Producer’s Bank of the Philippines v.

CA, GR 115324, 19 Feb 2003

FACTS:
Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend
Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in incorporating his
business, the Sterela Marketing and Services (“Sterela” for brevity). Specifically, Sanchez asked
private respondent to deposit in a bank a certain amount of money in the bank account of
Sterela for purposes of its incorporation. She assured private respondent that he could
withdraw his money from said account within a month’s time. With this, Mrs. Vivies, Sanchez
and a certain Estrella Dumagpi, secretary of Doronilla, went to the bank to open an account
with Mrs. Vives and Sanchez as signatories. A passbook was then issued to Mrs. Vives.
Subsequently, private respondent learned that part of the money was withdrawn without
presentment of the passbook as it was his wife got hold of such. Mrs. Vives could not also
withdraw said remaining amount because it had to answer for some postdated checks issued
by Doronilla who opened a current account for Sterela and authorized the bank to debit
savings.

Private respondent referred the matter to a lawyer, who made a written demand upon
Doronilla for the return of his client’s money. Doronilla issued another check for P212,000.00 in
private respondent’s favor but the check was again dishonored for insufficiency of funds.

Private respondent instituted an action for recovery of sum of money in the Regional Trial Court
(RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The RTC ruled
in favor of the private respondent which was also affirmed in toto by the CA. Hence this
petition.

ISSUE: WON THE TRANSACTION BETWEEN THE DORONILLA AND RESPONDENT VIVES WAS ONE
OF SIMPLE LOAN.

HELD: NO.
A circumspect examination of the records reveals that the transaction between them was a
commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of loans in
this wise:

By the contract of loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and return it, in which case
the contract is called a commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid, in which case the contract is
simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan,
ownership passes to the borrower.

The foregoing provision seems to imply that if the subject of the contract is a consumable thing,
such as money, the contract would be a mutuum. However, there are some instances where a
commodatum may have for its object a consumable thing. Article 1936 of the Civil Code
provides:

Consumable 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.

Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of
the parties is to lend consumable goods and to have the very same goods returned at the end
of the period agreed upon, the loan is a commodatum and not a mutuum.

The rule is that the intention of the parties thereto shall be accorded primordial consideration
in determining the actual character of a contract. In case of doubt, the contemporaneous and
subsequent acts of the parties shall be considered in such determination.

Pajuyo v. CA, G.R. No. 146364. March 19, 2002

Facts:
In June 1979, petitioner Colito T. Pajuyo (Pajuyo) paid P400 to a certain Pedro Perez for the
rights over a 250- square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a
house made of light materials on the lot. Pajuyo and his family lived in the house from 1979 to
7 December 1985.

On 8 December 1985, Pajuyo and private respondent Eddie Guevarra (Guevarra) executed a
Kasunduan or agreement. Pajuyo, as owner of the house, 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 Pajuyos demand.

In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that
Guevarra vacate the house. Guevarra refused.

Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon
City, Branch 31 (MTC).

In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot
where the house stands because the lot is within the 150 hectares set aside by Proclamation
No. 137 for socialized housing. Guevarra pointed out that from December 1985 to September
1994, Pajuyo did not show up or communicate with him. Guevarra insisted that neither he nor
Pajuyo has valid title to the lot.

MTC: The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the
house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the
house only by tolerance. Thus, Guevarras refusal to vacate the house on Pajuyos demand made
Guevarras continued possession of the house illegal.

RTC: 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 rejected Guevarras claim of a better right under Proclamation No. 137, the Revised
National Government Center Housing Project Code of Policies and other pertinent laws. In an
ejectment suit, the RTC has no power to decide Guevarras rights under these laws. The RTC
declared that in an ejectment case, the only issue for resolution is material or physical
possession, not ownership.

CA: Pajuyo and Guevarra are squatters. Pajuyo and Guevarra illegally occupied the contested lot
which the government owned.

Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no right
or title over the lot because it is public land. Pajuyo and Guevarra are in pari delicto or in equal
fault. The court will leave them where they are.

Kasunduan is not a lease contract but a commodatum because the agreement is not for a price
certain.

Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate
court held that Guevarra has a better right over the property under Proclamation No. 137.
President Corazon C. Aquino issued Proclamation No. 137 on 7 September 1987. At that time,
Guevarra was in physical possession of the property. Under Article VI of the Code of Policies
Beneficiary Selection and Disposition of Homelots and Structures in the National Housing
Project (the Code), the actual occupant or caretaker of the lot shall have first priority as
beneficiary of the project. The Court of Appeals concluded that Guevarra is first in the hierarchy
of priority.

Issue:
Whether or not the CA erred or abused its authority and discretion tantamount to lack of
jurisdiction in ruling that the Kasunduan voluntarily entered into by the parties was in fact a
commodatum, instead of a Contract of Lease as found by the Metropolitan Trial Court and in
holding that the ejectment case filed against defendant-appellant is without legal and factual
basis.
Held:
The Court do not subscribe to the CA’s theory that the Kasunduan is one of commodatum.

In a contract of commodatum, 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. An essential
feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use
of the thing belonging to another is for a certain period. Thus, 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.

The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not
essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated
him to maintain the property in good condition. The imposition of this obligation makes the
Kasunduan a contract different from a commodatum. The effects of the Kasunduan are also
different from that of a commodatum. Case law on ejectment has treated relationship based on
tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of
permission would result in the termination of the lease. The tenants withholding of the
property would then be unlawful. This is settled jurisprudence.

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. These contracts
certainly involve the obligation to deliver or return the thing received.

Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a
squatter. Squatters, Guevarra pointed out, cannot enter into a contract involving the land they
illegally occupy. Guevarra insists that the contract is void.

Guevarra should know that there must be honor even between squatters. Guevarra freely
entered into the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had
benefited from it. The Kasunduan binds Guevarra.

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 Guevarras recognition of Pajuyos 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.
Quintos and Ansaldo v. Beck, 69 Phils 108, 1939

FACTS:

The defendant was a tenant of the plaintiff. The latter gratuitously granted to the former the
use of the furniture subject to the condition that the defendant would return them to the
plaintiff upon the latter's demand. The plaintiff sold the property. There after the plaintiff
required the defendant to return all the furniture transferred to him for the new owners in the
house where they were found.

On November 5, 1936, the defendant wrote to the plaintiff reiterating that she may call for the
furniture in the ground floor of the house. On the 7th of the same month, the defendant wrote
another letter to the plaintiff informing her that he could not give up the three gas heaters and
the four electric lamps because he would use them until the 15th of the same month when the
lease in due to expire. The plaintiff refused to get the furniture in view of the fact that the
defendant had declined to make delivery of all of them. On November 15th, before vacating the
house, the defendant deposited with the Sheriff all the furniture belonging to the plaintiff and
they are now on deposit in the custody of the sheriff.

ISSUE: Whether or not defendant complied with his obligation to return the furniture upon the
plaintiff’s demand.
HELD: NO.

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 latters 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 three gas heaters and the four eletric
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 four
electric lamps.

Republic vs. Bagtas, G.R. L-9417

Facts:
Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal
Industry three bulls for a period of one year subject to a government charge of breeding fee of
10% of the book value of the bulls. Upon the expiration on 7 May 1949 of the contract, the
borrower asked for a renewal for another period of one year. However, was approved a
renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and
requested the return of the other two. Jose V. Bagtas failed to pay the book value of the three
bulls or to return them. In the Court of First Instance of Manila the Republic of the Philippines
commenced an action against him praying that he be ordered to return the three bulls loaned
to him or to pay their book value in the total sum of P3,241.45 and the unpaid breeding fee in
the sum of P199.62, both with interests, and costs; and that other just and equitable relief be
granted.

Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who died on 23 October
1951 and as administratrix of his estate, was notified. On 7 January 1959 she file a motion
alleging that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the Bureau
Animal of Industry and that sometime in November 1958 the third bull, the Sahiniwal, died
from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal, and praying that
the writ of execution be quashed and that a writ of preliminary injunction be issued. On 31
January 1959 the plaintiff objected to her motion. On 6 February 1959 she filed a reply thereto.
On the same day, 6 February, the Court denied her motion. Hence, this appeal certified by the
Court of Appeals to this Court as stated at the beginning of this opinion.

The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk
in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan,
where the animal was kept, and that as such death was due to force majeure she is relieved
from the duty of returning the bull or paying its value to the appellee. The contention is without
merit. The loan by the appellee to the late defendant Jose V. Bagtas of the three bulls for
breeding purposes for a period of one year from 8 May 1948 to 7 May 1949, later on renewed
for another year as regards one bull, was subject to the payment by the borrower of breeding
fee of 10% of the book value of the bulls. The appellant contends that the contract was
commodatum and that, for that reason, as the appellee retained ownership or title to the bull it
should suffer its loss due to force majeure.

Issue:
Whether the borrowing of the Bull from the appellee is a commodatum contract and that, for
that reason, as the appellee retained ownership or title to the bull it should suffer its loss due to
force majeure.?

Held:
No, 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;

CATHOLIC VICAR vs. COURT OF APPEALS, G.R. No. 80294-95 September 21, 1988

Facts:
filed with the Court of First Instance of Baguio Benguet on September 5, 1962 an application for
registration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La
Trinidad, Benguet. the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their
Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto.
After trial on the merits, the land registration court promulgated its Decision, dated November
17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4. the Respondent
appealed the decision of the land registration court to the then Court of Appeals, reversing the
decision of the land registration court and dismissing the VICAR’s application as to Lots 2 and 3,
the lots claimed by the two sets of oppositors in the land registration case. for The Court of
Appeals found that petitioner 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.

By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano.
Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The
predecessors of private respondents, not petitioner Vicar, were in possession of the questioned
lots since 1906.
There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not
Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in
1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The
improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only
in 1947, the church was constructed only in 1951 and the new convent only 2 years before the
trial in 1963.

When petitioner Vicar was notified of the oppositor’s claims, the parish priest offered to buy
the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in
1962.

Issue:
Whether the ownership of a property maybe transfer to the bailee for failure of the bailor to
demand for the return if it.

Held:
No, 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 the predecessors-in-interest and private respondents were
possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a
bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951.
 MUTUUM

Republic v. Grijaldo, G.R. L-20240

FACTS: Appellant Grijaldo obtained five loans from Bank of Taiwan, with total sum
ofP1,281.97 with interest. (Bank of Taiwan is Japanese owned)

Since the loans were crop loans it was considered that the loans were due one year after they
were incurred. Loan was secured by a chattel mortgage on the standing crops of Grijaldo’s
land,Hacienda Campugas.The assets of Bank of Taiwan, Ltd. were vested in the Government of
the United States,and subsequently to the Republic of the Philippines (RP). (After Japan lost to
US)RP then made a written extrajudicial demand upon the appellant for the payment of
theaccount in question, but appellant failed to pay.
Grijaldo died and now represented by his legal heirs. Appellant contends that because the loans
were secured by a chattel mortgage on thestanding crops on his land and these crops were lost
or destroyed through enemyactions(Japanese) his obligations to pay the loans were thereby
extinguished.

ISSUE and HELD1.W/N the destruction of the crops extinguished appellant Grijaldo’s obligation.

