CHAPTER 2 - SIMPLE LOAN OR MUTUUM

ART 1593 - Simple Loan or Muutum Defined

ALLIED BANKING CORP vs LIM SIO WAN

G.R. No. 133178, March 27, 2008

FACTS:
● On November 14, 1983, Lim Sio Wan deposited a money market placement worth
Php1,152,597.35 to Allied Bank for a term of 31 days to mature on December 15, 1983.
● On December 5, 1983, a person claiming to be Lim Sio Wan called up Cristina So, an officer of
Allied Bank, and instructed her to terminate the money market placement and to issue a
manager’s check representing the proceeds from the placement and to give the check to one
Deborah Dee Santos, who would pick up the check.
● Santos arrived at the bank and signed the application form for a manager’s check to be issued.
The check was cross-checked for Payees Account Only and given to Santos. Then the check
was deposited to the account of Filipinas Cement Corporation (FCC) at Metrobank, with the
forged signature of Lim Sio Wan.
● Earlier, on September 21, 1983, FCC had deposited a money market placement for Php2 million
to Producers Bank. Santos was the money market trader assigned to handle FCC’s account. The
placement matured on October 25, 1983, and was rolled over until December 5, 1983. The Allied
check was deposited with Metrobank in the account of FCC as Producers Bank’s payment of its
obligation to FCC.
● Metrobank stamped a guaranty on the check-in compliance with the requirements of the
Philippine Clearing House Corporation (PCHC) Rules and Regulations. The guaranty read: All
prior endorsements and/or lack of endorsement guaranteed. The check was then sent to Allied
Bank through the PCHC. Upon the presentment of the check, Allied funded it even without
checking the authenticity of Lim Sio Wan’s purported indorsement. So the amount of the check
was credited to the account of FCC.
● On December 14, 1983, Lim Sio Wan went to Allied Bank to withdraw the money market
placement. When she was informed that the placement has been terminated upon her
instructions, she took action. She filed a complaint with the RTC against Allied to recover the
proceeds of the money market placement.
● Allied filed a third-party complaint against Metrobank and Santos. In turn, Metrobank filed a
fourth-party complaint against FCC. Then FCC filed a fifth party complaint against Producers
Bank.
● Six months after the funding of the check, Allied informed Metrobank that the signature in the
check was forged. Thus, Metrobank withheld the amount but later on agreed to release it to FCC
after the latter executed an undertaking, promising to indemnify Metrobank in case it was made to
reimburse the amount.
● Lim Sio Wan then filed an amended complaint, adding Metrobank as party-defendant along with
Allied.
● RTC - favored Lim Sio Wan
● CA - modified RTC decision
● Allied contends that it has no liability against Lim Sio Wan.

ISSUE: Whether the money market placement deposited by Lim Sio Wan to Allied Bank is in the nature of
a simple loan or mutuum, holding the latter liable to the former.
RULING: YES - Affirmative
● Fundamental and familiar is the doctrine that the relationship between a bank and a client is one
of debtor-creditor.
○ 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.
○ Art. 1980. Fixed, savings and current deposits of money in banks and similar institutions
shall be governed by the provisions concerning the simple loan.
● In former cases, the SC has ruled that a bank deposit is in the nature of a simple loan or mutuum.
It is expressed in n Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, this Court
ruled that a money market placement is a simple loan or mutuum. Further, we defined a money
market in Cebu International Finance Corporation v. Court of Appeals, as follows:
○ [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 the 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 this case, the money market transaction between Allied Bank and Lim Sio Wan is in the nature
of a loan. Lim Sio Wan, as a creditor of the bank for her money market placement, is entitled to
payment upon her request, or upon maturity of the placement, or until the bank is released from
its obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains
unextinguished.

