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THIO Carolyn argues that once Rica received the checks, Rica had possession and
G.R. No. 154878, March 16, 2007 control of them such that she had the choice to either forward them to Santiago (who
was already her debtor), to retain them or to return them to Carolyn.
FACTS: On February 1995, Rica Marie S. Thio received from Carolyn M. Garcia a Delivery is the act by which the res or substance thereof is placed within the
US$100,000 check payable to the order of a certain Marilou Santiago. Carolyn then actual or constructive possession or control of another. Although Rica did not
received from Rica every month US$3,000 (on March, April, June and July 1995) and physically receive the proceeds of the checks, these instruments were placed in her
P76,500 (July, August, September and October, 1995). control and possession under an arrangement whereby she actually re-lent the
Rica then received another check worth P500,000, dated June 29, 1995, also amounts to Santiago.
payable to the order of Marilou Santiago. Carolyn then received from Rica the amount We hold that the CA committed reversible error when it ruled that Rica did
of P20,000 every month on August, September, October and November, 1995. not borrow the amounts of US$100,000 and P500,000 from Carolyn. We instead agree
However, Rica failed to pay the principal amounts due. On February 24, 1996, with the ruling of the RTC making Rica liable for the principal amounts of the loans.
Carolyn filed a complaint for a sum of money and damages in the RTC of Makati City
against Rica, seeking to collect the sums of US$100,000, with interest at 3% a month
from October 26, 1995 and P500,000, with interest at 4% a month from November 5,
Carolyn claims that Rica borrowed money from her. Rica paid the stipulated
monthly interest for both loans but on their maturity dates, she failed to pay the
principal amounts despite repeated demands.
Rica denied that she contracted the two loans with Carolyn and said that it
was Marilou Santiago to whom Carolyn lent the money. She claimed she was merely
asked by Carolyn to give the crossed checks to Santiago.She issued the checks for
P76,000 and P20,000 not as payment of interest but to accommodate Carolyn's
request that Rica use her own checks instead of Santiagos.
The RTC ruled in favor of Carolyn stating that there was a contract of loan. On
appeal, the Court of Appeals reversed the RTC's decision and stated that there was no
contract of loan between the parties.

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

HELD: YES. A loan is a real contract, not consensual, and as such is perfected only upon
the delivery of the object of the contract. This is evident in Art. 1934 of the Civil Code
which provides:
An accepted promise to deliver something by way of commodatum or simple
loan is binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until the delivery of the object of the contract.

Upon delivery of the object of the contract of loan (in this case the money
received by the debtor when the checks were encashed) the debtor acquires
ownership of such money or loan proceeds and is bound to pay the creditor an equal
It is undisputed that the checks were delivered to Rica. However, these checks
were crossed and payable not to the order of Rica but to the order of a certain Marilou
Santiago. Thus the main question to be answered is: who borrowed money from
Carolyn, Rica or Santiago?
LIWANAG v. CA ISSUE: Whether the transaction is a simple loan
G.R. No. 114398; October 24, 1997

HELD: The transaction cannot be considered a loan, since in a contract of loan once
FACTS: Petitioner Carmen Liwanag and Thelma Tabligan went to the house of
the money is received by the debtor, ownership over the same is transferred. Being
complainant Isidora Rosales (Rosales) and asked her to join them in the business of
the owner, the borrower can dispose of it for whatever purpose he may deem proper.
buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales
readily agreed. Under their agreement, Rosales would give the money needed to buy In the instant petition, however, it is evident that Liwanag could not dispose of
the cigarettes while Liwanag and Tabligan would act as her agents, with a the money as she pleased because it was only delivered to her for a single purpose,
corresponding 40% commission to her if the goods are sold; otherwise the money namely, for the purchase of cigarettes, and if this was not possible then to return the
would be returned to Rosales. Consequently, Rosales gave several cash advances to money to Rosales. Since in this case there was no transfer of ownership of the money
Liwanag and Tabligan amounting to P633,650.00 delivered, Liwanag is liable for conversion under Art. 315, par. 1(b) of the Revised
Penal Code.
During the first two months, Liwanag and Tabligan made periodic visits to
Rosales to report on the progress of the transactions. However the visits suddenly
stopped, and all efforts by Rosales to obtain information regarding their business
proved futile.