NO The obligation of the appellant was not to deliver a determinate thing namely, the cropsto
be harvested from his land, or the value of the crops that would be harvested fromhis land.
Rather, his obligation was to pay a generic thing - the amount of moneyrepresenting the total
sum of the five loans, with interest.The transaction between the appellant and the Bank of
Taiwan, Ltd. was a series of fivecontracts of simple loan of sums of money.Art. 1933:oBy a
contract of (simple) loan, one of the parties delivers to another x x xmoney or other
consumable thing upon the condition that the same amount ofthe same kind and quality shall
be paid.The obligation of the appellant under the five promissory notes evidencing the loans
inquestion is to pay the value thereof; that is, to deliver a sum of money - a clear case ofan
obligation to deliver a generic thing.Art. 1263:oIn an obligation to deliver a generic thing, the
loss or destruction of anything ofthe same kind does not extinguish the obligation.The chattel
mortgage on the crops growing on appellant’s land simply stood as asecurity for the fulfillment
of appellant’s obligation covered by the promissory notes,and the loss of the crops did not
extinguish his obligation to pay, because the accountcould still be paid from other sources aside
from the mortgaged cropss.*Something about prescription: Doesn’t run against the state. Also,
Moratorium Laws whichinterrupted the running of the prescription period during WWII.

Guingona v. City Fiscal of Manila

Facts:

From 1979 to 1981, Private respondent David invested with the Nation Savings and Loan
Association, (hereinafter called NSLA) the sum of money though the inducement of an
Australian national who was allegedly a close associate of petitioner Guingona Jr., then NSLA
President, petitioner Martin. That on March 21, 1981 NSLA was placed under receivership by
the Central Bank, which led to the filing of claims for his investments. David received a report
from the Central Bank that only partial amount of those investments were entered in the
records of NSLA; that, therefore, the respondents claimed that the petitioner misappropriated
the balance of the investments. David filed a criminal case for estafa.

Petitioners, countered that because NSLA was urgently in need of funds and at David’s
insistence, his investments were treated as special- accounts with interest above the legal rate,
and recorded in separate confidential documents only a portion of which were to be reported
because he did not want the Australian government to tax his total earnings (nor) to know his
total investments; that all transactions with David were recorded except the sum of
US$15,000.00 which was a personal loan of Santos; that the Philippine Deposit Insurance
Corporation had already reimbursed David within the legal limits; that majority of the
stockholders of NSLA had filed Special Proceedings in the Court of First Instance to contest its
(NSLA’s) closure; that after NSLA was placed under receivership, Martin executed a promissory
note in David’s favor and caused the transfer to him of a nine and on behalf (9 1/2) carat
diamond ring with a net value of P510,000.00; and, that the liabilities of NSLA to David were
civil in nature.”

Petitioner, Guingona, Jr., in his counter-affidavit states that he had no hand whatsoever in the
transactions between David and NSLA; that he assumed a portion the liabilities of NSLA to
David because of the latter’s insistence that he placed his investments with NSLA because of his
faith in Guingona, Jr.; that in a Promissory Note dated June 17, 1981, he bound himself to pay
David the sums of P668.307.01 and US$37,500.00 in stated installments; that he secured
payment of those amounts with second mortgages over two (2) parcels of land under a deed of
Second Real Estate Mortgage in which it was provided that the mortgage over one (1) parcel
shall be cancelled upon payment of one-half of the obligation to David; that he paid
P200,000.00 and tendered another P300,000.00 which David refused to accept, hence, he filed
Civil Case in the Court of First Instance of Rizal at Quezon City, to effect the release of the
mortgage over one (1) of the two parcels of land conveyed to David under second mortgages.”

note in favor of private respondent acknowledging an indebtedness of Pl,336,614.02 and

US$75,000.00 (p. 80, rec.). This promissory note was based on the statement of account as of
June 30, 1981 prepared by the private respondent (p. 81, rec.). The amount of indebtedness
assumed appears to be bigger than the original claim because of the added interest and the
inclusion of other deposits of private respondent’s sister in the amount of P116,613.20.

The public Respondent took cognizance of the complaint, to which the petitioner Appeal the
case directly to the Supreme Court as a pure question of Law.

Issue:

Whether the investment of David constitute a contract of Deposit in accordance to the Civil
Code?

