3) Garcia vs. Thio, G.R. No.

154878, March 16, 2007;

FACTS:

On February 1995, Rica Marie S. Thio received from Carolyn M. Garcia a US$100,000 check
payable to the order of a certain Marilou Santiago. Carolyn then received from Rica every month
US$3,000 (on March, April, June and July 1995) and P76,500 (July, August, September and October,
1995).

Rica then received another check worth P500,000, dated June 29, 1995, also payable to the order of
Marilou Santiago. Carolyn then received from Rica the amount of P20,000 every month on August,
September, October and November, 1995.

However, Rica failed to pay the principal amounts due. On February 24, 1996, Carolyn filed a
complaint for a sum of money and damages in the RTC of Makati City against Rica, seeking to collect
the sums of US$100,000, with interest at 3% a month from October 26, 1995 and P500,000, with
interest at 4% a month from November 5, 1995.

Carolyn claims that Rica borrowed money from her. Rica paid the stipulated monthly interest for both
loans but on their maturity dates, she failed to pay the principal amounts despite repeated demands.

Rica denied that she contracted the two loans with Carolyn and said that it was Marilou Santiago to
whom Carolyn lent the money. She claimed she was merely asked by Carolyn to give the crossed
checks to Santiago.She issued the checks for P76,000 and P20,000 not as payment of interest but to
accommodate Carolyn's request that Rica use her own checks instead of Santiagos.

The RTC ruled in favor of Carolyn stating that there was a contract of loan. On appeal, the Court of
Appeals reversed the RTC's decision and stated that there was no contract of loan between the
parties.

ISSUE: Whether there was a contract of loan between Carolyn and Rica.

RULING:

Yes. 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: 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 Rica. However, these checks were crossed and
payable not to the order of Rica but to the order of a certain Marilou Santiago. Thus the main question
to be answered is: who borrowed money from Carolyn, Rica or Santiago?

Carolyn argues that once Rica received the checks, Rica 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 Carolyn.

Delivery is the act by which the res or substance thereof is placed within the actual or constructive
possession or control of another. Although Rica 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.

We hold that the CA committed reversible error when it ruled that Rica did not borrow the amounts of
US$100,000 and P500,000 from Carolyn. We instead agree with the ruling of the RTC making Rica
liable for the principal amounts of the loans.