Credit Transactions

Acme VS CA

Facts: Petitioner Chua Pac, the president and general manager of co-petitioner Acme executed a chattel
mortgage in favor of private respondent Producers Bank as a security for a loan of P3,000,000. A
provision in the chattel mortgage agreement was to this effect:

"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the
former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations
such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on
Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory
note or notes and/or accommodations without the necessity of executing a new contract and this
mortgage shall have the same force and effect as if the said promissory note or notes and/or
accommodations were existing on the date thereof. This mortgage shall also stand as security for said
obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind
and nature, whether such obligations have been contracted before, during or after the constitution of
this mortgage."

In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained additional loan totalling
P2,700,000.00 which was also duly paid.

Another loan was again extended (P1,000,000.00) covered by four promissory notes for P250,000.00
each, but went unsettled prompting the bank to apply for an extrajudicial foreclosure with the Sheriff.

ISSUE: 
Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its
coverage to obligations yet to be contracted or incurred?

HELD:
No. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, a chattel mortgage, however, can
only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in
a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can
be compelled upon, the security itself, however, does not come into existence or arise until after a
chattel mortgage agreement covering the newly contracted debt is executed either by concluding a
fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the
Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the
after-incurred obligation can constitute an act of default on the part of the borrower of the financing
agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the
debts extant at the time of constitution and during the life of the chattel mortgage sought to be
foreclosed.
Navoa VS CA and Teresita and Eduardo Domdoma

Facts: On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case with the RTC for
collection of various sums of money based on loans given by them to Olivia Navoa. They cased was
dismissed on the ground that there was no cause of action and that the Domdoma’s do not have no
capacity to sue. They appealed to the C.A. and was granted a favourable decision.
There were 6 instances in which the Domdoma’s gave Olivia Navoa a loan. The first instance is when
Teresita gave Olivia a diamond ring valued at 15,000.00 which was secured by a PCIB check under the
condition that if the ring was not returned within 15 days from August 15, 1977 the ring is considered
sold. Teresita attempted to deposit the check on November 1977 but the check was not honoured for
lack of funds. After this instance, there were other loans of various amounts that were extended by
Teresita to Olivia, loans which were secured by PCIB checks, which were all dated to 1 month after the
loan. All these checks were not honoured under the same reason as the first loan.
Issue: 
Was the decision of the RTC to dismiss the case due to having no cause of action valid?
- NO, A cause of action is the fact or combination of facts which affords a party a right to judicial
interference in his behalf. 
- For the first loan it is a fact, that the ring was considered sold to Olivia Navoa 15 days after August 15,
1977, and even then, Olivia Navoa failed to pay the price for the ring when the payment was due (check
issued was not honoured. Thus it is confirmed that Teresita’s right under the agreement was violated.
- As for the other loans extended by Teresita to Olivia, they were all secured by PCIB checks. It can be
inferred that since the checks were all dated to 1 month after the loan, it follows that the loans are then
payable 1 month after they were contracted, and also these checks were dishonoured by the bank for
lack of funds.
- Olivia and Ernesto Navoa failed to make good the checks that were issued as payment for their
obligations. Art 1169 of the Civil Code is explicit: those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extra-judicially demands from them the fulfilment of the
obligations, the continuing refusal of Olivia and Ernesto Navoa to comply with the demand of payment
shows the existence of a cause of action.

Held:
The petition is DENIED and the decision of the C.A. remanding the case to the RTC for trial on the merits
is affirmed. 

Obligations and Contracts terms:

Security- A means of ensuring the enforcement of an obligation or of protecting some interest in
property. It may be personal or property security.
Cause of Action- is the fact or combination of facts which affords a party a right to judicial interference
in his behalf. The requisites for a cause of action are: (a) a right in favour of the plaintiff by whatever
means and under whatever law it arises or created, (b) an obligation on the part of the defendant to
respect and not to violate such right; and, (c) an act or omission on the part of the defendant
constituting a violation of the plaintiff’s right or breach of the obligation of the defendant to the
plaintiff. 
LOAN

People VS Concepcion 1922

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: 1. 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.

2. Was 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" or a "discount"?

Held: 1. 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,"

2. Counsel argue that while section 35 of Act No. 2747 prohibits the granting of a "loan," it does not
prohibit what is commonly known as a "discount." The ruling of the Acting Insular Auditor, dated August
11, 1916, was to the effect that said section referred to loans alone, and placed no restriction upon
discount transactions. Discounts are favored by bankers because of their liquid nature, growing, as they
do, out of an actual, live, transaction. But in its last analysis, to discount a paper is only a mode of
loaning money, with, however, these distinctions: (1) In a discount, interest is deducted in advance,
while in a loan, interest is taken at the expiration of a credit; (2) a discount is always on double-name
paper; a loan is generally on single-name paper.

