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Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan, the
2) Whether or not the mortgagor is liable to pay the amount covered by the
real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent.
promissory note
P63,000.00 is 78.75% of P80,000.00, hence the real estate mortgage covering 100 hectares is
unenforceable to the extent of 78.75 hectares. The mortgage covering the remainder of 21.25
3) Whether or not the real estate mortgage can be foreclosed hectares subsists as a security for the P17,000.00 debt. 21.25 hectares is more than sufficient
to secure a P17,000.00 debt.
Held:
B. Commodatum
1) Whether or not Tolentino’s can collect from the bank for damages Nature
Obligations of the Bailee
The loan agreement implied reciprocal obligations. When one party is willing and ready to Obligations of the Bailor
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real Cases:
estate mortgage, he signified willingness to pay. That time, the bank’s obligation to furnish the 1. Republic vs. Bagtas, G.R. No. L-17474, October 25, 1962
P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank to furnish
FACTS:
the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it did not
prohibit the bank fr releasing the balance of loans previously contracted. Insolvency of debtor Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of
is not an excuse for non-fulfillment of obligation but is a breach of contract. Animal Industry three bulls for a period of one year for breeding purposes subject to a
government charge of breeding fee of 10% of the book value of the bulls. Upon the expiration
of the contract, the borrower asked for a renewal for another period of one year. However,
The bank’s asking for advance interest for the loan is improper considering that the total loan the Secretary of Agriculture and Natural Resources approved a renewal thereof of only one
hasn’t been released. A person can’t be charged interest for nonexisting debt. The alleged bull for another year and requested the return of the other two. Bagtas wrote to the Director
discovery by the bank of overvaluation of the loan collateral is not an issue. The bank officials of Animal Industry that he would pay the value of the three bulls and later reiterated his desire
should have been more responsible and the bank bears risk in case the collateral turned out to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor
to be overvalued. Furthermore, this was not raised in the pleadings so this issue can’t be raised. General. The Director of Animal Industry advised him that the book value of the three bulls
The bank was in default and Tolentino may choose bet specific performance or rescission w/ could not be reduced and that they either be returned or their book value paid not later which
damages in either case. But considering that the bank is now prohibited fr doing business, Bagtas failed to pay or to return. An action against him was commenced, praying that he be
specific performance cannot be granted. Rescission is the only remedy left, but the rescission ordered to return the three bulls loaned to him or to pay their book value with interests, and
shld only be for the P63K balance. costs; and that other just and equitable relief be granted. Bagtas answered that because of the
bad peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note the pending appeal he had taken to the Secretary of Agriculture and Natural Resources and
the President of the Philippines from the refusal by the Director of Animal Industry to deduct
from the book value of the bulls corresponding yearly depreciation of 8% from the date of sell "the six-sevenths of the one-half of the warehouse, of 14 by 11 meters, together with its
acquisition, to which depreciation the Auditor General did not object, he could not return the lot." The plaintiffs, that is Alejandra Mina, et al., opposed the petition of Ruperta Pascual for
animals nor pay their value and prayed for the dismissal of the complaint. the reason that the latter had included therein the lot occupied by the warehouse, which they
The appellant contends that the Sahiniwal bull was accidentally killed during a raid claimed was their exclusive property.
by the Huks in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, The plaintiffs thereofre requested the court to decide the question of ownership first
Baggao, Cagayan, where the animal was kept, and that as such death was due to force majeure before the it passes upon the petition for the sale of the warehouse. However, the trial court
she is relieved from the duty of the returning the bull or paying its value to the appellee. still ordered the sale of the warehouse. So, the warehouse, together with the lot on which it
stands, was sold to Cu Joco.
ISSUE: On appeal, commenced by the plaintiffs, the decision of the trial court was reversed.
But soon after a writ of execution was issued and the plaintiffs were given possession of the
Whether or not Bagtas is relieved from the duty of returning or paying for the value of the bull.
lot, the trial court annulled this possession for the reason that it affected Cu Joco, who had not
been a party to the suit in which that writ was served. The plaintiffs now commenced this
SC RULING: present action for the purpose of having the sale of the said lot declared null and void and of
Bagtas is not relieved of his obligation. The loan by the appellee to the late defendant no force and effect.
