1 Pantaleon v. American Express (2010) Brion, J.

AMEX is a corporation engaged in providing credit services through the operation of a charge card system. Pantaleon was a cardholder since 1980. Oct. 1991- Panteleon, wife (Julialinda), daughter (regina) and son (Adrian) went on a guided European tour. They arrived Amsterdam on Oct. 25, 1991. While in Coster Diamond House, Julialinda wanted to purchase some diamond pieces, amounting to $13, 826. Pantaleon presented his credit card which was swiped. He was then asked to sign the charge slip which was electronically transferred to AMEXs Amsterdam office. However, Coster was not able to receive approval from AMEX for the purchase so Pantaleon asked the clerk to cancel the sale. The store manager convinced Pantaleon to wait for a few minutes and subsequently told Pantaleon that AMEX was asking for bank references and Pantaleon responded by giving names of his Phil. depository banks. Still, it was not approved. But Coster decided to release the items even without AMEXs approval since the tour couldnt go on without them. From the records, it appears that after Pantaleons purchase was transmitted for approval to AMEXs Amsterdam office at 9:20 a.m.; was referred to AMEXs Manila office at 9:33 a.m.; and was approved by the Manila office at 10:19 a.m. At 10:38 a.m., AMEXs Manila office finally transmitted the Approval Code to AMEXs Amsterdam office. In all, it took AMEX a total of 78 minutes to approve Pantaleons purchase and to transmit the approval to the jewelry store. They then had another trip to the US. They also experienced inconvenience using the AMEX credit card; eg. golf equipment and childrens shoes. When they got to Manila, Pantaleon sent a letter to AMEX, demanding an apology for the humiliation and inconvenience. AMEX responded that the delay in Amsterdam was due to the amount involved, saying that the purchase deviated from his established charge purchase pattern. Dissatisfied, Pantaleon filed an action for damages in RTC. RTC - guilty CA - reversed; even though the delay was in the nature of mora accipiendi or creditors default, there was no proof of breach of contract nor acted in a wanton or fraudulent manner SC - reversed CA; and said that AMEX was guilty of mora solvendi or debtors default= AMEX as debtor had an obligation as the credit provider to act on Pantaleons purchase requests, whether to approve or disapprove them, with "timely dispatch." The testimony of AMEXs credit authorizer Edgardo Jaurique, the approval time for credit card charges would be three to four seconds under regular circumstances. Here, it took AMEX 78 minutes to approve the Amsterdam purchase. SC attributed the unwarranted delay to Jaurique, who had to go over Pantaleons past credit history, his payment record and his credit and bank references before he approved the purchase. This is an MoR. AMEX - the transaction wasnt a normal one. They said that the amount of 13,826 was made in a single transaction while his previous purchase only exceeded this amount in a span of more than 10 years. As this was the biggest single transaction he ever made, they had to carefully review his credit history and bank references to protect itself from the possibility of Pantaleons inability to pay and Pantaleon from possible fraudulent use of the card. It was in keeping with the extraordinary degree of diligence required of banks in handling its transactions. the proximate cause of his humiliation was his own decision by purchasing the items despite his awareness that the tour group was waiting for them. Pantaleon - AMEX was guilty of mora solvendi - just cause for delay doesnt relieve the debtor from the consequences - AMEX duty includes timely or prompt performance of its obligations - evil motive not necessary for finding of bad faith and gross negligence or wanton disregard of contractual obligations is sufficient basis for the award of moral and exemplary damages WON AMEX is liable? No 1. Credit card- "any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, goods, property, labor or services or anything of value on credit."

a.

b.

City Stores Co v Henderson: The issuance of a credit card is but an offer to extend a line of open account credit. It is unilateral and supported by no consideration. The offer may be withdrawn at any time, without prior notice, for any reason and its withdrawal breache no duty. Under this view, each credit card transaction is considered a separate offer and acceptance. Gray v. American Express Company: The card membership agreement itself as a binding contract between the credit card issuer and the card holder. Unlike in the City Stores cases, however, the cardholder in Gray paid an annual fee for the privilege of being an American Express cardholder.

