Republic v. Bagtas

Facts:- Jose Bagtas borrowed from the Bureau of Animal Industry 3 bulls for 1 year for breeding

purposes- upon the expiration of the contract, Bagtas asked for a renewal for another year. The renewal

granted was only for 1 bull.- Bagtas offered to buy the bulls at book value less depreciation, but the Bureau told him that he

should either return the bulls or pay for their book value.- Bagtas failed to pay the book value, and so the Republic commenced an action with the CFI

Manila to order the return of the bulls of the payment of book value.- Felicidad Bagtas, the surviving spouse and administratrix of the decedent’s estate, stated that

the 2 bulls have already been returned in 1952, and that the remaining one died of gunshot during a Huk raid.

- As regards the two bulls, is was proven that they were returned and thus, there is no more obligation on the part of the appellant. As to the bull not returned, Felicidad contends that the obligation is extinguished since the contract is that of a commodatum and that the loss through fortuitous event should be borne by the owner.

Issue:W/N, depending on the nature of the contract, the respondent is liable for the death of the bull

Held:

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, because article 1942 of the Civil Code provides that a bailee in a contract of commodatum. . . is liable for loss of the things, even if it should be through a fortuitous event:(2) If he keeps it longer than the period stipulated . . .(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event;

The loan of one bull was renewed for another period of one year to end on 8 May 1950. But the appellant kept and used the bull until November 1953 when during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the deceased husband of the appellant the bulls had each an appraised book value. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having been instituted in the Court of First Instance of Rizal (Q-200), 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.

2. Garcia vs Thio16 March 2007J. Corona

FACTS:Petitioner – GarciaRespondent – Thio

- In February 1995, Thio received from Garcia a crossed check amounting to $100,000 payable to the order of Marilou Santiago.

o Garcia the received from Thio $3,000 for 4 months and P76,500 on July, August, September and October (Representing interest due)

- In June 1995, Thio received again from Garcia P500,000o Garcia the received from Thio P20,000 on August, September October and November.

(Represent interest due)- According to Garcia, Thio failed to pay the $100,000 and P500,000 amount opting him to file a

case for sum of money and damages. - Both loans are not covered by a promissory note as the two are close friends- Thio countered that it was Marilou Santiago whom the money was lent by Garcia. - She issued the checks for P76,000 and P20,000 not as payment of interest but to accommodate

petitioner’s request that respondent use her own checks instead of Santiago- RTC ruled in favor of Garcia- CA reversed RTC.

ISSUE: 1. Who borrowed the money (Santiago or Thio)

HELD:1. Thio

RATIO:

- A loan is a real contract as it is perfected upon delivery of the object. This is different from a consensual contract which only requires consent.

- An accepted promise to deliver by way of commodatum or simple loan is binding upon parties, however, the loan itself is only perfected upon delivery of the object.

- Petitioner insisted that it was upon respondent’s instruction that both checks were made payable to Santiago.

o It was also argued that upon delivery of the checks, respondents acquired control and possession of it and can choose to retain or delivery it to Santiago

- Factors that supported the conclusions are:o Petitioner did not know Santiago personally

o Leticia Ruiz (friend of both petitioner and respondent) testified that the plan of Thio is to borrow money from Garcia then subsequently lend it out to Santiago.

o for the US$100,000 loan, respondent admitted issuing her own checks in the amount of P76,000 each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the P500,000 loan, she also issued her own checks in the amount of P20,000 each for four months.

She claimed, however, that Santiago would replace the checks with cash. Her explanation is simply incredible. It is difficult to believe that respondent would put herself in a position where she would be compelled to pay interest, from her own funds, for loans she allegedly did not contract.

o In the petition of insolvency filed by Santiago, the one listed as creditor is Thio rather than Garcia.

o No corroborative evidence was presented by Thio

GALANG: REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS) vs.THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY, represented by RICARDO BALOY, ET AL., respondents.

G.R. No. L-46145 November 26, 1986PARAS, J.

FACTS: Petition for review on certiorari. This case originally emanated from a decision of the then Court of First Instance of Zambales in denying respondents' application for registration. Applicants' (heirs of Domingo Baloy) claim is anchored on their possessory information title coupled with their continuous, adverse and public possession over the land in question. Said possessory information title had been regularly issued having been acquired by applicants' predecessor, Domingo Baloy, under the provisions of the Spanish Mortgage Law.

The Director of Lands opposed the registration alleging that this land had become public land thru the operation of Act 627 of the Philippine Commission. On November 26, 1902 pursuant to the executive order of the President of the U.S., the area was declared within the U.S. Naval Reservation. Under Act 627 as amended by Act 1138, a period was fixed within which persons affected thereby could file their application, (that is within 6 months from July 8, 1905) otherwise "the said lands or interest therein will be conclusively adjudged to be public lands and all claims on the part of private individuals for such lands or interests therein not to presented will be forever barred." Petitioner argues that since Domingo Baloy failed to file his claim within the prescribed period, the land had become irrevocably public and could not be the subject of a valid registration for private ownership.

Trial court held the land to be of public use. Court of Appeals reversed trial court decision, it ruled that there has not been presented a formal order or decision of the said Court of Land Registration so declaring the land public

because of that failure, it can with plausibility be said that after all, there was no judicial declaration to that effect, the title of applicants was in a state of suspended animation only.