Bagtas of the three bulls for breeding purposes for a period of one year, later on renewed for
another year as regards one bull, was subject to the payment by the borrower of breeding fee ISSUE: Whether or not defendant Pascual is the owner of the property so as to give her the
of 10% of the book value of the bulls. The appellant contends that the contract was right to sell the warehouse and the lot where it stands.
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. A contract of commodatum is essentially
gratuitous. If the breeding fee be considered a compensation, then the contract would be a SC RULING:
lease of the bull. Under the Civil Code, the lessee would be subject to the responsibilities of a No. Defendant Pascual has no right to sell the lot where the warehouse is standing.
possessor in bad faith, because she had continued possession of the bull after the expiry of the What is essentially pertinent to the case is the fact that the defendant agree that the plaintiffs
contract. And even if the contract be commodatum still the appellant is liable, because the have the ownership, and they themselves only the use, of the said lot. But while finding the
Civil Code provides that a bailee in a contract of commodatum is liable for loss of the thing, plaintiffs to be the owners of the lot, we recognized in principle the existence of a
even if it should be through a fortuitous event: commodatum under which the defendants held the lot.
xxx 2) If he keeps it longer than the period stipulated; An essential feature of the commodatum is the use of the thing belonging to another
3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation shall for a certain period. Therefore, it is evident that he who has only the mere use of the
exempting the bailee from responsibility in case of a fortuitous event. thing cannot transfer its ownership. The sale of a thing effected by one who is not its owner is
null and void. The defendants never were the owners of the lot sold. The sale of it by them is
necessarily null and void. On cannot convey to another what he has never had himself.
2. Mina vs. Pascual, G.R. No. 8321, October 14, 1913
The purchaser could not acquire anything more than the interest that might be held
ALEJANDRA MINA, ET AL., vs. RUPERTA PASCUAL, ET AL., by a person to whom realty in possession of the vendor might be sold, for at a judicial auction
nothing else is disposed of. What the minor children of Ruperta Pascual had in their possession
FACTS: was the ownership of the six-sevenths part of one-half of the warehouse and the use of the lot
occupied by his building. This, and nothing more, could the Chinaman Cu Joco acquire at that
Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla sale: not the ownership of the lot; neither the other half, nor the remaining one-seventh of the
acquired a property during his lifetime having purchased a lot a public auction. Andres said first half, of the warehouse.
Fontanilla, with the consent of his brother, Francisco, erected a warehouse on a part of the lot
of his brother. The present contention, however, of the plaintiffs that Cu Joco, now in possession of
the lot, should pay rent for it at the rate of P5 a month, would destroy the theory of the
When Franciso Fontanilla died, the herein plaintiffs, Alejandro Mina, et al., were commodatum sustained by them, since, according to the second paragraph of the aforecited
recognized without discussion as his heirs. On the other hand, when Andres Fontanilla died, article 1740, "commodatum is essentially gratuitous”.
the children of Ruperta Pascual were recognized as his heirs without discussion and are
consequently entitled to the warehouse. The plaintiffs and the defendants are therefore, Hence, as the facts show that a building was erected on another's ground, the
virtually, to all appearance, the owners of the warehouse; while the plaintiffs are undoubtedly, question should be decided in accordance with the statutes that, thirty years ago, governed
the owners of the part of the lot occupied by that building, as well as of the remainder thereof. accessions to real estate, and which were Laws 41 and 42, title 28, of the third Partida, nearly
identical with the provisions of articles 361 and 362 of the Civil Code. So, then, pursuant to
But on May 6, 1909, Ruperta Pascual, as the guardian of her minor children, the article 361, the owner of the land on which a building is erected in good faith has a right to
herein defendants, petitioned the Court of First Instance of Ilocos Norte for authorization to appropriate such edifice to himself, after payment of the indemnity prescribed in articles 453
and 454, or to oblige the builder to pay him the value of the land. Such, and no other, is the judgments shall no longer be twelve percent (12%) per annum — as reflected in the case of
right to which the plaintiff are entitled. Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations for Banks and
For these reasons, it is only necessary to annul the sale of the said lot which was made Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
by Ruperta Pascual, in representation of her minor children, to Cu Joco, and to maintain the Institutions, before its amendment by BSP-MB Circular No. 799 — but will now be six percent
latter in the use of the lot until the plaintiffs shall choose one or the other of the two rights (6%) per annum effective July 1, 2013.
granted them by article 361 of the Civil Code.