Philippine jurisdiction: Generally adheres to the Gray ruling, recognizing the relationship between the credit card issuer and holder as a contractual one that is governed by the terms and conditions found in the card membership agreement. A card membership agreement is a contract of adhesion. 2. a. AMEX Obligations Pantaleon assumes that since his credit card has no pre-set spending limit, AMEX has to approve all charge requests.

SC says: distinguish relationship between credit card issuer-holder to a creditor-debtor relationship. Issuer-holder: relates merely to an agreement providing for credit facility to the holder Creditor-debtor: involves the actual credit on loan agreement involving three contracts. When cardholders use their cards to pay, they merely offer to enter into loan agreements with the company. Only after the approval do the parties enter into binding loan contracts, in keeping with NCC 1319. o This is supported in the reservation found in the card membership agreement which clearly states that AMEX "reserves the right to deny authorization for any requested Charge." Since AMEX has no obligation to approve purchase requests, Pantaleon cant claim that AMEX defaulted. NCC 1169 requisites for a debtor to be guilty of culpable delay:

Nature of credit card transactions: Involves 3 contracts: (a) the sales contract between the credit card holder and the merchant (b) the loan agreement between the credit card issuer and holder; (c) the promise to pay between the credit card issuer and the merchant When a credit card company gives the holder the privilege of charging items at establishments associated with the issuer, a necessary question in a legal analysis is when does this relationship begin? 2 views:

2 (a) that the obligation is demandable and liquidated; (b) the debtor delays performance; (c) the creditor judicially or extrajudicially requires the debtors performance. In this case, there is no demandable obligation. Before the credit card issuer accepts this offer, no obligation relating to the loan agreement exists between them. A demand presupposes the existence of an obligation between the parties. and NCC 21 which provides the remedy for the person injured by the willful act, an action for damages. Citing Nikko Hotel Manila Garden v. Reyes, a person who knowingly and voluntarily exposes himself to danger cannot claim damages for the resulting injury: The doctrine of volenti non fit injuria ("to which a person assents is not esteemed in law as injury") refers to selfinflicted injury or to the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in doing so. b. AMEX did not violate any legal duty to Pantaleon under the circumstances under the principle of damnum absque injuria, or damages without legal wrong, loss without injury. Citing BPI Express Card v. CA: We do not dispute the findings of the lower court that private respondent suffered damages as a result of the cancellation of his credit card. However, there is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the injured person alone, the law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. To maintain an action for the injuries of which he complains, he must establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility by the person causing it. The underlying basis for the award of tort damages is the premise that an individual was injured in contemplation of law. Thus, there must first be a breach of some duty and the imposition of liability for that breach before damages may be awarded; and the breach of such duty should be the proximate cause of the injury. Article 1933. 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. (1740a)

a.

Every time Pantaleon used his AMEX credit card to pay for purchases, what the stores transmitted to AMEX were his offers to execute loan contracts. b. Panteleon argues that even if AMEX had to view his credit card history, AMEX had to approve or deny his requests in a matter of seconds, emphasizing that his card has no pre-set spending limit and that in the 12 yrs hes used the card, AMEX had always approved them in a matter of seconds.

SC says: even if there was no limit, AMEX still has to determine whether it will allow this charge based on the history. This right to review the history is a necessary implication to deny the requested charge. His 12 years experience doesnt establish that Pantaleon had a legally enforceable obligation to expect AMEX to act on his charge requests within a matter of seconds. Looking at the membership agreement, there is no provision in this agreement that obligates AMEX to act on all cardholder purchase requests within a specifically defined period of time. AMEX is not bound or obligated to act on its cardholders purchase requests within any specific period of time. 3. AMEX Good Faith SC says that even if there was no obligation to act upon the purchase within a specific time and that they had a right to review the history, AMEX does not have an unlimited right to put off action on the purchases for indefinite periods of time. They cite NCC 19 which sets the standard for the conduct of all persons, whether artificial or natural, and requires that everyone, in the exercise of rights and the performance of obligations, must: (a) act with justice, (b) give everyone his due, and (c) observe honesty and good faith; it is not because a person invokes his rights that he can do anything, even to the prejudice and disadvantage of another