The conclusion is inevitable that the demand notes signed by the firm "Puno y Concepcion, S. en C."
were not discount paper but were mere evidences of indebtedness, because (1) interest was not
deducted from the face of the notes, but was paid when the notes fell due; and (2) they were single-
name and not double-name paper.
Republic VS PNB and The First National City Bank of New York

Facts: The Republic of the Philippines 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. Pursuant to the said Act, defendant banks  forwarded to the Treasurer of the
Philippines a statement under oath of their respective managing officials 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 is prayed that the said credits and deposits be
forwarded to the Treasurer of the Philippines.

In its answer, The First National City Bank of New York claims that, it has inadvertently included in said
report certain items amounting to P 18,589.89 which, properly speaking, are not credits or deposits
within the contemplation of Act No. 396.

The court a quo rendered a judgment holding that cashier’s or manager’s check and demand drafts, as
those which the defendants wants to exclude, come within the purview of Act No. 396, but not the
telegraphic transfer payment which orders are of different category. After a motion of reconsideration
was filed, the court changed its view and held that even demand drafts do not come within the purview
of the said Act.

Issue: WON demand drafts and telegraphic orders come within the term “credits” or “deposits”

Held: We may say that a demand draft is a bill of exchange payable on demand. Sec. 127 of the
Negotiable Instruments Law 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.

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.

The case, however, 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.

Wherefore, the decision of the trial court is hereby modified. Telegraphic transfer payment orders
should be escheated in favor of the Republic of the Philippines.
Herrera VS Petrophil

Facts: Herrera and ESSO Standard, (later substituted by Petrophil) entered into a lease agreement,
whereby Herrera leased to ESSO a portion of his property for a period of 20 years subject to the
condition that monthly rentals should be paid and there should be an advance payment of rentals for
the first eight years of the contract, to which ESSO paid. However ESSO deducted the amount of
101,010.73 as interest or discount for the 8 years advance rental. Later, ESSO informed Herrera that
there had been a mistake in the computation of the interest thus it was reduced to 98,828.03.

Herrera then sued ESSO for the sum of 98,828.03, with interest, claiming that this had been illegally
deducted to him in violation of the Usury Law. ESSO argued that the amount deducted was not usurious
interest but rather a discount given to it for paying the rentals in advance. Judgment was rendered in
favor of ESSO thus elevated to the SC.

Issue: 1. Whether the contract is one of a loan or lease. 2. Whether there is violation of Usury Law.

Held: 1. The contract between the parties is one of lease and not of loan. It is clearly denominated as
“Lease Agreement”. Nowhere in the contract Is there any showing that the parties intended a loan
rather than a lease. The provision for the payment of rentals in advance cannot be construed as a
repayment of a loan because there was no grant or forbearance of money as to constitute indebtedness
on the part of the lessor. On the contrary, the defendant-appellee was discharging its obligation in
advance by paying the 8 years rentals, and it was for this advance payment that it was getting a rebate
or discount.

2. There is no usury in this case because no money was given by the defendant-appellee to the plaintiff-
appellant, nor did it allow him to use its money already in his possession.  There was neither loan nor
forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee to deduct
from the total payments because they were being made in advance for eight years. The discount was in
effect a reduction of the rentals which the lessor had the right to determine, and any reduction thereof,
by any amount, would not contravene the Usury Law.

The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on usury. 

To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be exacted
for the use of the money in excess of and in addition to interest allowed by law." 

It has been held that the elements of usury are (1) a loan, express or implied; (2) an understanding
between the parties that the money lent shall or may be returned; that for such loan a greater rate or
interest that is allowed by law shall be paid, or agreed to be paid, as the case may be; and (4) a corrupt
intent to take more than the legal rate for the use of money loaned. Unless these four things concur in
every transaction, it is safe to affirm that no case of usury can be declared.
Saura Import and Export VS DBP

Facts: Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for
an industrial loan to be used for construction of factory building, for payment of the balance of the
purchase price of the jute 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. The cancellation
of the mortgage was requested 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 9 years after the mortgage was cancelled, Saura sued RFc alleging failure to comply with tits
obligations to release the loan proceeds, thereby prevented it from paying the obligation to Prudential
Bank. 

The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties ad
that the RFC was guilty of breach thereof. 

Issue: Whether or not there was a perfected contract between the parties. 

Held: Yes. Article 1934 provides: An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected
until delivery of the object of the contract.

· There was undoubtedly offer and acceptance in the case. The application of Saura, Inc. for a loan of
P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. The defendant failed to fulfill its obligation and the plaintiff is therefore
entitled to recover damages.

· When an application for a loan of money was approved by resolution of the respondent corporation
and the responding mortgage was executed and registered, there arises a perfected consensual
contract.

· However, it should be noted that RFC imposed two conditions (availability of raw materials and
increased production) when it restored the loan to the original amount of P500,000.00.