ART 1593 - Essential Requisites of the Contract

GARCIA vs THIO
G.R. No. 15488, March 16, 2007

FACTS:
● Rica Marie S. Thio received from Carolyn M. Garcia a crossed check dated February 24, 1995 in
the amount of US$100,000 payable to the order of a certain Marilou Santiago. Thereafter, Thio
received from Garcia every month.
● In June 1995, Thio received from Garcia another crossed check dated June 29, 1995 in the
amount of P500,000, also payable to the order of Marilou Santiago. Consequently, Garcia
received from Thio the amount of P20,000 every month.
● According to Garcia, THio failed to pay the principal amounts of the loans (US$100,000 and
P500,000) when they fell due.
● Thus, on February 22, 1996, Garcia filed a complaint for sum of money and damages in the RTC
of Makati City, Branch 58 against Thio, seeking to collect the sums of US$100,000, with interest
thereon at 3% a month from October 26, 1995, and P500,000, with interest thereon at 4% a
month from November 5, 1995, plus attorneys fees and actual damages.
● GARCIA - on February 24, 1995, Thio borrowed from her the amount of US$100,000 with interest
thereon at the rate of 3% per month, which loan would mature on October 26, 1995. The amount
of this loan was covered by the first check. On June 29, 1995, Thio again borrowed the amount of
P500,000 at an agreed monthly interest of 4%, the maturity date of which was on November 5,
1995. The amount of this loan was covered by the second check. For both loans, no promissory
note was executed since Garcia and Thio were close friends at the time.
 ● THIO - denied that she contracted the two loans with Garcia and countered that it was Marilou
Santiago to whom Garcia lent the money. She claimed she was merely asked by Garcia to give
the crossed checks to Santiago.
● RTC - favored Garcia, held that there was a valid contract of loan, held Thio liable
● CA - reversed RTC decision, there was bo contract of loan.

ISSUE: Whether a contract of loan existed between Garcia and Thio

RULING: YES - Affirmative

● A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the
object of the contract. This is evident in Art. 1934 of the Civil Code which provides:
○ ART. 1934 - An accepted promise to deliver something by way of commodatum or simple
loan is binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until the delivery of the object of the contract.
○ Upon delivery of the object of the contract of loan (in this case the money received by the
debtor when the checks were encashed) the debtor acquires ownership of such money or
loan proceeds and is bound to pay the creditor an equal amount.
○ It is undisputed that the checks were delivered to Thio. However, these checks were
crossed and payable not to the order of respondent but to the order of a certain Marilou
Santiago.
● Garcia insists that it was upon Thio’s instruction that both checks were made payable to
Santiago. She maintains that it was also upon Thio’s instruction that both checks were delivered
to her (Thio) so that she could, in turn, deliver the same to Santiago. Furthermore, she argues
that once Thio received the checks, the latter had possession and control of them such that she
had the choice to either forward them to Santiago (who was already her debtor), to retain them, or
to return them to Garcia.
● Delivery is the act by which the res or substance thereof is placed within the actual or
constructive possession or control of another, Although Thio did not physically receive the
proceeds of the checks, these instruments were placed in her control and possession under an
arrangement whereby she actually re-lent the amounts to Santiago.
○ FIRST, Thio was aware that Santiago was a stranger to Garcia, yet Thio had transactions
with Santiago already
○ SECOND, Leticia Ruiz, a common friend of the parties, testified that Thio was planning to
lend her with the interest the money Thio loaned from Garcia.
○ THIRD, Thio admitted that she was sending checks to Garcia to pay the interest, as
Santiago would then reimburse her.
○ LASTLY, Thio did not present Santiago as a witness.