Panteleon argues that the review is to protect AMEX, to make sure that cardholders could pay the credit but SC says that even if, there was no bad faith in such motive. AMEX is running a business, not a charity, and it would simply be ludicrous to suggest that it would not want to earn profit for its services. SC adds that the circumstances of the transaction justified the wait. This was Pantaleons 1st single purchase of $13k and his past spending doesnt support his ability to pay. It would be unjust to penalize AMEX for exercising his right to review. Also, the right to recover based on NCC 21 is equity and he who comes to court to demand equity, must come with clean hands. Article 21 should be construed as granting the right to recover damages to injured persons who are not themselves at fault which is not the case here. 4. Pantaleon as Proximate Cause Pantaleon knew even before entering Coster that the tour group would have to leave the store by 9:30 a.m. to have enough time to take the city tour of Amsterdam before they left the country. After 9:30 a.m., Pantaleons son, who had boarded the bus ahead of his family, returned to the store to inform his family that they were the only ones not on the bus and that the entire tour group was waiting for them. Pantaleon tried to cancel the sale at 9:40 a.m. because he did not want to cause any inconvenience to the tour group. However, when Costers sale manager asked him to wait a few more minutes for the credit card approval, he agreed. a. Pantaleon himself testified that the most basic rule when travelling in a tour group is that you must never be a cause of any delay because the schedule is very strict. When Pantaleon made up his mind to push through with his purchase, he must have known that the group would become annoyed and irritated with him. This was the natural, foreseeable consequence of his decision to make them all wait. At any time, he could have cancelled the sale so that the group could go on with the city tour. But he did not.

b.

In this case, Pantaleon claims that AMEX abused its rights when it caused unreasonable delay on processing the purchases and it shouldve known that its failure to act immediately would cause inconvenience, humiliation, distress etc. But SC says that good faith is presumed and in this case, there was no evidence to suggest that it acted with deliberate intent to cause Pantaleon any loss or injury. The review was to protect Panteleon with the possibility that the credit card was being fraudulently used by a third person.

3 Doronilla then authorized the bank to deduct from account 1, the amounts needed to cover overdrawings in account 2. o In opening account 2, Sterela was able to get a loan of P175,000. Later on to pay this, Doronilla issued 3 checks which were all dishonoured. o Asst bank manager said that Doonilla was allowed to withdraw from account 1 bec he was the sole proprietor of Sterela. Doronilla wrote to Vives assuring him of the money and even issued to Vives a check worth P212,000 to Vives. The check was dishonoured. This happened 3 times. Vives institutes an action for recovery. o RULE: intention of parties is accorded primordial consideration o When the INTENTION of the parties is to lend consumable goods and have the very same returned at the end of the agreed period, that is a commodatum. Evidence shows that Vives agreed to deposit for the purpose of making it appear that Sterela had sufficient capitalization for incorporation and that it will be returned within 30 days o Vives merely accommodated Doronilla as a favour to his good friend, Sanchez. o It was clear to the parties that the money would not be removed from the account and returned after 30 days Attempts to return P212,000 (meaning with an additional P12,000 interest) did not convert this to a mutuum because it was not the intent of the parties. The additional P12,000 corresponds to the fruits of lending the P200,000 o Art 1935. The bailee in a commodatum acquires the USE to the thing but NOT its fruits o So, it was proper to remit the interest

Article 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. (1941a) Article 1939. Commodatum is purely personal in character. Consequently: (1) The death of either the bailor or the bailee extinguishes the contract; (2) The bailee can neither lend nor lease the object of the contract to a third person. However, the members of the bailee's household may make use of the thing loaned, unless there is a stipulation to the contrary, or unless the nature of the thing forbids such use. (n) Producers Bank of the Phils v. CA and Franklin Vives (2003) Callejo, Sr., J. Sanchez asked her friend/neighbour, Vives, to help Doronilla. Doronilla, Sanchezs friend, needed help in incorporating his business, Sterela. The help needed was: o Vives was asked to deposit in the Producers bank account of Sterela a certain amount (P200,000) so that the business could be incorporated. o Sanchez assured Vives that Vives could withdraw the money within a month After discussion, Vives issued a P200,000 check to Sterela. Vives relied on the assurances and representations of Sanchez and Doronilla. Vives instructed his wife to accompany Doronilla and Sanchez in opening a savings account in the name of Sterela. But, Doronilla was absent when this account was opened but they had an authorization letter from Doronilla to allow Sanchez et al, in coordination with a Mr. Atienza (the bank asst manager) to open an account for Sterela. o The authorized signatories: the wife and/or Sanchez. o A passbook was issued to the wife After some time, Vives learned that Sterela was no longer holding office in the address given to him. So he and his wife went to the bank to verfy the existence of their money. Asst bank manager told them that only P90,000 remained and that the wife cannot withdraw that because that amount would have to answer for some checks issued by Doronilla because: o After the wife and Sanchez opened the Savings account (account 1), Doronilla opened a subsequent Current account (account 2).

