PEOPLE V.

CONCEPCION
KEY WORDS: DEMAND NOTES AS SECURITY, DISCOUNT PAPER, LOAN VS
CREDIT, PNB CREDIT TO WIFES CO-PARTNERSHIP 300K WAY ABOVE 5K-10K
LIMIT
FACTS: President of the Philippine National Bank, authorized an extension of credit in
favor of "Puno y Concepcion, S. en C." in the amount of P300,000. This special
authorization was essential in view of the memorandum order of President Concepcion
limiting the discretional power of the local manager at Aparri, Cagayan, to grant loans
and discount negotiable documents to P5,000, which, in certain cases, could be
increased to P10,000. The only security that was required consisted of six demand
notes.
Venancio Concepcion, as President of the Philippine National Bank and as member of
the board of directors of this bank, was charged in the CFI with a violation of section 35
of Act No. 2747, where he was found guilty.
Section 35 of Act No. 2747 reads as follows: "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."
ISSUES/HELD
1. Was the granting of a credit of P300,000 to the copartnership "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?
Counsel 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. In this statement of fact, counsel
is correct, for the exhibits in question speak of a "credito" (credit) and not of a "
prestamo" (loan).
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. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion,
S. en C.," by Venancio Concepcion, President of the Philippine National Bank, a "loan"
or a "discount"?
While section 35 of Act No. 2747 prohibits the granting of a "loan," it does not prohibit
what is commonly known as a "discount."
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 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.
3. Was the granting of a credit of P300,000 to the copartnership, "Puno y Concepcion,
S. en C." by Venancio Concepcion, President of the Philippine National Bank, an
"indirect loan" within the meaning of section 35 of Act No. 2747?
In the interpretation and construction of statutes, the primary rule is to ascertain and
give effect to the intention of the Legislature. In this instance, the purpose of the
Legislature is plainly to erect a wall of safety against temptation for a director of the
bank.
The prohibition against indirect loans is a recognition of the familiar maxim that no man
may serve two masters that where personal interest clashes with fidelity to duty the
latter almost always suffers. A loan, therefore, to a partnership of which the wife of
a director of a bank is a member, is an indirect loan to such director. (conjugal
partnership) The defendant was tempted to mingle his personal and family affairs with
his official duties, and to permit the loan P300,000 to a partnership of no established
reputation and without asking for collateral security.
4. Could Venancio Concepcion, President of the Philippine National Bank, be convicted
of a violation of section 35 of Act No. 2747 in relation with section 49 of the same Act,
when these portions of Act No. 2747 were repealed by Act No. 2938, prior to the finding
of the information and the rendition of the judgment? Yes.
Where an Act of the Legislature which penalizes an offense, such repeals a former Act
which penalized the same offense, such repeal does not have the effect of thereafter
depriving the courts of jurisdiction to try, convict, and sentenced offenders charged with
violations of the old law.
5. . Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion,
S. en C." by Venancio Concepcion, President of the Philippine National Bank, in
violation of section 35 of Act No. 2747, penalized by this law?
Yes. When the corporation itself is forbidden to do an act, the prohibition extends to the
board of directors, and to each director separately and individually.
6. Does the alleged good faith of Venancio Concepcion, President of the Philippine
National Bank, in extending the credit of P300,000 to the copartnership "Puno y
Concepcion, S. en C." constitute a legal defense?
Under the statute which the defendant has violated, criminal intent is not necessarily
material. Furthermore, It is fraud for directors to secure by means of their trust, and
advantage not common to the other stockholders.

Defendant is guilty.

