demand the object at will if the contract does not stipulate a
period or use to which the thing is devoted.

Republic of the Philippines vs. Jose Bagtas, Felicidad Bagtas

Facts: On May 8, 1948, Jose Bagtas borrowed from the Bureau of Animal Industry 3 bulls for 1
year for breeding purposes, subject to breeding fee for 10% of the book value of the bulls. Upon
the expiration of the contract, Bagtas asked for a renewal for another year. The renewal granted
was only for 1 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, and so the Republic commenced an action with the CFI Manila to order
the return of the bulls of the payment of book value. Felicidad Bagtas, the surviving spouse and
administratrix of the decedent’s estate, stated that the 2 bulls have already been returned in
1952, and that the remaining one died of gunshot during a Huk raid. As regards the two bulls, is
was proven that they were returned and thus, there is no more obligation on the part of the
appellant. As to the bull not returned, Felicidad contends 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, depending on the nature of the contract, the respondent is liable for the death
of the bull

Held: 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 . . .

(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;

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. Furthermore, when lent and delivered to the deceased husband of the appellant
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.

Special proceedings for the administration and settlement of the estate of the deceased Jose V.
Bagtas having been instituted in the Court of First Instance of Rizal (Q-200), the money
judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution
but must be presented to the probate court for payment by the appellant, the administratrix
appointed by the court.

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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.

Catholic Vicar Apostolic of the Mountain Province vs. Court of

Appeals, Heirs of Egmidio Octaviano and Juan Valdez

Facts:

The whole controversy started when the herein petitioner filed an application
for registration of lands 1, 2, 3 and 4 in La Trinidad, Benguet on September 5,
1962. The heirs of Juan Valdez and the heirs of Egmidio Octaviano filed an
opposition on lots 2 and 3, respectively. On November 17, 1965, the land
registration court confirmed the registrable title of the petitioner. On May 9,
1977, the Court of Appeals reversed the decision and dismissed the Vicar’s
application. The heirs filed a motion for reconsideration, praying that the lots
be ordered registered under their names. The Court of Appeals denied the
motion for lack of sufficient merit. Both parties then came before the
Supreme Court. The Supreme Court, in a minute resolution, denied both
petitions. The heirs filed the instant cases for the recovery and possession of
the lots.

Respondents argue that the petitioner is barred from setting up the defense
of ownership or long and continuous possession by the prior judgment of the
Court of Appeals under the principle of res judicata. Petitioner contends that
the principle is not applicable because the dispositive portion of the
judgment merely dismissed the application for registration.

The two cases affirmed by the Supreme Court, touched on the ownership of lots 2
and 3 in question; that the two lots were possessed by the predecessors-in-interest
of private respondents under claim of ownership in good faith from 1906 to 1951;
that petitioner had been in possession of the same lots as bailee in commodatum
up to 1951, when petitioner repudiated the trust and when it applied for registration
in 1962; that petitioner had just been in possession as owner for eleven years,
hence there is no possibility of acquisitive prescription which requires 10 years
possession with just title and 30 years of possession without; that the principle of
res judicata on these findings by the Court of Appeals will bar a reopening of these
questions of facts; and that those facts may no longer be altered.

Issue: WoN the failure of Vicar to return the subject property to respondents
constitute adverse possession which would entitle Vicar to have just title in order for
ordinary acquisitive prescription to set in.
Private respondents were able to prove that their predecessors' house was
borrowed by petitioner Vicar after the church and the convent were destroyed. They

Kitem Duque Kadatuan Jr. 3 | Page

never asked for the return of the house, but when they allowed its free use, they
became bailors in commodatum and the petitioner the bailee. The bailees' failure to
return the subject matter of commodatum to the bailor did not mean adverse
possession on the part of the borrower. The bailee held in trust the property subject
matter of commodatum. The adverse claim of petitioner came only in 1951 when it
declared the lots for taxation purposes. The action of petitioner Vicar by such
adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title.

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.

Kitem Duque Kadatuan Jr. 4 | Page

Chee Kiong Yam v. Malik
GR No-50550-52 October 31, 1979

Facts: Petitioners filed a petition for certiorari, prohibition and mandamus with
preliminary injunction against the respondent Judge Malik who ruled that several
cases of estafa filed against the petitioners should be admitted for trial in his sala.
It must be noted that all complainants admitted that the money which the
petitioners did not return were obtained from them by the latter in a form of loans.