Issue: Mutuum or commodatum? Is the bank solidarily liable with Doronilla to return the money? Held: Commodatum. Yes, bank solidarily laible. Ratio:

SC agrees with Vives. Vives arguments: o This is not a mutuum but an accommodation since he did not actually part with ownership of the P200,000. 1. He asked his wife to deposit the P200,000 in Sterelas account (so that a certificate can be issued that Sterela had sufficient funds for incorporation) 2. He retained some degree of control over his money by making his wife a signatory to the savings account 3. The savings account passbook was in wifes possession o Producer Bank is liable for return of his money because the asst manager connived with Doronilla to defraud him (Vives). The asst manager facilitated the opening of account 1 and the approval of authority to debit that account for any overdrawings in account 2.

Re: banks liability Whether this is a commodatum or a mutuum, has no effect on the banks liability bec the facts clearly indicate that the bank, through its employee, was partly responsible for the loss of the money o The rules for savings deposits (indicated on the passbook) state that a deposit/withdrawal is not allowed without the passbook but still, Doronilla was allowed, not just once but several times (TC & CA ruled that the asst manager allowed this bec he was a part of Doronillas scheme to defraud Vives) o The asst manager knew that the money deposited did not belong to Doronilla & was even explicitly told by the wife that the money belonged to her & husband Vives Article 1938. The bailor in commodatum need not be the owner of the thing loaned. (n) Article 1933. 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.

Re: Why this is a commodatum There are instances when a commadotum may have a consumable thing for its object. o Art 1936: 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.

4 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. (1740a) Article 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. (1941a) Article 1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. (n) Article 1939. Commodatum is purely personal in character. Consequently: (1) The death of either the bailor or the bailee extinguishes the contract; (2) The bailee can neither lend nor lease the object of the contract to a third person. However, the members of the bailee's household may make use of the thing loaned, unless there is a stipulation to the contrary, or unless the nature of the thing forbids such use. (n) Article 1945. When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily. (1748a) Article 1933. 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. (1740a) Article 1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum. (1941a) Article 1941. The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. (1743a) Article 1943. The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. (1746) Pajuyo v. CA (2004) Carpio, J. Pajuyo paid P400 to a certain Perez for the rights over a lot in QC and built a house from light materials. Pajuyo then entered into a Kasunduan with Guevarra: o Pajuyo as the owner allowed Guevarra to live there for free o Guevarra was to maintain the cleanliness and orderliness of the house o Guevarra is to vacate if Pajuyo demands it One day, Pajuyo informed Guevarra of the need to vacate and demanded Guevara to leave. Guevarra refused because he insists that both of them are squatters and have no valid title to the lot. Commodatum: one party delivers to another something not consumable so that it may be used for a certain time then return it o Essential feature: It is GRATUITOUS o Another feature: use of thing is for a certain period. Cannot demand the return until expiration of period or accomplishment of the use but if there is an urgent need, the owner (bailor) may demand return for temporary use o If use of the thing is merely TOLERATED, he can demand the thing AT WILL a contractual relation called a PRECARIUM. It is a kind of commodatum The Kasunduan in this case is NOT gratuitious: although no rent, Guevarra was obligated to maintain the property 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 termination of the lease EVEN if this were a commodatum: o Guevarra still had to turn over the possession because the obligation to deliver/return ATTACHES to contracts for safekeeping (or contracts of commission, administration, and commodatum)

