Beruflich Dokumente
Kultur Dokumente
CASE DIGEST
G.R. No. L-24968 April 27, 1972 appearing that China Engineers, Ltd. is now willing to
sign the promissory notes jointly with the borrower-
SAURA IMPORT and EXPORT CO., INC. vs. DEVELOPMENT corporation," but with the proviso the Department of
BANK OF THE PHILIPPINES Agriculture and Natural Resources shall certify to the
following:
Facts:
Plaintiff Saura applied to the Rehabilitation Finance 1. That the raw materials needed by the borrower-corporation to
Corporation (RFC), before its conversion into DBP, for carry out its operation are available in the immediate vicinity;
an industrial loan of P500,000.00. and
RFC passed Resolution No. 145 (1st) approving the
loan application for P500,000.00, to be secured by a 2. That there is prospect of increased production thereof to
first mortgage on the factory building to be constructed, provide adequately for the requirements of the factory.
the land site thereof, and the machinery and equipment
to be installed.
Saura, Inc. was officially notified of the resolution.
The day before, however, evidently having otherwise
The action thus taken was communicated to Saura, Inc.
in a letter of RFC wherein it was explained that the
been informed of its approval, Saura, Inc. wrote a letter
certification by the Department of Agriculture and
to RFC, requesting a modification of the terms laid down
Natural Resources was required "as the intention of the
by it, namely: that in lieu of having China Engineers, Ltd.
original approval (of the loan) is to develop the
(which was willing to assume liability only to the extent
manufacture of sacks on the basis of locally available
of its stock subscription with Saura, Inc.) sign as co-
raw materials."
maker on the corresponding promissory notes, Saura,
Inc. would put up a bond for P123,500.00, an amount RFC stated, in a letter to Saura, that “the releases of the
equivalent to such subscription; and that Maria S. Roca loan, if revived, are proposed to be made from time to
would be substituted for Inocencia Arellano as one of time, subject to availability of funds towards the end
the other co-makers, having acquired the latter's shares that the sack factory shall be placed in actual operating
in Saura, Inc. status. We shall be able to act on your request for
revised purpose and manner of releases upon re-
In view of such request RFC approved Resolution No.
appraisal of the securities offered for the loan.”With
736 (2nd) designating of the members of its Board of
regard to the additional requirement concerning the
Governors to reexamine all the aspects of the approved
certification of DANR, RFC stated “we wish to reiterate
loan.
that the basis of the original approval is to develop the
Saura, Inc. wrote RFC that China Engineers, Ltd. had manufacture of sacks on the basis of the locally
again agreed to act as co-signer for the loan, and asked available raw materials. Your statement that you will
that the necessary documents be prepared in have to rely on the importation of jute and your request
accordance with the terms and conditions specified in that we give you assurance that your company will be
Resolution No. 145. able to bring in sufficient jute materials as may be
The loan documents were executed: the promissory necessary for the operation of your factory, would not
note, with F.R. Halling, representing China Engineers, be in line with our principle in approving the
Ltd., as one of the co-signers; and the corresponding loan.”Saura, Inc. did not pursue the matter and
deed of mortgage, which was duly registered. requested RFC to cancel the mortgage.
It appears, however, that despite the formal execution RFC executed the corresponding deed of cancellation
of the loan agreement, the reexamination contemplated and delivered it to Ramon F. Saura himself as president
in Resolution No. 736 proceeded. In a meeting of the of Saura, Inc.
RFC Board of Governors, it was decided to reduce the The cancellation was requested to make way for the
loan from P500,000.00 to P300,000.00. This was registration of a mortgage contract, over the same
Resolution No. 3989 (3rd). property in favor of the Prudential Bank and Trust Co.,
Then, F.R. Halling, representing China Engineers Ltd., under which contract Saura, Inc. had to pay its
jointly and severally with the other RFC, stated that his obligation on the trust receipt.
company no longer wants the loan and therefore It appears further that for failure to pay the said
considered the same as cancelled as far as it was obligation the Prudential Bank and Trust Co. sued
concerned. A follow-up letter requested RFC that the Saura, Inc.
registration of the mortgage be withdrawn.
Almost 9 years after the mortgage in favor of RFC was
In the meantime Saura, Inc. had written RFC requesting cancelled, Saura, Inc. filed a suit for damages, alleging
that the loan of P500,000.00 be granted. The request failure of RFC (as predecessor of the defendant DBP) to
was denied by RFC. comply with its obligation to release the proceeds of the
Saura, Inc. took exception to the cancellation of the loan loan applied for and approved, thereby preventing the
and informed RFC that China Engineers, Ltd. "will at any plaintiff from completing or paying contractual
time reinstate their signature as co-signer of the note if commitments it had entered into, in connection with its
RFC releases to us the P500,000.00 originally approved jute mill project.
by you.".
RFC passed Resolution No. 9083 (4th), restoring the
loan to the original amount of P500,000.00, "it
1
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
2
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
by the borrower of breeding fee of 10% of the book value of the secured by the same property, at an interest rate of 20%
bulls. The appellant contends that the contract was commodatum per annum and service fee of 1% per annum on the
and that, for that reason, as the appellee retained ownership or outstanding principal balance payable within ten years
title to the bull it should suffer its loss due to force majeure. A in equal monthly amortization of P9,996.58 and penalty
contract of commodatum is essentially gratuitous. If the breeding interest at the rate of 21% per annum per day from the
fee be considered a compensation, then the contract would be a date the amortization became due and payable.
lease of the bull. Then, ALS executed a mortgage deed containing the
above stipulations with the provision that payment of
Under article 1671 of the Civil Code, the lessee would be subject the monthly amortization shall commence on May 1,
to the responsibilities of a possessor in bad faith, because she had 1981.
continued possession of the bull after the expiry of the contract. ALS and Litonjua updated Roa’s arrearages by paying
And even if the contract be commodatum, still the appellant is BPIIC the sum of P190,601.35. This reduced Roa’s
liable, because article 1942 of the Civil Code provides that a principal balance to P457,204.90 which, in turn, was
bailee in a contract of commodatum — liquidated when BPIIC applied thereto the proceeds of
private respondents loan of P500,000.
. . . is liable for loss of the things, even if it should be through a
BPIIC instituted foreclosure proceedings against ALS on
fortuitous event:
the ground that they failed to pay the mortgage
indebtedness which from May 1, 1981 to June 30, 1984,
(2) If he keeps it longer than the period stipulated . . .
amounted to P475,585.31.
(3) If the thing loaned has been delivered with appraisal of its ALS and Litonjua filed Civil Case No. 52093 against
BPIIC.
value, unless there is a stipulation exempting the bailee from
responsibility in case of a fortuitous event; RTC: in favor of ALS Management and Development
Corporation and Antonio K. Litonjua. The amount of
The original period of the loan was from 8 May 1948 to 7 May loan granted by BPI to ALS and Litonjua was only in the
1949. The loan of one bull was renewed for another period of one principal sum of P464,351.77, with interest at 20% plus
year to end on 8 May 1950. But the appellant kept and used the service charge of 1% per annum, payable on equal
bull until November 1953 when during a Huk raid it was killed by monthly and successive amortizations at P9,283.83 for
stray bullets. Furthermore, when lent and delivered to the ten (10) years or one hundred twenty (120) months.
deceased husband of the appellant the bulls had each an CA: Affirmed. It ruled that a simple loan is perfected
appraised book value, to with: the Sindhi, at P1,176.46, the only upon the delivery of the object of the contract. The
Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not contract of loan between BPIIC and ALS & Litonjua was
stipulated that in case of loss of the bull due to fortuitous event perfected only on September 13, 1982, the date when
the late husband of the appellant would be exempt from liability. BPIIC released the purported balance of the P500,000
loan after deducting therefrom the value of Roas
As the appellant already had returned the two bulls to the indebtedness. Thus, payment of the monthly
appellee, the estate of the late defendant is only liable for the sum amortization should commence only a month after the
of P859.63, the value of the bull which has not been returned to said date, as can be inferred from the stipulations in the
the appellee, because it was killed while in the custody of the contract. Evidence showed that private respondents had
administratrix of his estate. an overpayment, because as of June 1984, they already
paid a total amount of P201,791.96. Therefore, there
was no basis for BPIIC to extrajudicially foreclose the
mortgage and cause the publication in newspapers
concerning private respondents delinquency in the
BPI INVESTMENT CORPORATION vs. HON. COURT OF payment of their loan.