Issue: Can there be a crime of estafa for non-payment of a loan?

Held: No. In order that a person be convicted of Swindling (Estafa) under Art. 315
of the Revised Penal Code, it must be proven that he has the obligation to deliver or
return the same money, goods or personal property that he received. Petitioners
had no such obligation to return the same money, i.e., the bills or coins, which they
received from private respondents. This is so because as clearly stated in criminal
complaints, the related civil complaints and the supporting sworn statements, the
sums of money that petitioners received were loans. In U.S. vs. Ibañez, 19 Phil.
559, 560 (1911), the Supreme Court held that it is not estafa for a person to refuse
to pay his debt or to deny its existence.

It is the opinion of the Court that when the relation is purely that of debtor and
creditor, the debtor can not be held liable for the crime of estafa, under said article,
by merely refusing to pay or by denying the indebtedness.

It appeared that respondent judge failed to appreciate the distinction between the
two types of loan, mutuum and commodatum, when he performed the questioned
acts. He mistook the transaction between petitioners and private respondents to be
commodatum wherein the borrower does not acquire ownership over the thing
borrowed and has the duty to return the same thing to the lender.

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Saura Import &Export Co., Inc v. DBP
G.R. No. L-24968 April 27, 1972

Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before its conversion
to DBP) for a loan of 500k secured by a first mortgage of the factory building to
finance for the construction of a jute mill factory and purchase of factory
implements. RFC accepted and approved the loan application subject to some
conditions which Saura admitted it could not comply with. Without having received
the amount being loaned, and sensing that it could not at anyway obtain the full
amount of loan, Saura Inc. then asked for cancellation of the mortgage which RFC
also approved. Nine years after the cancellation of the mortgage, Saura sued RFC
for damages for its non-fulfillment of obligations arguing that there was indeed a
perfected consensual contract between them.

Issue: Was there a perfected consensual contract? Was there a real contract of loan
which would warrant recovery of damages arising out of breach of such contract?

Held: On the first issue, yes, there was indeed a perfected consensual contract, as
recognized in Article 1934 of the Civil Code. There was undoubtedly offer and
acceptance in this 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. But this fact alone falls short of resolving the second issue
and the basic claim that the defendant failed to fulfill its obligation and the plaintiff
is therefore entitled to recover damages. The action thus taken by both parties—
Saura's request for cancellation and RFC's subsequent approval of such cancellation
—was in the nature of mutual desistance — what Manresa terms "mutuo disenso"—
which is a mode of extinguishing obligations. It is a concept derived from the
principle that since mutual agreement can create a contract, mutual disagreement
by the parties can cause its extinguishment. In view of such extinguishment, said
perfected consensual contract to deliver did not constitute a real contract of loan.

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Hermojina Estores vs. Spouses Arturo and Laura Supangan
G.R. No. 175139 April 18, 2012

DEL CASTILLO, J.:

Facts:
1. In Oct. 1993, Hermojina Estores and Spouses Supangan entered into a
Conditional Deed of Sale where Estores offered to sell, and Spouses offered to
buy a parcel of land in Cavite for P4.7M.
2. After almost 7 years and despite the payment of P3.5M by the Spouses, Estores
still failed to comply with her obligation to handle the peaceful transfer of
ownership as stated in 5 provisions in the contract.
3. In a letter in 2000, Spouses demanded the return of the amount within 15 days
from receipt
4. In reply, Estores promised to return the same within 120 days
5. Spouses agreed but imposed an interest of 12% annually
6. Estores still failed despite demands
7. Spouses filed a complaint with the RTC against Estores and Roberto Arias
(allegedly acted as Estores’ agent)
8. In Answer, Estores said they were willing to pay the principal amount but without
the interest as it was not agreed upon
a. That since the Conditional Deed of Sale provided only for the return of the
downpayment in case of breach, they cant be liable for legal interest as
well
2. RTC ruled saying that the Spouses are entitled to the interest but only at 6% per
annum and also entitled to atty’s fees
3. On appeal, CA said that the issue to resolve is
a. whether it is proper to impose interest for an obligation that does not
involve a loan or forbearance of money in the absence of stipulation of the
parties
4. CA affirmed RTC
a. That interest should start on date of formal demand by Spouses to return
the money not when contract was executed as stated by the RTC
b. That Arias not be solidarily liable as he acted as agent only and did not
expressly bind himself or exceeded his authority
5. Estores contends:

Kitem Duque Kadatuan Jr. 7 | Page

 a. Not bound to pay interest because the deed only provided for the return of
the downpayment in case of failure to comply with her obligations
b. That atty fees not proper because both RTC and CA sustained her
contention that 12% interest was uncalled for so it showed that Spouses
did not win
6. Spouses contend:
a. It is only fair that interest be imposed because Estores failed to return the
amount upon demand and used the money for her benefit
b. Estores failed to relocate the house outside the perimeter of the subject
lot and complete the necessary documents
c. As to the fees, they claim that they were forced to litigate when Estores
unjustly held the amount

Issue:

Is the imposition of interest and attorney’s fees is proper? YES

Interest based on Art 2209 of CC (6%) or under Central Bank Circular 416 (12%)? 12%

Held:
Interest may be imposed even in the absence of stipulation in the
contract.

 Article 2210 of the Civil Code expressly provides that “[i]nterest may, in the discretion
of the court, be allowed upon damages awarded for breach of contract.”
 Estores failed on her obligations despite demand.
o She admitted that the conditions were not fulfilled and was willing to
return the full amount of P3.5M but hasn’t done so
o She is now in default
The interest at the rate of 12% is applicable in the instant case.

 Gen Rule: the applicable interest rate shall be computed in accordance with the
stipulation of the parties
 Exc: if no stipulation, applicable rate of interest shall be 12% per annum
o When obligation arises out of a loan or forbearance of money, goods or
credits
 In other cases, it shall be 6%
 In this case, no stipulation was made
 Contract involved in this case is not a loan but a Conditional Deed of
Sale.
o No question that the obligations were not met and the return of
money not made
 Even if transaction was a Conditional Deed of Sale, the stipulation
governing the return of the money can be considered as a forbearance
of money which requires 12% interest

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 In Crismina Garments, Inc. v. Court of Appeals, Forbearance-- “contractual obligation
of lender or creditor to refrain during a given period of time, from requiring the
borrower or debtor to repay a loan or debt then due and payable.”
o In such case, “forbearance of money, goods or credits” will have no distinct
definition from a loan.
o however, the phrase “forbearance of money, goods or credits” is meant to have
a separate meaning from a loan, otherwise there would have been no need to
add that phrase as a loan is already sufficiently defined in the Civil Code
o Forbearance of money, goods or credits should therefore refer to arrangements
other than loan agreements, where a person acquiesces to the temporary use
of his money, goods or credits pending happening of certain events or
fulfillment of certain conditions.
 Estores’ unwarranted withholding of the money amounts to forbearance of money
which can be considered as an involuntary loan so rate is 12% starting in Sept. 2000
The award of attorney’s fees is warranted.

 no doubt that the Spouses were forced to litigate to protect their interest, i.e., to
recover their money. The amount of P50,000.00 more appropriate

GSIS vs CA 56478
Facts: In 1961, herein private respondents spouses Nemencio R. Medina and Josefina G.
Medina (Medinas for short) applied with the herein petitioner Government Service Insurance
System (GSIS for short) for a loan of P600,000.00.

The GSIS Board of Trustees, in its Resolution of December 20, 1961, approved under
Resolution No. 5041 only the amount of P350,000.00, subject to the following conditions:
that the rate of interest shall be 9% per annum compounded monthly; repayable in ten (10)
years at a monthly amortization of P4,433.65 including principal and interest, and that any
installment or amortization that remains due and unpaid shall bear interest at the rate of
9%/12% per month.

Upon application by the Medinas, the GSIS Board of Trustees adopted Resolution No. 121 on
January 18, 1963, as amended by Resolution No. 348 dated February 25, 1963, approving an
additional loan of P230,000.00 in favor of the Medinas on the security of the same
mortgaged properties and the additional properties covered

the Medinas having defaulted in the payment of the monthly amortization on their loan, the
GSIS imposed 9%/12% interest on an installments due and unpaid.

the GSIS notified the Medinas that they had arrearages in the aggregate amount of
P575,652.42 as of April 18, 1974, and demanded payment within seven (7) days from notice
thereof, otherwise, it would foreclose the mortgage.