· Saura, Inc. obviously was in no position to comply with RFC’s conditions. So instead of doing so and
insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The
action thus taken by both parties was in the nature of mutual desistance which is a mode of
extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can
create a contract, mutual disagreement by the parties can cause its extinguishment.
Bonnevie VS CA

Facts: Spouses Lozano mortgaged their property to secure the payment of a loan amounting to 75K with
private respondent Philippine Bank of Communication (PBCom). The deed of mortgage was executed on
12-6-66, but the loan proceeeds were received only on 12-12-66. Two days after the execution of the
deed of mortgage, the spouses sold the property to the petitioner Bonnevie for and in consideration of
100k—25K of which payable to the spouses and 75K as payment to PBCom. Afterwhich, Bonnevie
defaulted payments to PBCom prompting the latter to auction the property after Bonnivie failed to
settle despite subsequent demands, in order to recover the amount loaned. The latter now assails the
validity of the mortgage between Lozano and Pbcom arguing that on the day the deed was executed
there was yet no principal obligation to secure as the loan of P75,000.00 was not received by the Lozano
spouses, so that in the absence of a principal obligation, there is want of consideration in the accessory
contract, which consequently impairs its validity and fatally affects its very existence.

Issue: WON there was a perfect contract of loan

Held: Yes. A contract of loan being a consensual contract is perfected at the same time the contract of
mortgage was 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 VS CA

Facts: Island Savings Bank, upon favorable recommendation of its legal department, approved the loan
application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the
same day a real estate mortgage over his 100-hectare land located in Cubo, Las Nieves, Agusan. The loan
called for a lump sum of P80,000, repayable in semi-annual installments for 3 yrs, with 12% annual
interest. After the agreement, a mere P17K partial release of the loan was made by the bank and
Tolentino and his wife signed a promissory note for the P17,000 at 12% annual interest payable w/in 3
yrs. An advance interest was deducted fr the partial release but this prededucted interest was refunded
to Tolentino after being informed that there was no fund yet for the release of the P63K balance.

Monetary Board of Central Bank, after finding that bank was suffering liquidity problems, prohibited the
bank fr making new loans and investments. And after the bank failed to restore its solvency, the Central
Bank prohibited Island Savings Bank from doing business in the Philippines. Island Savings Bank in view
of the non-payment of the P17K filed an application for foreclosure of the real estate mortgage.
Tolentino filed petition for specific performance or rescission and damages with preliminary injunction,
alleging that since the bank failed to deliver P63K, he is entitled to specific performance and if not, to
rescind the real estate mortgage.

Issue: Whether or not Tolentino’s can collect from the bank for damages

Held: The loan agreement implied reciprocal obligations. When one party is willing and ready to
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real estate
mortgage, he signified willingness to pay. That time, the bank’s obligation to furnish the P80K loan
accrued. Now, the Central Bank resolution made it impossible for the bank to furnish the P63K balance.
The prohibition on the bank to make new loans is irrelevant bec it did not prohibit the bank fr releasing
the balance of loans previously contracted. Insolvency of debtor is not an excuse for non-fulfillment of
obligation but is a breach of contract.

 The bank’s asking for advance interest for the loan is improper considering that the total loan hasn’t
been released. A person can’t be charged interest for nonexisting debt. The alleged discovery by the
bank of overvaluation of the loan collateral is not an issue. The bank officials should have been more
responsible and the bank bears risk in case the collateral turned out to be overvalued. Furthermore, this
was not raised in the pleadings so this issue can’t be raised. The bank was in default and Tolentino may
choose bet specific performance or rescission w/ damages in either case. But considering that the bank
is now prohibited for doing business, specific performance cannot be granted. Rescission is the only
remedy left, but the rescission should only be for the P63K balance.
COMMODATUM

Republic VS Bagtas

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

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

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

Even if this is a commodatum, Bagtas is still liable because the fortuitous event happened when he held
the bull and the period stipulated already expired and he is liable because the thing loaned was
delivered with appraisal of value and there was no contrary stipulation regarding his liability in case
there is a fortuitous event.
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 Court 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: The Supreme Court held that it was not a commodatum. It is an essential feature of commodatum
that the use of the thing belonging to another shall be for a certain period. The parties never fixed a
definite period during which Andres could use the lot and afterwards return it.

Note: 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 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.
Spouses Abella VS Spouses Abella

Facts: Petitoner Spouses Salvador and Alma Abella filed a complaint for sum of money and damages
against respondent spouses Romeo and Annie Abella, alleging that respondents obtained a loan from
them in the amount of 500k. The loan was evidenced by an acknowledgement receipt dated March 22,
1999 and payable within 1 year. That respondents were able to pay 200k leaving a balance of 300k. In
their answer, respondents alleged that the amount involved did not pertain to a loan but was part of a
capital of joint venture involving the lending of money. The RTC ruled in favor of petitioners. It
concluded that the respondents obtained a simple loan, although they later invested its proceeds in a
lending enterprise, ordering respondents to pay the balance with 30% interest per annum. The CA ruled
that while respondents had indeed entered into a simple loan with petitioners, respondents were no
longer liable to pay the outstanding amount of P300,000.00. CA noted that while the acknowledgement
receipt showed that interest was to be charged, no particular interest rate was specified. Thus, at the
time respondents were making interest payments of 2.5% per month, these interest payments were
invalid for not being properly stipulated by the parties. Since petitioners' charging of interest was invalid,
the Court of Appeals reasoned that all payments respondents made by way of interest should be
deemed payments for the principal amount of P500,000.00. The Court of Appeals further noted that
respondents made a total payment of P648,500.00, which, as against the principal amount of
P500,000.00, entailed an overpayment of P148,500.00. Applying the principle of solutio indebiti, the
Court of Appeals concluded that petitioners were liable to reimburse respondents for the overpaid
amount of P148,500.