DE LOS SANTOS V. JARRA

KEY WORDS: 3 SOLD V. 10 COMMODATUM (6 LEFT, 4 DIED), CARABAOUS FOR
ANIMAL POWER MILL, NOT A SALE CUZ NO DOCUMENTS (NEW OR OLD), NOT
PART OF ESTATE, MUST RETURN 6 CARABAOS
FACTS:
Felix de los Santos brought suit against Agustina Jarra, the administratrix of the estate
of Magdaleno Jimenea, alleging that Jimenea borrowed and obtained from the
plaintiff ten first-class carabaos, to be used at the animal-power mill of his hacienda
without recompense or remuneration under the sole condition that they should be
returned to the owner as soon as the work at the mill was terminated. Magdaleno
Jimenea, however, did not return the carabaos, notwithstanding the fact that the
plaintiff claimed their return after the work at the mill was finished. Jimenea died,
and Jarra took over as administratrix.
Plaintiff presented his claim to the commissioners of the estate of Jimenea, but his
claim was rejected. Therefore, the plaintiff prayed that judgment be entered ordering
her to return the ten first-class carabaos loaned to the late Jimenea, or their present
value, and to pay the costs. Defendant answered saying that it was true that the late
Magdaleno Jimenea asked the plaintiff to loan him ten carabaos, but that he only
obtained three second-class animals, which were afterwards transferred by sale by the
plaintiff to the said Jimenea.
The record shows that Santos, sent the ten carabaos requested by his father-in-law,
Magdaleno Jimenea, in the two letters produced at the trial by the plaintiff, and that
Jimenea received them in the presence of some of said persons. Four died of
rinderpest, and it is for this reason that the judgment appealed from only deals with six
surviving carabaos.
The alleged purchase of three carabaos by Jimenea not evidenced by any trustworthy
documents such as those of transfer, nor were the declarations of the witnesses
presented by the defendant affirming it; for said reason it can not be considered that
Jimenea only received three carabaos on loan from his son-in-law, and that he
afterwards kept them definitely by virtue of the purchase.
By the laws in force the transfer of large cattle was and is still made by means of
official documents issued by the local authorities; these documents constitute the
title of ownership of the carabao or horse so acquired. Furthermore, not only should
the purchaser be provided with a new certificate or credential, a document which has
not been produced in evidence by the defendant, nor has the loss of the same been
shown in the case, but the old documents ought to be on file in the municipality, or they
should have been delivered to the new purchaser, and in the case at bar neither did
the defendant present the old credential on which should be stated the name of the
previous owner of each of the three carabaos said to have been sold by the plaintiff.

ISSUE: W/N there was a loan or a sale? Commodatum.

it may be logically inferred that the carabaos loaned or given on commodatum to the
now deceased Magdaleno Jimenea were ten in number; that they have not been
returned to the owner thereof, Felix de los Santos, and that it is not true that the latter
sold to the former three carabaos that the purchaser was already using; therefore, as
the said six carabaos were not the property of the deceased, it is the duty of the
administratrix of the estate to return them or indemnify the owner for their value.
The Civil Code, in dealing with loans in general, from which generic denomination the
specific one of commodatum is derived, establishes prescriptions in relation to the lastmentioned contract by the following articles:
ART. 1740. By the contract of loan, one of the parties delivers to the other, either
anything not perishable, in order that the latter may use it during a certain period
and return it to the former, in which case it is called commodatum, or money or
any other perishable thing, under the condition to return an equal amount of the same
kind and quality, in which case it is merely called a loan.
Commodatum is essentially gratuitous.
A simple loan may be gratuitous, or made under a stipulation to pay interest.
ART. 1741. The bailor retains the ownership of the thing loaned. The bailee
acquires the use thereof, but not its fruits; if any compensation is involved, to be paid
by the person requiring the use, the agreement ceases to be a commodatum.
ART. 1742. The obligations and rights which arise from the commodatum pass to
the heirs of both contracting parties, unless the loan has been in consideration for the
person of the bailee, in which case his heirs shall not have the right to continue using
the thing loaned.
The carabaos delivered to be used not being returned by the defendant upon demand,
there is no doubt that she is under obligation to indemnify the owner thereof by paying
him their value.
Article 1101 of said code reads: Those who in fulfilling their obligations are guilty of
fraud, negligence, or delay, and those who in any manner whatsoever act in
contravention of the stipulations of the same, shall be subjected to indemnify for the
losses and damages caused thereby.
It is the imperative duty of the bailee to return the thing itself to its owner, or to pay him
damages if through the fault of the bailee the thing should have been lost or injured. It
is sufficient to state that we are not dealing with a claim for the payment of a certain
sum, the collection of a debt from the estate, or payment for losses and damages, but
with the exclusion from the inventory of the property of the late Jimenea, or from his
capital, of six carabaos which did not belong to him, and which formed no part of the
inheritance.
The demand for the exclusion of the said carabaos belonging to a third party and which

did not form part of the property of the deceased, must be the subject of a direct
decision of the court in an ordinary action. The refusal of the commissioners before
whom the plaintiff unnecessarily appeared can not affect nor reduce the unquestionable
right of ownership of the latter, inasmuch as there is no law nor principle of justice
authorizing the successors of the late Jimenea to enrich themselves at the cost and to
the prejudice of Felix de los Santos.

(from RFC) that my company and associates will be able to bring in sufficient jute
materials as may be necessary for the full operation of the jute mill" RFC replied that
Sauras request was not in line with the principle of RFC approving the loan.

SAURA IMPORT V. DBP

9 years after the mortgage in favor of RFC was cancelled at the request of Saura,
Inc., the latter commenced the present suit for damages, alleging failure of RFC
(as predecessor of the defendant DBP) to comply with its obligation to release
the proceeds of the loan applied for and approved.