Issue: Is Pajuyo entitled to the physical possession of the property? Is this a commodatum? Held: Yes, Pajuyo entitled. No, not a commodatum. Ratio: Re: Pajuyos entitlement This is a case for unlawful detainer. UD involves the withholding by a person from another of possession of real property to which the latter is entitled after the expiration of the formers right to hold possession under a contract, express or implied. o When plaintiff ALLOWS defendant to the use of the property by TOLERANCE without contract, the defendant is bound by an IMPLIED PROMISE that he will vacate on demand. If he fails to do so, there can be an action for unlawful detainer. This principle applies with GREATER FORCE in cases where a contract embodies the tolerance. The Kasunduan expressly articulated Pajuyos FORBEARANCE. o Guevarras continued possession became unlawful when he refused to comply with the demand to vacate. Re: Not a commodatum

Re: Kasunduans validity Kasunduan is not void for purposes of determining who has a better right. It is undeniable evidence of Guevarras recognition of Pajuyos better right Re: Proc 137 on socialized housing Law gives preferential right to actual occupant because an evil that an absentee squatter makes a profit is sought to be avoided not applicable, Guevarra stayed without any rent, no profit for Pajuyo Article 1949. The bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger. If the extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even though he acted without fault, they shall be borne equally by both the bailor and the bailee, unless there is a stipulation to the contrary. (1751a)

5 Article 1950. If, for the purpose of making use of the thing, the bailee incurs expenses other than those referred to in articles 1941 and 1949, he is not entitled to reimbursement. (n) Article 1952. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee. (n) Article 1944. The bailee cannot retain the thing loaned on the ground that the bailor owes him something, even though it may be by reason of expenses. However, the bailee has a right of retention for damages mentioned in article 1951. (1747a) Article 1951. The bailor who, knowing the flaws of the thing loaned, does not advise the bailee of the same, shall be liable to the latter for the damages which he may suffer by reason thereof. (1752) Article 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous event: (1) If he devotes the thing to any purpose different from that for which it has been loaned; (2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted; (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; (4) If he lends or leases the thing to a third person, who is not a member of his household; (5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter. (1744a and 1745) Republic v. Bagtas (1962) Padilla, J. Bagtas borrowed 3 bulls from the Republic (through the Bureau of Animals), each with a stated book value, for a period of 1 year (May 1948-49), for breeding purposes, subject to a breeding fee of 10%. Upon expiration, he asked for a renewal for another year but the Sec of Agriculture and Natural Resources approved only 1 bull. Bagtas wrote them asking to pay the value of the 3 bulls with a deduction of the bulls yearly depreciation rate but the Director of Animal Industry said that either he pays the full book value of the bulls or return them. Bagtas failed to deliver the bulls. An action was filed against him. He answers by saying he failed to return or pay for their value because of the bad peace & order situation in Cagayan Valley and that his appeal to the Secretary was still pending. TC ordered that Bagtas to pay. His widow filed a motion alleging that 2 of the 3 bulls were already returned (evidenced by a memorandum receipt signed by the Bureau of Animal Industry) and that sometime in Nov 1958, the 3rd bull was shot during a Huk raid. Since it was force majeure and contract was a commodatum, she contends that she is relieved of returning/paying for it. Article 1948. The bailor may demand the immediate return of the thing if the bailee commits any act of ingratitude specified in article 765. (n) Quintos v. Beck (1939) Imperial, J. Beck was a tenant of Quintos and upon novation of their contract of lease, Quintos grantes Beck the use of furniture with the condition that Beck would return them upon Quintoss demand. Quintos sold the property to the Lopezes and they notified Beck of this and gave him 60 days to vacate. He was also required to return the furniture. Beck answered and told Quintos that she may call for them in the house where they are found and said that he could not give back the 3 gas heaters and 4 electric lamps bec he was using them until the 15th when the lease is due. Beck refused to deliver the furniture and Quintos refused to get the furniture. Before vacating the house, Beck deposited the furniture with the Sheriff

Issue: Bagtas liable? Is this commodatum? Held: Yes. No, its a lease. Ratio: Commodatum is essentially gratuitous. If breeding fee is considered a compensation, contract would be a lease. Art 1671, the lessee would be subject to the responsibilities of a possessor in bad faith bec she had continued ossession of the bull after contract expired. Even if commodatum, Art 1942 says bailee is still liable if lost during fortuitous event if: o Keeps it longer than period stipulated o Thing was delivered with appraised value, unless there is a stipulation to the contrary Original loan period: May 1948-49. Loan of one bull extended to 1950. Bagtas kept the bull until Nov 1953. Also, the bulls were delivered to him at an appraised value and there was no stipulation that Bagtas would be exempted in case of fortuitous events.