APPEALS and ALS MANAGEMENT & DEVELOPMENT MR – denied.
CORPORATION
Issues: (1) WON the ruling in Bonnevie v. CA is applicable to
Facts: the case.
Frank Roa obtained a loan at an interest rate of 16 (2) WON BPI should be held liable for moral and
1/4% per annum from Ayala Investment and exemplary damages and attorney’s fees.
Development Corporation (AIDC), the predecessor of
petitioner BPIIC, for the construction of a house on his Held: (1) NO. Petitioner misapplied Bonnevie. Petitioner
lot in New Alabang Village, Muntinlupa. claims that a contract of loan is a consensual contract, and a loan
contract is perfected at the time the contract of mortgage is
Said house and lot were mortgaged to AIDC to secure
executed conformably with the ruling in Bonnevie v. Court of
the loan.
Appeals.
Roa sold the house and lot to private respondents ALS
and Antonio Litonjua for P850,000. They paid P350,000 A loan contract is not a consensual contract but a real contract. It
in cash and assumed the P500,000 balance of Roas is perfected only upon the delivery of the object of the contract.
indebtedness with AIDC. The contract in Bonnevie declared by this Court as a perfected
However, AIDC was not willing to extend the old consensual contract falls under the first clause of Article 1934,
interest rate to ALS and proposed to grant them a new
loan of P500,000 to be applied to Roa’s debt and
3
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Civil Code. It is an accepted promise to deliver something by way given in recognition of their rights which were violated by BPIIC.
of simple loan. For this purpose, the amount of P25,000 is sufficient.
In the present case, the loan contract between BPI, on the one Lastly, as in SSS where we awarded attorneys fees because
hand, and ALS and Litonjua, on the other, was perfected only on private respondents were compelled to litigate, we sustain the
September 13, 1982, the date of the second release of the loan. award of P50,000 in favor of private respondents as attorneys
Following the intentions of the parties on the commencement of fees.
the monthly amortization, as found by the Court of Appeals,
private respondents obligation to pay commenced only on
October 13, 1982, a month after the perfection of the contract.
We also agree with private respondents that a contract of loan CELESTINA T. NAGUIAT vs. COURT OF APPEALS and AURORA
involves a reciprocal obligation, wherein the obligation or QUEAÑO
promise of each party is the consideration for that of the other.
Facts:
As averred by private respondents, the promise of BPIIC to Queaño applied with Naguiat for a loan in the amount of
extend and deliver the loan is upon the consideration that ALS 200K, which Naguiat granted.
and Litonjua shall pay the monthly amortization commencing on
May 1, 1981, one month after the supposed release of the loan. It
Naguiat indorsed to Queaño - Associated Bank Check
No. 090990 (dated 11 August 1980) for the amount
is a basic principle in reciprocal obligations that neither party
95K, which was earlier issued to Naguiat by the
incurs in delay, if the other does not comply or is not ready to
Corporate Resources Financing Corporation. She also
comply in a proper manner with what is incumbent upon him.
issued her own Filmanbank Check No. 065314, to the
Only when a party has performed his part of the contract can he
order of Queaño, also dated 11 August 1980 and for the
demand that the other party also fulfills his own obligation and if
amount of 95K. The proceeds of these checks were to
the latter fails, default sets in. Consequently, petitioner could only
constitute the loan granted by Naguiat to Queaño.
demand for the payment of the monthly amortization after
September 13, 1982 for it was only then when it complied with To secure the loan, Queaño executed a Deed of Real
its obligation under the loan contract. Therefore, in computing Estate Mortgage dated 11 August 1980 in favor of
the amount due as of the date when BPIIC extrajudicially caused Naguiat, and surrendered to the latter the owner’s
the foreclosure of the mortgage, the starting date is October 13, duplicates of the titles covering the mortgaged
1982 and not May 1, 1981. properties.
The mortgage deed was notarized, and Queaño issued to
(2) No moral and exemplary damages were awarded. Naguiat a promissory note for the amount of 200K, with
Only, nominal damages and attorney’s fees. In Social Security interest at 12% per annum, payable on 11 September
System vs. Court of Appeals, 120 SCRA 707, where we said: 1980.5
Queaño also issued a Security Bank and Trust Company
Nor can the SSS be held liable for moral and temperate damages. check, postdated 11 September 1980, for the amount of
As concluded by the Court of Appeals the negligence of the 200K and payable to the order of Naguiat.
appellant is not so gross as to warrant moral and temperate Upon presentment on its maturity date, the Security
damages, except that, said Court reduced those damages by only Bank check was dishonored for insufficiency of funds.
P5,000.00 instead of eliminating them. Neither can we agree with Queaño requested Security Bank to stop payment of her
the findings of both the Trial Court and respondent Court that the postdated check, but the bank rejected the request
SSS had acted maliciously or in bad faith. The SSS was of the pursuant to its policy not to honor such requests if the
belief that it was acting in the legitimate exercise of its right check is drawn against insufficient funds.6
under the mortgage contract in the face of irregular payments On 16 October 1980, Queaño received a letter from
made by private respondents and placed reliance on the Naguiat’s lawyer, demanding settlement of the loan.
automatic acceleration clause in the contract. The filing alone of Shortly thereafter, Queaño and one Ruby Ruebenfeldt
the foreclosure application should not be a ground for an award met with Naguiat. At the meeting, Queaño told Naguiat
of moral damages in the same way that a clearly unfounded civil that she did not receive the proceeds of the loan, adding
action is not among the grounds for moral damages. that the checks were retained by Ruebenfeldt, who
purportedly was Naguiat’s agent.7
As admitted by ASL themselves, they were irregular in their
Naguiat applied for the extrajudicial foreclosure of the
payment of monthly amortization. Conformably with our ruling
mortgage
in SSS, we can not properly declare BPIIC in bad faith.
Consequently, we should rule out the award of moral and Queaño filed the case seeking the annulment of the
exemplary damages. mortgage deed. The trial court eventually stopped the
auction sale.9
However, in our view, BPIIC was negligent in relying merely on RTC rendered judgment, declaring the Deed of Real
the entries found in the deed of mortgage, without checking and Estate Mortgage null and void, and ordering Naguiat to
correspondingly adjusting its records on the amount actually return to Queaño the owner’s duplicates of her titles to
released to private respondents and the date when it was the mortgaged lots.
released. Such negligence resulted in damage to private CA affirmed RTC.
respondents, for which an award of nominal damages should be
4
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Issue: WON issuance of the check resulted in the perfection of a executed since petitioner and respondent were close
contract of loan friends at the time.[15] Respondent paid the stipulated
monthly interest for both loans but on their maturity
Held: No. No evidence was submitted by Naguiat that the checks dates, she failed to pay the principal amounts despite
she issued or endorsed were actually encashed or deposited. The repeated demands.[16]
mere issuance of the checks did not result in the perfection of the Thio denied that she contracted the two loans with
contract of loan. For the Civil Code provides that the delivery of petitioner and countered that it was Marilou Santiago to
bills of exchange and mercantile documents such as checks shall whom petitioner lent the money. She claimed she was
produce the effect of payment only when they have been merely asked by petitioner to give the crossed checks
cashed.20 It is only after the checks have produced the effect of to Santiago.[17] She issued the checks for P76,000
payment that the contract of loan may be deemed perfected. Art. and P20,000 not as payment of interest but to
1934 of the Civil Code provides: accommodate petitioners request that respondent use
"An accepted promise to deliver something by way of her own checks instead of Santiagos.[18]
commodatum or simple loan is binding upon the parties, but the RTC ruled in favor of petitioner.[19] It found that
commodatum or simple loan itself shall not be perfected until the respondent borrowed from petitioner the amounts of
delivery of the object of the contract." US$100,000 with monthly interest of 3% and P500,000
A loan contract is a real contract, not consensual, and, as such, is at a monthly interest of 4%
perfected only upon the delivery of the object of the contract.21 In
CA reversed the decision of the RTC and ruled that there
this case, the objects of the contract are the loan proceeds which
was no contract of loan between the parties:
Queaño would enjoy only upon the encashment of the checks
[petitioner] failed to substantiate her claim that
signed or indorsed by Naguiat. If indeed the checks were [respondent] indeed borrowed money from her. There
encashed or deposited, Naguiat would have certainly presented
is nothing in the record that shows that
the corresponding documentary evidence, such as the returned [respondent] received money from [petitioner]. The
checks and the pertinent bank records. Since Naguiat presented
checks received by [respondent], being crossed,
no such proof, it follows that the checks were not encashed or may not be encashed but only deposited in the bank
credited to Queaño’s account.1awphi1.nét by the payee thereof, that is, by Marilou Santiago
WHEREFORE, the petition is denied and the assailed decision is herself.
affirmed. Costs against petitioner.
