SAURA IMPORT and EXPERT CO., INC.

, vs DBP
[G.R. No. L-24968, April 27, 1972] MAKALINTAL, J.

FACTS:

 In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an industrial
loan of P500,000 to be used for the construction of a factory building, to pay the balance of the jute
mill machinery and equipment and as additional working capital. In Resolution No.145, the loan
application was approved to be secured first by mortgage on the factory buildings, the land site, and
machinery and equipment to be installed.
 The mortgage was registered and documents for the promissory note were executed. But
then, later on, was cancelled to make way for the registration of a mortgage contract over the same
property in favor of Prudential Bank and Trust Co., the latter having issued Saura letter of credit for
the release of the jute machinery. As security, Saura execute a trust receipt in favor of the Prudential.
For failure of Saura to pay said obligation, Prudential sued Saura.
 After almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the
latter to comply with its obligations to release the loan applied for and approved, thereby preventing
the plaintiff from completing or paying contractual commitments it had entered into, in connection
with its jute mill project.
 The trial court ruled in favor of Saura, ruling that there was a perfected contract between the
parties and that the RFC was guilty of breach thereof.
ISSUE: Whether or not there was a perfected contract between the parties. YES. There was indeed a perfected
consensual contract.

HELD:
·Article 1934 provides: An accepted promise to deliver something by way of commodatum or simple loan is binding
upon the parties, but the commodatum or simple loan itself shall not be perfected until delivery of the object of the
contract.
· There was undoubtedly offer and acceptance in the case. The application of Saura, Inc. for a loan of P500,000.00
was approved by resolution of the defendant, and the corresponding mortgage was executed and registered. The
defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.
· When an application for a loan of money was approved by resolution of the respondent corporation and the
responding mortgage was executed and registered, there arises a perfected consensual contract.
· However, it should be noted that RFC imposed two conditions (availability of raw materials and increased
production) when it restored the loan to the original amount of P500,000.00.
· Saura, Inc. obviously was in no position to comply with RFC’s conditions. So instead of doing so and insisting that
the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The action thus taken by
both parties was in the nature of mutual desistance which is a mode of extinguishing obligations. It is a concept
that derives from the principle that since mutual agreement can create a contract, mutual disagreement by the
parties can cause its extinguishment.
·WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.
BPI Investment Corp V. CA

Facts:

 Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and Development
Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the construction of a house on his lot
in New Alabang Village, Muntinlupa.
 He mortgaged the house and lot to AIDC as security for the loan.
 1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio Litonjua for P850K
who paid P350K in cash and assumed the P500K indebtness of ROA with AIDC.
 AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of 20%/annum and service
fee of 1%/annum on the outstanding balance payable within 10 years through equal monthly amortization of
P9,996.58 and penalty interest of 21%/annum/day from the date the amortization becomes due and payable.
 March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with the provision
that the monthly amortization will commence on May 1, 1981
 August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal loan to P457,204.90.
 September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what was left of their loan
after full payment of Roa’s loan
 June 1984: BPIIC instituted foreclosure proceedings against ALS and Litonjua on the ground that they failed to
pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984 amounting to P475,585.31
 August 13, 1984: Notice of sheriff's sale was published
 February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that they are not in
arrears and instead they made an overpayment as of June 30, 1984 since the P500K loan was only released
September 13, 1982 which marked the start of the amortization and since only P464,351.77 was released
applying legal compensation the balance of P35,648.23 should be applied to the monthly amortizations
 RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and Litonjua was only in
the principal sum of P464,351.77 and awarding moral damages, exemplary damages and attorneys fees for
the publication
 CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the contract which is on
September 13, 1982
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the loan?

HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages. The award of moral and exemplary
damages in favor of private respondents is DELETED, but the award to them of attorney’s fees in the amount of
P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay private respondents P25,000 as nominal damages.
Costs against petitioner.

 obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract
 contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other. 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. 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.
 BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without checking and
correspondingly adjusting its records on the amount actually released and the date when it was
released. Such negligence resulted in damage for which an award of nominal damages should be given
 SSS where we awarded attorney’s fees because private respondents were compelled to litigate, we sustain
the award of P50,000 in favor of private respondents as attorney’s fees

Credit Transactions Case Digest: Bonnevie V. CA (1983)

Facts:

 December 6, 1966: Spouses Lozano secured their loan of P75K from Philippine Bank of Commerce (PBC) by
mortgaging their property
 December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is payable to PBC
and P25K is payable to Spouses Lanzano.
 April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to PBC
 May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with Assumption of Mortgage
to his brother, intervenor Raoul Bonnevie
 June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale was published
 January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against PBC for the annulment of the Deed of
Mortgage dated December 6, 1966 as well as the extrajudicial foreclosure made on September 4, 1968.
 CFI: Dismissed the complaint with costs against the Bonnevies
 CA: Affirmed

ISSUE: W/N the foreclosure on the mortgage is validly executed.

HELD: YES. CA affirmed

 A contract of loan being a consensual contract is perfected at the same time the contract of mortgage was
executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does
not indicate lack of consideration of the mortgage at the time of its execution.

 Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to
look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an
innocent mortgagee for value.

 Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption
period expired on September 3, 1969. It was not until September 29, 1969 that Honesto Bonnevie first wrote
respondent and offered to redeem the property.

 Loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, the loan was already
six months overdue. Payment of interest on July 12, 1968 does not make the earlier act of PBC inequitous nor
does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only
the payment of the accrued interest is necessary but also the payment of interest for the proposed period of
 renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but
more so on the discretion of the bank.

Central Bank v Court of Appeals G.R. No. L-45710 October 3, 1985

The bank’s asking for advance interest for the loan is improper considering that the total loan hasn’t been
released. A person can’t be charged interest for nonexisting debt. The alleged discovery by the bank of
overvaluation of the loan collateral is not an issue. Since Island Savings Bank failed to furnish the P63,000.00
balance of the P80,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such
extent.
Facts: Island Savings Bank, upon favorable recommendation of its legal department, approved the loan application
for P80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate
mortgage over his 100-hectare land located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000,
repayable in semi-annual installments for 3 yrs, with 12% annual interest. After the agreement, a mere P17K partial
release of the loan was made by the bank and Tolentino and his wife signed a promissory note for the P17,000 at
12% annual interest payable w/in 3 yrs. An advance interest was deducted fr the partial release but this prededucted
interest was refunded to Tolentino after being informed that there was no fund yet for the release of the P63K
balance.

Monetary Board of Central Bank, after finding that bank was suffering liquidity problems, prohibited the bank fr
making new loans and investments. And after the bank failed to restore its solvency, the Central Bank prohibited
Island Savings Bank from doing business in the Philippines. Island Savings Bank in view of the non-payment of the
P17K filed an application for foreclosure of the real estate mortgage. Tolentino filed petition for specific performance
or rescission and damages with preliminary injunction, alleging that since the bank failed to deliver P63K, he is
entitled to specific performance and if not, to rescind the real estate mortgage.

Issues: 1) Whether or not Tolentino’s can collect from the bank for damages

2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note

3) Whether or not the real estate mortgage can be foreclosed

Held:

1) Whether or not Tolentino’s can collect from the bank for damages

The loan agreement implied reciprocal obligations. When one party is willing and ready to perform, the other party
not ready nor willing incurs in delay. When Tolentino executed real estate mortgage, he signified willingness to pay.
That time, the bank’s obligation to furnish the P80K loan accrued. Now, the Central Bank resolution made it
impossible for the bank to furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec
it did not prohibit the bank fr releasing the balance of loans previously contracted. Insolvency of debtor is not an
excuse for non-fulfillment of obligation but is a breach of contract.

The bank’s asking for advance interest for the loan is improper considering that the total loan hasn’t been released.
A person can’t be charged interest for nonexisting debt. The alleged discovery by the bank of overvaluation of the
loan collateral is not an issue. The bank officials should have been more responsible and the bank bears risk in case
the collateral turned out to be overvalued. Furthermore, this was not raised in the pleadings so this issue can’t be
raised. The bank was in default and Tolentino may choose bet specific performance or rescission w/ damages in
either case. But considering that the bank is now prohibited fr doing business, specific performance cannot be
granted. Rescission is the only remedy left, but the rescission shld only be for the P63K balance.