Alarmed that Liwanag was no longer visiting her regarding their business and
believing that the amounts she advanced were being misappropriated, Rosales filed a
case of estafa against Liwanag.

Liwanag advances the theory that the intention of the parties was to enter
into a contract of partnership, wherein Rosales would contribute the funds while she
would buy and sell the cigarettes, and later divide the profits between them. She also
argues that the transaction can also be interpreted as a simple loan, with Rosales
lending to her the amount stated on an installment basis.

RTC found Liwanag guilty for the crime of estafa. The Court of Appeals
affirmed the lower courts decision
PRUDENTIAL BANK AND TRUST COMPANY (now BANK OF THE PHILIPPINE ISLANDS), application of the registered owner of the real property who requests that proceeds
Petitioner vs. LIWAYWAY ABASOLO, Respondent. of the loan or part thereof be payable directly to a third party [but] the applicant must
G.R. No. 186738 submit a letter request to the Bank.
FACTS: Leonor Valenzuela-Rosales inherited two parcels of land situated in Palanan, On March 12, 2004, RTC rendered judgment in favor of Abasolo and against Corazon
Sta. Cruz, Laguna (the properties), registered as OCT Nos. RO-527 and RO-528. After who was made directly liable to respondent, and against PBTC who was made
she passed away, her heirs executed on June 14, 1993 a Special Power of Attorney subsidiarily liable in the event that Corazon fails to pay. Thus the trial court disposed:
(SPA) in favor of Liwayway Abasolo empowering her to sell the properties. Defendant Corazon Marasigan to pay the plaintiff the amount of
Sometime in 1995, Corazon Marasigan wanted to buy the properties which were being P1,783,960.00 plus three percent (3%) monthly interest per month from August
sold for P2,448,960, but as she had no available cash, she broached the idea of first 25, 1995 until fully paid. Further, to pay the plaintiff the sum equivalent to
mortgaging the properties to petitioner Prudential Bank and Trust Company (PBTC), twenty percent five [sic] (25%) of P1,783,960.00 as attorneys fees.
the proceeds of which would be paid directly to Abasolo which she agreed to the Defendant Prudential Bank and Trust Company to pay the plaintiff the amount
proposal. of P1,783,960.00 or a portion thereof plus the legal rate of interest per annum
Corazon and Abasolo consultation with PBTCs Head Office, its employee, Norberto until fully paid in the event that Defendant Corazon Marasigan fails to pay the
Mendiola , allegedly advised Abasolo to issue an authorization for Corazon to mortgage said amount or a portion thereof.
the properties, and for her to act as one of the co-makers so that the proceeds could On appeal, the Court of Appeals by Decision of January 14, 2008, affirmed the trial
be released to both of them. courts decision with modification on the amount of the balance of the purchase price
To guarantee the payment of the property, Corazon executed on August 25, 1995 a which was reduced from P1,783,960 to P1,753,960.
Promissory Note for P2,448,960 in favor of Abasolo. Petitioners motion for reconsideration having been denied by the appellate court by
In October 1995, Mendiola advised her to transfer the properties first to Corazon for Resolution of February 23, 2009
the immediate processing of Corazons loan application with assurance that the ISSUE: Whether the PBCT is subsidiary liable?
proceeds thereof would be paid directly to Abasolo, and the obligation would be HELD: In the absence of a lender-borrower relationship between petitioner and
reflected in a bank guarantee. Liwayway, there is no inherent obligation of PBTC to release the proceeds of the loan to
Heeding Mendiolas advice, Abasolo executed a Deed of Absolute Sale over the Abasolo.
properties in favor of Corazon following which or on December 4, 1995, TCT Nos. To a banking institution, well-defined lending policies and sound lending practices are