ISSUE: WON not holding the private respondents' rights by virtue of their possessory information title was lost by prescription.

HELD: NO. It partakes of the character of a commodatum. It cannot therefore militate against the title of Domingo Baloy and his successors-in-interest. AFFIRMED CTA decision.

RATIO: Under the provisions of Act 627, private land could be deemed to have become public land only by virtue of a judicial declaration after due notice and hearing. It runs contrary therefore to the contention of petitioners that failure to present claims set forth under Sec. 2 of Act 627 made the land ipso facto public without any deed of judicial pronouncement.

The finding of respondent court that during the interim of 57 years from November 26, 1902 to December 17, 1959 (when the U.S. Navy possessed the area) the possessory rights of Baloy or heirs were merely suspended and not lost by prescription, is supported by a communication or letter No. 1108-63, dated June 24, 1963, which contains an official statement of the position of the Republic of the Philippines with regard to the status of the land in question. Said letter recognizes the fact that Domingo Baloy and/or his heirs have been in continuous possession of said land since 1894 as attested by an "Informacion Possessoria" Title, which was granted by the Spanish Government. Hence, the disputed property is private land and this possession was interrupted only by the occupation of the land by the U.S. Navy in 1945 for recreational purposes. The U.S. Navy eventually abandoned the premises. The heirs of the late Domingo P. Baloy, are now in actual possession, and this has been so since the abandonment by the U.S. Navy. A new recreation area is now being used by the U.S. Navy personnel and this place is remote from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept of owner. It partakes of the character of a commodatum. One's ownership of a thing may be lost by prescription by reason of another's possession if such possession be under claim of ownership, not where the possession is only intended to be transient, as in the case of the U.S. Navy's occupation of the land concerned, in which case the owner is not divested of his title, although it cannot be exercised in the meantime.

QUINTOS V. BECKBy CarlosTheFierce

FACTS:Beck was a tenant occupying the house of Quintos in MH Del Pilar St. January 14, 1936 - The original contract of lease between them was NOVATED when Quintos gratuitously granted Beck the use of his furniture subject to the condition that he would return them upon plaintiff’s (Quintos) demand.September 14, 1936 - Quintos, however, SOLD THE HOUSE being occupied by Beck. Beck was given 60 DAYS to vacate the house. Quintos also demanded that the furniture be returned to him at once. Beck informed Quintos that he may get the furniture at his house where they are found.November 5 , 1936 – Beck WROTE to Quintos through another person that the furniture can be taken (NOTE: the phrase used in the case is “call for” which I just interpreted by context clues as “to take” ) in the ground floor of the house.

November 7, 1936 – Beck wrote a letter again to Quintos saying that he could not give up the three gas heaters and four electric lamps because he would use them until November 15, 1936 – the end of the 60-day grace period to vacate the house, when the contract of lease would have expired.Quintos, despite having been informed that he may take the furniture in the house, REFUSED to get them because Beck declined to make the DELIVERY OF ALL OF THEM.November 15, 1936 – Beck DEPOSITED all the furniture in a warehouse in the custody of a sheriff.CFI Manila ordered that plaintiff Quintos should pay the expenses occasioned by the deposit of the furniture in the warehouse. Quintos appealed the ruling. ISSUE:Whether Beck complied with his obligation to return the furniture upon Quintos’ demand Whether Quintos should bear the cost of depositing the furniture in the warehouseHELD:Beck did not comply with his obligation to deliver the furniture. Beck should pay the costs of deposit.RATIO:

1. The contract entered into is one of a COMMODATUM where plaintiff gratuitously granted the use of the furniture to the defendant, reserving the ownership thereof and where the defendant bound himself to RETURN the furniture to the plaintiff upon the latter’s demand

2. Beck should return ALL THE FURNITURE --- not just some or not without the gas heaters and electric lamps --- AT THE RESIDENCE of Quintos.

3. Beck DID NOT COMPLY with this obligation; He merely placed them at the disposal of the plaintiff Quintos, retaining for his benefit the 3 gas heaters and 4 electric lamps.

4. Beck should bear the cost occasioned by the deposit of the furniture in the warehouse under the custody of the sheriff.

Simply put, defendant has no right to place the furniture in a deposit and plaintiff has no duty to accept incomplete furniture.

5. Plaintiff Quintos, however, is NOT ENTITLED to the payment of the value of the furniture NOT AGREED UPON by both parties in case defendant fails to deliver them. Court is to determine their value through evidence the parties may desire to present.

Dispositive: 1. Beck is ordered to return and deliver to Quintos all the furniture in the residence or house of the

latter. 2. Beck should also bear the cost of the deposit of the furniture in the warehouse.

G.R. No. L-4150 February 10, 1910Delos Santos v Jarra

Facts: The Plaintiff Felix delos Santos filed this suit against Agustina Jarra. Jarra was the administratix of the estate of Jimenea. Plaintiff alleged that he owned 10 1st class carabaos which he lent to his father-in-

law Jimenea to be used in the animal-power mill without compensation. This was done on the condition of their return after the work at the latter’s mill is terminated. When delos Santos demanded the return of the animals Jimenea refused, hence this suit.Issue: W/N the contracts is one of a commodatum Ruling: YES. The carabaos were given on commodatum as these were delivered to be used by defendant. Upon failure of defendant to return the cattle upon demand, he is under the obligation to indemnify the plaintiff by paying him their value. Since the 6 carabaos were not the property of the deceased or of any of his descendants, it is the duty of the administratrix of the estate to either return them or indemnify the owner thereof of their value.