KEY WORDS: RFC / DBP LOAN OF 500K REDUCED TO 300K RETURN TO 500K,
LOCAL RAW MATERIALS (KENAF) FOR SACK MANUFACTURE, STANDSTILL =
MORTGAGE WITHDRAWN, PERFECTED CONSENSUAL CONTRACT, MUTUAL
DESISTANCE
FACTS:
Saura, Inc. applied to the Rehabilitation Finance Corporation (RFC), before its
conversion into DBP, for an industrial loan of P500,000.00, to be used as follows:
P250,000.00 for the construction of a factory building (for the manufacture of jute
sacks); P240,900.00 to pay the balance of the purchase price of the jute mill machinery
and equipment; and P9,100.00 as additional working capital.
RFC passed a Resolution approving the loan application for P500,000.00, to be
secured by a first mortgage on the factory building to be constructed, and the land, and
the machinery. Despite the formal execution of the loan agreement, a reexamination
was done, where it was decided to reduce the loan from P500,000.00 to P300,000.00.
China Engineers Ltd., which initially signed as co-maker informed RFC that his
company no longer to of the loan and therefore considered the same as cancelled as
far as it was concerned. A follow-up letter requested RFC that the registration of the
mortgage be withdrawn. The loan request of Saura was then denied.
RFC restored the loan to the original amount of P500,000.00, with the proviso that
required a certification from the Department of Agriculture and Natural Resources, that
1. That the raw materials needed by the borrower-corporation to carry out its operation
are available in the immediate vicinity; and 2. That there is prospect of increased
production thereof to provide adequately for the requirements of the factory."
The intention of the original approval (of the loan) is to develop the manufacture
of sacks on the basis of locally available raw materials. Saura, Inc. does not deny
that the factory he was building in Davao was for the manufacture of bags from local
raw materials. It was created to finance, manage and operate a Kenaf mill plant, to
manufacture copra and corn bags, runners, floor mattings, carpets, draperies; out of
100% local raw materials, principal kenaf." This fact, according to defendant DBP, is
what moved RFC to approve the loan application.
Saura, Inc. itself confirmed the defendant's stand impliedly in its letter (1) stating that
according to a special study made by the Bureau of Forestry "kenaf will not be available
in sufficient quantity this year or probably even next year;" (2) requesting "assurances

With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursue
the matter further. Instead, it requested RFC to cancel the mortgage, and so, RFC
executed the corresponding deed of cancellation. It appears that the cancellation was
requested to make way for the registration of a mortgage contract, over the same
property in favor of the Prudential Bank and Trust Co. (they failed to pay the bank back)

ISSUE: W/N there was a perfected contract? Yes. But.

There was indeed a perfected consensual contract, as recognized in Article 1934 of
the Civil Code, which provides:
ART. 1954. 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 perferted until the delivery of the object of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura,
Inc. for a loan of P500,000.00 was approved by resolution of the defendant, and the
corresponding mortgage was executed and registered. But this fact alone falls short
of resolving the basic claim that the defendant failed to fulfill its obligation and
the plaintiff is therefore entitled to recover damages.
RFC entertained the loan application of Saura, Inc. on the assumption that the factory
to be constructed would utilize locally grown raw materials, principally kenaf. The
imposition of the two conditions set in the proviso was by no means a deviation from
the terms of the agreement, but rather a step in its implementation.
Saura, Inc. realized that it could not meet the conditions required by RFC, and so wrote
stating that local jute "will not be able in sufficient quantity this year or probably next
year," and asking that out of the loan agreed upon the sum of P67,586.09 be released
"for raw materials and labor." This was a deviation from the terms laid down and
embodied in the mortgage contract, implying as it did a diversion of part of the proceeds
of the loan to purposes other than those agreed upon.
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, which was done on June 15, 1955. The action thus taken
by both parties was in the nature of mutual desistance, a mode of extinguishing
obligations. Since mutual agreement can create a contract, mutual disagreement
by the parties can cause its extinguishment.
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest

against any alleged breach of contract by RFC, or even point out that the latter's stand
was legally unjustified. Its request for cancellation of the mortgage carried no
reservation of whatever rights it believed it might have against RFC for the latter's noncompliance.

the contract of loan. For the Civil Code provides that the delivery of bills of exchange
and mercantile documents such as checks shall produce the effect of payment only
when they have been cashed. It is only after the checks have produced the effect of
payment that the contract of loan may be deemed perfected.