ART 1593 - Form of Contract

SPS TAN vs. VILLAPAZ

G.R. No. 160892, November 22, 2005

FACTS:
● On February 6, 1992, Carmelito Villapaz issued a Philippine Bank of Communications (PBCom)
crossed check in the amount of P250,000.00, payable to the order of Antonio Tan.
 ● On even date, the check was deposited at the drawee bank, PBCom Davao City branch at
Monteverde Avenue, to the account of Antonio Tan also at said bank.
● The Davao del Sur Police issued an invitation-request to Antonio Tan inviting him to appear
before the Deputy Chief of Police Office on June 27, 1994, at 9:00 o’clock in the morning “in
connection with the request of respondent Carmelito Villapaz, for the conference of vital
importance.” On the advice of his lawyer, he did not show up at the Davao del Sur Police Office.
● Villapaz filed a Complaint for the sum of money against Sps. Tan, alleging that, inter alia, on
February 6, 1992, Sps. Tan repaired to his place of business at Malita, Davao and obtained a
loan of P250,000.00, hence, his issuance of February 6, 1992, PBCom crossed check which loan
was to be settled interest-free in six (6) months; on the maturity date of the loan or on August 6,
1992, petitioner Antonio Tan failed to settle the same, and despite repeated demands, petitioners
never did, drawing him to file the complaint.
● SPS. TAN - the check issued by Villapaz in Davao City was “in exchange for equivalent cash”;
they never received from Villapaz any demand for payment, be it verbal or written, respecting the
alleged loan; since the alleged loan was one with a period — payable in six months, it should
have been expressly stipulated upon in writing by the parties but it was not, hence, the essential
requisite for the validity and enforceability of a loan is wanting; and the check is inadmissible to
prove the existence of a loan for P250,000.00.
● RTC - dismissed Villpaz’s petition, granted the compulsory counterclaim
● CA - reversed RTC decision, held that the existence of a contract of loan cannot be denied
merely because it is not reduced in writing. Surely, there can be a verbal loan. 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.

ISSUE: Whether the contract of loan entered by Tan and Villapaz is enforceable.

RULING: YES - Affirmative

● Upheld CA’s decision which said that:
○ The existence of a contract of loan cannot be denied merely because it is not
reduced in writing. Surely, there can be a verbal loan. 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 loan (simple loan or mutuum) exists when a person receives a
loan of money or any other fungible thing and acquires the ownership thereof. He is
bound to pay to the creditor an equal amount of the same kind and quality.
○ Contracts are perfected by mere consent, and from that moment the parties are bound
not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage
and law.
● At all events, a check, the entries of which are no doubt in writing, could prove a loan transaction.
○ That apart from the check no written proof of the grant of the loan was executed was
credibly explained by Villapaz when he declared that Spouses Tan‘s son being his
godson, he, out of trust and respect, believed that the crossed check sufficed to prove
their transaction.
○ As for spouses Tan‘s reliance on Art. 1358 of the Civil Code, the same is misplaced for
the requirement that contracts, where the amount involved exceeds P500.00, must
appear in writing is only for convenience.
 ○ That Antonio Tan had an outstanding balance of more than P950,000.00 in his account at
PBCom Monteverde branch where he was later to deposit Villapaz‘s check did not rule
out Tan securing a loan. It is pure naivete to believe that if a businessman has such an
outstanding balance in his bank account, he would have no need to borrow a lesser
amount.
○ In fine, as Spouses Tan‘s side of the case is incredible as it is inconsistent with the
principles by which men similarly situated are governed, whereas Villapaz‘s claim that the
proceeds of the check, which were admittedly received by the spouses, represented a
loan extended to Antonio Tan is credible, the preponderance of evidence inclines on
Villapaz.

ART 1593 - No Criminal Liability for Failure to Pay

YONG CHAN KIM vs PEOPLE

G.R. No. 84719, January 25, 1991

FACTS:
● Yong Chan Kim was employed as a Researcher at the Aquaculture Department of the Southeast
Asian Fisheries Development Center (SEAFDEC). 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, Yong Chan Kim was issued Travel Order No. 2222 which covered his travels to
different places in Luzon from 16 June to 21 July 1982. Under this travel order, he received
P6,438.00 as a cash advance to defray his travel expenses.
● Within the same period, Yong Chan Kim was issued another travel order, requiring him to travel
from the Head Station at Tigbauan, Iloilo to Roxas City from 30 June to 4 July 1982. For this
travel order, Yong CHan received a cash advance of P495.00.
● On 14 January 1983, Yong Chan 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 Yong Chan Kim collected per diems twice. In sum, the total amount in the
form of per diems and allowances charged and collected by Yong Chan Kim under Travel Order
No. 2222, when he did not actually and physically travel as represented by his liquidation papers,
was P1,230.00.
● Yong Chan Kim denied the alleged anomaly, claiming that he made make-up trips to compensate
for the trips he failed to undertake under T.O. 2222 because he was recalled to the head office
and given another assignment.
● MCTC -2 Estafa complaints were filed against Yong Chan Kim and were affirmed
● RTC - affirmed MCTC decision
● ICA - dismissed for being filed out of time
● SOLGEN - prayed for dismissal of the case before the SC, since the case was filed out time, but
was denied
● YONG CHAN KIM - the case presented a peculiar case, thus need to be reseloved