Held:

No, It must be pointed out that when private respondent David invested his money on nine.
and savings deposits with the aforesaid bank, the contract that was perfected was a contract of
simple loan or mutuum and not a contract of deposit. Thus, Article 1980 of the New Civil Code
provides that Fixed, savings, and current deposits of-money in banks and similar institutions
shall be governed by the provisions concerning simple loan.

It should be noted that fixed, savings, and current deposits of money in banks and similar
institutions are hat true deposits. are considered simple loans and, as such, are not preferred
credits. Bank deposits are in the nature of irregular deposits. They are really ‘loans because
they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans. Current and saving deposits, are
loans to a bank because it can use the same.

Hence, the relationship between the private respondent and the Nation Savings and Loan
Association is that of creditor and debtor; consequently, the ownership of the amount
deposited was transmitted to the Bank upon the perfection of the contract and it can make use
of the amount deposited for its banking operations, such as to pay interests on deposits and to
pay withdrawals. While the Bank has the obligation to return the amount deposited, it has,
however, no obligation to return or deliver the same money that was deposited. And, the
failure of the Bank to return the amount deposited will not constitute estafa through
misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code, but it will
only give rise to civil liability over which the public respondents have no- jurisdiction.

In order that a person can be convicted under the above-quoted provision, it must be proven
that he has the obligation to deliver or return the some money, goods or personal property that
he received Petitioners had no such obligation to return the same money, i.e., the bills or coins,
which they received from private respondents. This is so because as clearly as stated in criminal
complaints, the related civil complaints and the supporting sworn statements, the sums of
money that petitioners received were loans.
Garcia v. Thio, 518 SCRA 433, 2007

FACTS
Respondent Thio received from petitioner Garcia two crossed checks which amount to
US$100,000 and US$500,000, respectively, payable to the order of Marilou Santiago. According
to petitioner, respondent failed to pay the principal amounts of the loans when they fell due
and so she filed a complaint for sum of money and damages with the RTC. Respondent denied
that she contracted the two loans and countered that it was Marilou Satiago to whom
petitioner lent the money. She claimed she was merely asked y petitioner to give the checks to
Santiago. 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’s.

RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no contract of
loan between the parties.

ISSUE
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?

HELD
(1) The Court held in the affirmative. A loan is a real contract, not consensual, and as such
I perfected only upon the delivery of the object of the contract. Upon delivery of the contract of
loan (in this case the money received by the debtor when the checks were encashed) the
debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an
equal amount. It is undisputed that the checks were delivered to respondent.

(2) However, the checks were crossed and payable not to the order of the respondent but
to the order of a certain Marilou Santiago. Delivery is the act by which the res or substance is
thereof placed within the actual or constructive possession or control of another. Although
respondent did not physically receive the proceeds of the checks, these instruments were
placed in her control and possession under an arrangement whereby she actually re-lent the
amount to Santiago.

Petition granted; judgment and resolution reversed and set aside.

BPI Family Bank v. Franco, 538 SCRA 184

Facts:
An ostensible fraud perpetrated on the petitioner BPI Family Bank (BPI-FB) allegedly by
respondent Amado Franco in conspiracy with other individuals, some of whom opened and
maintained separate accounts with BPI-FB, San Francisco del Monte (SFDM) branch, in a series
of transactions.
On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. opened a savings and current
account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro Investment
Corporation (FMIC) also opened a time deposit account with the same branch of BPI-FB with a
deposit of P100,000,000.00, to mature one year thence.

Subsequently, on August 31, 1989, Franco opened three accounts, namely, a current, savings,
and time deposit, with BPI-FB. The current and savings accounts were respectively funded with
an initial deposit of P500,000.00 each, while the time deposit account had P1,000,000.00 with a
maturity date of August 31, 1990. The total amount of P2,000,000.00 used to open these
accounts is traceable to a check issued by Tevesteco allegedly in consideration of Franco's
introduction of Eladio Teves, who was looking for a conduit bank to facilitate Tevesteco's
business transactions, to Jaime Sebastian, who was then BPI-FB SFDM's Branch Manager. In
turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB
from FMIC's time deposit account and credited to Tevesteco's current account pursuant to an
Authority to Debit purportedly signed by FMIC's officers.