Issue: WON interest accrued on respondents loan from petitioners. If so, at what rate?

Held: Yes. Art. 1956 of Civil Code spells out the basic rule that “no interest shall be due unless it has
been stipulated in writing”. The controversy, however, stems from the acknowledgement receipt’s
failure to state the exact rate of interest. Jurisprudence is clear about the applicable interest rate if a
written instrument fails to specify a rate. In Spouses Toring VS Spouses Olan, this court clarified the
effect of Art. 1956 and noted that the legal interest rate (then at 12%) is to apply: “In a loan or
forbearance of money, according to the Civil Code, the interest due should be stipulated in writing, in
the absence thereof, the rate shall be 12% per annum.” The Monetary Board, in its Resolution No. 796
dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of
stipulation in loan contracts, thereby amending Sec. 2 of Circular No. 905, Series of 1982. Thus, from the
foregoing, in the absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for for loans or forbearance of any money, goods or credits and the
rate allowed in judgments shall no longer be twelve percent (12%) per annum but will now be six
percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could
only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum
legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per
annum shall be the prevailing rate of interest when applicable.

Applying this, the loan obtained by respondents from petitioners is deemed subjected to conventional
interest at the rate of 12% per annum, the legal rate of interest at the time the parties executed their
agreement. Moreover, should conventional interest still be due as of July 1, 2013, the rate of 12% per
annum shall persist as the rate of conventional interest.
Catholic Vicar Apostolic VS CA

Facts: 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with the court an
application for the registration of title over lots 1, 2, 3 and 4 situated in Poblacion Central, Benguet, said
lots being used as sites of the Catholic Church, building, convents, high school building, school
gymnasium, dormitories, social hall and stonewalls.

- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have ownership over lots
1, 2 and 3. (2 separate civil cases)

- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3 and 4. Upon
appeal by the private respondents (heirs), the decision of the lower court was reversed. Title for lots 2
and 3 were cancelled.

- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of
Appeals dismissing his  application for registration of Lots 2 and 3.

- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the alleged ownership
of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano; his written demand
to Vicar for the return of the land to them; and the reasonable rentals for the use of the land at P10,000
per month. On the other hand, Vicar presented the Register of Deeds for the Province of Benguet, Atty.
Sison, who testified that the land in question is not covered by any title in the name of Egmidio
Octaviano or any of the heirs. Vicar dispensed with the testimony of Mons. Brasseur when the heirs
admitted that the witness if called to the witness stand, would testify that Vicar has been in possession
of Lot 3, for 75 years continuously and peacefully and has constructed permanent structures thereon.

Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in commodatum, a
gratuitous loan for use.

Held: YES. Private respondents were able to prove that their predecessors' house was borrowed by
petitioner Vicar after the church and the convent were destroyed. They 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.

The Court of Appeals found that petitioner Vicar did not meet the requirement of 30 years possession
for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years
possession for ordinary acquisitive prescription because of the absence of just title. The appellate court
did not believe the findings of the trial court that Lot 2 was acquired from Juan Valdez by purchase and
Lot 3 was acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there was
absolutely no documentary evidence to support the same and the alleged purchases were never
mentioned in the application for registration.
Quintos VS Beck

Facts: Beck was a tenant of Quintos. Upon the novation of the contract, Quintos gratuitously granted to
Beck the use of the furniture, subject to the condition that Beck would return them upon plaintiff’s
demand.

Quintos sold the property and notified Beck of the conveyance, giving him 60 days to vacate the
premises. Thereafter, Quintos required Beck to return all the furniture transferred to him. Beck refused
to return 3 gas heaters and 4 electric lamps since he would use them until the lease was due to expired.
Quintos refused to get the furniture since Beck declined to return all of them. Beck deposited all the
furniture to the Sheriff.

Issue: WON Beck complied with his obligation of returning the furnitures by depositing it to the sheriff.

Held: No. The contract entered into between the parties is one of commodatum, 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 electric lamps. The provisions of article 1169 of the
Civil Code cited by counsel for the parties are not squarely applicable.