ISSUE: Whether the failure of Yong Chan Kim to pay the cash advance warrants a conviction of Estafa.
RULING: NO - Negative
● In order that a person can be convicted of Estafa under Art. 315, par. 1(b) of the RPC, it must be
proven that he had the obligation to deliver or return the same money, goods or personal property
that he had received.
● The Court believed that the petition was under no obligation to return the same money which he
had received.
○ Liquidation simply means the settling of an indebtedness. An employee, such as
herein petitioner, who liquidates a cash advance is in fact paying back his debt in
the form of a loan of money advanced to him by his employer, as per diems and
allowances. Similarly, as stated in the assailed decision of the lower court, if the amount
of the cash advance he received is less than the amount he spent for actual travel x x x
he has the right to demand reimbursement from his employer the amount he spent
coming from his personal funds. In other words, the money advanced by either party is
actually a loan to the other. Hence, the petitioner was under no legal obligation to return
the same cash or money, i.e., the bills or coins, which he received from the private
respondent.
● Article 1933 and Article 1953 of the Civil Code define the nature of a simple loan.
○ ART. 1933 - By the contract of loan, one of the parties delivers to another, either
something not consumable so that the latter may use the same for a certain time and
return it, in which case the contract is called a commodatum; or money or other
consumable thing, upon the condition that the same amount of the same kind and quality
shall be paid, in which case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous. Simple loan may be gratuitous or with a
stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned, while in simple loan,
ownership passes to the borrower.
○ 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 the ownership of the money (cash advance) was transferred to Yong Chan Kim, 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.

TIOMICO vs CA
G.R. No. 122539, March 4, 1999

FACTS:
● Jesus V. Tiomico opened a Letter of Credit with the Bank of the Philippine Islands (BPI) for
$5,600 to be used for the importation of two (2) units of Forklifts, Shovel loader and a truck
mounted with crane.
● On October 29, 1982, the said pieces of machinery were received by the Tiomico, as evidenced
by the covering trust receipt. Upon maturity of the trust receipt, on December 28, 1982, he made
a partial payment of US$855.94, thereby leaving an unpaid obligation of US$4,770.46.
 ● As of December 21, 1989, Tiomico owed BPI US$4,770.46, or P109,386.65, computed at P22.93
per US dollar, the rate of exchange at the time. Failing to pay the said amount or to deliver
subject pieces of machinery and equipment, despite several demands, the International
Operations Department of BPI referred the matter to the Legal Department of the bank. But the
letter of demand sent to him notwithstanding, Tiomico failed to satisfy his monetary obligation
sued upon.
● BPI then accused Tiomico of violating PD 115 or the Trust Receipts Law. Gretel Donato testified
against Tiomico, as she was the one who processed the Letter of Credit. Four documents were
presented in the course of Donato’s testimony.
● Tiomico’s counsel objected to the admission of 4 of the documents as evidence, alleging that the
signatures made by Tiomico in all those 4 documents were hearsays. The demurrer to evidence
was denied.
● RTC - found TIomico in violation of PD 115
● CA - affirmed RTC decision

ISSUE: Whether the imprisonment of Tiomico for the non-payment of his debts encroaches upon his
constitutional right not to be imprisoned by reason of debt.