NAGUIAT V. CA

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

KEY WORDS: LOAN FOR 200K NOT RECEIVED, CHECK NOT ENCASHED, LOAN
IS REAL CONTRACT, DELIVERED OR ENCASHED TO PERFECT CONTRACT,
DEED OF REAL ESTATE MORTGAGE NULL AND VOID FOR ABSENCE OF
CONSIDERATION, MORTGAGE DEPEND ON VALIDITY OF LOAN CONTRACT
SINCE ITS ACCESSORY ONLY
FACTS: Aurora Queao applied with Celestina Naguiat for a loan for P200,000.00, which
Naguiat granted. Naguiat indorsed to Queao a Bank Check (dated 11 August 1980) for
the amount of P95,000.00. She also issued her own Filmanbank Check to the order of
Queao, also dated 11 August 1980 and for the amount of Ninety Five Thousand Pesos
(P95,000.00). The proceeds of these checks were to constitute the loan granted by
Naguiat to Queao.
To secure the loan, Queao executed a Deed of Real Estate Mortgage in favor of
Naguiat, and surrendered to the latter the owners duplicates of the titles covering the
mortgaged properties. Queao issued to Naguiat a promissory note for the amount of
P200,000, and a Security Bank check postdated 11 September 1980, for the same
amount.
Upon presentment on its maturity date, the Security Bank check was dishonored for
insufficiency of funds. Queao requested Security Bank to stop payment of her
postdated check, but the bank rejected the request pursuant to its policy not to honor
such requests if the check is drawn against insufficient funds.
Queao told Naguiat that she did not receive the proceeds of the loan, adding that the
checks were retained by Ruebenfeldt, who purportedly was Naguiats agent. Naguiat
applied for the extrajudicial foreclosure of the mortgage. Queao filed the case before
the RTC, seeking the annulment of the mortgage deed.
RTC rendered judgment, declaring the Deed of Real Estate Mortgage null and void,
and ordering Naguiat to return to Queao the owners duplicates of her titles. The CA
affirmed the RTC decision.
ISSUE: whether Queao had actually received the loan proceeds which were supposed
to be covered by the two checks Naguiat had issued or indorsed.
HELD: The Court of Appeals, is correct in ruling that the presumption of truthfulness of
the recitals in a public document was defeated by the clear and convincing evidence in
this case that pointed to the absence of consideration. Absolutely no evidence was
submitted by Naguiat that the checks she issued or endorsed were actually encashed
or deposited. The mere issuance of the checks did not result in the perfection of

A loan contract is a real contract, not consensual, and, as such, is perfected only upon
the delivery of the object of the contract.In this case, the objects of the contract are
the loan proceeds which Queao would enjoy only upon the encashment of the
checks signed or indorsed by Naguiat. If indeed the checks were encashed or
deposited, Naguiat would have certainly presented the corresponding documentary
evidence, such as the returned checks and the pertinent bank records. Since Naguiat
presented no such proof, it follows that the checks were not encashed or credited to
Queaos account.
***other issue: Ruebenfeldt who withheld the checks is an agent of Naguiat by the
doctrine of agency by estoppel.

PAJUYO V. CA
KEY WORDS: SQUATTER BOUGHT LOT AND ALLOWED OTHER SQUATTER TO
LIVE IN IT UNTIL ASKED TO LEAVE, GUEVARRA DIDNT WANT TO LEAVE SAYING
PAJUYO HAD NO RIGHT TO LAND UNDER PROCLAMATION 117 FOR
SOCIALIZED HOUSING, KASUNDUAN NOT A COMMODATUM, MORE LIKE
LANDLORD-TENANT, NEED TO MAINTAIN CLEANLINESS AND ORDERLINESS OF
HOUSE, SOCIALIZED HOUSING IS NOT THE ISSUE IN EJECTMENT = ONLY
PHYSICAL POSSESSION, KASUNDUAN IS EVIDENCE OF PHYSICAL
POSSESSION UNDER PAJUYO, UNLAWFUL DETAINER CASE = SO EVEN
WITHOUT PROOF OF PHYSICAL POSSESSION IS OKAY
FACTS: Colito T. Pajuyo (Pajuyo) paid P400 to a certain Pedro Perez for the rights over
a lot in Barrio Payatas, Quezon City. Pajuyo then constructed a house made of light
materials on the lot. Pajuyo and his family lived in the house from 1979 to 1985.
Pajuyo and private respondent Eddie Guevarra (Guevarra) executed a Kasunduan.
Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided
Guevarra would maintain the cleanliness and orderliness of the house. Guevarra
promised that he would voluntarily vacate the premises on Pajuyos demand.
Pajuyo informed Guevarra of his need of the house and demanded that Guevarra
vacate the house. Guevarra refused. Pajuyo filed an ejectment case. Guevarra claimed
that Pajuyo had no valid title or right of possession over the lot where the house stands
because the lot is within the 150 hectares set aside by Proclamation No. 137 for
socialized housing. Guevarra pointed out that from December 1985 to September
1994, Pajuyo did not show up or communicate with him. Guevarra insisted that neither

he nor Pajuyo has valid title to the lot.