MANZANO V. PEREZAugust 9, 2001Panganiban, J.

The Fox1. Petitioner, Emilia Manzano, owns the subject property (a lot and a house). She is the sister

of Nieves Manzano, the predecessor-in-interest of the respondent. 2. Emilia alleges that Nieves BORROWED (commodatum) the property for the latter to use as

collateral to a projected loan. Emilia agreed.3. Two deeds of conveyances for the sale of the lot and the house were executed for a

consideration of P1.00 plus OTHER VALUABLES.4. Nieves, with her husband, succeeded in obtaining the loan from Rural Bank of Infanta, and

executed a Real Estate Mortgage of the property as collateral. 5. Na-tegui si Nieves in 1979. Her husband, Miguel and children, as heirs, allegedly refused to

return the property even after payment of the loan. 6. Emilia sought for the annulment of the deeds of sale and execution of a deed of

reconveyance of the property + damages eklat. 7. As an affirmative defense, Miguel argued that the original agreement was to resell the

property to Emilia after payment of the loan but since the property was their only memory of Emilia, they politely refused to sell the same. Huhuhu

ISSUE: Was the agreement between the parties a COMMODATUM OR an ABSOLUTE SALE? Held: SC: ABSOLUTE SALE. The Deed of Sale executed was valid. Perez is the rightful owner of the subject property.

CA: ABSOLUTE SALERTC: COMMODATUM

Labanan ito ng ebidensya. SC reviewed the factual findings because of the conflicting findings of the lower tribunals. Ratio: Petitioner presented no convincing proof of her OWNERSHIP of the subject property. Respondents presented the deeds of sale were each was in consideration of P1.00 plus OTHER VALUABLES and

having been notarized, must be accorded with the presumption to have been duly executed. Also, after the sale, Tax Declaration No.9589 which covered the property was issued in favor of NIEVES.Findings of the CA which the Court agreed with:

1. If EMILIA maintained the ownership of the property, she would have not agreed to reacquire one-half of the property for a consideration of 10k.

2. If indeed the agreement was to merely use the property as collateral, it was not explained why physical possession had to be transferred to NIEVES and family.

3. Non-payment of NIEVES of real estate taxes does not prejudice them. Payment of realty tax is not conclusive evidence of ownership. It becomes strong evidence of ownership when accompanied by ACTUAL POSSESSION. Also, EMILIA only began paying the taxes due when the case was instituted. wais si day.

4. NIEVES obtained a Cert of Tax Declaration as the owner and possessor of the property. The issuance of the tax declaration number indicates that the transfer of property was based on the Deed of Absolute Sale.

5. There is a presumption that a written contract was for a valuable consideration. The party alleging the lack of consideration has the burden of proof.

6. Assuming that the consideration is suspiciously insufficient, it will not necessarily invalidate the sale. Inadequacy of monetary consideration does not render a conveyance null since the vendor’s liberality may be a sufficient cause for a valid contract.

Other points by the Court:1. Emilia avers that the property was merely by virtue of tolerance – this allegation has

not been substantiated hence cannot stand. 2. In order to prevail over a written agreement of the parties and the presumption of

regularity in the execution thereof, there must be clear and convincing evidence that is more than merely preponderant but EMILIA failed to come up with even a preponderance of evidence.

3. Jurisprudence on the subject matter, when applied thereto, points to the existence of a sale, not a commodatum over the subject house and lot.

Claims of EMILIA: 1. She inherited the subject house from her parents; her siblings waived claim over the same. 2. The property was mortgaged to secure a loan of 30k in the name of Nieves 3. Upon full payment of the loan, the documents pertaining to the house were returned to her4. Three of the respondents signed a document transferring one half of the property to her for

0k did not materialize because of the refusal of the other respondents to sign5. EMILIA hacked the stairs of the house yet no case was filed against her.

For the Court, these claims even buttress the claim of the Miguel Perez: Indeed, how could one of them have obtained a mortgage over the property, without having dominion over it? Why would they execute a reconveyance of one half of it in favor of petitioner? Why would the latter have to pay P10,000 for that portion if, as she claims, she owns the whole? NOTE: There was no discussion or anything said about a COMMODATUM and SALE. Yun lang.

Credit - 6Producers Bank of the Philippines vs CA (2003)

Doctrine:

Facts: Vives (will be the creditor in this case) was asked by his friend Sanchez to help the latter’s friend, Doronilla

(will be the debtor in this case) in incorporating Doronilla’s business “Strela”. This “help” basically involved Vives depositing a certain amount of money in Strela’s bank account for purposes of incorporation (rationale: Doronilla had to show that he had sufficient funds for incorporation). This amount shall later be returned to Vives.

Relying on the assurances and representations of Sanchez and Doronilla, Vives issued a check of P200,00 in favor of Strela and deposited the same into Strela’s newly-opened bank account (the passbook was given to the wife of Vives and the passbook had an instruction that no withdrawals/deposits will be allowed unless the passbook is presented).

