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G.R. No. L-17474
October 26, 1962

Facts: Bagtas borrowed three bulls from the Bureau of Animal Industry for one year for breeding purposes
subject to payment of breeding fee of 10% of book value of the bull. Upon expiration, Bagtas asked for renewal.
The renewal was granted only to one bull. Bagtas offered to buy the bulls at its book value less depreciation but
the Bureau refused. The Bureau said that Bagtas should either return or buy it at book value. Bagtas proved that
he already returned two of the bulls, and the other bull died during a Huk raid, hence, obligation already
extinguished. He claims that the contract is a commodatum hence, loss through fortuitous event should be borne
by the owner.

Issue: WON Bagtas is liable for the death of the bull.

Held: Yes. Commodatum is essentially gratuitous. However, in this case, there is a 10% charge. If this is
considered compensation, then the case at bar is a lease. Lessee is liable as possessor in bad faith because the
period already lapsed.
Even if this is a commodatum, Bagtas is still liable because the fortuitous event happened when he held the bull
and the period stipulated already expired and he is liable because the thing loaned was delivered with appraisal
of value and there was no contrary stipulation regarding his liability in case there is a fortuitous event.

Mina v. Pascual, 25 Phil 540

Facts: Francisco is the owner of land and he allowed his brother, Andres, to erect a warehouse in that lot. Both
Francisco and Andres died and their children became their respective heirs: Mina for Francisco and Pascual for
Andres. Pascual sold his share of the warehouse and lot. Mina opposed because the lot is hers because her
predecessor (Francisco) never parted with its ownership when he let Andres construct a warehouse, hence, it
was a contract of commodatum.

Issue: What is the nature of the contract between Francisco and Andres?

Held: The Supreme Court held that it was not a commodatum. It is an essential feature of commodatum that the
use of the thing belonging to another shall be for a certain period. The parties never fixed a definite period
during which Andres could use the lot and afterwards return it. It would seem that the Supreme Court failed to
consider the possibility of a contract of precardium between Francisco and Andres. Precardium is a kind of
commodatum wherein the bailor may demand the object at will if the contract does not stipulate a period or use
to which the thing is devoted.


G.R. No. 195166, July 08, 2015


FACTS: Petitioners Spouses Salvador and Alma Abella filed a Complaint for sum of money and
damages against respondents Spouses Romeo and Annie Abella wherein it was alleged that
respondents obtained a loan from them in the amount of P500K. The loan was evidenced by an
acknowledgment receipt dated March 22, 1999 and was payable within one (1) year. Petitioners
added that respondents were able to pay a total of P200K—P100K paid on two separate occasions—
leaving an unpaid balance of P300K.

In their Answer, respondents alleged that the amount involved did not pertain to a loan but was part of
the capital for a joint venture involving the lending of money when respondents that they were
approached by petitioners, who proposed that if respondents were to "undertake the management of
whatever money [petitioners] would give them, [petitioners] would get 2.5% a month with a 2.5%
service fee to [respondents]." Moreover, they claimed that the entire amount of P500,000.00 was
disposed of in accordance with their agreed terms and conditions and that petitioners terminated the
joint venture, prompting them to collect from the joint venture's borrowers. They were, however, able
to collect only to the extent of P200,000.00; hence, the P300,000.00 balance remained unpaid.
The RTC ruled in favor of petitioners. On respondents' appeal, the Court of Appeals ruled that while
respondents had indeed entered into a simple loan with petitioners, respondents were no longer liable
to pay the outstanding amount of P300,000.00.

ISSUE1: What contract was entered into by the parties?

HELD1: Respondents entered into a simple loan or mutuum, rather than a joint venture, with

Respondents' claims, as articulated in their testimonies before the trial court, cannot prevail over the
clear terms of the document attesting to the relation of the parties. "If the terms of a contract are clear
and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations
shall control.”

ISSUE2: Whether interest accrued on respondents' loan from petitioner and if in the affirmative, at
what rate?

HELD2: First issue - Guided by the decision in Nacar v. Gallery Frames: In the absence of an
express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for
loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no
longer be twelve percent (12%) per annum — as reflected in the case of Eastern Shipping Lines and
Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and
4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its amendment by
BSP-MB Circular No. 799 — but will now be six percent (6%) per annum effective July 1, 2013.

It should be noted, nonetheless, that the new rate could only be applied prospectively and not
retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until
June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing
rate of interest when applicable.


The whole controversy started when Catholic Vicar of the Mountain Province (Vicar for brevity) filed with the
CFI of Baguio, Benguet an applicaton for registraton of title for Lots 1,2,3 and 4 of Psu-194357 situated at
Poblacion Central, La Trinidad, Benguet. Said lots being the sites of the Catholic Church building, convents,
school, etc., upon learning of the application, the Heirs of Juan Valdez and the Heirs of Emigdio Octaviano Fled
an Answer/Opposition thereto on Lots 2 and 3, respectively, asserting ownership and title thereto. The land
registration court promulgated its decision confirming the registrable title to Vicar. Both heirs of Valdez and
Octaviano appealed to the Court of Appeals. The CA modified the decision of the land registration court and
found that Lots 2 and 3 were possessed by the predecessors-in-interest of private respondents under claim of
ownership in good faith from 1906 to 1951; that Vicar has been in possession of the same lots as bailee in
commodatum up to 1951, when Vicar repudiated the trust and when it applied for registration in1962; that Vicar
had just been in possession as owner for 11 years, hence there is no possibility of acquisitive prescription which
requires 10 years possession with just title and 30 years possession without.

ISSUE: WON the failure of Vicar to return the subject property to private respondents would cons²tute an
adverse possession that would en²tle Vicar to have a just ²tle in order for ordinary acquisi²ve prescrip²on to set

RULING: Private respondents were able to prove that their predecessors' house was borrowed by petitioner
Vicar after the church and the convent were destroyed. They never asked for the return of the house, but when
they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees' failure
to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the
borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim of petitioner
came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such
adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of
just title. The Court of Appeals found that 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.