It should be noted, nonetheless, that the new rate could only be applied prospectively and not
3. Spouses Abella v. Spouses Abella, G.R. No. 195166, July 8, 2015 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
FACTS: Petitioners Spouses Salvador and Alma Abella filed a Complaint for sum of money and
prevailing rate of interest when applicable.
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. 4. Catholic Vicar Apostolic vs. CA, [G.R. No. 80294-95, September 21, 1988
Petitioners added that respondents were able to pay a total of P200K—P100K paid on two CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE vs. COURT OF APPEALS, HEIRS
separate occasions—leaving an unpaid balance of P300K. OF EGMIDIO OCTAVIANO AND JUAN VALDEZ
In their Answer, respondents alleged that the amount involved did not pertain to a loan but FACTS:
was part of the capital for a joint venture involving the lending of money when respondents
The whole controversy started when the petitioner Catholic Vicar Apostolic of the
that they were approached by petitioners, who proposed that if respondents were to
Mountain Province (VICAR for brevity) filed with the Court of First Instance of Baguio Benguet
"undertake the management of whatever money [petitioners] would give them, [petitioners]
an application for registration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at
would get 2.5% a month with a 2.5% service fee to [respondents]." Moreover, they claimed
Poblacion Central, La Trinidad, Benguet. On March 22, 1963 the Heirs of Juan Valdez and the
that the entire amount of P500,000.00 was disposed of in accordance with their agreed terms
Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively,
and conditions and that petitioners terminated the joint venture, prompting them to collect
asserting ownership and title thereto. After trial on the merits, the land registration court
from the joint venture's borrowers. They were, however, able to collect only to the extent of
promulgated its Decision, dated November 17, 1965, confirming the registrable title of VICAR
P200,000.00; hence, the P300,000.00 balance remained unpaid.
to Lots 1, 2, 3, and 4.
The RTC ruled in favor of petitioners. On respondents' appeal, the Court of Appeals ruled that
The respondent in this case appealed the decision of the land registration court to
while respondents had indeed entered into a simple loan with petitioners, respondents were
the then Court of Appeals. The Court of Appeals rendered its decision, reversing the decision
no longer liable to pay the outstanding amount of P300,000.00.
of the land registration court and dismissing the VICAR's application as to Lots 2 and 3. VICAR
then filed with the Supreme Court a petition for review on certiorari of the decision of the
ISSUE1: What contract was entered into by the parties? Court of Appeals dismissing his (its) application for registration of Lots 2 and 3. The Heirs of
Juan Valdez and Pacita Valdez, on likewise filed with the Supreme Court a petition for review.
HELD1: Respondents entered into a simple loan or mutuum, rather than a joint venture, with The Supreme Court denied in a minute resolution both petitions (of VICAR on the
petitioners. one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit. Upon
the finality of both Supreme Court resolution. The Heirs of Octaviano filed with the then Court
of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying that the
Respondents' claims, as articulated in their testimonies before the trial court, cannot prevail Heirs of Octaviano be placed in possession of Lot 3. The Court, presided over by Hon. Salvador
over the clear terms of the document attesting to the relation of the parties. "If the terms of a J. Valdez, on December 7, 1978, denied the motion on the ground that the Court of Appeals
contract are clear and leave no doubt upon the intention of the contracting parties, the literal decision did not grant the Heirs of Octaviano any affirmative relief. The heirs of Octaviano and
meaning of its stipulations shall control.” the Heirs of Valdez then filed their cases for recovery of possession.