2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note

The promissory note gave rise to Sulpicio M. Tolentino’s reciprocal obligation to pay the P17,000.00 loan when it
falls due. His failure to pay the overdue amortizations under the promissory note made him a party in default, hence
not entitled to rescission (Article 1191 of the Civil Code). If there is a right to rescind the promissory note, it shall
belong to the aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note setting the
date for payment of P17,000.00 within 3 years, he would be entitled to ask for rescission of the entire loan because
he cannot possibly be in default as there was no date for him to perform his reciprocal obligation to pay. Since both
parties were in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank
failed to comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his
obligation to pay his P17,000.00 debt within 3 years as stipulated, they are both liable for damages.

3) Whether or not the real estate mortgage can be foreclosed

Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan, the real estate mortgage
of Sulpicio M. Tolentino became unenforceable to such extent. P63,000.00 is 78.75% of P80,000.00, hence the real
estate mortgage covering 100 hectares is unenforceable to the extent of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25 hectares is more than sufficient to
secure a P17,000.00 debt.

Republic V. Bagtas (1962)

FACTS:

 May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal
Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of
P744.46, for a period of 1 year for breeding purposes subject to a breeding fee of 10% of the book value of the
bulls
 May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one bull was approved
while the others are to be returned
 March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of the 3 bulls
 October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly depreciation to be
approved by the Auditor General.
 October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be returned or their
book value without deductions should be paid not later than October 31, 1950 which he was not able to do
 December 20, 1950: An action at the CFI was commenced against Jose praying that he be ordered to return
the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee of P199.62, both with
interests, and costs
 July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the bad
peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending appeal he
had taken to the Secretary of Agriculture and Natural Resources and the President of the Philippines, he could
not return the animals nor pay their value and prayed for the dismissal of the complaint.
 RTC: granted the action
 December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve the writ outside
Manila
 December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October 23, 1951 and
administratrix of his estate, was notified
 January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26, 1952 evidenced by
recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid and prayed that the writ of
execution be quashed and that a writ of preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the loss due to force
majeure due to delay.

HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs
 If contract was commodatum then Bureau of Animal Industry retained ownership or title to the bull it should
suffer its loss due to force majeure. A contract of commodatum is essentially gratuitous. If the breeding fee
be considered a compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil
Code the lessee would be subject to the responsibilities of a possessor in bad faith, because she had
continued possession of the bull after the expiry of the contract. And even if the contract be commodatum,
still the appellant is liable if he keeps it longer than the period stipulated
 the estate of the late defendant is only liable for the sum of P859.63, the value of the bull which has not been
returned because it was killed while in the custody of the administratrix of his estate
 Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having
been instituted in the CFI, the money judgment rendered in favor of the appellee cannot be enforced by
means of a writ of execution but must be presented to the probate court for payment by the appellant, the
administratrix appointed by the court.

Catholic Vicar Vs. CA

Socialize Us

Date: September 31, 1988

Facts:

- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with the court an application for

the registration of title over lots 1, 2, 3 and 4 situated in Poblacion Central, Benguet, said lots being used as sites of

the Catholic Church, building, convents, high school building, school gymnasium, dormitories, social hall and

stonewalls.

- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have ownership over lots 1, 2 and 3.

(2 separate civil cases)

- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3 and 4. Upon appeal by the

private respondents (heirs), the decision of the lower court was reversed. Title for lots 2 and 3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals

dismissing his application for registration of Lots 2 and 3.

- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the alleged ownership of the land

in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano; his written demand to Vicar for the return

of the land to them; and the reasonable rentals for the use of the land at P10,000 per month. On the other hand,

Vicar presented the Register of Deeds for the Province of Benguet, Atty. Sison, who testified that the land in question

is not covered by any title in the name of Egmidio Octaviano or any of the heirs. Vicar dispensed with the testimony

of Mons. Brasseur when the heirs admitted that the witness if called to the witness stand, would testify that Vicar

has been in possession of Lot 3, for 75 years continuously and peacefully and has constructed permanent structures

thereon.

Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in commodatum, a gratuitous

loan for use.

Held: YES.

Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the

church and the convent were destroyed. They never asked for the return of the house, but when they allowed its

free use, they became bailors in commodatum and the petitioner the bailee.

