G.R. No. 133632. February 15, 2002.

BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF APPEALS and ALS MANAGEMENT &
DEVELOPMENT CORPORATION, respondents.

Obligations and Contracts; Loans; A loan contract is not a consensual contract but a real contract,
perfected only upon the delivery of the object of the contract.—We agree with private respondents. A
loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of
the object of the contract. Petitioner misapplied Bonnevie. The contract in Bonnevie declared by this
Court as a perfected consensual contract falls under the first clause of Article 1934, Civil Code. It is an
accepted promise to deliver something by way of simple loan.

Same; Same; While a perfected loan contract can give rise to an action for damages, said contract does
not constitute the real contract of loan which requires the delivery of the object of the contract for its
perfection and which gives rise to obligations only on the part of the borrower.—In Saura Import and
Export Co. Inc. vs. Development Bank of the Philippines, 44 SCRA 445, petitioner applied for a loan of
P500,000 with respondent bank. The latter approved the application through a board resolution.
Thereafter, the corresponding mortgage was executed and registered. However, because of acts
attributable to petitioner, the loan was not released. Later, petitioner instituted an action for damages.
We recognized in this case, a perfected consensual contract which under normal circumstances could
have made the bank liable for not releasing the loan. However, since the fault was attributable to
petitioner therein, the court did not award it damages. A perfected consensual contract, as shown
above, can give rise to an action for damages. However, said contract does not constitute the real
contract of loan which requires the delivery of the object of the contract for its perfection and which
gives rise to obligations only on the part of the borrower.

Same; Same; A contract of loan involves a reciprocal obligation, wherein the obligation or promise of
each party is the consideration for that of the other; It is a basic principle in reciprocal obligations that
neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him.—We also agree with private respondents that a contract of loan
involves a reciprocal

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* SECOND DIVISION.

118
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SUPREME COURT REPORTS ANNOTATED

BPI Investment Corporation vs. Court of Appeals

obligation, wherein the obligation or promise of each party is the consideration for that of the other. As
averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the
consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1, 1981,
one month after the supposed release of the loan. It is a basic principle in reciprocal obligations that
neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. Only when a party has performed his part of the contract can he
demand that the other party also fulfills his own obligation and if the latter fails, default sets in.
Consequently, petitioner could only demand for the payment of the monthly amortization after
September 13, 1982 for it was only then when it complied with its obligation under the loan contract.
Therefore, in computing the amount due as of the date when BPIIC extrajudicially caused the
foreclosure of the mortgage, the starting date is October 13, 1982 and not May 1, 1981.

Same; Same; Foreclosure of Mortgage; Damages; Where the borrower was irregular in the payment of
its monthly amortization, it may not claim moral and exemplary damages due to the erroneous
foreclosure proceedings initiated by the creditor-mortgagor.—Private respondents counter that BPIIC
was guilty of bad faith and should be liable for said damages because it insisted on the payment of
amortization on the loan even before it was released. Further, it did not make the corresponding
deduction in the monthly amortization to conform to the actual amount of loan released, and it
immediately initiated foreclosure proceedings when private respondents failed to make timely payment.
But as admitted by private respondents themselves, they were irregular in their payment of monthly
amortization. Conformably with our ruling in SSS, we can not properly declare BPIIC in bad faith.
Consequently, we should rule out the award of moral and exemplary damages.

Same; Same; Same; Same; The negligence of the creditor-mortgagor in relying merely on the entries
found in the deed of mortgage, without checking and correspondingly adjusting its records on the
amount actually released to the borrower and the date when it was released, which negligence resulted
in damages to the latter, entitles the borrower to an award of nominal damages in recognition of its
rights which were violated.—In our view, BPIIC was negligent in relying merely on the entries found in
the deed of mortgage, without checking and correspondingly adjusting its records on the amount
actually released to private respondents and the date when it was released. Such negligence resulted in
damage to private respondents, for which an award of nominal damages should be given in

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BPI Investment Corporation vs. Court of Appeals

recognition of their rights which were violated by BPIIC. For this purpose, the amount of P25,000 is
sufficient.

Same; Same; Same; Same; Attorney’s Fees; An award of attorney’s fees is warranted where a party was
compelled to litigate.—As in SSS where we awarded attorney’s fees because private respondents were
compelled to litigate, we sustain the award of P50,000 in favor of private respondents as attorney’s fees.

PETITION for review on certiorari of a decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Benedicto, Tale, Versoza & Associates for petitioner.

Vicente B. Chuidian for private respondent. BPI Investment Corporation vs. Court of Appeals, 377
SCRA 117, G.R. No. 133632 February 15, 2002

G.R. No. 154878. March 16, 2007.*

CAROLYN M. GARCIA, petitioner, vs. RICA MARIE S. THIO, respondent.

Loans; Contracts; A loan is a real contract, not consensual, and as such is perfected only upon the
delivery of the object of the contract.—A loan is a real contract, not consensual, and as such is perfected
only upon the delivery of the object of the contract.

Same; Same; Upon delivery of the object 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.—Upon delivery of the object 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.

Same; Same; Words and Phrases; Delivery is the act by which the res or substance thereof is placed
within the actual or constructive

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* FIRST DIVISION.

434

434

SUPREME COURT REPORTS ANNOTATED

Garcia vs. Thio

possession or control of another.—Delivery is the act by which the res or substance thereof is 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 amounts to Santiago.