It must be noted that crossing a
check has the following effects: (a) the check
may not be encashed but only deposited in the
bank; (b) the check may be negotiated only
CAROLYN M. GARCIA vs. RICA MARIE S. THIO onceto one who has an account with the bank;
(c) and the act of crossing the check serves as
Facts: warning to the holder that the check has been
Thio received from Garcia a crossed issued for a definite purpose so that he must
check[4] dated 02/24/95 in the amount of US$100,000 inquire if he has received the check pursuant
payable to the order of a certain Marilou Santiago.[5] to that purpose, otherwise, he is not a holder
Thereafter, Garcia received from Thio every month the in due course.
amount of US$3,000[6] and P76,500[7] on July
26,[8] August 26, September 26 and October 26, 1995. Issue: WON there is a contract of loan bet. Thio and Garcia
Garcia received from petitioner another crossed
Held: Yes. A loan is a real contract, not consensual, and as such is
check in the amount of 500K also payable to the order
perfected only upon the delivery of the object of the
of Marilou Santiago.[10]
contract.[25] This is evident in Art. 1934 of the Civil Code which
Garcia received from respondent the amount of P20,000 provides:
every month on August 5, September 5, October 5
and November 5, 1995.[11] An accepted promise to deliver
According to Garcia, Thio failed to pay the principal something by way of commodatum or simple
amounts of the loans (US$100,000 and P500,000) when loan is binding upon the parties, but the
they fell due. commodatum or simple loan itself shall not
Thus, Garcia filed a complaint for sum of money and be perfected until the delivery of the object
damages of the contract. (Emphasis supplied)
Petitioner alleged that on 02/24/95 respondent
borrowed from her the amount of US$100,000 with Upon delivery of the object of the contract of loan (in this case the
interest thereon at the rate of 3% per month, which loan money received by the debtor when the checks were encashed)
would mature on October 26, 1995.[13] the debtor acquires ownership of such money or loan proceeds
The amount of this loan was covered by the first check. and is bound to pay the creditor an equal amount.[26]It is
On June 29, 1995, respondent again borrowed the undisputed that the checks were delivered to
amount of P500,000 at an agreed monthly interest of respondent. However, these checks were crossed and payable not
4%, the maturity date of which was on November 5, to the order of respondent but to the order of a certain Marilou
1995.[14] The amount of this loan was covered by the Santiago.
second check. For both loans, no promissory note was
5
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Issue: who borrowed money from petitioner respondent the verbal agreement that the loans would earn 3% and 4%
or Santiago? interest per month. Article 1956 of the Civil Code provides that
[n]o interest shall be due unless it has been expressly stipulated
Held: We agree with petitioner. Petitioner insists that it was upon in writing.
respondents instruction that both checks were made payable
to Santiago.[27] She maintains that it was also upon respondents Be that as it may, while there can be no stipulated
instruction that both checks were delivered to her (respondent) interest, there can be legal interest pursuant to Article 2209 of
so that she could, in turn, deliver the same the Civil Code. It is well-settled that:
to Santiago.[28] Furthermore, she argues that once respondent
received the checks, the latter had possession and control of them When the obligation is breached, and
such that she had the choice to either forward them to Santiago it consists in the payment of a sum of money,
(who was already her debtor), to retain them or to return them to i.e., a loan or forbearance of money, the
petitioner.[29] interest due should be that which may have
been stipulated in writing. Furthermore, the
Delivery is the act by which the res or substance thereof is placed interest due shall itself earn legal interest from
within the actual or constructive possession or control of the time it is judicially demanded. In the
another.[30] Although respondent did not physically receive the absence of stipulation, the rate of interest shall
proceeds of the checks, these instruments were placed in her be 12% per annum to be computed from
control and possession under an arrangement whereby she default, i.e., from judicial or extrajudicial
actually re-lent the amounts to Santiago. demand under and subject to the provisions of
Several factors support this conclusion: (summarized:) Article 1169 of the Civil Code.
6
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Savings Account No. 10-1567 was thereafter issued to what private respondent deposited in Sterelas bank
Mrs. Vives.[4] account.[15] Moreover, the fact that private respondent
Vives learned that Sterela was no longer holding office sued his good friend Sanchez for his failure to recover
in the address previously given to him. He and his wife his money from Doronilla shows that the transaction
went to the Bank to verify if their money was still was not merely gratuitous but had a business angle to
intact. The bank manager referred them to Mr. Rufo it. Hence, petitioner argues that it cannot be held liable
Atienza, the assistant manager, who informed them that for the return of private respondents P200,000.00
part of the money in Savings Account No. 10-1567 had because it is not privy to the transaction between the
been withdrawn by Doronilla, and that only 90k latter and Doronilla.[16]
remained therein. o Producers Bank also asserts that the CA erred in
Mrs. Vives could not withdraw said remaining amount affirming the trial courts decision since the findings of
because it had to answer for some postdated checks fact therein were not accord with the evidence
issued by Doronilla. presented by petitioner during trial to prove that the
transaction between private respondent and Doronilla
According to Atienza, after Mrs. Vives and Sanchez
opened Savings Account No. 10-1567, Doronilla opened was a mutuum, and that it committed no wrong in
Current Account No. 10-0320 for Sterela and authorized allowing Doronilla to withdraw from Sterelas savings
account.[19]
the Bank to debit Savings Account No. 10-1567 for the
o Private respondent, on the other hand, argues that the
amounts necessary to cover overdrawings in Current
transaction between him and Doronilla is not
Account No. 10-0320. In opening said current account,
a mutuum but an accommodation,[21] since he did not
Sterela, through Doronilla, obtained a loan
actually part with the ownership of his P200,000.00 and
of P175,000.00 from the Bank.
in fact asked his wife to deposit said amount in the
To cover payment thereof, Doronilla issued three account of Sterela so that a certification can be issued to
postdated checks, all of which were dishonored. Atienza
the effect that Sterela had sufficient funds for purposes
also said that Doronilla could assign or withdraw the
of its incorporation but at the same time, he retained
money in Savings Account No. 10-1567 because he was
some degree of control over his money through his wife
the sole proprietor of Sterela.[5]
who was made a signatory to the savings account and in
Vives tried to contact Doronilla through Sanchez. whose possession the savings account passbook was
On June 29, 1979, he received a letter from Doronilla, given.[22]
assuring him that his money was intact and would be
returned to him. Issue: WON the transaction was a commodatum or mutuum
On August 13, 1979, Doronilla issued a postdated check
for Two Hundred Twelve Thousand Pesos Held: Commodatum. No error was committed by the Court of
(P212,000.00) in favor of private respondent. Appeals when it ruled that the transaction between private
However, upon presentment by Vives t to the drawee respondent and Doronilla was a commodatum and not
bank, the check was dishonored. Doronilla requested a mutuum. A circumspect examination of the records reveals that
Vives to present the same check on September 15, 1979 the transaction between them was a commodatum. Article 1933
but when the latter presented the check, it was again of the Civil Code distinguishes between the two kinds of loans in
dishonored.[6] this wise:
Vives referred the matter to a lawyer, who made a
written demand upon Doronilla for the return of his By the contract of loan, one of the parties delivers to another,
clients money. Doronilla issued another check either something not consumable so that the latter may use the
for P212,000.00 in private respondents favor but the same for a certain time and return it, in which case the contract is
check was again dishonored for insufficiency of funds.[7] called a commodatum; or money or other consumable thing,
Vives instituted an action for recovery of sum of money upon the condition that the same amount of the same kind and
in RTC against Doronilla, Sanchez, Dumagpi and quality shall be paid, in which case the contract is simply called a
petitioner. He also filed criminal actions against loan or mutuum.