Later on, Vives learned that Strela was no longer holding office in the address previously given to him. He later found out that the funds had already been withdrawn leaving only a balance of P90,000. The Vives spouses tried to withdraw the amount, but it was unable to since the balance had to answer for certain postdated checks issued by Doronilla.

Doronilla made various tenders of check in favor of Vives in order to pay his debt. All of which were dishonored.

Hence, Vives filed an action for recovery of sum against Doronilla, Sanchez, Dumagpi and Producer’s Bank. TC & CA: ruled in favor of Vives.

Issue/s:(1) WON the transaction is a commodatum or a mutuum. COMMODATUM.(2) WON the fact that there is an additional P 12,000 (allegedly representing interest) in the amount to be

returned to Vives converts the transaction from commodatum to mutuum. NO.(3) WON Producer’s Bank is solidarily liable to Vives, considering that it was not privy to the transaction

between Vives and Doronilla. YES.

Held/Ratio:(1) The transaction is a commodatum. CC 1933 (the provision distinguishing between the two kinds of loans) seem to imply that if the subject of the

contract is a consummable thing, such as money, the contract would be a mutuum. However, there are instances when a commodatum may have for its object a consummable thing. Such can be found in CC 1936 which states that “consummable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition”. In this case, the intention of the parties was merely for exhibition. Vives agreed to deposit his money in Strela’s account specifically for purpose of making it appear that Streal had sufficient capitalization for incorporation, with the promise that the amount should be returned withing 30 days.

(2) CC 1935 states that “the bailee in commodatum acquires the use of the thing loaned but not its fruits”. In this case, the additional P 12,000 corresponds to the fruits of the lending of the P 200,000.

(3) Atienza, the Branch Manager of Producer’s Bank, allowed the withdrawals on the account of Strela despite the rule written in the passbook that neither a deposit, nor a withdrawal will be permitted except upon the

production of the passbook (recall in this case that the passbook was in the possession of the wife of Vives all along). Hence, this only proves to show that Atienza allowed the withdrawals because he was party to Doronilla’s scheme of defrauding Vives. By virtue of CC 2180, PNB, as employer, is held primarily and solidarily liable for damages caused by their employees acting within the scope of their assigned tasks. Atienza’s acts, in helpong Doronilla, a customer of the bank, were obviously done in furtherance of the business of the bank, even though in the process, Atienza violated some rules.

Digested by: Cari Mangalindan (A2015)

Saura Import & Export Company, Inc. v. Development Bank of the Philippines (Namingit)27 April 2013J. Makalintal

Facts:Saura Import & Export Company, Inc. (Saura) applied to the Rehabilitation Finance Corporation (RFC), now DBP for an industrial loan of P500,000.00. The loan will be used to develop the manufacture of jute sacks in Mindanao. Of the 500,000 loan 250,000 will be for the construction of a factory building, 240,900 for the payment of the balance of the purchase price of the jute mill factory and equipment, and 9,100 for additional capital.

The project was described by Saura in their brochure as the first attempt in the country to use 100% locally grown materials notably kenaf. On the basis of which the original approval was given by RFC.

Jan. 7. 1954 – Resolution # 145 by RFC Board approving the loan subject to the given terms and conditions (how the loan will be implemented, execution of securities, and the manner of release of funds)

o Saura made a request to modify the terms because China Engineers was willing to assume liability only to the extent of its stock subscription with Saura

Feb. 4, 1954 – Resolution # 736 providing for the reexamination of all the aspects of the loan with special reference to the advisability of finance the project based present conditions obtaining in the operation of jute mills (lack of local raw materials)

o China Engineers agreed again to act as co-signer of the loan. Thus, the loan documents were executed.

June 10, 1954 - Resolution #736 was approved reducing the loan from 500,000 to 300,000.o China Engineers, Ltd. withdraws from the contract but was willing to go back if the loan

will be raised to 500,000. Dec. 17, 1954 – Resolution #9083 restoring the loan back to 500,00). Additional condition that

the Dept. of Agri and Natural Resources will certify the availability of raw materials in the immediate vicinity. (local raw materials were not enough at that time). Saura asked RCF to give

assurance that will be able to bring in sufficient jute materials necessary for the operation of the factory. This contravenes the basis of RCF in approving the loan.

Saura no longer pursued the loan. Asked RCF to cancel the mortgage 9 years after the mortgage was cancelled, Saura instated a suit for damages arising from RCF’s

breach of in performing its obligation.

Issue: W/N RCF committed breach of contract.

Held:No. The obligations of the two parties were extinguished by mutual desistance.

There was a perfected contract between the two parties. Where an application for a loan of money was approved by resolution of the RCF Board and the corresponding mortgage was executed and registered, there arises a perfected consensual contract of loan.

However, after the approval of Saura’s loan, Saura, instead of insisting for its release, asked the mortgage given as security be canceled to which RCF complied. The action taken by the parties was in the nature of mutual desistance which is a mode of extinguishment of obligations.

Therefore, no breach was committed and Saura is not entitled to damages.

BPI Investment Corporation v CA15 February 2002Quisumbing, J.

