LOAN | C R E D I T
SIMPLE LOAN ISSUES: (1) WON there is a perfected consensual contract (2)
SAURA IMPORT V. DBP
FACTS:
 Saura applied to RFC an industrial loan of P500k.
o 250k for construction of a factory building
o 240,900 balance of the purchase price of jute
mill
o 9100 additional working capta
 The jute mill machinery was already purchased by
Saura via letter of credit extended by PBTC, and to
secure such, a trust receipt was executed in favor of
the said bank
 RFC passed Reso 145 approving the loan for P500k to
be secured by a first mortgage on the factory building
to be constructed, the land site, and the machinery and
equipment to be installed.
 Before the day Saura was officially notified, Saura
wrote a letter to RFC requesting a modification:
o Instead of China Engineers as a co-maker,
Saura would put up a bond for P123,500
o Maria Roca would be substituted for
Inocencia Arellano
 In view of such request, Saura approved Reso 736 – to
reexamine all the aspects of the approved loan
 But Saura wrote to RFC stating that China had agreed
and asked that the necessary documents be prepared
in accordance with the terms of Reso 145
 Loan documents were executed
 Despite the formal execution, reexamination still
proceeded.
o The loan was reduced to P300k
 FR Hauling who signed the PN for China informed RFC
that his company is no longer involved therefore
considered the same as cancelled
 RFC requested RFC to grant the P500k loan
 Denied by RFC
o As they are constrained to consider as
cancelled the loan of P300k and in view of the
notification from China
 Saura informed RFC that China will reinstate their
signature if RFC will release the P500k loan
 Reso 9083 was approved restoring the P500k loan
 RFC wrote a letter to Saura that it will release the loan
from time to time but Saura did not pursue the matter.
Instead, it requested RFC to cancel the mortgage
 RFC cancelled the mortgage
 After almost 9 years, Saura commenced the present
suit alleging failure of RFC to comply with its obligation
to release the proceeds of the loan
WON the contract is still existing.
RULING: There was perfected consensual contract, but the
contract is no longer existing.
Article 1934. 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.
In the case at bar, there was offer and acceptance. However,
when Saura asked that the mortgage be cancelled, there was a
mutual desistance –“mutuo disenso”- which is mode of
extinguishing the obligations. Since mutual agreement can
create a contract, mutual disagreement by the parties can cause
its extinguishment.
BPI INVESTMENT V. CA
FACTS:
 Frank Roa obtained a loan at an interest rate of 16
1/4% per annum from AIDC, for the construction of a
house in his lot
o The house and lot were mortgaged to AIDC to
secure the loan.
 Roa sold the house and lot to ALS for P850k
 ALS paid P350k cash and assumed the P500k balance
of Roa’s indebtedness with AIDC
 AIDC proposed to ALS that it will grant them a new loan
of P500k to be applied to Roa’s debt and secured by
the same property, with an increased interest rate of
20% per annum and service fee of 1% per annum on
the outstanding principal balance payable within 10
years
 AIDC also added a penalty interest at the rate of 21%
per day from the date of the amortization
 3/31/1981 – ALS executed a mortgage deed containing
the above stipulations and the monthly amortization
commence on 5/1/1981
 ALS paid Roa’s loan and arrearages amounting to
P190k on 8/19/1982 and applying the loan proceeds of
P500k to the principal balance of Roa’s loan amounting
to P457,204.9
 9/13/1982 – BPIIC released to ALS P7146.87
purporting to be what was left of their loan after full
payment of Roa’s loan.
 BPIIC instituted a foreclosure proceeding against ALS
on the ground that they failed to pay the mortgage
indebtedness from 5/1/1981 to 6/30/1984 amounting
to P475,585.31
 ALS argued that they were not in arrears in their
payment but in fact made an overpayment as of
6/30/184. They maintained that they should not be
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LOAN | C R E D I T
made to pay amortization before the actual release of
the loan in August and September 1982.
ISSUES / RULING:
(1) WON the contract of simple loan in this case was perfected
on 9/13/1982, when BPIIC delivered the purported net
proceeds of the loan to ALS
 YES. A loan contract is not a consensual contract but a
real contract.
 It is perfected only upon the delivery of the object of
the contract
 A simple loan is perfected upon the delivery of the
object of the contract, hence a real contract
 In this case, even though the loan contract was signed
on 3/31/1981, it was perfected only on 9/13/1982
when the full loan was released to ALS
(2) WON the payment of monthly amortization should
commence on 5/1/1982 as stipulated
 NO. ALS obligation to pay commence only on
10/13/1982, a month after the perfection of the
contract
 As averred by private respondents, the promise of
BPIIC to extend and deliver the loan is upon the
consideration that ALS and Litonjua shall pay the
monthly amortization commencing on May 1, 1981,
one month after the supposed release of the loan. It is
a basic principle in reciprocal obligations that neither
party incurs in delay, if the other does not comply or is
not ready to comply in a proper manner with what is
incumbent upon him. Only when a party has
performed his part of the contract can he demand that
the other party also fulfills his own obligation and if the
