Olivia Navoa and Ernesto Navoa vs. C.A.

, Teresita Domdoma and Eduardo Domdoma

GR No 59255 20December1995

Facts:

 Domdomas filed a case with the RTC for collection of various 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 which was secured by a PCIB check under the condition that if the ring
was not returned within 15 days the ring is considered sold.
 Teresita attempted to deposit the check but the check was not honoured for lack of funds. After this
instance, there were other loans of various checks. 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.
 BPI Investment Corp. v. CA

G.R. No. 133632. February 15, 2002

o credit transactions: Loan (Mutuum): A loan contract is not a consensual contract but a real contract. It is perfected
upon delivery of the object of the contract.
o obligations and contracts: Reciprocal Obligations: It is a basic principle in reciprocal obligations that neither party
incurs in delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent
upon him.

FACTS:

Frank Roa obtained a loan at 16 1/4% interest rate per annum from Ayala Investment and Development Corporation.
For security, Roa's house and lot were mortgaged. Later, Roa sold the house and lot to ALS and Antonio Litonjua,
who assumed Roa's debt to Ayala Investment. Ayala Investment, however, granted a new loan to be applied to Roa's
debt, secured by the same property at a different interest rate of 20% per annum.

When ALS and Litonjua failed to pay, BPIIC, successor to Ayala Investment, filed for foreclosure of mortgage.

ISSUE:

o W/N a contract of loan is a consensual contract

HELD:

A loan contract is not a consensual contract but a real contract. It is perfected upon delivery of the object of the
contract. Although a perfected consensual contract can give rise to an action for damages, it does not constitute a
real contract which requires delivery for perfection. A perfected real contract gives rise only to obligations on the
part of the borrower.

In the present case, the loan contract was only perfected on the date of the second release of the loan.

A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other. It is a basic principle in reciprocal obligations that neither party incurs in delay, if
the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only
when a party has performed his part of the contract can he demand that the other party also fulfills his own
obligation and if the latter fails, default sets in.

DECISION:

The payment of amortization should accrue from the time BPIIC released the loan amount to ALS and Litonjua
because it was only at that time (the delivery of the amount -- the object of the contract) that the loan contract was
perfected.
 SAURA IMPORT and EXPERT CO., INC., vs DBP
[G.R. No. L-24968, April 27, 1972] MAKALINTAL, J.

FACTS:

 In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an industrial
loan of P500,000 to be used for the construction of a factory building, to pay the balance of the jute mill
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. But then,
later on, was cancelled 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 almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the
latter to comply with its obligations to release the loan applied for and approved, thereby preventing the
plaintiff from completing or paying contractual commitments it had entered into, in connection with its
jute mill project.
 The trial court ruled in favor of Saura, ruling that there was a perfected contract between the
parties and that the RFC was guilty of breach thereof.
ISSUE: Whether or not there was a perfected contract between the parties. YES. There was indeed a perfected
consensual contract.

HELD:
·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.
·WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.