It appears, however, that the signatures of FMIC's officers on the Authority to Debit were
forged. On September 4, 1989, Antonio Ong, upon being shown the Authority to Debit,
personally declared his signature therein to be a forgery. Unfortunately, Tevesteco had already
effected several withdrawals from its current account (to which had been credited the
P80,000,000.00 covered by the forged Authority to Debit) amounting to P37,455,410.54,
including the P2,000,000.00 paid to Franco.

On September 8, 1989, impelled by the need to protect its interests in light of FMIC's forgery
claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus Arangorin to
debit Franco's savings and current accounts for the amounts remaining therein. However,
Franco's time deposit account could not be debited due to the capacity limitations of BPI-FB's
computer.

In the meantime, two checks drawn by Franco against his BPI-FB current account were
dishonored upon presentment for payment, and stamped with a notation "account under
garnishment." Apparently, Franco's current account was garnished by virtue of an Order of
Attachment issued by the Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89-4996
(Makati Case), which had been filed by BPI-FB against Franco et al.,[14] to recover the
P37,455,410.54 representing Tevesteco's total withdrawals from its account.

Issue:
Whether or not Franco had a better right in the deposits in the subject accounts which are part
of the proceeds of a forged Authority to Debit

Held:
BPI-FB cannot unilaterally freeze Franco's accounts and preclude him from withdrawing his
deposits. However, contrary to the appellate court's ruling, the Court held that Franco is not
entitled to unearned interest on the time deposit as well as to moral and exemplary damages.

BPI-FB urges the Court that the legal consequence of FMIC's forgery claim is that the money
transferred by BPI-FB to Tevesteco is its own, and considering that it was able to recover
possession of the same when the money was redeposited by Franco, it had the right to set up
its ownership thereon and freeze Franco's accounts.

To bolster its position, BPI-FB cites Article 559 of the Civil Code, which provides:
Article 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
BPI-FB's argument is unsound. To begin with, the movable property mentioned in Article 559 of
the Civil Code pertains to a specific or determinate thing. A determinate or specific thing is one
that is individualized and can be identified or distinguished from others of the same kind.

In this case, the deposit in Franco's accounts consists of money which, albeit characterized as a
movable, is generic and fungible.The quality of being fungible depends upon the possibility of
the property, because of its nature or the will of the parties, being substituted by others of the
same kind, not having a distinct individuality.

Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived
of a movable to recover the exact same thing from the current possessor, BPI-FB simply claims
ownership of the equivalent amount of money, i.e., the value thereof, which it had mistakenly
debited from FMIC's account and credited to Tevesteco's, and subsequently traced to Franco's
account. In fact, this is what BPI-FB did in filing the Makati Case against Franco, et al. It staked
its claim on the money itself which passed from one account to another, commencing with the
forged Authority to Debit.

It bears emphasizing that money bears no earmarks of peculiar ownership, and this
characteristic is all the more manifest in the instant case which involves money in a banking
transaction gone awry. Its primary function is to pass from hand to hand as a medium of
exchange, without other evidence of its title. Money, which had passed through various
transactions in the general course of banking business, even if of traceable origin, is no
exception.

De La Paz v. L&J Development Co, G.R. 183360

FACTS: Out of trust and confidence, Rolando dela Paz lent a sum of money worth Php 350,000
to L & J Development Corporation, a property developer represented by Atty. Esteban Salonga
as its president and general manager.

The loan was executed without any security and no maturity date. It was however agreed
between the parties that the loan will have a 6% monthly interest (amounting to Php 21,000).
So far, L&J paid a total of Php 576,000 already – including interest charges from December 2000
to August 2003.