RULING: NO - Negative
● The Court has repeatedly upheld the validity of the Trust Receipts Law and consistently declared
that the said law does not violate the constitutional proscription against imprisonment for
non-payment of debts.
● PD 115 is a declaration by the legislative authority that, as a matter of public policy, the failure of a
person to turn over the proceeds of the sale of goods covered by a trust receipt or to return said
goods if not sold is a public nuisance to be abated by the imposition of penal sanctions. As held in
Lozano vs. Martinez:
○ certainly, it is within the authority of the lawmaking body to prescribe certain act deemed
pernicious and inimical to public welfare. Acts mala in se are not the only acts that the
law can punish. An act may not be considered by society as inherently wrong, hence, not
malum in se, but because of the harm that it inflicts on the community, it can be outlawed
and criminally punished as malum prohibitum. The State can do this in the exercise of its
police power.
● In a similar vein, the case of People vs. Nitafan held:
○ The Trust Receipts Law 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 or not. The law does not seek to enforce the payment of a loan. Thus,
there can be no violation of the right to imprisonment for non-payment of a debt.

LOZANO vs. MARTINEZ

G.R. No L-63419, December 18, 1986

FACTS:
● Folrentina A. Lozana, along with other petitioners, challenges the consitutionality of BP 22 or the
Bouncing Check Law.
● BP 22 punishes a person "who makes or draws and issues any check on account or for value,
knowing at the time of issue that he does not have sufficient funds in or credit with the drawee
bank for the payment of said check in full upon presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored
 for the same reason had not the drawer, without any valid reason, ordered the bank to stop
payment." The penalty prescribed for the offense is imprisonment of not less than 30 days nor
more than one year or a fine or not less than the amount of the check nor more than double said
amount, but in no case to exceed P200,000.00 or both such fine and imprisonment at the
discretion of the court.
● The statute likewise imposes the same penalty on "any person who, having sufficient funds in or
credit with the drawee bank when he makes or draws and issues a check, shall fail to keep
sufficient funds or to maintain a credit to cover the full amount of the check if presented within a
period of ninety (90) days from the date appearing thereon, for which reason it is dishonored by
the drawee bank.
● An essential element of the offense is "knowledge" on the part of the maker or drawer of the
check of the insufficiency of his funds in or credit with the bank to cover the check upon its
presentment. Since this involves a state of mind difficult to establish, the statute itself creates a
prima facie presumption of such knowledge where payment of the check "is refused by the
drawee because of insufficient funds in or credit with such bank when presented within ninety
(90) days from the date of the check. To mitigate the harshness of the law in its application, the
statute provides that such presumption shall not arise if, within five (5) banking days from receipt
of the notice of dishonor, the maker or drawer makes arrangements for payment of the check by
the bank or pays the holder the amount of the check.
● Another provision of the statute, also in the nature of a rule of evidence, provides that the
introduction in evidence of the unpaid and dishonored check with the drawee bank's refusal to
pay "stamped or written thereon or attached thereto, giving the reason therefor, "shall constitute
prima facie proof of "the making or issuance of said check, and the due presentment to the
drawee for payment and the dishonor thereof ... for the reason written, stamped or attached by
the drawee on such dishonored check."

ISSUE: Whether BP 22 violates the constitutional provision forbidding imprisonment against debt.

RULING: NO - Negative
● The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless
check or a check that is dishonored upon its presentation for payment. It is not the
non-payment of an obligation that the law punishes. The law is not intended or designed
to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and putting them in circulation. Because of its
deleterious effects on the public interest, the practice is proscribed by the law. The law punishes
the act not as an offense against property, but an offense against public order.
● The effects of the issuance of a worthless check transcend the private interests of the parties
directly involved in the transaction and touch the interests of the community at large. The mischief
it creates is not only wrong to the payee or holder but also an injury to the public. The harmful
practice of putting valueless commercial papers in circulation, multiplied a thousandfold, can very
wen pollute the channels of trade and commerce, injure the banking system, and eventually hurt
the welfare of society and the public interest.