the GSIS filed an Application for Foreclosure of Mortgage with the Sheriff of the City of Manila

the real properties of the Medinas were sold at public auction to the GSIS as the highest
bidder for the total amount of P440,080.00 on January 12, 1976, and the corresponding
Certificate of Sale was executed by the Sheriff of Manila on January 27, 1976

Kitem Duque Kadatuan Jr. 9 | Page

the Medinas filed an Amended Complaint with the trial court, praying for (a) the declaration
of nullity of their two real estate mortgage contracts with the GSIS as well as of the extra-
judicial foreclosure proceedings; and (b) the refund of excess payments, plus damages and
attorney's fees

Issue: 3. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE
INTEREST RATES ON THE LOAN ACCOUNTS OF RESPONDENT-APPELLEE SPOUSES
ARE USURIOUS;

Held: As to whether or not the interest rates on the loan accounts of the Medinas
are usurious, it has already been settled that the Usury Law applies only to interest
by way of compensation for the use or forbearance of money (Lopez v. Hernaez, 32
Phil. 631; Bachrach Motor Co. v. Espiritu, 52 Phil. 346; Equitable Banking
Corporation v. Liwanag, 32 SCRA 293, March 30, 1970). Interest by way of damages
is governed by Article 2209 of the Civil Code of the Philippines which provides:

Art. 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon,...

In the Bachrach case (supra) the Supreme Court ruled that the Civil Code permits the
agreement upon a penalty apart from the interest. Should there be such an agreement, the
penalty does not include the interest, and as such the two are different and distinct things
which may be demanded separately. Reiterating the same principle in the later case of
Equitable Banking Corp. (supra), where this Court held that the stipulation about payment of
such additional rate partakes of the nature of a penalty clause, which is sanctioned by law.

Yong Chan Kim vs People of the Philippines

Facts: Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture Department of the
Southeast Asian Fisheries Development Center (SEAFDEC) with head station at Tigbauan, Province of
Iloilo. As Head of the Economics Unit of the Research Division, he conducted prawn surveys which
required him to travel to various selected provinces in the country where there are potentials for prawn
culture.

On 15 June 1982, petitioner was issued Travel Order No. 2222 which covered his travels to different
places in Luzon from 16 June to 21 July 1982, a period of thirty five (35) days. Under this travel order, he
received P6,438.00 as cash advance to defray his travel expenses.

Within the same period, petitioner was issued another travel order, T.O. 2268, requiring him to travel from
the Head Station at Tigbauan, Iloilo to Roxas City from 30 June to 4 July 1982, a period of five (5) days.
For this travel order, petitioner received a cash advance of P495.00.

On 14 January 1983, petitioner presented both travel orders for liquidation, submitting Travel Expense
Reports to the Accounting Section. When the Travel Expense Reports were audited, it was discovered
that there was an overlap of four (4) days (30 June to 3 July 1982) in the two (2) travel orders for which
petitioner collected per diems twice. In sum, the total amount in the form of per diems and allowances
charged and collected by petitioner under Travel Order No. 2222, when he did not actually and physically
travel as represented by his liquidation papers, was P1,230.00.

the court finds the accused, Yong Chan Kim, guilty beyond reasonable doubt for the crime of Estafa
penalized under paragraph l(b) of Article 315,

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Issue: WoN a person receiving a Cash advance may be held liable for Estafa
if he does not return the excess or if he he collected for each day twice

Held: Art. 1953.— A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.

The ruling of the trial judge that ownership of the cash advanced to the petitioner by private respondent
was not transferred to the latter is erroneous. Ownership of the money was transferred to the petitioner.

Since ownership of the money (cash advance) was transferred to petitioner, no fiduciary relationship was
created. Absent this fiduciary relationship between petitioner and private respondent, which is an
essential element of the crime of estafa by misappropriation or conversion, petitioner could not have
committed estafa.

LIGUTAN VS. COURT OF APPEALS

G.R. No. 147465, February 12, 2002

Facts: Ligutan and dela Llana obtained a loan from Security Bank and Trust Co.
They executed a promissory note binding themselves jointly and severally to pay
the sum borrowed with an interest of 15.89% per annum upon maturity and to pay a
penalty of 5% every month on the outstanding principal and interest in case of
default. In addition, they agreed to pay 10% of the total amount due by way of
attorney’s fees if the matter were indorsed to a lawyer for collection or if a suit were
instituted to enforce payment. Ligutan and dela Llana failed to settle the debt. A
complaint for recovery of the amount due was filed with the RTC. The court held,
among others, the borrowers were liable for a 3% per month penalty (instead of 5%)
and 10% of the total amount of the indebtedness for attorney’s fee, in addition to
the principal loan.