Issue: Is Beck duty bound to return the furniture? Is Quintos entitled to payment of value of furniture? Held: Beck duty bound, Quintos not entitled. Ratio:

Article 1946. The bailor cannot demand the return of the thing loaned till after the expiration of the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted. However, if in the meantime, he should have urgent need of the thing, he may demand its return or temporary use. In case of temporary use by the bailor, the contract of commodatum is suspended while the thing is in the possession of the bailor. (1749a) Article 1947. The bailor may demand the thing at will, and the contractual relation is called a precarium, in the following cases: (1) If neither the duration of the contract nor the use to which the thing loaned should be devoted, has been stipulated; or (2) If the use of the thing is merely tolerated by the owner. (1750a)

Contract was a commodatum because Quintos gratuitously granted the use of the furniture, reserving the ownership to herself, and by this contract Beck bound himself to return the furniture upon demand. The obligation voluntarily assumed by Beck means that he should return all of them to Quintos at her residence. Beck did not comply with this when he merely placed them at Quintoss disposal, retaining for his benefit the heaters and lamps. Also, Quintos is not bound to accept the oofer of return of the furnitures because Beck wanted to retain the heaters and lamps. Quintos is not entitled to the payment of the value of the furniture because in the stipulation of facts, Beck has neither agreed nor admitted to the correctness of the value of the furniture. Value should be later determined by trial.

People v. Puig and Porras (2008) Chico-Nazario, J. Overview: Puig and Porras, cashier and bookkeeper of Rural Bank of Pototan were charged with Qualified Theft. The RTC

6 did not find probable cause to issue a warrant of arrest against them because the information filed was lacking. But the SC ruled that it was sufficient. The bank owns the money the deposited by depositors, and so, when the teller, who is reposed with confidence, takes the money of the bank, the teller commits Qualified Theft. 7 November 2005: The Iloilo Prosecutor filed 112 cases of Qualified Theft against Puig and Porras, Cashier and Bookkeeper of Rural Bank of Pototan. TC did not find any probable cause in the case to issue a warrant of arrest since: o No taking without consent of the owners. It was the depositor-clients, and not the bank, who filed the case. The depositors owned the money taken, so they are the real parties in interest. o There was no dependence, guardianship or vigilance between the accused and the offended party that would have created a high degree of confidence between them which the respondents could have abused. In all cases, the information cited grave abuse of confidence with intent to gain without knowledge and consent of the bank and without employing the word "owner" in lieu of "Bank". Therefore, such wording is sufficient. delay is the other does not or is not ready to comply. o BPI can only demand for payment of the amortization after Sept 13 bec it was only then that it complied with its obligation under the loan contract. Frias v. San Diego-Sison (2007) Austria-Martinez, J. Frias acquired a house and lot in Muntinlupa from Island Masters Realty Devt Corporation (IMRDC) by a deed of sale. December 1990: Frias and Sison entered into a MOA over the property. In the MOA, it was stipulated that in consideration of P3M, the parties agree that: o Sison (buyer) has 6 months to notify Frias (seller) of her intention to purchase the property valued at P6.4M. Upon notice, she has another 6 months to pay the remaining balance of P3.4M. o Prior to the first 6 months, Frias (seller) may still offer to other persons to buy the property but Frias (seller) should pay the P3M given to him by Sison (buyer) plus interest and the amount of the sale in excess of P7M, in case it was sold for more than P7M. o In case Frias (seller) has no other buyer, no interest would be charged against him. And if Sison (buyer) decided not to buy the property, Frias (seller) has another 6 months to pay the P3M provided that the amount shall earn compounded bank interest for the last 6 months. In this case, the P3M shall be treated as a loan and the property as the security for the mortgage. Frias (seller) received from Sison (buyer) P2M in cash and P1M in a post-dated check dated 1990, instead of 1991, which rendered the check stale. Frias (seller) then gave the TCT of the property to Sison (buyer). Sison (buyer) decided not to buy the property. She sent a letter to Frias (seller) dated March 1991 which Frias (seller) received only on June 1991, reminding Frias (seller) of their agreement that the amount of P2M shall be considered as a loan and should be paid within the next 6 months. Frias (seller) failed to pay. On April 1993, Sison filed a complaint for payment of P2m with interest at 36% per annum from December 7, 1991. Frias claimed fraud and deception against Sison and Atty. Lozada (lawyer of both parties), thus, no