Doronilla, Sanchez and Dumagpi in the RTC. Commodatum is essentially gratuitous.
Sanchez died while the case was pending before the Simple loan may be gratuitous or with a stipulation to pay
trial court. interest.
RTC- judgment is hereby rendered sentencing In commodatum, the bailor retains the ownership of the thing
defendants Arturo J. Doronila, Estrella Dumagpi and loaned, while in simple loan, ownership passes to the borrower.
Producers Bank of the Philippines to pay plaintiff
Franklin Vives jointly and severally The foregoing provision seems to imply that if the subject of
CA affirmed in toto the decision of the RTC. the contract is a consumable thing, such as money, the contract
o Petitioner contends that the transaction between would be a mutuum. However, there are some instances where
private respondent and Doronilla is a simple loan a commodatum may have for its object a consumable
(mutuum) since all the elements of a mutuum are thing. Article 1936 of the Civil Code provides:
present: what was delivered by private respondent to
Doronilla was money, a consumable thing; and second, Consumable goods may be the subject of commodatum if the
the transaction was onerous as Doronilla was obliged to purpose of the contract is not the consumption of the object, as
pay interest, as evidenced by the check issued by when it is merely for exhibition.
Doronilla in the amount of 212K, or 12K more than
7
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Thus, if consumable goods are loaned only for purposes of Reason: Landlord and tenant relationship
exhibition, or when the intention of the parties is to lend between Pajuyo and Guevarra was established
consumable goods and to have the very same goods returned at by the Kasunduan. Its terms bound Guevarra
the end of the period agreed upon, the loan is a commodatum and to return possession of the house on demand.
not a mutuum.
The rule is that the intention of the parties thereto shall be In an ejectment case, the only issue for
accorded primordial consideration in determining the actual resolution is material or physical possession,
character of a contract.[27] In case of doubt, the contemporaneous not ownership.
and subsequent acts of the parties shall be considered in such CA: Reversed RTC decision. (In favor of Guevarra)
determination.[28] o CA declared that Pajuyo and Guevarra are
squatters. Pajuyo and Guevarra illegally
occupied the contested lot which the
government owned.
PAJUYO vs. CA
o Perez, the person from whom Pajuyo acquired
G.R. No. 146364 his rights, was also a squatter. Perez had no
right or title over the lot because it is public
Petitioner: Colito T. Pajuyo land. The assignment of rights between Perez
Respondent: Court of Appeals and Eddie Guevarra (private and Pajuyo, and the Kasunduan between
respondent) Pajuyo and Guevarra, did not have any legal
Promulgation: June 3, 2004 effect. Pajuyo and Guevarra are in pari delicto
Ponente: Carpio, J. or in equal fault. The court will leave them
where they are.
Facts: o CA reversed the MTC and RTC rulings, which
June 1979: Petitioner Colito T. Pajuyo (Pajuyo) paid held that the Kasunduan between Pajuyo and
P400 to Pedro Perez for the rights over a lot. Pajuyo Guevarra created a legal tie akin to that of a
then constructed a house made of light materials on the landlord and tenant relationship. It ruled that
lot. Pajuyo and his family lived in the house from 1979 the Kasunduan is not a lease contract but a
to 7 December 1985. commodatum because the agreement is not
December 8, 1985: Pajuyo and private respondent for a price certain.
Eddie Guevarra (Guevarra) executed a Kasunduan or o Since Pajuyo admitted that he resurfaced only
agreement. in 1994 to claim the property, the appellate
Pajuyo, as owner of the house, allowed court held that Guevarra has a better right
Guevarra to live in the house for free provided over the property under Proclamation No. 137
Guevarra would maintain the cleanliness and which was issued on 7 September 1987. At
orderliness of the house. Guevarra promised that time, Guevarra was in physical possession
that he would voluntarily vacate the premises of the property. Under Article VI of the Code of
on Pajuyos demand. Policies Beneficiary Selection and Disposition
September 1994: Pajuyo informed Guevarra of his of Homelots and Structures in the National
need of the house and demanded that Guevarra vacate Housing Project (the Code), the actual
the house. Guevarra refused. occupant or caretaker of the lot shall have first
Pajuyo filed an ejectment case against Guevarra with priority as beneficiary of the project. CA
the MTC. concluded that Guevarra is first in the
hierarchy of priority.
Guevarra claimed that Pajuyo had no valid title or right
of possession over the lot where the house stands Pajuyo filed MR. Pointing out that Guevarra’s Petition
because the lot is within the 150 hectares set aside by for Review was filed of time and it was Guevarra’s
Proclamation No. 137 for socialized housing. Guevarra counsel who signed certification against forum-
pointed out that from December 1985 to September shopping.
1994, Pajuyo did not show up or communicate with Denied.
him. Guevarra insisted that neither he nor Pajuyo has
Issue: (Ang daming issue, meron pang procedural and other
valid title to the lot.
substantive. Credits lang sinama ko.)
MTC: In favor of Pajuyo. 1. W/N principle of in pari delicto is applicable in
Reason: agreement between Pajuyo and ejectment cases.
Guevarra is the house and not the lot. Pajuyo is 2. W/N the Kasunduan entered by the parties was a
the owner of the house, and he allowed Commodatum instead of a Contract of Lease.
Guevarra to use the house only by tolerance.
Thus, Guevarras refusal to vacate the house on Held:
Pajuyos demand made Guevarras continued 1. No, principle of pari delicto is not applicable to
ejectment cases. CA erroneously applied the principle. Articles
possession of the house illegal.
1411 and 1412 of the NCC embody the principle of pari delicto.
RTC: Affirmed the MTC decision. (In favor of Pajuyo)
8
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
The law will not aid either party to an illegal agreement. It leaves have the duty to turn over possession of the property to Pajuyo,
the parties where it finds them. The application of the pari delicto the bailor. The obligation to deliver or to return the thing
principle is not absolute, as there are exceptions to its received attaches to contracts for safekeeping, or contracts of
application. One of these exceptions is where the application of commission, administration and commodatum. These contracts
the pari delicto rule would violate well-established public policy. certainly involve the obligation to deliver or return the thing
received.
Application of the principle of pari delicto to a case of ejectment
between squatters is fraught with danger. To shut out relief to Guevarra turned his back on the Kasunduan on the sole ground
squatters on the ground of pari delicto would openly invite that like him, Pajuyo is also a squatter. Squatters, Guevarra
mayhem and lawlessness. A squatter would oust another pointed out, cannot enter into a contract involving the land they
squatter from possession of the lot that the latter had illegally illegally occupy thereby making the contract void. Guevarra
occupied, emboldened by the knowledge that the courts would should know that there must be honor even between squatters.
leave them where they are. Nothing would then stand in the way Guevarra freely entered into the Kasunduan. Guevarra cannot
of the ousted squatter from re-claiming his prior possession at all now impugn the Kasunduan after he had benefited from it. The
cost. Petty warfare over possession of properties is precisely Kasunduan binds Guevarra.
what ejectment cases or actions for recovery of possession seek
to prevent. Even the owner who has title over the disputed The Kasunduan is not void for purposes of determining who
property cannot take the law into his own hands to regain between Pajuyo and Guevarra has a right to physical possession
possession of his property. The owner must go to court. of the contested property. The Kasunduan is the undeniable
evidence of Guevarras recognition of Pajuyos better right of
Courts must resolve the issue of possession even if the parties to physical possession. Guevarra is clearly a possessor in bad faith.
the ejectment suit are squatters. The determination of priority The absence of a contract would not yield a different result, as
and superiority of possession is a serious and urgent matter that there would still be an implied promise to vacate.
cannot be left to the squatters to decide. To do so would make
squatters receive better treatment under the law. The law Pajuyo did not profit from his arrangement with Guevarra
restrains property owners from taking the law into their own because Guevarra stayed in the property without paying any rent.
hands. However, the principle of pari delicto as applied by CA There is also no proof that Pajuyo is a professional squatter who
would give squatters free rein to dispossess fellow squatters or rents out usurped properties to other squatters. Moreover, it is
violently retake possession of properties usurped from them. for the proper government agency to decide who between Pajuyo
Courts should not leave squatters to their own devices in cases and Guevarra qualifies for socialized housing. The only issue that
involving recovery of possession. we are addressing is physical possession.