latter fails, default sets in. Consequently, petitioner
could only demand for the payment of the monthly
amortization after September 13, 1982 for it was only
then when it complied with its obligation under the
loan contract. Therefore, in computing the amount
due as of the date when BPIIC extrajudicially caused
the foreclosure of the mortgage, the starting date is
October 13, 1982 and not May 1, 1981.
NAGUIAT V. CA
FACTS:
 Queaño applied with Naguiat for a loan in the amount
of P200k, which Naguiat granted.
o Naguiat indorsed to Queaño Associated Bank
Check for the amount P95k, which was earlier
issued to Naguiat by the Corporate Resources
Financing Corporation. She also issued her
own Filmanbank Check, to the order of
Queaño, and for the amount of P95k. The
proceeds of these checks were to constitute
the loan granted by Naguiat to Queaño.
o To secure the loan, Queaño executed a Deed
of Real Estate Mortgage in favor of Naguiat,
and surrendered to the latter the owner’s
duplicates of the titles covering the
mortgaged properties
o Queaño issued to Naguiat a promissory note
for the amount of P200,000.00, with interest
at 12% per annum. Queaño also issued a
Security Bank and Trust Company check,
postdated for the amount of P200,000.00 and
payable to the order of Naguiat.
 Upon presentment on its maturity date, the Security
Bank check was dishonored for insufficiency of funds.
 Queaño received a letter from Naguiat’s lawyer,
demanding settlement of the loan.
 Queaño and Ruebenfeldt met with Naguiat. At the
meeting, Queaño told Naguiat that she did not receive
the proceeds of the loan, adding that the checks were
retained by Ruebenfeldt, who purportedly was
Naguiat’s agent.
 Naguiat applied for the extrajudicial foreclosure of the
mortgage. Before the scheduled sale, Queaño filed
annulment of the mortgage deed.
ISSUE: WON there was a perfected contract of loan between
the parties
RULING: NO.
 There was no evidence 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.
o It is only after the checks have produced the
effect of payment that the contract of loan
may be deemed perfected.
 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 Queaño would enjoy only upon the
encashment of the checks signed or indorsed by
Naguiat.
 Since Naguiat presented no such proof, it follows that
the checks were not encashed or credited to Queaño’s
account.
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LOAN | C R E D I T
 That being the case, it follows that the mortgage which
is supposed to secure the loan is null and void.
CEBU INTERNATIONAL FINANCE CORP V. CA
FACTS:
 Alegre invested with CIFC P500k in cash
 CIFC issued a promissory note for P516,238.67 to
mature on May 27, 1991
o CIFC issued BPI Check
o The check was drawn from CIFC’s current
account with BPI
 When Alegre’s wife deposited the check, BPI
dishonored it with the annotation that the check is
subject of an investigation
 BPI took custody of the check and used it to trace the
perpetrators of the forgery
 Alegre notified CIFC of the dishonored check and
demanded that he be paid in cash
o CIFC refused
 Alegre made a formal demand for the payment
o CIFC promised to replace the check but
required an impossible condition that the
original must first be surrendered
 Alegre filed a complaint for recovery of a sum of money
against CIFC
 When BPI deducted the full amount of the forged
checks, including that issued to Alegre, CIFC sued BPI
for collection
o BPI did not deliver to Alegre the amount
deducted from CIFC’s current account
 The parties then entered into a compromise
agreement to the effect that BPI will debit the amount
of the check issued to Alegre from CIFC’s current
account representing payment/discharge and that BPI
will have no more liability in case petitioner is
adjudged liable to Alegre.
 BPI encashed and deducted the said amount from the
account of CIFC, but the proceed as well as the check
remained in BPI’s custody
ISSUE: WON there is a contract of loan between Alegre and
CIFC. / WON CIFC is discharged from its liability
RULING: YES / NO
 The private respondent accepted the CHECK, instead
of requiring payment in money. Yet, when he
presented it to RCBC for encashment, as early as June
17, 1991, the same was dishonored by non-
acceptance, with BPIs annotation: Check is subject of
an investigation. These facts were testified to by BPIs
manager.
 Under these circumstances, and after the notice of
dishonor, the holder has an immediate right of
recourse against the drawer, and consequently could
immediately file an action for the recovery of the value
of the check.
 In a loan transaction, the obligation to pay a sum
certain in money may be paid in money, which is the
legal tender or, by the use of a check. A check is not a
legal tender, and therefore cannot constitute valid
tender of payment.
 Mere delivery of checks does not discharge the
obligation under a judgment. The obligation is not
extinguished and remains suspended until the
payment by commercial document is actually realized
(Art. 1249)
 when the bank deducted the amount of the CHECK
from CIFCs current account, this did not ipso facto
operate as a discharge or payment of the instrument.
Although the value of the CHECK was deducted from
the funds of CIFC, it was not delivered to the payee,
Vicente Alegre. Instead, BPI offset the amount against
the losses it incurred from forgeries of CIFC checks,
allegedly committed by Alegre. The confiscation of the
value of the check was agreed upon by CIFC and BPI.