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 not 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.
MUTUUM
Cebu International VS CA and Alegre

Facts: Vicente Alegre invested with Cebu International Finance Corporation (CIFC) P500,000 in cash. CIFC
issued promissory note which covered private respondent’s placement. CIFC issued BPI Check No.
513397 (the Check) in favor of private respondent as proceeds of his matured investment. Mrs. Alegre
deposited the Check with RCBC but BPI dishonoured it, annotating therein that the “Check is subject of
an investigation”. BPI took possession of the Check pending investigation of several counterfeit checks
drawn against CIFC’s checking account. Private respondent demanded from CIFC that he be paid in cash
but the latter refused. Private respondent Alegre filed a case for recovery of a sum of money against
CIFC.

CIFC asserts that the provisions of Negortiable Instruments Law are the pertinent provisions to govern
its money market transaction and not paragraph 2 of Art. 1249 of the Civil Code. Petitioner stresses that
since BPI accepted the instrument, the bank became primarily liable for the payment of the Check.
When BPI offset the value of the Check against the losses from the forged cheks allegedly committed by
private respondent, the Check was deemed paid.

Issue: WON Art. 1249 of the Civil Code is applicable in this case.

Held: Yes. Article 1249 of the New Civil Code deals with a mode of extinction of an obligation and
expressly provides for the medium in the payment of debts. It provides that:

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to
deliver such currency, then in the currency, which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents
shall produce the effect of payment only when they have been cashed, or when through the fault of the
creditor they have been impaired.

Considering the nature of a money market transaction, the above-quoted provision should be applied in
the present controversy. As held in Perez vs. Court of Appeals, a money market is a market dealing in
standardized short-term credit instruments (involving large amounts) where lenders and borrowers do
not deal directly with each other but through a middle man or dealer in open market. In a money
market transaction, the investor is a lender who loans his money to a borrower through a middleman or
dealer.

In the case at bar, the money market transaction between the petitioner and the private respondent is
in the nature of a loan. The private respondent accepted the CHECK, instead of requiring payment in
money. In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which
is the legal tender or, by the use of a check. A check is not a legal tender, and therefore cannot
constitute valid tender of payment. Since a negotiable instrument is only a substitute for money and not
money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a
managers check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not
a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks
does not discharge the obligation under a judgment. The obligation is not extinguished and remains
suspended until the payment by commercial document is actually realized.
Tolentino VS Gonzales

Facts: On November 28, 1922, Tolentino and Manio purchased from Luzon Rice Mills Inc., a parcel of
land located in Tarlac, for 25,000 payable in 3 installments. One of the conditions of the contract was
that upon failure of the purchasers to pay the balance, the property will revert back to the original
owner.

The purchaser defaulted so the owner sent a demand letter. To pay for the balance, Tolentino applied
for a loan from Gonzales on a condition that he would execute a pacto de retro sale on the property in
favor of Gonzales. Upon the maturity of the loan, Tolentino failed to pay so Gonzales demanded
recovery of the land. Tolentino contends that the pacto de retro is a mortgage and not an absolute sale.

Issue: 1. WON the contract is a pacto de retro or a mortgage 2. Under a retro pact , when the seller
becomes a tenant of the purchaser and agrees to pay a certain amount per month as rent, may such
rent render such a contract when the amount paid as rent, computed upon the purchase price ,
amounts to a higher rate of interest on said amount than that allowed by law?

Held: An examination of said contract of sale shows clearly that it is a pact of retro and not a mortgage.
The contract of compact retro is an absolute sale of the property with the right to repurchase and not a
mortgage; and, that by virtue of the said contract of the seller became the tenant of the purchaser.

Tolentino contends that the rental price paid during the period of the existence of the right to
repurchase, or the sum of P375 per month, based on the value of the property, amounted to
usury. Usury, generally speaking, may be defined as contracting for or receiving something in excess of
the amount allowed by law for the loan or forbearance of money-the taking of more interest for the use
of money than the law allows. The collection of a rate of interest higher than that allowed by law is
condemned by the Philippine Legislature. But is it unlawful for the owner of a property to enter into a
contract with the tenant for the payment of a specific amount of rent for the use and occupation of said
property, even though the amount paid as "rent," based upon the value of the property, might exceed
the rate of interest allowed by law?

A contract of "loan," is very different contract from that of "rent". A contract of "rent" is a contract by
which one of the parties delivers to the other some nonconsumable thing, in order that the latter may
use it during a certain period and return it to the former; "a loan", as that word is used in the statute,
signifies the delivery of money or other consumable things upon condition of returning an equivalent
amount of the same kind or quantity, in which cases it is called merely a "loan." In the case of a contract
of "rent," under the civil law, it is called a "commodatum."
Colinares VS CA

Facts: Melvin Colinares and Lordino Veloso (hereafter Petitioners) were contracted for a consideration
of P40,000 by the Carmelite Sisters of Cagayan de Oro City to renovate the latter’s convent at Camaman-
an, Cagayan de Oro City. Colinares applied for a commercial letter of credit  with the Philippine Banking
Corporation, Cagayan de Oro City branch (hereafter PBC) in favor of CM Builders Centre. PBC approved
the letter of credit  for P22,389.80 to cover the full invoice value of the goods. Petitioners signed a pro-
forma trust receipt  as security.