FACTSFrank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), for the construction of his house. Said house and lot were mortgaged to AIDC to secure the loan. Roa sold the properties to ALS and Litonjua (respondents), the latter paid in cash and assumed the balance of Roa’s indebtedness with AIDC. AIDC was not willing to extend the old interest to private respondents and proposed to grant of new loan of P500,000 with higher interest to be applied to Roa’s debt, secured by the same property. Private respondents executed a mortgage deed on March 31, 1981 with the provision that payment shall commence on May 1, 1981. However, the full loan was released only on September 13, 1982.

BPIIC, AIDC’s predecessor, filed for foreclosure proceedings on the ground that private respondents failed to pay the mortgage indebtedness from May 1, 1981 to June 30, 1984. Private respondents maintained that they should not be made to pay amortization before the actual release of the P500,000 loan. The suit was dismissed and affirmed by the CA.

ISSUEWON a contract of loan is a consensual contract

HELDNo. A loan contract is not a consensual contract but a real contract. It is perfected only upon delivery of the object of the contract. A 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 is a proper manner with what is incumbent upon him.

In this case, even though the loan contract was signed on March 31, 1981, it was perfected only on September 13, 1982, the date of the second release of the loan. Thus, obligation to pay commenced only a month after the perfection of the contract despite the express agreement that payment shall commence on May 1, 1981.

 CELESTINA T. NAGUIAT,petitioner, vs.COURT OF APPEALS and AURORAQUEAÑO,respondents. G.R. No. 118375 October 3, 2003

Facts: Queaño applied with Naguiat for a loan in the amount of P200,000

which Naguiat granted. Naguiat indorsed to Queaño Associated Bank Check for the amount P95,000, which was earlier issued to Naguiat by the Corporate Resources Financing Corporation. She also issued her own Filmanbank Check, to the order of Queaño, and for the amount of P95,000. The proceeds of these checks constitute the loan granted by Naguiat to Queaño. To secure the loan, Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat, and surrendered to the latter the owner’s duplicates of the titles covering the mortgaged properties. Queaño issued to Naguiat a promissory note for the amount of P200,000, with interest at 12% per annum. Queaño also issued a Security Bank and Trust Company check, postdated for the amount of P200,000 and payable to the order of Naguiat. Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds. Queaño received a letter from Naguiat’s lawyer, demanding settlement of the loan. Queaño and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queaño told Naguiat that she did not receive the proceeds of the loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent.

Naguiat applied for the extrajudicial foreclosure of the mortgage. Before the scheduled sale, Queaño filed annulment of the mortgage deed.

Issues:(1) Whether or not petitioner can foreclose the mortgage properties.(2) Agency by estoppel between petitioner and Ruebenfeldt.Rulings:(1) Absolutely no evidence was submitted by Naguiat that the checks she issued or endorsed were actually encashed or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. For the Civil Code provides that the delivery of bills of  exchange and mercantile documents such as checks shall produce the effect of payment only when they have been cashed. It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected. A loan contract is a real contract, not consensual, and, as such, is perfected only upon the delivery of the object of the contract. In this case, the objects of the contract are the loan proceeds which Queaño would enjoy only upon the encashment of the checks signed or indorsed by Naguiat. Since Naguiat presented no such proof, it follows that the checks were not encashed or credited to Queaño’s account. No compelling reason to disturb the finding of the courts a quo that the lender did not remit and the borrower did not receive the proceeds of the loan. That being the case, it follows that the mortgage which is supposed to secure the loan is null and void.

(2) The existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. Naguiat instructed Ruebenfeldt to withhold from Queaño the checks she issued or indorsed to Queaño, pending delivery by the latter of additional collateral. It was also Ruebenfeldt who accompanied Queaño in her meeting with Naguiat.

Source: http://thestraydecision.wordpress.com/2010/12/07/cebu-international-vs-court-of-appeals/CEBU INTERNATIONAL vs. COURT OF APPEALSG.R. No. 123031 October 12, 1999Facts:Cebu International Finance Corporation (CIFC), a quasi-banking institution, is engaged in money market operations.On April 25, 1991, Vicente Alegre, invested with CIFC, P500,000.00 pesos, in cash. Petitioner issued a promissory note to mature on May 27, 1991 for P516,238.67 placement plus interest at twenty and a half (20.5%) percent for thirty-two (32) days.On May 27, 1991, CIFC issued BPI Check No. 513397 for P514,390.94 in favor of Alegre as proceeds of his matured investment plus interest. The CHECK was drawn from petitioner’s current account number maintained with the BPI Makati City.Alegre’s wife deposited the CHECK with RCBC Puerto Princesa, Palawan but it was dishonoured with the annotation, that the “Check (is) Subject of an Investigation.” Alegre notified CIFC of the dishonored CHECK and demanded, on several occasions, that he be paid in cash. Alegre, through counsel, made a formal demand for the payment of his money market placement. In turn, CIFC promised to replace the CHECK but required an impossible condition that the original must first be surrendered.Hence, this case for recovery of sum of money. RTC ruled in favour of Alegre. CA affirmed.Issue:1. Was there valid payment to Alegre?2. Was there a valid discharge of the check?Held:1. No. In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. The private respondent accepted the CHECK, instead of requiring payment in money. Yet, when he presented it to RCBC for encashment, as early as June 17, 1991, the same was dishonored by non-acceptance, with BPI’s annotation: “Check (is) subject of an investigation.” These facts were testified to by BPI’s manager. Under these circumstances, and after the notice of dishonor, the holder has an immediate right of recourse against the drawer, and consequently could immediately file an action for the recovery of the value of the check.In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check. A check is not a legal tender, and therefore cannot constitute valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (citation omitted). A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3.)2. No. When the bank deducted the amount of the CHECK from CIFC’s current account, this did not ipso facto operate as a discharge or payment of the instrument. Although the value of the CHECK was deducted from the funds of CIFC, it was not delivered to the payee, Vicente Alegre. Instead, BPI offset the amount against the losses it incurred from forgeries of CIFC checks, allegedly committed by Alegre. The confiscation of the value of the check