2. No, the Kasunduan was not a Commodatum. In a Prior possession is not always a condition sine qua non in
contract of commodatum, one of the parties delivers to ejectment. This is one of the distinctions between forcible entry
another something not consumable so that the latter may and unlawful detainer. In forcible entry, the plaintiff is deprived
use the same for a certain time and return it. An essential of physical possession of his land or building by means of force,
feature of commodatum is that it is gratuitous. Another feature intimidation, threat, strategy or stealth. Thus, he must allege and
of commodatum is that the use of the thing belonging to another prove prior possession. But in unlawful detainer, the defendant
is for a certain period. Thus, the bailor cannot demand the unlawfully withholds possession after the expiration or
return of the thing loaned until after expiration of the period termination of his right to possess under any contract, express or
stipulated, or after accomplishment of the use for which the implied. In such a case, prior physical possession is not required.
commodatum is constituted. If the bailor should have urgent Pajuyos withdrawal of his permission to Guevarra terminated the
need of the thing, he may demand its return for temporary use. If Kasunduan. Guevarras transient right to possess the property
the use of the thing is merely tolerated by the bailor, he can ended as well. Moreover, it was Pajuyo who was in actual
demand the return of the thing at will, in which case the possession of the property because Guevarra had to seek Pajuyos
contractual relation is called a precarium. Under the Civil Code, permission to temporarily hold the property and Guevarra had to
precarium is a kind of commodatum. follow the conditions set by Pajuyo in the Kasunduan. Control
over the property still rested with Pajuyo and this is evidence of
The Kasunduan reveals that the accommodation accorded by actual possession.
Pajuyo to Guevarra was not essentially gratuitous. While the
Kasunduan did not require Guevarra to pay rent, it obligated him Pajuyos absence did not affect his actual possession of the
to maintain the property in good condition. The imposition of this disputed property. Possession in the eyes of the law does not
obligation makes the Kasunduan a contract different from a mean that a man has to have his feet on every square meter of the
commodatum. The effects of the Kasunduan are also different ground before he is deemed in possession. One may acquire
from that of a commodatum. Case law on ejectment has treated possession not only by physical occupation, but also by the fact
relationship based on tolerance as one that is akin to a landlord- that a thing is subject to the action of ones will. Actual or physical
tenant relationship where the withdrawal of permission would occupation is not always necessary.
result in the termination of the lease. The tenants withholding of
the property would then be unlawful. This is settled Thus, Pajuyo is entitled to physical possession of the disputed
jurisprudence. property.
9
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
BPI FAMILY BANK vs. FRANCO and CA In the meantime, two checks drawn by Franco against
G.R. No. 123498 his BPI-FB current account were dishonored upon
presentment for payment, and stamped with a notation
Petitioner: BPI Family Bank account under garnishment.
Respondent: Amado Franco and Court of Appeals
Promulgation: November 23, 2007 Apparently, Francos current account was garnished by
Ponente: Nachura, J. Makati RTC in civil case (Makati Case), which had been
filed by BPI-FB against Franco et al. to recover the
Facts: P37,455,410.54 representing Tevestecos total
This is an ostensible fraud perpetrated on the petitioner withdrawals from its account.
BPI Family Bank (BPI-FB) allegedly by respondent Notably, the dishonored checks were issued by Franco
Amado Franco (Franco) in conspiracy with other and presented for payment at BPI-FB prior to Francos
individuals, some of whom opened and maintained receipt of notice that his accounts were under
separate accounts with BPI-FB, San Francisco del Monte garnishment. In fact, at the time the Notice of
(SFDM) branch, in a series of transactions. Garnishment was served on BPI-FB, Franco had yet to
August 15, 1989: Tevesteco Arrastre-Stevedoring Co., be impleaded in the Makati case where the writ of
Inc. (Tevesteco) opened a savings and current account attachment was issued.
with BPI-FB. Soon thereafter, First Metro Investment Upon receipt the complaint, Franco filed a Motion to
Corporation (FMIC) also opened a time deposit account Discharge Attachment.
with the same branch of BPI-FB with a deposit of o Granted on May 16, 1990.
P100,000,000.00, to mature one year thence. The Order Lifting the Order of Attachment was served
August 31, 1989: Franco opened three accounts, on BPI-FB on even date, with Franco demanding the
namely, a current, savings, and time deposit, with BPI- release to him of the funds in his savings and current
FB. accounts.
o The current and savings accounts were funded Jesus Arangorin, BPI-FBs new manager, could not
with an initial deposit of P500,000.00 each. forthwith comply with the demand as the funds, as
o Time deposit account had P1,000,000.00 with previously stated, had already been debited because of
a maturity date of August 31, 1990. FMICs forgery claim. As such, BPI-FBs computer at the
The total amount of P2,000,000.00 used to open these SFDM Branch indicated that the current account record
accounts is traceable to a check issued by Tevesteco was not on file.
allegedly in consideration of Francos introduction of With respect to Francos savings account, it appears that
Eladio Teves, who was looking for a conduit bank to Franco agreed to an arrangement, as a favor to
facilitate Tevestecos business transactions, to Jaime Sebastian, whereby P400,000.00 from his savings
Sebastian, who was then BPI-FB SFDMs Branch account was temporarily transferred to Domingo
Manager. Quiaoits savings account, subject to its immediate
In turn, the funding for the P2,000,000.00 check was return upon issuance of a certificate of deposit which
part of the P80,000,000.00 debited by BPI-FB from Quiaoit needed in connection with his visa application
FMICs time deposit account and credited to Tevestecos at the Taiwan Embassy. As part of the arrangement,
current account pursuant to an Authority to Debit Sebastian retained custody of Quiaoits savings account
purportedly signed by FMICs officers. passbook to ensure that no withdrawal would be
It appears, however, that the signatures of FMICs effected therefrom, and to preserve Francos deposits.
officers on the Authority to Debit were forged. May 17, 1990: Franco pre-terminated his time deposit
September 4, 1989: Antonio Ong, upon being shown account. BPI-FB deducted the amount of P63,189.00
the Authority to Debit, personally declared his signature from the remaining balance of the time deposit account
therein to be a forgery. Unfortunately, Tevesteco had representing advance interest paid to him.
already effected several withdrawals from its current These transactions spawned a number of cases, some of
account (to which had been credited the which we had already resolved.
P80,000,000.00 covered by the forged Authority to FMIC filed a complaint against BPI-FB for the recovery
Debit) amounting to P37,455,410.54, including the of the amount of P80,000,000.00 debited from its
P2,000,000.00 paid to Franco. account.
September 8, 1989:Impelled by the need to protect its o The case eventually reached this Court, and in
interests in light of FMICs forgery claim, BPI-FB, thru its BPI Family Savings Bank, Inc. v. First Metro
Senior Vice-President, Severino Coronacion, instructed Investment Corporation, Court upheld the
Jesus Arangorin to debit Francos savings and current finding of the courts below that BPI-FB failed
accounts for the amounts remaining therein. However, to exercise the degree of diligence required by
Francos time deposit account could not be debited due the nature of its obligation to treat the
to the capacity limitations of BPI-FBs computer. accounts of its depositors with meticulous
care. Thus, BPI-FB was found liable to FMIC for
the debited amount in its time deposit.
10
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
In a related case, Edgardo Buenaventura, Myrna Lizardo If the possessor of a movable lost or of which
and Yolanda Tica (Buenaventura, et al.), recipients of a the owner has been unlawfully deprived, has
P500,000.00 check proceeding from the P80,000,000.00 acquired it in good faith at a public sale, the
mistakenly credited to Tevesteco, likewise filed suit. owner cannot obtain its return without
reimbursing the price paid therefor.