The MTC decided in Pajuyos favor, which the RTC affirmed (Then, many procedural
issues occur, kasi sa SC siya nagfile ng motions not CA)
Pertinent ISSUE: W/N it was a commodatum? No.
HELD: In a contract of commodatum, one of the parties delivers to another something
not consumable so that the latter may use the same for a certain time and return it. An
essential feature of commodatum is that it is gratuitous. Another feature of
commodatum is that the use of the thing belonging to another is for a certain period.
Thus, the bailor cannot demand the return of the thing loaned until after expiration of
the period stipulated, or after accomplishment of the use for which the commodatum is
constituted. If the bailor should have urgent need of the thing, he may demand its return
for temporary use. If the use of the thing is merely tolerated by the bailor, he can
demand the return of the thing at will, in which case the contractual relation is called a
precarium. Under the Civil Code, precarium is a kind of commodatum.
While the Kasunduan did not require Guevarra to pay rent, it obligated him to
maintain the property in good condition. The imposition of this obligation makes the
Kasunduan a contract different from a commodatum. The effects of the Kasunduan
are also different from that of a commodatum. Case law on ejectment has treated
relationship based on tolerance as one that is akin to a landlord-tenant relationship
where the withdrawal of permission would result in the termination of the lease.
Even assuming that the relationship between Pajuyo and Guevarra is one of
commodatum, Guevarra as bailee would still have the duty to turn over
possession of the property to Pajuyo, the bailor. The obligation to deliver or to
return the thing received attaches to contracts of commodatum.
Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo
is also a squatter. Squatters, Guevarra pointed out, cannot enter into a contract
involving the land they illegally occupy. Guevarra insists that the contract is void.
There must be honor even between squatters. Guevarra freely entered into the
Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from
it. The Kasunduan binds Guevarra.
The Kasunduan is the undeniable evidence of Guevarras recognition of Pajuyos
better right of physical possession. Guevarra is clearly a possessor in bad faith.
Guevarra bases his argument on the preferential right given to the actual occupant or
caretaker under Proclamation No. 137 on socialized housing.
Pajuyo did not profit from his arrangement with Guevarra because Guevarra stayed in
the property without paying any rent. There is also no proof that Pajuyo is a professional
squatter who rents out usurped properties to other squatters. Moreover, it is for the
proper government agency to decide who between Pajuyo and Guevarra qualifies for
socialized housing.
Prior possession is not always a condition sine qua non in ejectment. This is one of the

distinctions between forcible entry and unlawful detainer. In forcible entry, the plaintiff
is deprived of physical possession of his land or building by means of force, intimidation,
threat, strategy or stealth. Thus, he must allege and prove prior possession. But in
unlawful detainer, the defendant unlawfully withholds possession after the expiration or
termination of his right to possess under any contract, express or implied. In such a
case, prior physical possession is not required.
Pajuyos withdrawal of his permission to Guevarra terminated the Kasunduan.
Guevarras transient right to possess the property ended as well. Moreover, it was
Pajuyo who was in actual possession of the property because Guevarra had to seek
Pajuyos permission to temporarily hold the property and Guevarra had to follow the
conditions set by Pajuyo in the Kasunduan. Control over the property still rested with
Pajuyo and this is evidence of actual possession.
PRODUCERS BANK OF THE PHILIPPINES V. CA
KEY WORDS: CHECK FOR 200K TO STERELA / DORONILLA, 200K REDUCED TO
90K, DORONILLA TO PAY 212K BUT DISHONORED CHECK, NOT A MUTUUM,
CONSUMABLE GOOD (MONEY) FOR EXHIBITION = TO SHOW THERE IS
SUFFICIENT CAPITALIZATION FOR FIRM, ADDITIONAL 12K = FRUITS WC
BELONGS TO VIVES/OWNER OF MONEY, ATIENZA CONNIVED WITH
DORONILLA SO BANK RESPONSIBLE FOR EMPLOYEE
FACTS: Franklin Vives was asked by his neighbor and friend Angeles Sanchez to help
her friend and townmate, Col. Arturo Doronilla, in incorporating his business, the
Sterela Marketing and Services. Specifically, Sanchez asked Vives to deposit in a bank
a certain amount of money in the bank account of Sterela for purposes of its
incorporation. She assured Vives that he could withdraw his money from said account
within a months time.
Relying on the assurances and representations of Sanchez and Doronilla, Vives
issued a check in the amount of P200,000.00 in favor of Sterela. Private respondent
instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in
opening a savings account in the name of Sterela at Producers Bank of the Philippines.
Only Sanchez, Mrs. Vives and Dumagpi went to the bank to deposit the check. They
had with them an authorization letter from Doronilla authorizing Sanchez o open an
account for Sterela Marketing Services in the amount of P200,000.00.
Vives learned that Sterela was no longer holding office in the address previously given
to him. The assistant manager, Mr. Atienza informed them that part of the money in
Savings Account had been withdrawn by Doronilla, and that only P90,000.00 remained
therein. He likewise told them that Mrs. Vives could not withdraw said remaining amount
because it had to answer for some postdated checks issued by Doronilla.
Apparently, Doronilla opened a Current Account for Sterela and authorized the Bank to
debit Savings Account for the amounts necessary to cover overdrawings in its Current
Account. In opening said current account, Sterela, through Doronilla, obtained a loan
of P175,000.00 from the Bank. To cover payment thereof, Doronilla issued three
postdated checks, all of which were dishonored. Atienza also said that Doronilla could