Evidence; The presumption is that “evidence willfully suppressed would be adverse if produced.”—
Respondent inexplicably never presented Santiago as a witness to corroborate her story. The
presumption is that “evidence willfully suppressed would be adverse if produced.” Respondent was not
able to overturn this presumption.

Loans; Interests; Article 1956 of the Civil Code provides that “no interest shall be due unless it has been
expressly stipulated in writing.”—We do not, however, agree that respondent is liable for the 3% and 4%
monthly interest for the US$100,000 and P500,000 loans respectively. There was no written proof of the
interest payable except for the verbal agreement that the loans would earn 3% and 4% interest per
month. Article 1956 of the Civil Code provides that “[n]o interest shall be due unless it has been
expressly stipulated in writing.”

Same; Same; While there can be no stipulated interest, there can be legal interest pursuant to Article
2209 of the Civil Code.—Be that as it may, while there can be no stipulated interest, there can be legal
interest pursuant to Article 2209 of the Civil Code. It is well-settled that: 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.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Conrado R. Ayuyao and Associates for petitioner.

43 Garcia vs. Thio, 518 SCRA 433, G.R. No. 154878 March 16, 2007
G.R. No. 118375. October 3, 2003.*

CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and AURORA QUEAÑO, respondents.

Remedial Law; Appeals; Under Rule 45 which governs appeal by certiorari, only questions of law may be
raised as the Supreme Court is not a trier of facts.—The resolution of the issues presented before this
Court by Naguiat involves the determination of facts, a function which this Court does not exercise in an
appeal by certiorari. Under Rule 45 which governs appeal by certiorari, only questions of law may be
raised as the Supreme Court is not a trier of facts. The resolution of factual issues is the function of
lower courts, whose findings on these matters are received with respect and are in fact generally
binding on the Supreme Court. A question of law which the Court may pass upon must not involve an
examination of the probative value of the evidence presented by the litigants. There is a question of law
in a given case when the doubt or difference arises as to what the law is on a certain state of facts; there
is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts.

Evidence; Documents; The presumption of truthfulness engendered by notarized documents is

rebuttable, yielding as it does to clear and convincing evidence to the contrary.—Against the common
finding of the courts below, Naguiat vigorously insists that Queaño received the loan proceeds.

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* SECOND DIVISION.

592

592

SUPREME COURT REPORTS ANNOTATED

Naguiat vs. Court of Appeals

Capitalizing on the status of the mortgage deed as a public document, she cites the rule that a public
document enjoys the presumption of validity and truthfulness of its contents. The Court of Appeals,
however, is correct in ruling that the presumption of truthfulness of the recitals in a public document
was defeated by the clear and convincing evidence in this case that pointed to the absence of
consideration. This Court has held that the presumption of truthfulness engendered by notarized
documents is rebuttable, yielding as it does to clear and convincing evidence to the contrary, as in this
case.

Civil Law; Estoppel; Court of Appeals is correct in invoking the said rule on agency by estoppel.—The
Court of Appeals recognized the existence of an “agency by estoppel” citing Article 1873 of the Civil
Code. Apparently, it considered that at the very least, as a consequence of the interaction between
Naguiat and Ruebenfeldt, Queaño got the impression that Ruebenfeldt was the agent of Naguiat, but
Naguiat did nothing to correct Queaño’s impression. In that situation, the rule is clear. One who clothes
another with apparent authority as his agent, and holds him out to the public as such, cannot be
permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third
parties dealing with such person in good faith, and in the honest belief that he is what he appears to be.
The Court of Appeals is correct in invoking the said rule on agency by estoppel.

Same; Mortgages; A mortgage contract being a mere accessory contract, its validity would depend on
the validity of the loan secured by it.—All told, we find no compelling reason to disturb the finding of the
courts a quo that the lender did not remit and the borrower did not receive the proceeds of the loan.
That being the case, it follows that the mortgage which is supposed to secure the loan is null and void.
The consideration of the mortgage contract is the same as that of the principal contract from which it
receives life, and without which it cannot exist as an independent contract. A mortgage contract being a
mere accessory contract, its validity would depend on the validity of the loan secured by it.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Ocampo, Dizon & Domingo for petitioner.

D.G. Macalino & Associates for respondent A. Queaño.

Naguiat vs. Court of Appeals, 412 SCRA 591, G.R. No. 118375 October 3, 2003
FELIX DE LOS SANTOS, plaintiff and appellee, vs. AGUSTINA JARRA, administratrix of the estate of
Magdaleno Jimenea, deceased, defendant and appellant.

1.ESTATES; ACTION AGAINST ADMINISTRATOR J BAILMENT; COMMODATUM.—In a contract of

commodatum whereby one of the parties thereto delivers to the other a thing that is not perishable, to
be used for a certain time and afterwards returned, it is the imperative duty of the bailee, if he should
be unable to return the thing itself to the owner, to pay damages to the latter if, through the fault of the
bailee, the thing loaned was lost or destroyed, inasmuch as the bailor retains the ownership thereof.

2.ID.; ID.; THIRD PARTY'S RIGHTS.—A demand for the exclusion of certain property belonging to a third
party, and which forms no part of the estate of a deceased person, should be tried in an ordinary action
and should be the subject of a direct decision by the court, at the same time taking into account the
right of the third party to the property excluded as well as the right of the deceased or of his heirs.

APPEAL from a judgment of the Court of First Instance of Occidental Negros. Jocson, J.

The facts are stated in the opinion of the court.

Matias Hilado, for appellant.

Jose Felix Martinez, for appellee.

De los Santos vs. Jarra., 15 Phil. 147, No. 4150 February 10, 1910