Issue: Whether the court is correct in holding the borrowers liable for the penalty.
Whether or not the payment of Interest is still proper even after payment of penalty

Held: A penalty clause, expressly recognized by law, is an accessory undertaking to

assume greater liability on the part of an obligor in case of breach of an obligation.
It functions to strengthen the coercive force of the obligation and to provide for
what could be the stipulated indemnity without the necessity of proof on the

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existence and on the measure of damages caused by the breach. Although the
court may not at liberty ignore the freedom of the parties to agree on such terms
and conditions as they see fit, a stipulated penalty, nevertheless may be equitably
reduced by the courts if iniquitous or unconscionable or if the principal obligation
has been partly or irregularly complied with. The reduction is justified by the facts
that the borrowers were able to partly comply with their obligations.

Held: The essence or rationale for the payment of interest, quite often referred to as cost of
money, is not exactly the same as that of a surcharge or a penalty. A penalty stipulation is not
necessarily preclusive of interest, if there is an agreement to that effect, the two being distinct
concepts which may separately be demanded. i

Eastern Shipping Lines v. CA

GR No. 97412 July 12, 1994

Facts: Petitioner-defendant was consigned to deliver a cargo. Upon embarkment, the cargo
was found to be damaged while on transit. Private respondent-plaintiff, Mercantile
Insurance, paid the consignee the amount of damage based on a marine insurance policy.
Mercantile consquently sued the petitioner for recovery of damages it paid to the consignee.
The court a quo decided in favor of the plaintiff and further stressing the amount paid by the
insurance company to the consignee be paid and with the present legal interest of 12% per
annum commencing on the date of filing of the complaint, until fully paid. The petitioner
now constests the ruling particularly on the issue of interest.

Issue: When should the reckoning period be for the computation of the payment of legal
interest on an award for loss or damage? What is the applicable rate of interest?

Held: The Court laid down the following rules of thumb for guidance in cases like that of the
above:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under
Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable

Kitem Duque Kadatuan Jr. 12 | P a g e

damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. 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.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest

on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.

Producers Bank of the Philippines vs CA (2003)

Facts:
 Vives (will be the creditor in this case) was asked by his friend Sanchez to help the
latter’s friend, Doronilla (will be the debtor in this case) in incorporating Doronilla’s
business “Strela”. This “help” basically involved Vives depositing a certain amount of
money in Strela’s bank account for purposes of incorporation (rationale: Doronilla had to
show that he had sufficient funds for incorporation). This amount shall later be returned
to Vives.
 Relying on the assurances and representations of Sanchez and Doronilla, Vives issued a
check of P200,00 in favor of Strela and deposited the same into Strela’s newly-opened
bank account (the passbook was given to the wife of Vives and the passbook had an
instruction that no withdrawals/deposits will be allowed unless the passbook is
presented).
 Later on, Vives learned that Strela was no longer holding office in the address previously
given to him. He later found out that the funds had already been withdrawn leaving only
a balance of P90,000. The Vives spouses tried to withdraw the amount, but it was
unable to since the balance had to answer for certain postdated checks issued by
Doronilla.

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  Doronilla made various tenders of check in favor of Vives in order to pay his debt. All of
which were dishonored.
 Hence, Vives filed an action for recovery of sum against Doronilla, Sanchez, Dumagpi
and Producer’s Bank.
 TC & CA: ruled in favor of Vives.

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) in
the amount to be returned to Vives converts the transaction from commodatum to
mutuum. NO.
(3) WON Producer’s Bank is solidarily liable to Vives, considering that it was not privy to
the transaction between Vives and Doronilla. YES.