PBC debited P6,720 from Petitioners’ marginal deposit as partial payment of the loan.  After the initial
payment, the spouses defaulted.  PBC wrote  to Petitioners demanding that the amount be paid within
seven days from notice. Instead of complying with PBC’s demand, Veloso confessed that they
lost P19,195.83 in the Carmelite Monastery Project and requested for a grace period of until 15 June
1980 to settle the account.  Colinares proposed  that the terms of payment of the loan be
modified P2,000 on or before 3 December 1980, and P1,000 per month . Pending approval of the
proposal, Petitioners paid P1,000 to PBC on 4 December 1980, and thereafter P500 on 11 February
1981, 16 March 1981, and 20 April 1981. Concurrently with the separate demand for attorney’s fees by
PBC’s legal counsel, PBC continued to demand payment of the balance.  On 14 January 1983, Petitioners
were charged with the violation of P.D. No. 115 (Trust Receipts Law) in relation to Article 315 of the
Revised Penal Code

During trial, petitioner Veloso insisted that the transaction was a “clean loan” as per verbal guarantee of
Cayo Garcia Tuiza, PBC’s former manager. He and petitioner Colinares signed the documents without
reading the fine print, only learning of the trust receipt implication much later. When he brought this to
the attention of PBC, Mr. Tuiza assured him that the trust receipt was a mere formality. The Trust
Receipts Law does not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse
of confidence in the handling of money or goods to the prejudice of another regardless of whether the
latter is the owner. Here, it is crystal clear that on the part of Petitioners there was neither dishonesty
nor abuse of confidence in the handling of money to the prejudice of PBC. Petitioners continually
endeavored to meet their obligations, as shown by several receipts issued by PBC acknowledging
payment of the loan.

Issue: Whether or not the transaction of Colinares falls within the ambit of the Law on Trust Receipt

Held: Colinares received the merchandise from CM Builders Centre on 30 October 1979. On that day,
ownership over the merchandise was already transferred to Petitioners who were to use the materials
for their construction project. It was only a day later, 31 October 1979, that they went to the bank to
apply for a loan to pay for the merchandise. This situation belies what normally obtains in a pure trust
receipt transaction where goods are owned by the bank and only released to the importer in trust
subsequent to the grant of the loan.

The bank acquires a “security interest” in the goods as holder of a security title for the advances it had
made to the entrustee. The ownership of the merchandise continues to be vested in the person who
had advanced payment until he has been paid in full, or if the merchandise has already been sold, the
proceeds of the sale should be turned over to him by the importer or by his representative or successor
in interest. To secure that the bank shall be paid, it takes full title to the goods at the very beginning and
continues to hold that title as his indispensable security until the goods are sold and the vendee is called
upon to pay for them; hence, the importer has never owned the goods and is not able to deliver
possession. In a certain manner, trust receipts partake of the nature of a conditional sale where the
importer becomes absolute owner of the imported merchandise as soon as he has paid its price. There
are two possible situations in a trust receipt transaction. The first is covered by the provision which
refers to money received under the obligation involving the duty to deliver it (entregarla) to the owner
of the merchandise sold. The second is covered by the provision which refers to merchandise received
under the obligation to “return” it (devolvera) to the owner. Failure of the entrustee to turn over the
proceeds of the sale of the goods, covered by the trust receipt to the entruster or to return said goods if
they were not disposed of in accordance with the terms of the trust receipt shall be punishable as estafa
under Article 315 (1) of the Revised Penal Code, without need of proving intent to defraud.
Republic VS Grijaldo

Facts: Grijaldo obtained five loans from the Bank of Taiwan amounting to P1,281.97 with interest at the
rate of 6% per annum. These were evidenced by five promissory notes. To secure the payment of loans,
Grijaldo executed a chattel mortgage on the standing crops on his land. Thereafter, The assets of the
Bank of Taiwan were vested in the Government of the United States. Pursuant to Philippine Property Act
of 1946, these assets include the loan in question. The Republic of the Philippines made a written
extrajudicial demand upon Grijaldo for the payment of the account and later filed a complaint to collect
the unpaid account from Grijaldo. The court a quo rendered a decision ordering Grijaldo to pay the
Republic. Grijaldo contends that the Republic has no cause of action against him since the contract of
loan was instituted with the Bank of Taiwan.