164159 and 164160 were issued in the name of Corazon. essential to perform its lending function effectively and minimize the risk inherent in
Corazons application for a loan with PBTCs Tondo Branch was approved on December any extension of credit.
1995. She thereupon executed a real estate mortgage covering the properties to In order to identify and monitor loans that a bank has extended, a system of
secure the payment of the loan. In the absence of a written request for a bank documentation is necessary. Under this fold falls the issuance by a bank of a guarantee
guarantee, the PBTC released the proceeds of the loan to Corazon. which is essentially a promise to repay the liabilities of a debtor, in this case Corazon.
Abasolo later got wind of the approval of Corazons loan application and the release of It would be contrary to established banking practice if Mendiola issued a bank
its proceeds to Corazon who, despite repeated demands, failed to pay the purchase guarantee, even if no request to that effect was made.
price of the properties. The principle of relativity of contracts in Article 1311 of the Civil Code supports
Abasolo eventually accepted from Corazon partial payment in kind consisting of one petitioners cause; for Liwayway to prove her claim against petitioner, a clear and
owner type jeepney and four passenger jeepneys, plus installment payments, which, deliberate act of conferring a favor upon her must be present. A written request would
by the trial courts computation, totaled P665,000. have sufficed to prove this, given the nature of a banking business, not to mention the
In view of Corazons failure to fully pay the purchase price, Abasolo filed a complaint amount involved.
for collection of sum of money and annulment of sale and mortgage with damages, Since it has not been established that petitioner had an obligation to Liwayway, there
against Corazon and PBTC before the (RTC) of Sta. Cruz, Laguna. is no breach to speak of. Liwayways claim should only be directed against
Petitioners Contention (Corazon and PBTC) : Corazon.Petitioner cannot thus be held subisidiarily liable.
Corazon denied that there was an agreement that the proceeds of the loan would be WHEREFORE, the Decision of January 14, 2008 of the Court of Appeals, in so far as it
paid directly to Abasolo. And she claimed that the vehicles represented full payment holds petitioner, Prudential Bank and Trust Company (now Bank of the Philippine
of the properties, and had in fact overpaid P76,040. Islands), subsidiary liable in case its co-defendant Corazon Marasigan, who did not
PBTC also denied that there was any arrangement between it and respondent that the appeal the trial courts decision, fails to pay the judgment debt, is REVERSED and SET
proceeds of the loan would be released to her. It claimed that it may process a loan ASIDE. The complaint against petitioner is accordingly DISMISSED.
Garcia vs Thio G.R. No. 154878 Hence, Thio is liable for the payment of US$100,000 and 500,000 at 12% per annum
interest from November 21, 1995 until the finality of the decision. The total amount
FACTS: On February 24, 1995, Thio received from Garcia a crossed check in the due as of the date of finality will earn interest of 12% per annum until fully paid.
amount of US$100,000 payabale to the order of Marilou Santiago, with an interest
rate of 3% per month, which loan would mature on October 26, 1995. On June 29,
1995, Thio again received a check in the amount of P500,000 payable to the order of
Marilou Santiago, at an agreed monthly interest of 4%, the maturity date of which
was on November 5, 1995. Thio paid the verbally stipulated monthly interest for
both loans but on their maturity dates, she failed to pay the principal amounts
despite repeated demand. Hence, a complaint for sum of money with damages was