Held/Ratio:
(1) The transaction is a commodatum.
 CC 1933 (the provision distinguishing between the two kinds of loans) seem to imply
that if the subject of the contract is a consummable thing, such as money, the contract
would be a mutuum. However, there are instances when a commodatum may have for
its object a consummable thing. Such can be found in CC 1936 which states that
“consummable 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”. In this case,
the intention of the parties was merely for exhibition. Vives agreed to deposit his money
in Strela’s account specifically for purpose of making it appear that Streal had sufficient
capitalization for incorporation, with the promise that the amount should be returned
withing 30 days.
(2) CC 1935 states that “the bailee in commodatum acquires the use of the thing loaned but
not its fruits”. In this case, the additional P 12,000 corresponds to the fruits of the
lending of the P 200,000.
(3) Atienza, the Branch Manager of Producer’s Bank, allowed the withdrawals on the account of Strela
despite the rule written in the passbook that neither a deposit, nor a withdrawal will be permitted
except upon the production of the passbook (recall in this case that the passbook was in the
possession of the wife of Vives all along). Hence, this only proves to show that Atienza allowed the
withdrawals because he was party to Doronilla’s scheme of defrauding Vives. By virtue of CC
2180, PNB, as employer, is held primarily and solidarily liable for damages caused by their
employees acting within the scope of their assigned tasks. Atienza’s acts, in helpong Doronilla, a
customer of the bank, were obviously done in furtherance of the business of the bank, even
though in the process, Atienza violated some rules.

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

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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.

Pajuyo v. CA
GR No. 146364 June 3, 2004

Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he should
return the same upon demand and with the condition that Guevara should be
responsible of the maintenance of the property. Upon demand Guevara refused to
return the property to Pajuyo. The petitioner then filed an ejectment case against

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Guevara with the MTC who ruled in favor of the petitioner. On appeal with the CA,
the appellate court reversed the judgment of the lower court on the ground that
both parties are illegal settlers on the property thus have no legal right so that the
Court should leave the present situation with respect to possession of the property
as it is, and ruling further that the contractual relationship of Pajuyo and Guevara
was that of a commodatum.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a

commodatum?

Held: No. The Court of Appeals’ theory that the Kasunduan is one of commodatum
is devoid of merit. 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.

People VS Puig

Facts: On 7 November 2005, the Iloilo Provincial Prosecutor's Office filed before RTC
in Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig
(Puig) and Romeo Porras (Porras) who were the Cashier and Bookkeeper,
respectively, of private complainant Rural Bank of Pototan, Inc.

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It was alleged in the information that Teresita Puig and Romeo Porras took away
P15,000 without the consent of the owner Bank to the prejudice and damage of the
bank.
The RTC dismissed the case for insufficiency of the information ruling that the real
parties in interest are the depositors-clients and not the bank because the bank
does not acquire ownership of the money deposited in it.
Hence petitioner Rural Bank went directly to the court via petition for certiorari.
Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings,
and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning simple loans." Corollary thereto, Article 1953 of the same
Code provides that "a person who receives a loan of money or any other fungible
thing acquires the ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality." Thus, it posits that the depositors who place
their money with the bank are considered creditors of the bank. The bank acquires
ownership of the money deposited by its clients, making the money taken by
respondents as belonging to the bank.

Issue: Whether or not the Bank acquired ownership of the money deposited in it to
be able to hold the respondents liable for qualified theft which requires that there
must be taking of the money without the consent of the owners.

Held: The petition is meritorious

Banks where monies are deposited, are considered the owners thereof. This is very
clear not only from the express provisions of the law, but from established
jurisprudence. The relationship between banks and depositors has been held to be
that of creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as
appropriately pointed out by petitioner, provide as follows:
Article 1953.A person who receives a loan of money or any other fungible
thing acquires the ownership thereof, and is bound to pay to the creditor
an equal amount of the same kind and quality.
Article 1980. Fixed, savings, and current deposits of money in banks and
similar institutions shall be governed by the provisions concerning loan.
In a long line of cases involving Qualified Theft, the Court has firmly established the
nature of possession by the Bank of the money deposits therein, and the duties
being performed by its employees who have custody of the money or have come
into possession of it. The Court has consistently considered the allegations in the
Information that such employees acted with grave abuse of confidence, to the
damage and prejudice of the Bank, without particularly referring to it as owner of
the money deposits, as sufficient to make out a case of Qualified Theft
In summary, the Bank acquires ownership of the money deposited by its clients; and
the employees of the Bank, who are entrusted with the possession of money of the
Bank due to the confidence reposed in them, occupy positions of confidence. The
Informations, therefore, sufficiently allege all the essential elements constituting the
crime of Qualified Theft.

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i