Buenaventura et al., as in the case of Franco, were also
prevented from effecting withdrawals from their
BPI-FBs argument is unsound. To begin with, the movable
current account with BPI-FB. property mentioned in Article 559 of the Civil Code pertains to a
o Case was docketed as BPI Family Bank v. specific or determinate thing. A determinate or specific thing is
Buenaventura, Coourt ruled that BPI-FB had one that is individualized and can be identified or distinguished
no right to freeze Buenaventura, et al.s from others of the same kind.
accounts and adjudged BPI-FB liable therefor,
in addition to damages. In this case, the deposit in Francos accounts consists of money
BPI-FB filed separate civil and criminal cases against which, albeit characterized as a movable, is generic and fungible.
those believed to be the perpetrators of the multi- The quality of being fungible depends upon the possibility of the
million peso scam. property, because of its nature or the will of the parties, being
substituted by others of the same kind, not having a distinct
o Criminal case: Franco, along with the other
individuality.
accused, except for Manuel Bienvenida who
was still at large, were acquitted of the crime Significantly, while Article 559 permits an owner who has lost or
of Estafa. has been unlawfully deprived of a movable to recover the exact
o Civil case: remains under litigation and the same thing from the current possessor, BPI-FB simply claims
respective rights and liabilities of the parties ownership of the equivalent amount of money, i.e., the value
have yet to be adjudicated. thereof, which it had mistakenly debited from FMICs account and
June 4, 1990: In light of BPI-FBs refusal to heed credited to Tevestecos, and subsequently traced to Francos
Francos demands to unfreeze his accounts and release account. In fact, this is what BPI-FB did in filing the Makati Case
his deposits, Franco filed on with the Manila RTC the against Franco, et al. It staked its claim on the money itself which
subject suit praying: passed from one account to another, commencing with the forged
Authority to Debit.
o the interest on the remaining balance of his
current account;
It bears emphasizing that money bears no earmarks of peculiar
o balance on his savings account, plus interest ownership, and this characteristic is all the more manifest in the
thereon; instant case which involves money in a banking transaction gone
o advance interest paid to him which had been awry. Its primary function is to pass from hand to hand as a
deducted when he pre-terminated his time medium of exchange, without other evidence of its title. Money,
deposit account; and which had passed through various transactions in the general
o payment of actual, moral and exemplary course of banking business, even if of traceable origin, is no
damages, attorneys fees. exception.
RTC: In favor of Franco.
Thus, inasmuch as what is involved is not a specific or
Issue: (Check other issues) W/N Franco had a better right to determinate personal property, Article 559, is inapplicable to the
the deposits in the subject accounts which are part of the instant case.
proceeds of a forged Authority to Debit.
There is no doubt that BPI-FB owns the deposited monies in the
Held: Yes, Franco had a better right. BPI-FB urges us that accounts of Franco, but not as a legal consequence of its
the legal consequence of FMICs forgery claim is that the money unauthorized transfer of FMICs deposits to Tevestecos account.
transferred by BPI-FB to Tevesteco is its own, and considering BPI-FB conveniently forgets that the deposit of money in banks
that it was able to recover possession of the same when the is governed by the Civil Code provisions on simple loan or
money was redeposited by Franco, it had the right to set up its mutuum. As there is a debtor-creditor relationship between a
ownership thereon and freeze Francos accounts. bank and its depositor, BPI-FB ultimately acquired ownership
of Francos deposits, but such ownership is coupled with a
BPI-FB contends that its position is not unlike that of an owner of corresponding obligation to pay him an equal amount on
personal property who regains possession after it is stolen. To demand. Although BPI-FB owns the deposits in Francos accounts,
bolster its position, BPI-FB cites Article 559 of the Civil Code, it cannot prevent him from demanding payment of BPI-FBs
which provides: obligation by drawing checks against his current account, or
asking for the release of the funds in his savings account. Thus,
Article 559. The possession of movable when Franco issued checks drawn against his current account, he
property acquired in good faith is equivalent had every right as creditor to expect that those checks would be
to a title. Nevertheless, one who has lost any honored by BPI-FB as debtor.
movable or has been unlawfully deprived
thereof, may recover it from the person in More importantly, BPI-FB does not have a unilateral right to
possession of the same. freeze the accounts of Franco based on its mere suspicion that the
funds therein were proceeds of the multi-million peso scam
11
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Franco was allegedly involved in. To grant BPI-FB, or any bank account, when FMICs account was a time deposit and it had
for that matter, the right to take whatever action it pleases on already paid advance interest to FMIC. Considering that there is
deposits which it supposes are derived from shady transactions, as yet no indubitable evidence establishing Francos participation
would open the floodgates of public distrust in the banking in the forgery, he remains an innocent party. As between him and
industry. BPI-FB, the latter, which made possible the present predicament,
must bear the resulting loss or inconvenience.
Our pronouncement in Simex International (Manila), Inc. v. Court
of Appeals continues to resonate, thus:
AMEX CASE
The banking system is an indispensable Pantaleon, together with his wife (Julialinda), daughter (Regina),
institution in the modern world and plays a and son (Adrian Roberto), went on a guided European tour. The
vital role in the economic life of every civilized tour group arrived in Amsterdam. Due to their late arrival, they
nation. Whether as mere passive entities for postponed the tour of the city for the following day.
the safekeeping and saving of money or as
active instruments of business and commerce, The next day, the group began their sightseeing at around 8:50
banks have become an ubiquitous presence a.m. with a trip to the Coster Diamond House (Coster). To have
among the people, who have come to regard enough time to have a tour in Amsterdam before their departure
them with respect and even gratitude and, scheduled on that day, the tour group planned to leave Coster
most of all, confidence. Thus, even the humble by 9:30 a.m. at the latest.
wage-earner has not hesitated to entrust his
lifes savings to the bank of his choice, knowing While at Coster, Mrs. Pantaleon decided to purchase some
that they will be safe in its custody and will diamond pieces worth a total of US$13,826.00. Pantaleon
even earn some interest for him. The ordinary presented his American Express credit card to the sales clerk to
person, with equal faith, usually maintains a pay for this purchase at around 9:15 a.m. The sales clerk swiped
modest checking account for security and the credit card and asked Pantaleon to sign the charge slip, which
convenience in the settling of his monthly bills was then electronically referred to AMEXs Amsterdam office
and the payment of ordinary expenses. x x x. at 9:20 a.m.
In every case, the depositor expects the bank
to treat his account with the utmost fidelity, At around 9:40 a.m., Coster had not received approval from AMEX
whether such account consists only of a few for the purchase so Pantaleon asked the store clerk to cancel the
hundred pesos or of millions. The bank must sale. The store manager convinced Pantaleon to wait a few more
record every single transaction accurately, minutes. The store manager informed Pantaleon that AMEX was
down to the last centavo, and as promptly as asking for bank references; Pantaleon responded by giving the
possible. This has to be done if the account is names of his Philippine depository banks.
to reflect at any given time the amount of
money the depositor can dispose of as he sees At around 10 a.m., or 45 minutes after Pantaleon presented his
fit, confident that the bank will deliver it as credit card, AMEX still had not approved the purchase. Since the
and to whomever directs. A blunder on the city tour could not begin until the Pantaleons were onboard the
part of the bank, such as the dishonor of the tour bus, Coster decided to release at around 10:05 a.m. the
check without good reason, can cause the purchased items to Pantaleon even without AMEXs approval.
depositor not a little embarrassment if not
also financial loss and perhaps even civil and When the Pantaleons finally returned to the tour bus, they found
criminal litigation. their travel companions visibly irritated. This irritation
intensified when the tour guide announced that they would have
The point is that as a business affected with to cancel the tour because of lack of time as they all had to be
public interest and because of the nature of its in Calais,Belgium by 3 p.m. to catch the ferry to London.
functions, the bank is under obligation to treat
the accounts of its depositors with meticulous It appears that at 10:38 a.m., AMEXs Manila office finally
care, always having in mind the fiduciary transmitted the Approval Code to AMEXs Amsterdam office. It
nature of their relationship. x x x. took AMEX a total of 78 minutes to approve Pantaleons purchase
and to transmit the approval to the jewelry store.