BPI Investment Corp v. CA and ALS Management & Devt Corp (2002) Quisumbing, J. Frank Roa got a loan at 16.25% interest rate per annum from Ayala Investment for the construction of a house. The house and lot were mortgaged to Ayala Investment (predecessor of BPI Investment) to secure the loan. Then, Roa sold the house and lot to ALS and Litonjua for P850,000. They paid P350,000 and assumed the P500,000 balance of Roas debt with Ayala. Ayala however, was not willing to extend the same interest rate, instead wanted 20% per annum and service fee of 1% per annum. March 1981, ALS executed a mortgage deed with the stipulation that mortgage payment starts on May 1, 1981. September 13, 1982, BPI released to ALS and Litonjua P7,000 purporting to be what was left of their loan after full payment of Roas loan. In June, BPI instituted foreclosure proceedings against ALS bec of failure to pay the mortgage indebtedness from May 1, 1981 to June 30, 1984. ALS and Litonjua filed a civil case against BPI alleging they were not in arrears in their payment but in fact made an overpayment as of June 30, 1984, maintaining that they should not be made to pay amortization before the actual release of the P500,000 loan. Only the total of P464,000 was released. Applying legal compensation, P35,000 should be applied to the initial monthly amortization.

ISSUE: Did the information sufficiently allege taking without consent of the owner? YES Ratio:

The wording of the information is sufficient, with it saying "with grave abuse of confidence, being the Cashier and Bookkeeper". It's beyond doubt that these employees who come into possession of the money of the bank enjoy confidence reposed on them by their employer. The bank owns the money, and the relationship between the bank and the depositor is that of creditor-debtor. In a long line of cases on Qualified Theft, the SC has considered that employees acting with grave abuse of confidence act to the damage of the bank, without referring to the bank as owner of the money deposits. o Roque vs People: a teller was convicted of qualified theft. o People vs Sison: the Branch Operation Officer was convicted. o People vs Locson, the nature of possession of the bank was described. The money was in possession of the teller of the bank, and the tellers possession was that of the bank's. So, when the teller removed the money without the consent of the bank, there was qualified theft.

Ratio:

A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object. In this case, the contract was perfected on Sept 13, 1982, the date of the second release of the loan. Following the intention of the parties on the commencement of the amortization, ALS and Litonjuas obligation to pay started only on Oct 13, a month after perfection of the contract. A contract of loan involves reciprocal obligations. The promise by BPI to deliver the loan is upon the consideration that ALS will pay the monthly amortization on May 1. Neither party incurs in

7 interest could be due as there was no valid mortgage over the property as the principal obligation is vitiated with fraud and deception. RTC: decided in favor of Sison (buyer) CA: reduced the rate of interest from 32% to 25%. o no basis for petitioner to say that the interest should be charged for six months only and no more; that a loan always bears interest otherwise it is not a loan; o that interest should commence on June 7, 1991 with compounded bank interest prevailing at the time the P2m was considered as a loan which was in June 1991; o that the bank interest rate for loans secured by a real estate mortgage in 1991 ranged from 25% to 32% per annum as certified to by Prudential Bank; o that in fairness to seller, the rate to be charged should be 25% only. Non-payment of the interest while the debtor continues to be in possession of the principal loan constitutes unjust enrichment. Frias and Sison stipulated that the loaned amount shall earn compounded bank interests, and per the certification issued by Prudential Bank, the interest rate for loans in 1991 ranged from 25% to 32% per annum. The CA reduced the interest rate to 25% instead of the 32% awarded by the trial court which seller no longer assailed. RESPONDENT (buyer): only fair that interest be imposed on the amount they paid considering vendor failed to return the amount upon demand and had been using the P3.5 million for her benefit. ISSUE: Is the imposition of interest proper? YES Even if the transaction involved a Conditional Deed of Sale, can the stipulation governing the return of the money be considered as a forbearance of money which required payment of interest at the rate of 12%? YES What is the applicable rate of interest? 12% under Central Bank Circular 416 RATIO: 1. YES. Interest may be imposed even in the absence of stipulation in the contract. Interest at the rate of 12% is applicable in the instant case. See NCC 2210: i]nterest may, in the discretion of the court, be allowed upon damages awarded for breach of contract. In this case, no question that petitioner is legally obligated to return the P3.5 million because of her failure to fulfill the obligation under the Conditional Deed of Sale, despite demand. She admitted that the conditions were not fulfilled. RE: Applicable rate of interest general rule: applicable rate of interest shall be computed in accordance with the stipulation of the parties. Absent any stipulation, the applicable rate of interest shall be 12% per annum when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be six percent (6%). In this case, the parties did not stipulate as to the applicable rate of interest. 2 YES IT IS A FORBEARANCE. FORBEARANCE: contractual obligation of lender or creditor to refrain during a given period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable. (Crismina Garments, Inc. v. Court of Appeals) This definition describes a loan where a debtor is given a period within which to pay a loan or debt. In such case, forbearance of money, goods or credits will have no distinct definition from a loan.