In these two cases , the plaintiffs argue that the defendant Vicar is barred from
ISSUE2: Whether interest accrued on respondents' loan from petitioner and if in the setting up the defense of ownership and/or long and continuous possession of the two lots in
affirmative, at what rate? question since this is barred by prior judgment of the Court of Appeals under the principle of
res judicata. Plaintiffs contend that the question of possession and ownership have already
been determined by the Court of Appeals and affirmed by the Supreme Court (Exh. 1, Minute
HELD2: First issue - Guided by the decision in Nacar v. Gallery Frames: In the absence of an Resolution of the Supreme Court). On his part, defendant Vicar maintains that the principle of
express stipulation as to the rate of interest that would govern the parties, the rate of legal res judicata would not prevent them from litigating the issues of long possession and
interest for loans or forbearance of any money, goods or credits and the rate allowed in ownership because the dispositive portion of the prior judgment merely dismissed their
application for registration and titling of lots 2 and 3. Defendant Vicar contends that only the them to the plaintiff upon the latter's demand. The plaintiff sold the property to Maria Lopez
dispositive portion of the decision, and not its body, is the controlling pronouncement of the and Rosario Lopez and on notified the defendant of the conveyance, and asked him to vacate
Court of Appeals. the premises. Also, Quintos required the defendant to return all the furniture transferred to
him for them in the house where they were found.
ISSUE: Whether or not the adverse possession of the petitioner of the subject lot Beck wrote a letter to the plaintiff informing her that he could not give up the three
for 11 years would constitute as a valid acquisitive prescription of the lot? 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. 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
SC RULING: warehouse situated at No. 1521, Rizal Avenue, in the custody of the said sheriff.
Petitioner was in possession as borrower in commodatum up to 1951, when it
repudiated the trust by declaring the properties in its name for taxation purposes. When
ISSUE:
petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept
of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten 1. Whether the defendant complied with his obligation to return the furniture upon the
years, but always with just title. Extraordinary acquisitive prescription requires 30 years. plaintiff's demand;
The Court of Appeals found that petitioner did not meet the requirement of 30 years 2. whether the latter is bound to bear the deposit fees thereof,
possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement 3. whether she is entitled to the costs of litigation.
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
SC RULING: The contract entered into between the parties is one of commadatum,
Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by
because under it the plaintiff gratuitously granted the use of the furniture to the defendant,
petitioner Vicar because there was absolutely no documentary evidence to support the same
reserving for herself the ownership thereof; by this contract the defendant bound himself to
and the alleged purchases were never mentioned in the application for registration.
return the furniture to the plaintiff, upon the latters demand
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 Private Issue 1: YES, The obligation voluntarily assumed by the defendant to return the furniture
respondents were able to prove that their predecessors' house was borrowed by petitioner upon the plaintiff's demand, means that he should return all of them to the plaintiff at the
Vicar after the church and the convent were destroyed. They never asked for the return of the latter's residence or house.
house, but when they allowed its free use, they became bailors in commodatum and the As the defendant had voluntarily undertaken to return all the furniture to the
petitioner the bailee. The bailees' failure to return the subject matter of commodatum to the plaintiff, upon the latter's demand, the Court could not legally compel her to bear the expenses
bailor did not mean adverse possession on the part of the borrower. The bailee held in trust occasioned by the deposit of the furniture at the defendant's behest. The latter, as bailee, was
the property subject matter of commodatum. The adverse claim of petitioner came only in not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the
1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such offer to return the furniture, because the defendant wanted to retain the three gas heaters
adverse claim could not ripen into title by way of ordinary acquisitive prescription because of and the four electric lamps.
the absence of just title.
The Court of Appeals found that the predecessors-in-interest and private Issue 2: NO, the Court could not legally compel her to bear the expenses occasioned by the
respondents were possessors under claim of ownership in good faith from 1906; that deposit of the furniture at the defendant's behest. The latter, as bailee, was not entitled to
petitioner Vicar was only a bailee in commodatum; and that the adverse claim and repudiation place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return
of trust came only in 1951. the furniture, because the defendant wanted to retain the three gas heaters and the four
We find no reason to disregard or reverse the ruling of the Court of Appeals in CA- electric lamps.