BPI-FB, as the trustee in the fiduciary relationship, is duty bound
to know the signatures of its customers. Having failed to detect The Pantaleon family proceeded to the United States. Again,
the forgery in the Authority to Debit and in the process Pantaleon experienced delay in securing approval for purchases
inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB using his American Express credit card on two separate when he
cannot now shift liability thereon to Franco and the other payees wanted to purchase golf equipment in the amount of US$1,475.00
of checks issued by Tevesteco, or prevent withdrawals from their at the Richard Metz Golf Studio in New York; and when he
respective accounts without the appropriate court writ or a wanted to purchase childrens shoes worth US$87.00 at the
favorable final judgment. Quiency Market in Boston on November 3, 1991.
Further, it boggles the mind why BPI-FB, even without delving Upon return to Manila, Pantaleon sent AMEX a letter demanding
into the authenticity of the signature in the Authority to Debit, an apology for the humiliation and inconvenience he and his
effected the transfer of P80,000,000.00 from FMICs to Tevestecos
12
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
family experienced due to the delays in obtaining approval for his 2. AMEX guilty of culpable delay in complying with its obligation
credit card purchases. to act with timely dispatch on Pantaleons purchases
AMEX responded by explaining that the delay in Amsterdam was 3. Whether or not AMEX has obligation to act on the offer within a
due to the fact that the purchase was at variance with Pantaleons specific period of time
established charge pattern.
4.,Whether or not AMEX was in good faith.
Dissatisfied with this explanation, Pantaleon filed an action for
damages against the credit card company with the Makati City
Regional Trial Court (RTC). Discussion: A credit card is defined as any card, plate, coupon
book, or other credit device existing for the purpose of obtaining
RTC Ruling - found AMEX guilty of delay. money, goods, property, labor or services or anything of value on
credit.
CA - reversed the awards. The delay was not attended by bad Nature of Credit Card Transactions: The issuer bank establishes
faith, malice or gross negligence. AMEX exercised diligent efforts an account on behalf of the person to whom the card is issued,
to effect the approval of Pantaleons purchases. and the two parties enter into an agreement which governs their
relationship. This agreement provides that the bank will pay for
SC- (May 8, 2009 decision) AMEX was guilty of mora solvendi, or cardholders account the amount of merchandise or services
debtors default. AMEX failed to timely act on Pantaleons purchased through the use of the credit card and will also make
purchases. Based on the testimony of AMEXs credit authorizer cash loans available to the cardholder. It also states that the
Edgardo Jaurique, the approval time for credit card charges cardholder shall be liable to the bank for advances and payments
would be three to four seconds under regular circumstances. In made by the bank and that the cardholders obligation to pay the
Pantaleons case, it took AMEX 78 minutes to approve bank shall not be affected or impaired by any dispute, claim, or
the Amsterdam purchase. demand by the cardholder with respect to any merchandise or
service purchased.
AMEX contention: (filed an MR) While it normally takes seconds Simply put, every credit card transaction involves three
to approve charge purchases, Pantaleon experienced delay contracts, namely: (a) the sales contract between the credit card
in Amsterdam because his transaction was not a normal one. holder and the merchant or the business establishment which
Pantaleon sought to charge in a single transaction jewelry items accepted the credit card; (b) the loan agreement between the
purchased from Coster in the total amount of US$13,826.00 credit card issuer and the credit card holder; and lastly, (c)
or P383,746.16. While the total amount of Pantaleons previous the promise to paybetween the credit card issuer and the
purchases using his AMEX credit card did exceed US$13,826.00, merchant or business establishment.
these purchases were made in a span of more than 10 years, not When a credit card company gives the holder the privilege of
in a single transaction. charging items at establishments associated with the issuer when
This was the biggest single transaction that Pantaleon ever made does this relationship begin? The issuance of a credit card is but
using his AMEX credit card, the transaction necessarily required an offer to extend a line of open account credit. It is unilateral and
the credit authorizer to carefully review Pantaleons credit history supported by no consideration. The offer may be withdrawn at
and bank references. It did this not only to ensure Pantaleons any time, without prior notice, for any reason or, indeed, for no
protection (to minimize the possibility that a third party was reason at all, and its withdrawal breaches no duty for there is no
fraudulently using his credit card), but also to protect itself from duty to continue it and violates no rights.
the risk that Pantaleon might not be able to pay for his purchases Under this view, each credit card transaction is considered a
on credit. This careful review is also in keeping with the separate offer and acceptance.
extraordinary degree of diligence required of banks in handling Relationship between the credit card issuer and the credit card
its transactions. The proximate cause of Pantaleons humiliation holder as a contractual one that is governed by the terms and
and embarrassment was his own decision to proceed with the conditions found in the contract. A card membership agreement
purchase despite his awareness that the tour group was waiting is a contract of adhesion as its terms are prepared solely by the
for him and his wife. Pantaleon could have prevented the credit card issuer, with the cardholder merely affixing his
humiliation had he cancelled the sale when he noticed that the signature signifying his adhesion to these terms. This
credit approval for the Coster purchase was unusually delayed. circumstance, however, does not render the agreement void;
contracts of adhesion are as binding as ordinary contracts, the
Pantaleon's contention: A just cause for delay does not relieve the reason being that the party who adheres to the contract is free to
debtor in delay from the consequences of delay; thus, even if reject it entirely. The only effect is that the terms of the contract
AMEX had a justifiable reason for the delay, this reason would not are construed strictly against the party who drafted it.
relieve it from the liability arising from its failure to timely act on
Pantaleons purchase. Evil motive or design is not always Ruling:
necessary to support a finding of bad faith; gross negligence or 1. Yes. From the loan agreement perspective, the contractual
wanton disregard of contractual obligations is sufficient basis for relationship begins to exist only upon the meeting of the
the award of moral and exemplary damages. offer and acceptance of the parties involved. In more concrete
terms, when cardholders use their credit cards to pay for their
Issue: 1. Whether or not the Use of credit card is a mere offer to purchases, they merely offer to enter into loan agreements with
enter into loan agreements the credit card company. Only after the latter approves the
purchase requests that the parties enter into binding loan
13
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
contracts, in keeping with Article 1319 of the Civil Code, which right; as a general rule, a practice or custom is not a source of a
provides: legally demandable or enforceable right.
Article 1319. Consent is manifested by the meeting of the offer There is no provision in this agreement that obligates AMEX to
and the acceptance upon the thing and the cause which are to act on all cardholder purchase requests within a specifically
constitute the contract. The offer must be certain and the defined period of time. The State does not require credit card
acceptance absolute. A qualified acceptance constitutes a companies to act upon its cardholders purchase requests within a
counter-offer. specific period of time.
This view finds support in the reservation found in the card BSP Circular No. 398 provides that before issuing credit cards,
membership agreement itself, particularly paragraph 10, which banks and/or their subsidiary credit card companies must
clearly states that AMEX reserve[s] the right to deny exercise proper diligence by ascertaining that applicants possess
authorization for any requested Charge. By so providing, AMEX good credit standing and are financially capable of fulfilling their
made its position clear that it has no obligation to approve any credit commitments. The general intent is to foster fair and sound
and all charge requests made by its card holders. consumer credit practices.
2. No. AMEX was not guilty of culpable delay. Snce AMEX has no 4. Yes, AMEX was in good faith. The court found no evidence to
obligation to approve the purchase requests of its credit suggest that it acted with deliberate intent to cause Pantaleon
cardholders, Pantaleon cannot claim that AMEX defaulted in its any loss or injury, or acted in a manner that was contrary to
obligation. Article 1169 of the Civil Code provides the three morals, good customs or public policy. We give credence to
requisites for a finding of default are: (a) that the obligation is AMEXs claim that its review procedure was done to ensure
demandable and liquidated; (b) the debtor delays performance; Pantaleons own protection as a cardholder and to prevent the
and (c) the creditor judicially or extrajudicially requires the possibility that the credit card was being fraudulently used by a
debtors performance. third person.