The Makati City Regional Trial Court ruled in favor of Garcia, sentencing
Thio to pay Garcia the following among others:
1. US$100,000 or its equivalent in peso with interest thereon at 3% per
month from October 26, 1995 until fully paid.
2. P500,000 with interest thereon at 4% per month from November 5,
1995 until fully paid.

The CA reversed the decision of the RTC until it eventually reached the
Supreme Court.

ISSUE: Whether Thio is liable to pay the 3% and 4% interest respectively since there
was no written agreement to pay interest.

HELD: The Supreme Court held that Thio is not liable or the payment of the stipulated
monthly interest because there was no written proof of the interest payable except
for the verbal agreement that the loans would earn 3% and 4% interest per month.
Art. 1956 of the Civil Code provides that no interest shall be due unless it has been
expressly stipulated in writing.

Be that as it may, while there can be no stipulated interest, there can be legal
interest pursuant to Article 2209 of the Civil Code. It is well-settled that:

When the obligation is breached, and it consists in the payment of

a sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil
This is a case involving Citibank, N.A., a banking corporation duly registered under US
Laws and is licensed to do commercial banking and trust functions in the Philippines a. Yes. As already found by this Court, petitioner Citibank was the creditor of
and Investor's Finance Corporation (aka FNCB Finance), and affiliate company of respondent for her outstanding loans. At the same time, respondent was the
Citibank, mainly handling money market placements (MMPs are short term debt creditor of petitioner Citibank, as far as her deposit account was concerned,
instruments that give the owner an unconditional right to receive a stated, fixed sum since bank deposits, whether fixed, savings, or current, should be considered
of money on a specified date). as simple loan or mutuum by the depositor to the banking institution. Both
debts consist in sums of money. By June 1979, all of respondent's PNs in the
FACTS: Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB second set had matured and became demandable, while respondent's
Finance. Unfortunately, the business relations among the parties subsequently went savings account was demandable anytime. Neither was there any retention
awry. Subsequently, Sabeniano filed a complaint with the RTC against petitioners as or controversy over the PNs and the deposit account commenced by a third
she claims to have substantial deposits and money market placements with the person and communicated in due time to the debtor concerned.
petitioners and other investment companies, the proceeds of which were supposedly Compensation takes place by operation of law.
deposited automatically and directly to her account with Citibank. Sabeniano alleged
that Citibank et al refused to return her deposits and the proceeds of her money b. Yes, but technically speaking Citibank did not effect a legal compensation or
market placements despite her repeated demands, thus, the civil case for off-set under Article 1278 of the Civil Code, but rather, it partly extinguished
"Accounting, Sum of Money and Damages. respondent's obligations through the application of the security given by the
respondent for her loans.
In their reply, Citibank et al admitted that Sabeniano had deposits and money market
placements with them, including dollar accounts in other Citibank branches. However, Respondent's money market placements were with petitioner FNCB Finance, and after
they also alleged that respondent later obtained several loans from Citibank, executed several roll-overs, they were ultimately covered by PNs No. 20138 and 20139, which,
through Promissory Notes and secured by a pledge on her dollar accounts, and a deed by 3 September 1979, the date the check for the proceeds of the said PNs were issued,
of assignment against her MMPS with FNCB Finance. When Sabeniano defaulted, amounted to P1,022,916.66, inclusive of the principal amounts and interests. As to
Citibank exercised its right to off-set or compensate respondent's outstanding loans these money market placements, respondent was the creditor and petitioner FNCB
with her deposits and money market placements, pursuant to securities she executed. Finance the debtor (thereby implying that money market placement is a simple loan
Citibank supposedly informed Sabeniano of the foregoing compensation through or mutuum); while, as to the outstanding loans, petitioner Citibank was the creditor
letters, thus, Citibank et al were surprised when six years later, Sabeniano and her and respondent the debtor. Consequently, legal compensation, under Article 1278 of
counsel made repeated requests for the withdrawal of respondent's deposits and the Civil Code, would not apply since the first requirement for a valid compensation,
MMPs with Citibank, including her dollar accounts with Citibank-Geneva and her that each one of the obligors be bound principally, and that he be at the same time a
money market placements with petitioner FNCB Finance. Thus, petitioners prayed for principal creditor of the other, was not met.
the dismissal of the Complaint and for the award of actual, moral, and exemplary
damages, and attorney's fees. What petitioner Citibank actually did was to exercise its rights to the proceeds of
respondent's money market placements with petitioner FNCB Finance by virtue of the
The case was eventually decided after 10 years with the Judge declaring the offsetting Deeds of Assignment executed by respondent in its favor. Petitioner Citibank was only
done as illegal and the return of the amount with legal interest, while Sabeniano was acting upon the authority granted to it under the foregoing Deeds when it finally used
ordered to pay her loans to Citibank. The ruling was then appealed. The CA modified the proceeds of PNs No. 20138 and 20139, paid by petitioner FNCB Finance, to partly
the decision but only to the extent of Sabenianos loans which it ruled that Citibank pay for respondent's outstanding loans. Strictly speaking, it did not effect a legal
failed to establish the indebtedness and is also without legal and factual basis. The compensation or off-set under Article 1278 of the Civil Code, but rather, it partly
case was thus appealed to the SC. extinguished respondent's obligations through the application of the security given by
the respondent for her loans. Although the pertinent documents were entitled Deeds
ISSUE: Whether or not there was a valid off setting/compensation of loan vis a vis the of Assignment, they were, in reality, more of a pledge by respondent to petitioner
a.)Deposits and Citibank of her credit due from petitioner FNCB Finance by virtue of her money market
b.) MMPs. placements with the latter.
NOTE: A money market transaction is in the nature of a simple loan or mutuum.