ART 1593 - Simple Loan Distinguished from Trust Receipt

CONSOLIDATED BANK & TRUST CI vs CA

G.R. No. 114291, April 19, 2001
FACTS:
● On July 13, 1982, Continental Cement Corporation (Continental Cement) and its President,
Gregory Lim, obtained from Consolidated Bank and Trust Corporation (CBTC) a Letter of Credit
in the amount of P1,068,150.00 which was used to purchase fuel oil from Petrophil Corporation.
● On the same date, Continental Cement paid a marginal deposit of P320,445.00 to CBTC. In
relation to the same transaction, a trust receipt for the amount of P1,001,520.93 was executed by
Continental Cement.
● CBTC filed a complaint for a sum of money claiming that Continental Cement and Lim failed to
turn over the goods covered by the trust receipt or the proceeds.
● In its answer, Continental Cement argued that the transaction was a simple loan and not a trust
receipt transaction.
● RTC - dismissed CBTC, awarded counterclaims to Continental Cement
● CA - both parties appealed, affirmed RTC decision but modified the award on damages

ISSUE: Whether the transaction involved was a simple loan.

RULING: YES
● CBTC has failed to convince that its transaction with Continental Cement is really a trust receipt
transaction instead of merely a simple loan, as found by the lower court and the Court of Appeals.
● In Colinares v. Court of Appeals, inasmuch as the debtor received the goods subject of the trust
receipt before the trust receipt itself was entered into, the transaction was a simple loan and not a
trust receipt agreement. Prior to the date of execution of the trust receipt, ownership over the
goods was already transferred to the debtor. This situation is inconsistent with what normally
obtains in a pure trust receipt transaction, wherein the goods belong in ownership to the
bank and are only released to the importer in the trust after the loan is granted.
○ In this case, the delivery to Continental Cement of the goods subject of the trust
receipt occurred long before the trust receipt itself was executed. More specifically,
delivery of the bunker fuel oil to Continental Cement’s Bulacan plant commenced on July
7, 1982, and was completed by July 19, 1982. Further, the oil was used up by respondent
Corporation in its normal operations by August 1982. 14 On the other hand, the subject
trust receipt was only executed nearly two months after full delivery of the oil was
made to Continental Cement, or on September 2, 1982.
○ “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.
○ Also noteworthy is the fact that Petitioners are not importers acquiring the goods for
re-sale, contrary to the express provision embodied in the trust receipt. They are
contractors who obtained the fungible goods for their construction project. At no time did
the title over the construction materials pass to the bank, but directly to the Petitioners
from CM Builders Centre. This impresses upon the trust receipt in question vagueness
and ambiguity, which should not be the basis for criminal prosecution in the event of a
violation of its provision
○ The practice of banks of making borrowers sign trust receipts to facilitate
collection of loans and place them under the threats of criminal prosecution
 should they be unable to pay it may be unjust and inequitable, if not reprehensible.
Such agreements are contracts of adhesion that borrowers have no option but to sign lest
their loan is disapproved. The resort to this scheme leaves poor and hapless
borrowers at the mercy of banks, and is prone to misinterpretation, as had
happened in this case. Eventually, PBC showed its true colors and admitted that it was
only after the collection of the money, as manifested by its Affidavit of Desistance.

ART 1593 - Transfer of Ownership

PEOPLE vs. PUIG & PORRAS

G.R. No. 173654-765, August 28, 2008

FACTS:
● Teresita Puig and Romeo Porras were the cashier and bookkeeper, respectively, of the Rural
Bank of Pototan, Inc. The Bank allegedly accused them of taking P 15,000.00, thus, charging
them with qualified theft.
● However, the trial court did not find the existence of probable cause because (1) the element of
‘taking without the consent of the owners’ was missing on the ground that it is the
depositors-clients, and not the Bank, which filed the complaint in these cases, who are the
owners of the money allegedly taken by respondents and hence, are the real parties-in-interest;
and (2) the Information are bereft of the phrase alleging "dependence, guardianship or vigilance
between the respondents and the offended party that would have created a high degree of
confidence between them which the respondents could have abused.".
● RTC - dismissed the charges, held that to push through would be violative of the right of the
respondents under Section 14(2), Article III of the 1987 Constitution which states that in all
criminal prosecutions, the accused shall enjoy the right to be informed of the nature and cause of
the accusation against him. MR was also denied.
● PEOPLE - 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 Puig and Porras as
belonging to the bank.