The parties intended to amicably settle the collection
suit filed by CIFC with the RTC-Makati, Branch 147, by
entering into a compromise agreement
 A compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put
an end to one already commenced. It is an agreement
between two or more persons who, for preventing or
putting an end to a lawsuit, adjust their difficulties by
mutual consent in the manner which they agree on,
and which everyone of them prefers in the hope of
gaining, balanced by the danger of losing. The
compromise agreement could not bind a party who
did not sign the compromise agreement nor avail of its
benefits. Thus, the stipulations in the compromise
agreement is unenforceable against Vicente Alegre,
not a party thereto. His money could not be the
subject of an agreement between CIFC and BPI.
Although Alegre’s money was in custody of the bank,
the banks possession of it was not in the concept of an
owner. BPI cannot validly appropriate the money as its
own.
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BPI FAMILY BANK V. FRANCO  One of the conditions of that contract of purchase was
that on failure of the purchaser to pay the balance of
FACTS: said purchase price or any of the installments on the
date agreed upon, the property bought would revert
 On Aug 16, 1989 Tevesteco opened a savings and
to the original owner.
current account with BPI-FB. FMIC also opened a time
 For the last installment, upon receiving the letter of the
deposit account with the same branch of BPI-FB
vendor of said property, the purchasers, the appellants
 On Aug 31, 1989 Franco opened 3 accounts – current,
herein, realizing that they would be unable to pay the
savings and time deposit – with BPI-FB amounting to
balance due, began to make an effort to borrow
P2M
money with which to pay the balance due, began to
o In opening these accounts he used a check
make an effort to borrow money with which to pay the
issued by Tevesteco
balance of their indebtedness on the purchase price of
 Check was part of the P80M debited
the property involved.
by BPI-FB from FMIC’s time deposit
 an application was made to the defendant for a loan
account and credited to Tevesteco’s
for the purpose of satisfying their indebtedness to the
current account pursuant to an
vendor of said property. After some negotiations the
Authority to Debit purportedly
defendants agreed to loan the plaintiffs to loan the
signed by FMIC’s officers
plaintiffs the sum of P17,500 upon condition that the
 It appears however, that the signatures of FMIC’s
plaintiffs execute and deliver to him a pacto de retro
officers were forged.
of said property.
 BPI-FB debited Franco’s savings and current accounts
for the amounts remaining therein ISSUE: WON the contract in question is a mortgage
 The 2 checks drawn by Franco against his BPI-FB were
dishonored and stamped with a notation “account RULING: NO
under garnishment”  The contract is a pacto de retro and not a mortgage.
ISSUE: WON the amounts shall be given to Franco There is not a word, a phrase, a sentence or a
paragraph in the entire record, which justifies this
RULING: YES court in holding that the said contract of pacto de retro
is a mortgage and not a sale with the right to
 the deposit of money in banks is governed by the Civil
repurchase.
Code provisions on simple loan or mutuum.
 The purpose of the contract is expressed clearly that
 As there is a debtor-creditor relationship between a
there can certainly be no doubt as to the purpose of
bank and its depositor, BPI-FB ultimately acquired
the Tolentino to sell the property in question, reserving
ownership of Franco's deposits, but such ownership is
the right only to repurchase the same
coupled with a corresponding obligation to pay him an
 First, that the contract of pacto de retro is an absolute
equal amount on demand.
sale of the property with the right to repurchase and
 Although BPI-FB owns the deposits in Franco's
not a mortgage; and, second, that by virtue of the said
accounts, it cannot prevent him from demanding
contract the vendor became the tenant of the
payment of BPI-FB's obligation by drawing checks
purchaser, under the conditions mentioned in
against his current account, or asking for the release of
paragraph 3 of said contact. When the vendor of
the funds in his savings account.
property under a pacto de retro rents the property and
 Thus, when Franco issued checks drawn against his
agrees to pay a rental value for the property during the
current account, he had every right as creditor to
period of his right to repurchase, he thereby becomes
expect that those checks would be honored by BPI-FB
a "tenant" and in all respects stands in the same
as debtor.
relation with the purchaser as a tenant under any
TOLENTINO V. GONZALES SY CHIAM other contract of lease.
 In the present case the property in question was sold.
FACTS: It was an absolute sale with the right only to
repurchase. During the period of redemption the
 Sometime prior to the 28th day of November, 1922, purchaser was the absolute owner of the property.
the Tolentino and Manio purchased to the Luzon Rice During the period of redemption the vendor was not
Mills, Inc., a piece or parcel of land with the camarin the owner of the property. During the period of
located thereon for the price of P25k, promising to pay redemption the vendor was a tenant of the purchaser.
therefor in three installments.
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LOAN | C R E D I T