Issue: WON the obligation of Grijaldo was extinguished

Held: No. The obligation of the appellant under the 5 promissory notes was not to deliver a determinate
thing namely, the crops to be harvested from his land, or the value of the crops that would be harvested
on his land. Rather, his obligation was to pay a generic thing – the amount of money representing the
total sum of the five loans, with interest. The transaction between the appellant and Bank of Taiwan was
a series of five contracts of simple loan of sums of money. “By a contract of loan, one of the contracting
parties delivers to another…money or consumable thing upon the condition that the same amount of
the same kind and quality shall be paid.” (Art. 1933, Civil Code)

The chattel mortgage on the crops growing on appellant’s land simply stood as a security for the
fulfilment of appellant’s obligation covered by the 5 promissory notes, and the loss of the crops did not
extinguish his obligation to pay, because the account could still be paid from other sources aside from
the mortgaged crops.
Soncuya VS Azarraga

Facts: Atty. Azarraga served as counsel for the defendant Azarragas in a case for which the latter owed
the lawyer P2700 for his services. Defendants mortgaged to him a parcel of land which the lawyer
assigned to petitioner Soncuya thru a “sale and cession” of his rights. Soncuya therafter possessed the
land, brought in cattle that allegedly destroyed the crops and coconut trees planted by one of the
defendants (but was actually destroyed by drought).

Petitioner became the creditor of the defendants. When the debt matured, he allowed them extension
with the condition of payment of interest 12% per annum, and this was made in writing. Later, he
allowed another extension, but subject to the condition that instead of 7000, which referrd to the 12%
per annum charged, the defendants should pay him 12,000.

The defendants however was able to register the land in their name.

Issue: WON Soncuya was the rightful owner.

Held: No. The contention of the defendants that the plaintiff did not and could never receive the lands in
question as an assignment in payment of debt, and much less did he acquire them by purchase with
pacto de retro is well taken.

It is only in contracts of loan, with or without guaranty, that interest may be demanded.
State Investment House VS CA and Aquino

Facts: Private respondents Spouses Rafael & Refugia Aquino pledged certain shares of stock to
petitioner to secure a loan. Prior to the execution of such pledge, respondents, agreed with the
petitioner for the latter's purchase of receivables from Spouses Jose and Marcelina Aquino. Respondent
spouses paid their loan partly from their own money and from the proceeds of a new loan secured by
the same pledge. Upon maturity of the new loan, petitioner demanded payment. Respondents
expressed willingness to pay requesting that upon payment the shares of stocks pledged be released.
Petitioner denied the request on the ground that the loan extended to Jose & Marcelina had remained.
Respondent sued the petitioner. The trial judge ruled in their favor. During execution, the petitioner
refused to accept payment demanding that interests be paid.

Issue: Are the respondents liable for payment of interest even without mora? If they are liable, on what
rate should the interests be?

Held: Yes. Art. 2209 of the New Civil Code provides that 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 stimulation to
the contrary. shall be the payment of the interest agreed upon, and in the absence of stipulation, the
legal interest, which is six per cent per annum.

The respondents may not be in default in view of their expressed willingness to pay the same upon
demand and the refusal of the petitioner to accept. However, their tender of payment should have been
properly consigned with the court. Since respondent spouses were held not to have been in delay, they
were properly liable only for the principal of the loan and the stipulated regular or monetary interest of
17% per annum. They were not liable for penalty or compensatory interest, fixed by the promissory note
in Account No. IF-82-0904-AA at two percent (2%) per month or twenty-four (24%) per annum. It must
be stressed that the appropriate measure for damages in case of delay in discharging an obligation
consisting of the payment of a sum or money, is the payment of penalty interest at the rate agreed
upon; and in the absence of a stipulation of a particular rate of penalty interest, then the payment of
additional interest at a rate equal to the regular monetary interest; and if no regular interest had been
agreed upon, then payment of legal interest or six percent (6%)per annum, or in the case of loans or
forbearances of money, 12 % per annum as provided for in Central Bank Circular No. 416.
Osmena-Jalandoni VS Encomienda

Facts: Encomienda narrated that she met petitioner on Oct 1995, when she was purchasing a
condominium unit and thereafter, they became close friends. On March 1997, Jalandoni borrowed
100,000 pesos from Encomienda for the search and rescue operation of Jalandoni’s children allegedly
taken by her father. Thereafter Jalandoni borrowed again for various errands. All in all, Encomienda
spent around ₱3,245,836.02 and $6,638.20 for Jalandoni. Despite several demands, no payment was
made. Jalandoni insisted that the amounts given were not in the form of loans. When they had to
appear before the Barangay for conciliation, no settlement was reached. But a member of the Lupong
Tagapamayapa of Barangay Kasambagan, Laureano Rogero, attested that J alandoni admitted having
borrowed money from Encomienda and that she was willing to return it. Jalandoni said she would talk to
her lawyer first, but she never came back. Hence, Encomienda filed a complaint. She impleaded Luis as a
necessary party, being Georgia's husband.

For her defense, Jalandoni claimed that there was never a discussion or even just an allusion about a
loan. She confirmed that Encomienda would indeed deposit money in her bank account and pay her bills
in Cebu. But when asked, Encomienda would tell her that she just wanted to extend some help and that
it was not a loan.

The trial court dismissed Encomienda’s complaint. On appeal, CA reversed the decision of the trial court,
ordering Jalandoni to pay Encomienda.