was agreed upon by CIFC and BPI. This compromise agreement between CIFC and BPI cannot bind Alegre who was a non-party thereto. His money could not be the subject of an agreement between CIFC and BPI. Although Alegre’s money was in custody of the bank, the bank’s possession of it was not in the concept of an owner. BPI cannot validly appropriate the money as its own.

Severino Tolentino and Potenciana Manio v. Benito Gonzalez

August 12, 1927; Johnson, J.

Facts

Plaintiff (Tolentino) purchased a parcel of land from Luzon Rice Mills promising to pay in 3

installments

P2,000 due on May 2, 1921; P8,000 due on May 31, 1921; balance of P15,000 and

12% interest due on or about Nov. 31, 1922

One condition was that upon failure to pay the balance of the said purchase or any

installment on the date agreed upon, the property would revert to the original owner

On Nov. 7, 1922, the vendor wrote to Plaintiff Manio that failure to pay balance would

make vendor file actions for recovery with damages

Plaintiffs feeling that they would not be able to pay the balance of P16, 965.09 due,

decided to borrow P17,500 from Defendant Gonzalez under the condition that plaintiffs

execute and deliver a pacto de retro of said property.

Issues/Holding/Ratio

1. WON the contract between plaintiff and respondent is a pacto de retro or a mortgage? It is

clearly a pacto de retro and not a mortgage.

The Court finds that it is a contract of pacto de retro, which is a contract of absolute sale

with right to repurchase; the vendor became the tenant of the purchaser

Due to the severity of a contract of pacto de retro, generally, the court would declare the

same to be a mortgage and not a sale

However, there must be something in the language or in the conduct of the parties which

shows clearly and beyond doubt that they intended it to be a mortgage and not a pacto de

retro

The terms of the contract use “sale” and there is no language to the contrary. Examples of

contracts deemed to be mortgages:

Padilla v. Linsangan: the word was “pledged” instead of “sold”

Manlagnit v. Dy Puico: “sale and transfer with right to repurchase” was in the contract,

but the parties were referred to as “debtor,” “purchaser,” and the contract a “mortgage”

Rodriguez v. Pamintuan and De Jesus: “authorizing him to borrow money in such

amount and upon such terms and conditions as he might deem proper, and to secure

payment of the loan by a mortgage.”

Villa v. Santiago: the vendor remained in possession and invested the money in

making improvements

Cuyugan v. Santos: purchaser accepted partial payments; such is incompatible with

the idea of irrevocability of the title of ownership

CJ Arellano: consideration must chiefly be paid to those acts execute by said parties which

are contemporary with and subsequent to the contract; they must not be held to include

things and cases different from those with regard to which the interested parties agreed to

contract

There is not a word, a phrase, a sentence or a paragraph in the entire record which proves

this is a mortgage and not a sale with right to repurchase

Lichauco v. Berenguer: Vendor merely continued in the possession of the lands, not as

owner but as lessee. Right of ownership is not implied by the lessee’s payment of taxes.

2. May a tenant charge his landlord with a violation of the Usury Law upon the ground of the

amount of rent he pays? No, because rents are different from interest, and so the Usury Law

does not apply

This is a case of first impression

While collection of a rate of interest higher than law is illegal, it only applies on loans

A loan signifies the giving of a sum of money, goods or credits to another, with a promise

to repay, but not a promise to return the same thing. It never means the return of the

same thing, but only an equivalent.

A contract of rent is on where the parties delivers to the other some nonconsumible thing, in order that the latter may use it during a certain period and

return it to the former. It is also known as commodatum

Loan Rent

The thing loaned becomes property of the obligor Owner does not lose ownership; he only loses control

The relation is obligor and obligee

The relation is landlord and tenantIt may be defined as the compensation in money, provisions, chattels, or labor, received by the owner of the soil from the occupant

Delivery of a consumable thing Delivery of a nonconsumable thing

Value of money, goods, or credit is easily ascertained

Value of rent is dependent on a thousand different conditions (i.e. farm land value depends on location, prices of commodities, proximity to the market, etc.)

Justice Malcolm, Dissenting Opinion

The contract was executed as a “mere clever device” to cover up the payment of usurious

interest. The transaction should be considered as in the nature of an equitable mortgage.