L&J later failed to make payments due to financial difficulties in the business. Rolando then filed
a collection case with the MTC and alleged as of January 2005, L&J still owes him Php 772,000
inclusive of monthly interests.

L&J (represented by Atty. Salonga) did not deny that they did incurred a debt from Rolando,
and admitted that they failed to pay due to a fortuitous event (financial difficulties). They also
contended that the 6% monthly interest is unconscionable and that their total payment of Php
576,000 should be applied to the principal loan which only amounts to Php 350,000.

Rolando also contends that Atty. Salonga tricked him to execute the said loan plus interest
without reducing the agreement in writing. He also said that the 6% interest rate was at the
suggestion and insistence of L&J.

The MTC rendered judgment in favor of Rolando and upheld the 6% interest rate as valid since
L&J complied to it as evidenced by the payment they made from December 2000 to August
2003. L&J is now estopped to impugn said interest rate.

The MTC also reduced the legal interest rate to 12% per annum on the remaining loan for
reasons of equity. They did not grant the prayer of moral damages to Rolando since there was
no bad faith on the part of L&J.

L&J appealed the decision to the RTC – contending once again that the 6% interest rate is
unconscionable, and that their previous payment which totaled Php 576,000 should be used to
set off the principal loan of Php 350,000. RTC however affirmed the decision of the MTC. L&J
appealed to the CA.

CA ruled in favor of L&J, noting that the agreed 6% interest rate was not reduced in a written
agreement and hence, it should not be considered due. CA ruled that the loan was already paid,
and that Rolando should return the excess Php 226,000 with interest of 12% per annum. The
case has now reached the Supreme Court.

ISSUE: Whether or not the unwritten 6% interest agreement should be honored.

HELD: No. The Supreme Court held that, as provided under the Civil Code, an agreement
regarding loan interests should be stipulated in writing. Even if the 6% monthly rate was done
in writing, it will still be void for being unconscionable and contrary to morals and public policy
– for at this time, an interest rate of 3% and higher is considered excessive and exorbitant.

Furthermore, the lack of maturity date puts the total interest to a whooping 72% per annum
which the Supreme Court considered to be “definitely outrageous and inordinate.” The
Supreme Court affirmed CA’s ruling, but as to Rolando’s obligation to pay the excess Php
226,000, the interest rate was reduced from 12% to 6% per annum.

Herrera v. Petrophil Corp, G.R. L-48349

FACTS:

On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil Corp.,)
entered into a lease agreement, whereby the former leased to the latter a portion of his
property for a period of 20yrs. subject to the condition that monthly rentals should be paid and
there should be an advance payment of rentals for the first eight years of the contract, to which
ESSO paid on December 31, 1969. However, ESSO deducted the amount of 101, 010.73 as
interest or discount for the eight years advance rental.
On August 20, 1970, ESSO informed Herrera that there had been a mistake in the computation
of the interest and paid an additional sum of 2,182.70; thus, it was reduced to 98, 828.03.
As such, Herrera sued ESSO for the sum of 98, 828.03, with interest, claiming that this had
been illegally deducted to him in violation of the Usury Law.
ESSO argued that amount deducted was not usurious interest but rather a discount given to it
for paying the rentals in advance. Judgment on the pleadings was rendered in favor of ESSO.
Thus, the matter was elevated to the SC for only questions of law was involve.
ISSUE: W/N the contract between the parties is one of loan or lease.

