People v.

Concepcion
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?
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. 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

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-inlaw, 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 last-mentioned 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.

Saura Import v. DBP

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 (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, 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.
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.
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 non- compliance.

Naguiat v. CA
FACTS: Aurora Queao 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 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.
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.
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.

Mina v. Pascual
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 de Villanueva.
Ruperta Pascual, as guardian of the defendants, petitioned the CFI for authorization to sell "the sixsevenths 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.
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.

Republic v. Bagtas
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.
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.
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.

Quintos v. Beck
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.

Producers Bank of the Philippines v. CA

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.
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.
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).
*** sabi sa book, better view is to see it as a mutuum, since commodatum says kailangan same object.

Pajuyo v. CA
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.