The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on

the part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim

of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by

such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of

just title.
The Court of Appeals found that petitioner Vicar did not meet the requirement of 30 years possession for acquisitive

prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years possession for ordinary acquisitive

prescription because of the absence of just title. The appellate court did not believe the findings of the trial court

that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio

Octaviano by petitioner Vicar because there was absolutely no documentary evidence to support the same and the

alleged purchases were never mentioned in the application for registration.

QUINTOS VS BECK 69 PHIL 108

Facts:
Quintos and Beck entered into a contract of lease, whereby the latter occupied the former’s house. On Jan 14,
1936, the contract of lease was novated, wherein the Quintos gratuitously granted to Beck the use of the furniture,
subject to the condition that Beck should return the furnitures to Quintos upon demand. Thereafter, Quintos sold the property
to Maria and Rosario Lopez. Beck was notified of the conveyance and given him 60 days to vacate the premises. In
addition, Quintos required Beck to return all the furniture. Beck refused to return 3 gas heaters and 4 electric lamps since he would use
them until the lease was due to expire. Quintos refused to get the furniture since Beck had declined to return all of them. Beck
deposited all the furniture belonging to Quintos to the sheriff.

ISSUE: WON
Beck complied with his obli$ation of returnin$ the furnitures toQuintos when it deposited the furnitures to the sheri .

RULING:
The contract entered into between the parties is one of commadatum,because under it the plaintiff gratuitously granted the
use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract the defendant bound
himself to return the furniture to the plaintiff, upon the latter’s demand (clause 7 of the contract, Exhibit A; articles 1740,
paragraph 1, and 1741 of the Civil Code). The obligation voluntarily assumed by the defendant to return the
furniture upon the plaintiff’s demand, means that he should return all of them to the plaintiff at the latter’s residence or house. The
defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff, retaining for
his benefit the 3 gas heaters and the 4 electric lamps.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter’s demand, the Court could
not legally compel her to bear the expenses occasioned by the deposit of the furniture at the defendant’s behest. The latter,
as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return
the furniture, because the defendant wanted to retain the three gas heaters and the 4 electric lamps.

THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK) v. CA 356 SCRA 671

Private respondent Continental Cement Corporation obtained from Consolidated Bank letter of
credit used to purchase 500,000 liters of bunker fuel oil from Petrophil Corporation,
which the latter delivered directly to respondent Corporation in its Bulacan plant.
Respondent Corporation made a marginal deposit to petitioner. A trust receipt was executed by
respondent corporation, with respondent Gregory Lim as signatory. Claiming that respondents failed to turnover
the goods or proceeds, petitioner filed a complaint for sum of money before the RTC of Manila.
In their answer, respondents aver that the transaction was a simple loan and not a trust receipt
one, and that the amount claimed by petitioner did not take into account payments already made by them.
The trial court dismissed the complaint, CA affirmed

Issue: WON the transaction between Solidbank and private respondent Continental Cement Corp.
is a trustreceipt transaction instead of merely a simple loan.

Held:
Inasmuch as the debtor received the goods subject of the trust receipt before the trust receipt itself was entered
into, the transaction in question was a simple loan and not a trust receipt agreement.

Prior to the date of execution of the trust receipt, ownership over the goods was already transferred to the
debtor. This situation is inconsistent with what normally obtains in a pure trust receipt transaction,
wherein the goods belong in ownership to the bank and are only released to the importer in trust after
the loan is granted.

In the case at bar, the delivery to respondent Corporation of the goods subject of the trust receipt occurred long
before the trust receipt itself was executed. More specifically, delivery of the bunker fuel oil to
respondent Corporations Bulacan plant commenced on July 7, 1982 and was completed by July 19, 1982.
Further, the oil was used up by respondent Corporation in its normal operations by August, 1982. On the other
hand, the subject trust receipt was only executed nearly 2 months after full delivery of the oil was made to
respondent Corporation, or on September 3, 1982.

The danger in characterizing a simple loan as a trust receipt transaction was explained in Colinares v. CA
The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the dishonesty and abuse
of confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the
owner. Here, it is crystal clear that on the part of Petitioners there was neither dishonesty nor abuse of confidence
in the handling of money to the prejudice of PBC. Petitioners continually endeavored to meet their
obligations, as shown by several receipts issued by PBC acknowledging payment of the loan.