The first requisite is no longer met because AMEX, by the express
terms of the credit card agreement, is not obligated to approve We cite in this regard Article 19, in conjunction with Article 21, of
Pantaleons purchase request. Without a demandable obligation, the Civil Code, which provide:
there can be no finding of default. Article 19. Every person must, in the exercise of his rights and in
Pantaleon failed to make the demand required by Article 1169 of the performance of his duties, act with justice, give everyone his
the Civil Code. Before the credit card issuer accepts this offer, no due and observe honesty and good faith.
obligation relating to the loan agreement exists between them. A Article 21. Any person who willfully causes loss or injury to
demand presupposes the existence of an obligation between the another in a manner that is contrary to morals, good customs or
parties. public policy shall compensate the latter for the damage.
Every time that Pantaleon used his AMEX credit card to pay for
his purchases, what the stores transmitted to AMEX were his
offers to execute loan contracts. These obviously could not be
classified as the demand required by law to make the debtor in While Article 19 enumerates the standards of conduct, Article 21
default. provides the remedy for the person injured by the willful act, an
action for damages.
3. No. Amex has no obligation. Pantaleon impresses upon us the It is but natural for AMEX to want to ensure that it will extend
existence of this obligation by emphasizing two points: (a) his credit only to people who will have sufficient means to pay for
card has no pre-set spending limit; and (b) in his twelve years of their purchases. AMEX, after all, is running a business, not a
using his AMEX card, AMEX had always approved his charges in a charity, and it would simply be ludicrous to suggest that it would
matter of seconds. Pantaleons assertions failed to convince the not want to earn profit for its services. Thus, so long as AMEX
court. exercises its rights, performs its obligations, and generally acts
AMEXs credit authorizer, Edgardo Jaurigue, explained that with good faith, with no intent to cause harm, even if it may
having no pre-set spending limit in a credit card simply means occasionally inconvenience others, it cannot be held liable for
that the charges made by the cardholder are approved based on damages.
his ability to pay. Every time Pantaleon charges a purchase on his It would certainly be unjust to penalize AMEX for merely
credit card, the credit card company still has to determine exercising its right to review Pantaleons credit history
whether it will allow this charge, based on his past credit history. meticulously.
This right to review a card holders credit history, although not Pantaleon is the proximate cause for this embarrassment and
specifically set out in the card membership agreement, is a humiliation. Although Pantaleon tried to cancel the sale at 9:40
necessary implication of AMEXs right to deny authorization for a.m. because he did not want to cause any inconvenience to the
any requested charge. tour group. However, when Costers sale manager asked him to
As for Pantaleons previous experiences with AMEX (i.e., that in wait a few more minutes for the credit card approval, he agreed,
the past 12 years, AMEX has always approved his charge requests despite the knowledge that he had already caused a 10-minute
in three or four seconds), this record does not establish that delay and that the city tour could not start without them.
Pantaleon had a legally enforceable obligation to expect AMEX to The basic rule when travelling in a tour group is that you must
act on his charge requests within a matter of seconds. Pantaleon never be a cause of any delay because the schedule is very
failed to present any evidence to support his assertion. Even if strict. When Pantaleon made up his mind to push through with
Pantaleon did prove that AMEX, as a matter of practice or custom, his purchase, he must have known that the group would become
acted on its customers purchase requests in a matter of seconds, annoyed and irritated with him. This was the natural, foreseeable
this would still not be enough to establish a legally demandable consequence of his decision to make them all wait.
14
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
Pantaleon was not entitled to damages. The malicious intent was already received ₱147,560.19, he is only entitled to the balance of
ever established here. In the absence of any other damages, the ₱11,459.73.
award of exemplary damages clearly lacks legal basis.
Petitioner maintains that considering that the October 15, 1998
decision of the Labor Arbiter did not become final and executory
until the April 17, 2002 Resolution of the Supreme Court in G.R.
G.R. No. 189871 August 13, 2013 No. 151332 was entered in the Book of Entries on May 27, 2002.
Further, petitioner posits that he is also entitled to the payment
DARIO NACAR, PETITIONER, of interest from the finality of the decision until full payment by
vs. the respondents.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR.,RESPONDENTS.
Respondents insist that since the decision clearly stated that the
Facts: separation pay and backwages are "computed only up to [the]
promulgation of this decision," and considering that petitioner no
Petioner Dario Nacar filed a complaint for constructive dismissal longer appealed the decision, petitioner is only entitled to the
before the Arbitration Branch of the NLRC against respondents award as computed by the Labor Arbiter in the total amount of
Gallery Frames (GF) and/or Felipe Bordey. ₱158,919.92. Respondents added that it was only during the
execution proceedings that the petitioner questioned the award,
The Labor Arbiter rendered a Decision in favor of petitioner and long after the decision had become final and executory.
found that he was dismissed from employment without a valid or
just cause. Thus, petitioner was awarded backwages and Issue: Whether or not Labor Arbiter did not err in its ruling.
separation pay in lieu of reinstatement in the amount of
₱158,919.92(respondents must pay jointly and severally) . It was Held: No.
clear from the records that complainant was never afforded due Section 3, Rule VIII of the then NLRC Rules of Procedure which
process before he was terminated. The court granted requires that a computation be made. This Section in part states:
complainant’s prayer for the payments of separation pay in lieu [T]he Labor Arbiter of origin, in cases involving monetary awards
of reinstatement to his former position, considering the strained and at all events, as far as practicable, shall embody in any such
relationship between the parties, and his apparent reluctance to decision or order the detailed and full amount awarded.
be reinstated, computed only up to promulgation of decision. Clearly implied from this original computation is its currency up
to the finality of the labor arbiter's decision.
Petitioner filed a Motion for Correct Computation, praying that A re-computation is necessary as it essentially considered the
his backwages be computed from the date of his dismissal on labor arbiter's original decision in accordance with its basic
January 24, 1997 up to the finality of the Resolution of the component parts as we discussed above. To reiterate, the first
Supreme Court on May 27, 2002. Upon recomputation, the part contains the finding of illegality and its monetary
Computation and Examination Unit of the NLRC arrived at an consequences; the second part is the computation of the awards
updated amount in the sum of ₱471,320.31. or monetary consequences of the illegal dismissal, computed as
of the time of the labor arbiter's original decision.
A Writ of Executionwas issued by the Labor Arbiter ordering the
Sheriff to collect from respondents the said. Respondents filed a The recomputation of the consequences of illegal dismissal upon
Motion to Quash Writ of Execution, arguing, among other things, execution of the decision does not constitute an alteration or
that since the Labor Arbiter awarded separation pay of amendment of the final decision being implemented. The illegal
₱62,986.56 and limited backwages of ₱95,933.33 no more dismissal ruling stands; only the computation of monetary
recomputation is required to be made of the said awards. They consequences of this dismissal is affected, and this is not a
claimed that after the decision becomes final and executory, the violation of the principle of immutability of final judgments.
same cannot be altered or amended anymore.
The records of the case were again forwarded to the Computation DISCUSSION ON INTEREST
and Examination Unit for recomputation, where the judgment Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its
award of petitioner was reassessed to be in the total amount of Resolution No. 796 dated 16 May 2013, approved the following
only ₱147,560.19. revisions governing the rate of interest in the absence of
stipulation in loan contracts, thereby amending Section 2 of
Petitioner then filed a Manifestation and Motion praying for the Circular No. 905, Series of 1982:
re-computation of the monetary award to include the appropriate Section 1. The rate of interest for the loan or forbearance of any
interests. money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be
The Labor Arbiter issued an Order granting the motion, but only six percent (6%) per annum. (12% before July 1, 2013.)
up to the amount of ₱11,459.73. The Labor Arbiter reasoned that
it is the October 15, 1998 Decision that should be enforced In the absence of an express stipulation as to the rate of interest
considering that it was the one that became final and executory. that would govern the parties, the rate of legal interest for loans
However, the Labor Arbiter reasoned that since the decision or forbearance of any money, goods or credits and the rate
states that the separation pay and backwages are computed only allowed in judgments shall no longer be twelve percent (12%)
up to the promulgation of the said decision, it is the amount of per annum but will now be six percent (6%) per annum effective
₱158,919.92 that should be executed. Thus, since petitioner July 1, 2013.
15
CREDIT TRANSACTIONS: LOAN
CASE DIGEST
16