During the period of redemption the relation which

existed between the vendor and the vendee was that
of landlord and tenant. That relation can only be
terminated by a repurchase of the property by the
vendor in accordance with the terms of the said
contract. The contract was one of rent. The contract
was not a loan, as that word is used in Act No. 2655.

Loan vs Rent as discussed under Usury Law in relation to Act No.

2655 "An Act fixing rates of interest upon 'loans' and declaring
the effect of receiving or taking usurious rates."

Usury, generally speaking, may be defined as contracting for or

receiving something in excess of the amount allowed by law for
the loan or forbearance of money—the taking of more interest
for the use of money than the law allows.

It will be noted that said statute imposes a penalty upon a

"loan" or forbearance of any money, goods, chattels or credits,
etc. The central idea of said statute is to prohibit a rate of
interest on "loans." A contract of "loan," is very different
contract from that of "rent".

Loan
 the giving of a sum of money,
goods or credits to another,
with a promise to repay, but
not a promise to return the
same thing
 to deliver to another for
temporary use, on condition
that the thing or its equivalent
be returned; or to deliver for
temporary use on condition
that an equivalent in kind
shall be returned with a
compensation for its use
 It never means the return of
the same thing. It means the
return of an equivalent only,
but never the same thing
loaned.
 the moment the contract is
completed the money, goods
or chattels given cease to be
the property of the former
owner and becomes the
property of the obligor to be
used according to his own
will, unless the contract itself
expressly provides for a
special or specific use of the
same.
 At all events, the money,
goods or chattels, the
moment the contract is
executed, cease to be the
property of the former owner
and becomes the absolute
property of the obligor.
Rent
 the owner of the property
does not lose his ownership.
He simply loses his control
over the property rented
during the period of the
contract.
 the relation between the
contractors is that of landlord
and tenant
 may be defined as the
compensation either in
money, provisions, chattels, or
labor, received by the owner
of the soil from the occupant
thereof.
 It is defined as the return or
compensation for the
possession of some corporeal
inheritance, and is a profit
issuing out of lands or
tenements, in return for their
use.
 contract by which one of the
parties delivers to the other
some nonconsumable thing, in
order that the latter may use it
during a certain period and
return it to the former
 In the case of a contract of
"rent," under the civil law, it is
called a "commodatum."

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