assign or withdraw the money in Savings Account No. 10-1567 because he was the
sole proprietor of Sterela.
Vives eceived a letter from Doronilla, assuring him that his money was intact and would
be returned to him. Doronilla issued a postdated check for P212,000.00 in favor of
Vives. However, the check was dishonored. Another check was issued, which was also
dishonored.
Vives instituted a case with the RTC for the recovery of the sum of money. Producers
Bank, Doronilla and Dumagpi were held to solidarily pay Vives. This was affirmed by
the CA.

The nature of said transaction, that is, whether it is a mutuum or a commodatum, has
no bearing on the question of petitioners liability for the return of private respondents
money because the factual circumstances of the case clearly show that petitioner,
through its employee Mr. Atienza, was partly responsible for the loss of private
respondents money and is liable for its restitution. (permitting withdrawals without the
depositor passbook, which was against the rules of the bank + knowing that Vives
owned the money, Doronilla with no signature in signature card so dapat cant
withdraw).
*** sabi sa book, better view is to see it as a mutuum, since commodatum says
kailangan same object.

ISSUE: W/N the transaction was a commodatum or a mutuum? Commodatum.

Petitioner contends that the transaction between private respondent and Doronilla is a
simple loan (mutuum) since all the elements of a mutuum are present: first, what was
delivered by private respondent to Doronilla was money, a consumable thing; and
second, the transaction was onerous as Doronilla was obliged to pay interest, as
evidenced by the check issued by Doronilla in the amount of P212,000.00, which was
P12,000 more than what was deposited. Moreover, the fact that private respondent
sued his good friend Sanchez for his failure to recover his money from Doronilla shows
that the transaction was not merely gratuitous but had a business angle to it. Hence,
petitioner argues that it cannot be held liable for the return of private respondents
P200,000.00 because it is not privy to the transaction between the latter and Doronilla.
HELD:
The transaction between them was a commodatum. Article 1933 of the Civil Code
distinguishes between the two kinds of loans. The foregoing provision seems to imply
that if the subject of the contract is a consumable thing, such as money, the contract
would be a mutuum. However, there are some instances where a commodatum may
have for its object a consumable thing. Article 1936 of the Civil Code provides:
Consumable goods may be the subject of commodatum if the purpose of the contract
is not the consumption of the object, as when it is merely for exhibition.
The evidence shows that private respondent agreed to deposit his money in the
savings account of Sterela specifically for the purpose of making it appear that said
firm had sufficient capitalization for incorporation.
Vives merely accommodated Doronilla by lending his money without consideration, as
a favor to his good friend Sanchez. It was however clear to the parties to the transaction
that the money would not be removed from Sterelas savings account and would be
returned to private respondent after thirty (30) days.
The additional P12,000.00 corresponds to the fruits of the lending of the
P200,000.00. Article 1935 of the Civil Code expressly states that [t]he bailee in
commodatum acquires the use of the thing loaned but not its fruits. Hence, it was only
proper for Doronilla to remit to private respondent the interest accruing to the latters
money deposited with petitioner.

REPUBLIC V. BAGTAS
KEY WORDS: THREE BULLS BORROWED FOR BREEDING WITH BREEDING FEE,
2 RETURNED, 1 DIED DUE TO HUK GUNSHOT, IF BREEDING
FEE=COMPENSATION, LEASE AND LIABLE FOR POSSESSOR IN BAD FAITH,
OTHERWISE = COMMODATUM, LIABLE FOR LOSS DESPITE FORTUITOUS IF A)
KEEP LONGER THAN PERIOD AND B) APPRAISAL OF VALUE OF THING
FACTS: Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls for breeding purposes subject to a government
charge of breeding fee of 10% of the book value of the bulls. Upon the expiration of the
contract, the borrower asked for a renewal for another period of one year. However,
the Secretary of Agriculture and Natural Resources approved a renewal thereof of only
one bull for another year and requested the return of the other two.
Bagtas replied that he would pay for the value of the 3 bulls. He reiterated his desire to
buy them at a value with a deduction of yearly depreciation to be approved by the
Auditor General. He was advised that the book value of the three bulls could not be
reduced and that they either be returned or their book value paid. Jose V. Bagtas failed
to pay the book value. The Republic of the Philippines commenced an action against
him with the CFI.
Plaintiff moved ex parte for a writ of execution which the court granted. Jose Bagtas
had died, and his wife filed a motion alleging that the two bull Sindhi and Bhagnari were
returned to the Bureau Animal of Industry and that the third bull, the Sahiniwal, died
from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal.
It is true that Jose M. Bagtas, Jr., son of the appellant by the late defendant, returned
the Sindhi and Bhagnari bulls to the Bureau of Animal Industry as evidenced by a
memorandum receipt. This is why Bagtas wife stated that she cannot be held liable for
the two bulls which already had been returned to and received by the appellee.
Furthermore, she could not be held liable for the third Sahiniwal bull, which died due to
force majeure.