G.R. No. 38830-R. Its findings of fact have become incontestable. This Court declined to review
said decision, thereby in effect, affirming it. It has become final and executory a long time ago.
Issue 3: Yes, the plaintiff is entitled to the payment thereof by the defendant in
case of his inability to return some of the furniture because under paragraph 6 of the
5. Quintos vs. Beck, [G.R. No. 46240. November 3, 1939 stipulation of facts, the defendant has neither agreed to nor admitted the correctness of the
FACTS: said value.
Beck was a tenant of Quintos and occupied the latter's house. Upon the novation of The costs in both instances should be borne by the defendant because the plaintiff
the contract of lease between the plaintiff and the defendant, the former gratuitously granted is the prevailing party. The defendant was the one who breached the contract of
to the latter the use of the furniture, subject to the condition that the defendant would return commodatum, and without any reason he refused to return and deliver all the furniture upon
the plaintiff's demand. The expenses which may be occasioned by the delivery to and deposit 2.) Tolentino vs. Gonzales, 50 Phil. 558 (1927);
of the furniture with the Sheriff shall be for the account of the defendant. the defendant shall TOLENTINO vs. GONZALES SY CHIAM
pay the costs in both instances
FACTS:
Sometime prior to the 28th day of November, 1922, the appellants (Tolentino and
C. Mutuum Manio) purchased of the Luzon Rice Mills, Inc., a piece or parcel of land with the camarin
Cases: located thereon for the price of P25,000, promising to pay therefor in three installments. One
1.) Cebu International vs. CA, G.R. No. 123031, October 12, 1999; of the conditions of that contract of purchase was that on failure of the purchaser (plaintiffs
and appellants) to pay the balance of said purchase price or any of the installments on the date
Facts:
agreed upon, the property bought would revert to the original owner. For the last installment,
upon receiving the letter of the vendor of said property, the purchasers, the appellants herein,
December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of realizing that they would be unable to pay the balance due, began to make an effort to borrow
P75K from Philippine Bank of Commerce (PBC) by mortgaging their property money with which to pay the balance due, began to make an effort to borrow money with
December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where which to pay the balance of their indebtedness on the purchase price of the property involved.
P75K is payable to PBC and P25K is payable to Spouses Lanzano. Finally an application was made to the defendant for a loan for the purpose of satisfying their
April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to PBC indebtedness to the vendor of said property. After some negotiations the defendants agreed
May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with to loan the plaintiffs to loan the plaintiffs the sum of P17,500 upon condition that the plaintiffs
Assumption of Mortgage to his brother, intervenor Raoul Bonnevie execute and deliver to him a pacto de retro of said property.
June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale was
published
ISSUE:
January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank of
Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 as well May a tenant charge his landlord with a violation of the Usury Law upon the ground
as the extrajudicial foreclosure made on September 4, 1968. that the amount of rent he pays, based upon the real value of the property, amounts to a
CFI: Dismissed the complaint with costs against the Bonnevies usurious rate of interest?
CA: Affirmed
ISSUE: W/N the forclosure on the mortgage is validly executed. SC RULING:
No. The value of money, goods or credits is easily ascertained while the amount of
HELD: YES. CA affirmed
rent to be paid for the use and occupation of the property may depend upon a thousand
A contract of loan being a consensual contract is perfected at the same time the contract
different conditions. It will thus be seen that the rent to be paid for the use and occupation of
of mortgage was executed. The promissory note executed on December 12, 1966 is only
property is not necessarily fixed upon the value of the property. The amount of rent is fixed,
an evidence of indebtedness and does not indicate lack of consideration of the mortgage
based upon a thousand different conditions and may or may not have any direct reference to
at the time of its execution.