Estores v Sps Supangan (2012) Estores (vendor) entered into a conditional deed of sale with Sps Supangan (buyer). They stipulated that: o Vendor will secure certain documents from DAR o The house located within the perimeter of the lot will be moved outside the perimeter o If after vendor completes necessary documents and buyer fails to complete payment, forfeiture fee of 25% or downpayment applied o But if vendor fails to complete necessary documents w/in 30 days, buyer has right to demand return of full amount of down payment. 7 years passed. Notwithstanding Supangans payment of P3.5M, Estores failed to comply with her obligations. Supangans demanded return of the P3.5M. Estores acknowledged receipt and agreed to return the money w/in 120 days. Supangans agreed PROVIDED THAT an interest of 12% shall be imposed. Estores failed to return amount. Supangans filed case with RTC. RTC and CA both agree that Estores liable to pay interest only at 6%, however: RTC: starts from Oct 1993 when contract executed CA opined that it shall start to run only from Sept 27, 2000 when Sps. Formally demanded return of their money When the case went up to SC, Estores already agreed to give back the P3.5M. Shes only contesting the interest imposed.

Issue: W/N the compounded bank interest should be limited to 6 months as contained in the memorandum of agreement. Held: No. While the CAs conclusion, that a loan always bears interest otherwise it is not a loan, is flawed since a simple loan may be gratuitous or with a stipulation to pay interest, we find no error committed by the CA in awarding a 25% interest per annum on the P2m loan even beyond the second 6 months stipulated period. Ratio:

There is nothing in the agreement that suggests that interest will be charged for 6 months ONLY even if it takes defendant-appellant an eternity to pay the loan. The agreement that the interest will be limited to the last 6 months was made on the expectation that the amount would be paid within the date stipulated. It does not mean that the interest will no longer be charged after the second 6-month period. Considering that seller failed to pay the amount which, basing on the MOA, shall be considered as a loan, the monetary interest for the last 6 months continued to accrue until the actual payment of the loaned amount. The payment of regular interest constitutes the price or cost of the use of money and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount.

PETITIONER (vendor): not bound to pay interest because conditional deed of sale only provided for return of downpayment in case of failure to comply with obligations.

8 BUT! SC believes that the phrase forbearance of money, goods or credits is meant to have a separate meaning from a loan. THUS, Forbearance of money, goods or credits should therefore refer to arrangements other than loan agreements, where a person acquiesces to the temporary use of his money, goods or credits pending happening of certain events or fulfillment of certain conditions. In this case, the buyers parted with their money even before the conditions were fulfilled. They have therefore allowed or granted forbearance to the seller to use their money pending fulfillment of the conditions. They were deprived of the use of their money for the period pending fulfillment of the conditions and when those conditions were breached, they are entitled not only to the return of the principal amount paid, but also to compensation for the use of their money. the compensation for the use of their money, absent any stipulation, should be the same rate of legal interest applicable to a loan since the use or deprivation of funds is similar to a loan. Petitioners unwarranted withholding of the money which rightfully pertains to buyers, amounts to forbearance of money which can be considered as an involuntary loan. Thus, applicable rate of interest is 12% per annum.

Guidelines as suggested in Eastern Shipping v CA and Crismina vs CA With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. DISP: 12% per annum, computed from September 27, 2000 until fully satisfied