ISSUE: W/N defendant is liable for the 3rd bull? Yes.

de Villanueva.

Held: The loan by the appellee to the late defendant Jose V. Bagtas of the three bulls
for breeding purposes for a period of one year, later on renewed for another year as
regards one bull, was subject to the payment by the borrower of breeding fee of 10%
of the book value of the bulls. The appellant contends that the contract was
commodatum and that, for that reason, as the appellee retained ownership or title to
the bull it should suffer its loss due to force majeure. A contract of commodatum is
essentially gratuitous. If the breeding fee be considered a compensation, then the
contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee
would be subject to the responsibilities of a possessor in bad faith, because she had
continued possession of the bull after the expiry of the contract.

Ruperta Pascual, as guardian of the defendants, petitioned the CFI for authorization to
sell "the six-sevenths of the one-half of the warehouse, together with its lot." The
plaintiffs opposed, but he court before determining the matter of the ownership of the
lot occupied by the warehouse, ordered the sale of this building, which was sold to Cu
Joco, the other defendant in this case.

Wven if the contract be commodatum, still the appellant is liable, because article 1942
of the Civil Code provides that a bailee in a contract of commodatum is liable for loss
of the things, even if it should be through a fortuitous event: (2) If he keeps it longer
than the period stipulated . . . (3) If the thing loaned has been delivered with appraisal
of its value, unless there is a stipulation exempting the bailee from responsibility in case
of a fortuitous event;
The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one
bull was renewed for another period of one year to end on 8 May 1950. But the appellant
kept and used the bull until November 1953. Furthermore, when lent and delivered to
the deceased husband of the appellant the bulls had each an appraised book value, to
with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46.
It was not stipulated that in case of loss of the bull due to fortuitous event the late
husband of the appellant would be exempt from liability.
As the appellant already had returned the two bulls to the appellee, the estate of the
late defendant is only liable for the sum of P859.63, the value of the bull which has not
been returned to the appellee, because it was killed while in the custody of the
administratrix of his estate.
MINA V. PASCUAL
KEY WORDS: TWO BROTHERS HEIRS OVER LOT WITH WAREHOUSE,
WAREHOUSE BROTHER = ONLY OWN 6/7 OF OF WAREHOUSE, LOT AND
OTHER CANNOT BE SOLD TO CU JOCO CUZ NOT THEIRS, SALE IS NULL AND
VOID = MERE USE CANNOT TRANSFER OWNERSHIP, 2 OPTIONS: 1) OWNER
PAY INDEMNITY FOR WAREHOUSE OR 2) WAREHOUSE BUILDER TO PAY FOR
LAND
FACTS: Francisco Fontanilla and Andres Fontanilla were brothers. Francisco acquired
a lot in the center of the town of Laoag. Andres, with the consent of his brother
Francisco, erected a warehouse on a part of the said lot.
Mina, et al., were Franciscos heirs. The children of Ruperta Pascual are Andres heirs.
Ruperta Pascual stated that Andres heirs were entitled to six-sevenths of one-half of
the building 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

ISSUE: W/N the sale was valid. No.

HELD: While finding the plaintiffs to be the owners of the lot, the SC recognized in
principle the existence of a commodatum under which the defendants held the lot. They
are the owners of the lot in question, although there existed and still exists a
commodatum by virtue of which the guardianship (meaning the defendants) had and
has the use, and the plaintiffs the ownership of the property.
The defendant agrees that the plaintiffs have the ownership, and they themselves only
the use of the said lot. On this premise, the nullity of the sale of the lot is in all respects
quite evident, whatsoever be the manner in which the sale was effected, whether
judicially or extrajudicially.
He who has only the use of a thing cannot validly sell the thing itself. The effect of the
sale being a transfer of the ownership of the thing, it is evident that he who has only
the mere use of the thing cannot transfer its ownership. The sale of a thing
effected by one who is not its owner is null and void. The defendants never were
the owners of the lot sold. The sale of it by them is necessarily null and void. On cannot
convey to another what he has never had himself.
The purchaser could not acquire anything more than the interest that might be held by
a person to whom realty in possession of the vendor might be sold, for at a judicial
auction nothing else is disposed of. What the minor children of Ruperta Pascual had in
their possession was the ownership of the six-sevenths part of one-half of the
warehouse and the use of the lot occupied by his building. This, and nothing more,
could the Chinaman Cu Joco acquire at that sale: not the ownership of the lot.
Consequently, the sale made to him of this one-seventh of one-half and the entire other
half of the building was null and void.
It is an essential feature of the commodatum that the use of the thing belonging to
another shall for a certain period. Francisco Fontanilla did not fix any definite period or
time during which Andres Fontanilla could have the use of the lot whereon the latter
was to erect a stone warehouse of considerable value, and so it is that for the past thirty
years of the lot has been used by both Andres and his successors in interest. The
present contention of the plaintiffs that Cu Joco, now in possession of the lot, should
pay rent for it at the rate of P5 a month, would destroy the theory of the commodatum
sustained by them, since, according to the second paragraph of the aforecited article
1740, "commodatum is essentially gratuitous."
It appears more likely that Francisco intended to allow his brother Andres a surface
right; but this right supposes the payment of an annual rent, and Andres had the
gratuitous use of the lot. The question should be decided in accordance with the