Pajuyo vs CA, GuerreraJune 3, 2004J. Carpio

FACTS:

Pajuyo & Eddie Guevarra executed a Kasunduan or agreement whereby the former allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyo’s demand. Nine years later, Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate the house.  Guevarra refused.

An ejectment case was filed in the MTC of QC which Pajuyo won. According to the MTC, Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Guevarra’s refusal to vacate the house on Pajuyo’s demand made Guevarra’s continued possession of the house illegal.

RTC affirmed in toto. The RTC upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and Guevarra. The terms of the Kasunduan bound Guevarra to return possession of the house on demand. The RTC declared that in an ejectment case, the only issue for resolution is material or physical possession, not ownership.

CA reversed the RTC. The Court of Appeals reversed the MTC and RTC rulings, which held that the Kasunduan between Pajuyo and Guevarra created a legal tie akin to that of a landlord and tenant relationship.  The Court of Appeals ruled that the Kasunduan is not a lease contract but a commodatum because the agreement is not for a price certain.

Issue: W/N the Kasunduan is a commodatum.

HELD: No. The Kasunduan is not commodatum.

Pajuyo is entitled to physical possession of the disputed property.

Guevarra does not dispute Pajuyo’s prior possession of the lot and ownership of the house built on it. The facts make out a case for unlawful detainer. Unlawful detainer involves the withholding by a person from another of the possession of real property to which the latter is entitled after the expiration or termination of the former’s right to hold possession under a contract, express or implied.The Kasunduan is not one of commodatum.

Features of Commodatum1.) One of the parties delivers to another something not consumable so that the latter may use the

same for a certain time and return it. 2.) It is essentially gratuitous. 3.) The use of the thing belonging to another is for a certain period. The bailor cannot demand the

return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium. Under the Civil Code, precarium is a kind of commodatum.

4.) There is an obligation to return.

In this case, the Kasunduan is NOT gratuitous. Although there was no rent, there was an obligation imposed to maintain the property in good condition. The imposition of this obligation makes the Kasunduan a contract different from a commodatum. Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee would still have the duty to turn over

possession of the property to Pajuyo, the bailor.  The obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and commodatum.

The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to physical possession of the contested property.  The Kasunduan is the undeniable evidence of Guevarra’s recognition of Pajuyo’s better right of physical possession. Guevarra is clearly a possessor in bad faith.  The absence of a contract would not yield a different result, as there would still be an implied promise to vacate.

PANTALEON v. American Express International, Inc.Carpio-Morales, 2010FACTS: Polo Pantaleon and family were on a guided European trip on 1991. While in Amsterdam, Pantaelon fancied some jewelry and tried to buy some diamond pieces worth $13,826 via credit card. He paid at 9:15, and the transaction was referred to AMEX at 9:20. The transaction had not been approved until 10:47AM, which caused irritation within their tour groupm and disallowed them to have a guided tour of Amsterdam, because they had to be in Calais, Belgium at 3PM to catch the ferry to London. AMEX countered that it had to go over Pantaleon’s transaction history and bank references. The delays happened twice subsequently – for purchases of golf equipment and children’s shoes – and upon Pantaleon’s return to Manila, he sent a letter to AMEX demanding an apology for the humiliation and inconvenience he and his family experienced due to the delays in obtaining approval for his purchases. AMEX said that it had to go over P’s established charge purchase pattern, because the transaction for diamonds deviated from it. Pantaelon filed an action for damages with the Makati RTC.RTC: AMEX guilty of delay; P500k MD, P300k ED, P100k AF, P85,233.01 LitExCAL RTC decision reversed due to ff grounds:

1. Although delay was in nature of mora accipiendi, delay was not attended by bad faith, malice, or gross negligence

2. AMEX exercised diligent efforts to effect the approval of P’s purchases3. Purchase for diamonds was a deviation from the established spending pattern4. No proof that AMEX breached in contract to make it liable for damages

SC (2009 decision): 1. AMEX guilty of mora solvendi (debtor’s default)2. AMEX had the obligation, as credit provider, to act on Pantaleon’s purchase requests with timely dispatch 3. Eduardo Jaurigue (AMEX’s credit authorizer): Approval time for credit card charges from 3-4 seconds

under regular circumstances; Pantaleon’s case took 78 minutes because Jaurigue had to go over Pantaleon’s past credit history, payment record, and credit and bank references before approval of purchase

AMEX’s Motion for Recon: 1. Delay was because transaction was not normal; while Pantaleon’s previous purchases amassed more than

the price of the diamonds, such total was acquired during a 10-year span2. Volume of transaction merited the review of Pantaleon’s credit history and bank references3. AMEX had to ensure Pantaleon’s protection and its own protection from the risk that P might not be able

to pay for his purchases on credit4. ^ such exercise was keeping with the EXTRAORDINARY DEGREE of DILIGENCE required of banks in

handling its transactions5. P could have prevented his humiliation and embarrassment had he cancelled the sale when he noticed

the unusual delay

ISSUE: Whether AMEX’s delay in approval of the purchases was justifiableHELD: YES, AMEX was in good faith in delaying approval of Pantaleon’s purchases because (a) Amex had neither a contractual nor legal obligation to act upon Pantaleon’s purchases within a specific period of time; and (b) AMEX has a right to review a cardholder’s credit card history

1. The use of a credit card is a mere offer to enter into loan agreements. The loan agreement only begins to exist upon the meeting of the offer and the acceptance of the parties involved. When cardholders use their credit cards to pay for their purchases, they merely offer to enter into loan agreements with the credit card company. Only upon approval of the latter will loan contracts be binding.

2. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract; the offer must be certain and the acceptance absolute; a qualified acceptance constitutes a counter offer (NCC 1319) The card membership agreement itself (paragraph 10) clearly states that AMEX reserves the right to deny authorization for any requested charge.

3. AMEX is not guilty of culpable delay. NCC 1169 provides that “Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demand from them the fulfilment of their obligation”. The three requisites for default are (1) obligation is demandable and liquidated; (2) debtor delays in performance; and (3) the creditor judicially or extrajudicially requires the debtor’s performance. The 1st requisite for default (a demandable and liquidated obligation) is absent because AMEX is not obligated to approve Pantaleon’s purchase request, and that there was NO DEMAND to speak of. Demand (“the assertion of a legal right; asking an authority, claiming or challenging as due) presupposes the existence of an obligation between the parties.

4. The use of a credit card to pay for a purchase is only an offer to the CC company to enter a loan agreement with the CC holder. Before the credit card issuer accepts this offer, no obligation relating to the loan agreement exists between them. Every time Pantaleon used his CC to pay for his purchases, what the stores transmitted to AMEX were offers to execute loan contracts, not demands, and thus, AMEX was not in default.

5. AMEX has NO OBLIGATION to act on the offer within a specific period of time. Accdg to Jaurige, having no pre-set spending limit in a CC means that charges made by P are approved based on his ability to pay, as demonstrated by his past spending, payment patterns, and personal resources. CC companies still have to determine whether it will allow charges on its account based on past credit history. Even if AMEX approved purchases within 3-4 second on a regular day, such fact does not create an obligation on the part of AMEX to act on all cardholder purchase requests within a specifically defined period of time.

6. Law/government issuances do not require credit card companies to act upon its cardholders’ purchase requests within a specific period of time. RA 8484’s salient provisions only impose the obligation on a CC company to disclose certain important financial information to CC applicants, as well as a definition of the acts that constitute access device fraud. BSP Circular No. 398 encourages “fair and sound consumer credit practices”, which entails that banks and their subsidiary CC companies must exercise proper diligence by ascertaining that applicants possess good credit standing and the financial capability of fulfilling their credit commitments.

7. AMEX acted in good faith in checking Pantaleon’s credit history before approving the transaction. AMEX, however, has no unlimited right to put off action on cardholders’ purchase requests for indefinite periods of time, in conjunction with Arts. 19, 20, and 21 of the NCC. Pantaleon was unable to prove that AMEX acted with deliberate intent to cause any loss or injury, or act in a manner contrary to morals, good customs, or public policy. Jaurigue only reviewed his spending pattern because it was his very first single purchase in that big an amount.

8. Pantaleon’s action was the proximate cause of his injury; Pantaleon knew that he had to go aboard the bus at 9:30, yet he did not cancel the sale when given the opportunity to. A person who knowingly and voluntarily exposes himself to danger cannot claim damages for the resulting injury (Nikko Hotel Manila Garden v. Reyes)

Nature of Credit Card Transactions: Involves a tripartite relationship among issuer bank, cardholders, and merchants participating in the

system. Issuer bank establishes an account on behalf of the person to whom the card is issuedObligation of the Bank to Cardholder Obligation of Cardholder to Bank

1. To pay for cardholder’s account the amount of merchandise or services purchased through the use of the credit card

2. To make the cash loans available to the cardholder

1. To be liable to the bank for advances and payments made by the bank

2. Obligation to pay the bank shall not be affected by any dispute, claim, demand by the cardholder with respect to any merchandise or service purchased

Obligation of the Bank to Merchants Obligation of Merchants to Banks1. To honor and pay the sales slips

presented by the merchant if the merchant performs his undertakings such as checking the list of revoked cards before accepting the card

1. To honor the bank’s credit cards

Credit cards are not limited to banks; business establishments may extend credit sales through the use of the credit card facilities of a non-bank credit card company to avoid the risk of uncollectible accounts from their customers. Establishments do not deposit in their bank accounts the CC drafts that arise from the credit sales, but record their receivables from the CC company and periodically send the drafts evidencing those receivables to the latter (CIR v. AMEX)

Every credit card transaction involves three transactions:o Sales contract between CC holder and merchant/business establishment w/c accepted the CCo Loan agreement between CC issuer and CC holdero Promise to pay between CC issuer and merchant/business establishment

On the CC issuer-cardholder relationship The relationship begins when both parties enter into a contract, which is found in the card membership

agreement. Conflicting jurisprudence; Gray applicable in our jurisdiction:

o Novack v. Cities Service Oil Co. & City Stores Co v. Henderson: Issuance of a credit card is an offer to extend a line of open account credit. It is unilateral and supported by no consideration. Offer may be withdrawn at any time, without prior notice, for any reason, or, indeed, for no reason at all, and its withdrawal breaches no duty and breaches no rights, because there is no duty to continue it; mere issuance of a credit card did not create a contractual relationship

o Gray v. AMEX: Card membership agreement itself is a binding contract