ISSUE: Whether the banks acquire ownership of the money deposited by their clients.

RULING: YES
● It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank who come
into possession of the monies deposited therein enjoy the confidence reposed in them by their
employer. Banks, on the other hand, 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.
● AS TO THE QUALIFIED THEFT: In a long line of cases involving Qualified Theft, this 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.
○ The money, in this case, was in the possession of the defendant as receiving teller of the
bank, and the possession of the defendant was the possession of the Bank. The Court
held therein that when the defendant, with grave abuse of confidence, removed the
money and appropriated it to his own use without the consent of the Bank, there was
taking as contemplated in the crime of Qualified Theft.

BPI FAMILY BANK vs AMADO FRANCO

G.R. No. 123498, November 23, 2007

FACTS:
● Amado Franco opened three accounts, namely, a current, savings, and time deposit, with
BPI-Family Bank. The current and savings accounts were respectively funded with an initial
deposit of P500,000.00 each, while the time deposit account had P1,000,000.00 with a maturity
date of August 31, 1990.
● The total amount of P2,000,000.00 used to open these accounts is traceable to a check issued by
Tevesteco Arrastre-Stevedoring Co Inc. allegedly in consideration of Franco’s introduction of
Eladio Teves, who was looking for a conduit bank to facilitate Tevesteco’s business transactions,
to Jaime Sebastian, who was then BPI-FB SFDM’s Branch Manager.
● In turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by
BPI-FB from First Metro Investment Corporation's time deposit account and credited to
Tevesteco’s current account pursuant to an Authority to Debit purportedly signed by FMIC’s
officers.
● It appears that the signatures of FMIC’s officers on the Authority to Debit were forged.
Unfortunately, Tevesteco had already effected several withdrawals from its current account (to
which had been credited the P80,000,000.00 covered by the forged Authority to Debit) amounting
to P37,455,410.54, including the P2,000,000.00 paid to Franco.
● On September 8, 1989, impelled by the need to protect its interests in light of FMIC’s forgery
claim, BPI-FB instructed Jesus Arangorin to debit Franco’s savings and current accounts for the
amounts remaining therein. In the meantime, two checks drawn by Franco against his BPI-FB
current account were dishonored upon presentment for payment, and stamped with a notation
“account under garnishment.”
● RTC - favored Franco
● CA - affirmed RTC decision with modification
● BPI-FB urges the court that the legal consequence of FMIC’s forgery claim is that the money
transferred by BPI-FB to Tevesteco is its own, and considering that it was able to recover
possession of the same when the money was redeposited by Franco, it had the right to set up its
 ownership thereon and freeze Franco’s accounts. To bolster its position, BPI-FB cites Article 559
of the Civil Code.

ISSUE: Whether Franco had a better right to the deposits in the subject accounts which are part of the
proceeds of a forged Authority to Debit.

RULING: YES - Affirmative

● The court held that the movable property mentioned in Article 559 of the Civil Code pertains to a
specific or determinate thing. A determinate or specific thing is one that is individualized and can
be identified or distinguished from others of the same kind.
○ The court held that the deposit in Franco’s accounts consists of money which, albeit
characterized as movable, is generic and fungible. The quality of being fungible depends
upon the possibility of the property, because of its nature or the will of the parties, being
substituted by others of the same kind, not having a distinct individuality.
● Moreover, BPI-FB conveniently forgets that the deposit of money in banks is governed by
the Civil Code provisions on simple loans or mutuum. As there is a debtor-creditor
relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s
deposits, but such ownership is coupled with a corresponding obligation to pay him an equal
amount on demand. Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent
him from demanding payment of BPI-FB’s obligation by drawing checks against his current
account or asking for the release of the funds in his savings account. Thus, when Franco issued
checks drawn against his current account, he had every right as a creditor to expect that those
checks would be honored by BPI-FB as the debtor.
● More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based
on its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco
was allegedly involved in. To grant BPI-FB or any bank for that matter, the right to take whatever
action it pleases on deposits that it supposes is derived from shady transactions would open the
floodgates of public distrust in the banking industry.