RULING:

Contract between the parties is one of lease and not of loan. It is clearly denominated a "LEASE
AGREEMENT." Nowhere in the contract is there any showing that the parties intended a loan
rather than a lease. The provision for the payment of rentals in advance cannot be construed as
a repayment of a loan because there was no grant or forbearance of money as to constitute an
indebtedness on the part of the lessor. On the contrary, the defendant-appellee was
discharging its obligation in advance by paying the eight years rentals, and it was for this
advance payment that it was getting a rebate or discount.
There is no usury in this case because no money was given by the defendant-appellee to the
plaintiff-appellant, nor did it allow him to use its money already in his possession. There was
neither loan nor forbearance but a mere discount which the plaintiff-appellant allowed the
defendant-appellee to deduct from the total payments because they were being made in
advance for eight years. The discount was in effect a reduction of the rentals which the lessor
had the right to determine, and any reduction thereof, by any amount, would not contravene
the Usury Law.
The difference between a discount and a loan or forbearance is that the former does not have
to be repaid. The loan or forbearance is subject to repayment and is therefore governed by the
laws on usury.
To constitute usury, "there must be loan or forbearance; the loan must be of money or
something circulating as money; it must be repayable absolutely and in all events; and
something must be exacted for the use of the money in excess of and in addition to interest
allowed by law."
It has been held that the elements of usury are (1) a loan, express or implied; (2) an
understanding between the parties that the money lent shall or may be returned; that for such
loan a greater rate or interest that is allowed by law shall be paid, or agreed to be paid, as the
case may be; and (4) a corrupt intent to take more than the legal rate for the use of money
loaned. Unless these four things concur in every transaction, it is safe to affirm that no case of
usury can be declared.

Nacar v. Gallery Frames, G.R. 189871

FACTS:

Petitioner Dario Nacar filed a complaint for constructive dismissal before theArbitration Branch
of the National Labor Relations Commission (NLRC) againstrespondents Gallery Frames.

On October 15, 1998, the Labor Arbiter rendered a Decision 3 in favor ofpetitioner and found
that he was dismissed from employment without a valid or justcause. Thus, petitioner was
awarded backwages and separation pay in lieu ofreinstatement in the amount of P158,919.92.

[February 29, 2000] Respondents appealed to the NLRC, but was dismissed.•[August 24, 2000]
ThePetition for Review of the respondents at the CA was dismissed.•[April 17, 2002]
Respondents sought relief from the SC, but was likewise, denied.

An Entry of Judgment was later issuedby the SCcertifying that the resolution became final
andexecutory on May 27, 2002.

November 5, 2002] Petitioner filed for aMotion for Correct Computation, praying that the
computation of his backwages be computed from his dismissal up to May 27, 2002.

[December 2, 2002] The Labor Arbiter issued a Writ of Execution ordering respondentto pay
P471,320.31.

Upon appeal by respondents, the LA ruled that it is the October 15, 1998Decision that should
be enforced considering that it was the one that became final andexecutory. Aggrieved, the
petitioner appealed at the CA, but his petition was denied. Hence, this petition for review on
certiorari.

ISSUES/ RATIOARTICLES/LAWS INVOLVED

1.WON the computationof the LA on October 15, 1998’s decisionbe applied on Nacar’s
backwages. –

NO. (Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) Resolution No. 796)

HELD1.The SC ruled that since the finality of the decision was on May 27, 2002, backwages
computed from the time petitioner was illegally dismissed on January24, 1997 up to May27,
2002, when the Resolution of this Court in G.R. No. 151332 becamefinal and executoryshall be
applied.Likewise, since there is an absence of an express stipulation as to the rate of
interestthat would govern the parties, the rate of legal interest for loans or forbearance of
anymoney, goods or credits and the rate allowed in judgments shall no longer be twelvepercent
(12%) per annum —as reflected in the case of Eastern Shipping Lines 40 andSubsection X305.1
of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3and 4303P.1 of the
Manual of Regulations for Non-Bank Financial Institutions, before itsamendment by BSP-MB
Circular No. 799 —but will now be six percent (6%) per annumeffective July 1, 2013. It should
be noted, nonetheless, that the new rate could only beapplied prospectively and not
retroactively. Thus, interest of twelve percent (12%) per annum of the total monetary
awards,computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from
July1, 2013 until their full satisfaction shall be applied.