Issue: WON Encomienda is entitled to be reimbursed for the amounts she defrayed for Jalandoni.

Held: Yes. Jalandoni insists that she never borrowed any amount of money from Encomienda. During the
entire time that Encomienda was sending hermoney and paying her bills, there was not one reference to
a loan. Jalandoni also contends that the amounts she received from Encomienda were mostly provided
and paid without her prior knowledge and thus she could not have consented to any loan agreement. It
must be stressed, however, that the trial court merely found that no documentary evidence was offered
showing Jalandoni's authorization or undertaking to pay the expenses. But the second paragraph of
Article 1236 of the Civil Code provides: Whoever pays for another may demand from the debtor what he
has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the debtor.

Clearly, Jalandoni greatly benefited from the purportedly unauthorized payments. Thus, even if she
asseverates that Encomienda's payment of her household bills was without her knowledge or against
her will, she cannot deny the fact that the same still inured to her benefit and Encomienda must
therefore be consequently reimbursed for it.

The RTC likewise harped on the fact that if Encomienda really intended the amounts to be a loan, nonnal
human behavior would have prompted at least a handwritten acknowledgment or a promissory note the
moment she parted with her money for the purpose of granting a loan. This would be particularly true if
the loan obtained was part of a business dealing and not one extended to a close friend who suddenly
needed monetary aid. In fact, in case of loans between friends and relatives, the absence of
acknowledgment receipts or promissory notes is more natural and real. Contracts are binding between
the parties, whether oral or written. The law is explicit that contracts shall be obligatory in whatever
form they may have been entered into, provided all the essential requisites for their validity are present.
A simple loan or mutuum exists when a person receives a loan of money or any other fungible thing and
acquires its ownership. He is bound to pay to the creditor the equal amount of the same kind and
quality.
Spouses Sy VS Westmont Bank

Facts: Westmont Bank filed a complaint for sum of money against Spouses Sy. Respondent alleged that
petitioners, doing business under the trade name Moondrops General Merchandising, obtained a loan in
the amount of 2,429,500, evidenced by a promissory note. Barely a month after, spouses obtained
another loan in the amount of 4,000,000 evidenced by another promissory note. Petitioners defaulted in
the payment of their loan obligations so Westmont sent demand letter but it was unheeded thus
Westmont filed the complaint.

In their answer, petitioners countered that they applied for a loan with Westmont Bank, through its
general manager Lao. Lao informed them that their application was disapproved. He however offered
them to help secure a loan through Chua. Spouses accepted Lao’s offer and received the loan amounts
respectively, as loans from Chua. Petitioners claimed that they paid Chua the total amount of their
loans. Thus, they contended that Westmont could not demand the payment of the said loans.

Petitioners presented Cashier’s check purchased from Chua, to prove that the said loan was obtained
from Chua. The trial court rendered a decision in favor of Westmont, ruling that Westmont’s cause of
action was based on the promissory notes executed by petitioners. On appeal, the CA affirmed the
decision of the trial court stating that petitioners failed to deny the genuineness and due execution of
the promissory notes.

Issue: WON CA erred that petitioners failed to specifically deny the promissory notes thus deemed to
have admitted the genuineness and due execution of the same.

Held: The Court finds the petition meritorious. Whenever an action or defense is based upon a written
instrument or document, the substance of such instrument or document shall be set forth in the
pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall
be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

Accordingly, to deny the genuineness and due execution of an actionable document: (1) there must be a
specific denial in the responsive pleading of the adverse party; (2) the said pleading must be under oath;
and (3) the adverse party must set forth what he claims to be the facts. Failure to comply with the
prescribed procedure results in the admission of the genuineness and due execution of the actionable
document.

In the present case, the actionable documents attached to the complaint of Westmont were PN 5280
and PN 5285. The CA opined that petitioners failed to specifically deny the genuineness and due
execution of the said instruments because nowhere in their answer did they "specifically deny" the
genuineness and due execution of the said documents. The Court finds that petitioners sufficiently
complied with Section 8 of Rule 8 and grants the petition. Verily, petitioners asserted throughout the
entire proceedings that the loans they applied from Westmont were disapproved, and that they never
received the loan proceeds from the bank. These significant and consistent denials by petitioners
sufficiently informed Westmont beforehand that it would have to meet the issue of genuineness or due
execution of the actionable documents during trial.

Moreover, A simple loan or mutuum is a contract where one of the parties delivers to another, either
money or other consumable thing, upon the condition that the same amount of the same kind and
quality shall be paid. A simple loan is a real contract and it shall not be perfected until the delivery of the
object of the contract. Necessarily, the delivery of the proceeds of the loan by the lender to the
borrower is indispensable to perfect the contract of loan. Once the proceeds have been delivered, the
unilateral characteristic of the contract arises and the borrower is bound to pay the lender an amount
equal to that received. Westmont failed to prove that it delivered the proceeds of the loan to the
petitioners.