statutes that, thirty years ago, governed accessions to real estate, and which were
Laws 41 and 42, title 28, of the third Partida, nearly identical with the provisions of
articles 361 and 362 of the Civil Code. So, then, pursuant to article 361, the owner of
the land on which a building is erected in good faith has a right to appropriate such
edifice to himself, after payment of the indemnity prescribed in articles 453 and
454, or to oblige the builder to pay him the value of the land. Such, and no other, is
the right to which the plaintiff are entitled.
For the foregoing reasons, it is only necessary to annul the sale of the said lot which
was made by Ruperta Pascual, in representation of her minor children, to Cu Joco, and
to maintain the latter in the use of the lot until the plaintiffs shall choose one or the other
of the two rights granted them by article 361 of the Civil Code.
QUINTOS V. BECK
KEY WORDS: BECK IN QUINTOS HOUSE, QUINTOS GAVE BECK FURNITURE VIA
COMMODATUM SO RETURN UPON DEMAND, DID NOT RETURN EVERYTHING
AND KEPT 3 GAS HEATERS AND 4 ELECTRIC LAMPS THEN LEFT THE REST
WITH SHERIFF ON DEPOSIT, DID NOT RETURN SINCE DID NOT RETURN ALLLLL
OF THE FURNITURE, BECK NEED TO PAY DEPOSIT FEES SINCE NOT ENTITLED
TO PLACE DEPOSIT IN THE FIRST PLACE
FACTS: The defendant was a tenant of the plaintiff and as such occupied the latter's
house on M. H. del Pilar street. Upon the novation of the contract of lease between the
plaintiff and the defendant, the former gratuitously granted to the latter the use of the
furniture subject to the condition that the defendant would return them to the plaintiff
upon the latter's demand.
The plaintiff sold the property to Maria Lopez and Rosario Lopez and, these three
notified the defendant of the conveyance, giving him sixty days to vacate the premises
under one of the clauses of the contract of lease. Plaintiff required the defendant to
return all the furniture. Defendant wrote another letter to the plaintiff informing her that
he could not give up the three gas heaters and the four electric lamps because he would
use them until the 15th of the same month when the lease in due to expire. The plaintiff
refused to get the furniture in view of the fact that the defendant had declined to make
delivery of all of them. On November 15th, before vacating the house, the defendant
deposited with the Sheriff all the furniture belonging to the plaintiff and they are now on
deposit in the warehouse.
ISSUES/HELD:
1. whether the defendant complied with his obligation to return the furniture upon the
plaintiff's demand?
The contract entered into between the parties is one of commadatum, because under
it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving
for herself the ownership thereof; by this contract the defendant bound himself to return
the furniture to the plaintiff, upon the latters demand. It 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.
2. whether the plaintiff is bound to bear the deposit fees thereof. No.
As the defendant had voluntarily undertaken to return all the furniture to the plaintiff,
upon the latter's demand, the Court could not legally compel her to bear the expenses
occasioned by the deposit of the furniture at the defendant's behest. The latter, as
bailee, was 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.
As to the value of the furniture, we do not believe that the plaintiff is entitled to the
payment thereof by the defendant in case of his inability to return some of the furniture
because under the stipulation of facts, the defendant has neither agreed to nor admitted
the correctness of the said value. Should the defendant fail to deliver some of the
furniture, the value thereof should be latter determined by the trial Court through
evidence which the parties may desire to present.
3. whether defendant is entitled to the costs of litigation. Yes.
The costs in both instances should be borne by the defendant because the plaintiff is
the prevailing party. The defendant was the one who breached the contract of
commodatum, and without any reason he refused to return and deliver all the furniture
upon the plaintiff's demand. In these circumstances, it is just and equitable that he pay
the legal expenses and other judicial costs which the plaintiff would not have otherwise
defrayed.