the value of the property rented. To hold that "usury" can be based upon the comparative
Respondent Bank had every right to rely on the certificate of title. It was not bound to go actual rental value and the actual value of the property, is to subject every landlord to an
behind the same to look for flaws in the mortgagor's title, the doctrine of innocent
annoyance not contemplated by the law, and would create a very great disturbance in every
purchaser for value being applicable to an innocent mortgagee for value.
business or rural community. We cannot bring ourselves to believe that the Legislature
Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the contemplated any such disturbance in the equilibrium of the business of the country.
one year redemption period expired on September 3, 1969. It was not until September
29, 1969 that Honesto Bonnevie first wrote respondent and offered to redeem the Act No. 2655 is "An Act fixing rates of interest upon 'loans' and declaring the effect
property. of receiving or taking usurious rates." It will be noted that said statute imposes a penalty upon
loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, a "loan" or forbearance of any money, goods, chattels or credits, etc. The central idea of said
the loan was already six months overdue. Payment of interest on July 12, 1968 does not statute is to prohibit a rate of interest on "loans." A contract of "loan," is very different
make the earlier act of PBC inequitous nor does it ipso facto result in the renewal of the contract from that of "rent". A "loan," as that term is used in the statute, signifies the giving
loan. In order that a renewal of a loan may be effected, not only the payment of the of a sum of money, goods or credits to another, with a promise to repay, but not a promise to
accrued interest is necessary but also the payment of interest for the proposed period of return the same thing. To "loan," in general parlance, is to deliver to another for temporary
renewal as well. Besides, whether or not a loan may be renewed does not solely depend use, on condition that the thing or its equivalent be returned; or to deliver for temporary use
on the debtor but more so on the discretion of the bank. on condition that an equivalent in kind shall be returned with a compensation for its use. The
word "loan," however, as used in the statute, has a technical meaning. It never means the
return of the same thing. It means the return of an equivalent only, but never the same thing
loaned. A "loan" has been properly defined as an advance payment of money, goods or credits Centre. PBC approved the letter of credit to cover the full invoice value of the goods.
upon a contract or stipulation to repay, not to return, the thing loaned at some future day in Petitioners signed the pro-forma trust receipt as security. The said loan was due on 29 January
accordance with the terms of the contract. Under the contract of "loan," as used in said 1980. However, petitioners failed to pay the whole amount on its due date. Several demand
statute, the moment the contract is completed the money, goods or chattels given cease to be letters were sent to them. Petitioners proposed that the terms of payment of the loan shall be
the property of the former owner and becomes the property of the obligor to be used modified. Pending approval of the said proposal, petitioners paid some amounts.
according to his own will, unless the contract itself expressly provides for a special or specific Concurrently with the separate demand for attorney's fees by PBC's legal counsel, PBC
use of the same. At all events, the money, goods or chattels, the moment the contract is continued to demand payment of the balance. On 14 January 1983, petitioners were charged
executed, cease to be the property of the former owner and becomes the absolute property with violation of P.D. No. 115 (Trust Receipts Law) in relation to Article 315 of the Revised
of the obligor. Penal Code.
A contract of "loan" differs materially from a contract of "rent." In a contract of During trial, petitioners insisted that the transaction was that of an ordinary loan.
"rent" the owner of the property does not lose his ownership. He simply loses his control over Subsequently, the trial court convicted the petitioners for the offense charged.
the property rented during the period of the contract. In a contract of "loan" the thing loaned
On appeal, the Court of Appeals affirmed the conviction of petitioners and increased the
becomes the property of the obligor. In a contract of "rent" the thing still remains the property
penalty imposed.
of the lessor. He simply loses control of the same in a limited way during the period of the
contract of "rent" or lease. In a contract of "rent" the relation between the contractors is that ISSUE: WON the true nature of the contract was an ordinary loan or a trust receipt agreement.
of landlord and tenant. In a contract of "loan" of money, goods, chattels or credits, the relation RULING: The transaction was an ordinary loan.
between the parties is that of obligor and obligee. "Rent" may be defined as the compensation Petitioners received the merchandise from CM Builders Centre on 30 October 1979. On that
either in money, provisions, chattels, or labor, received by the owner of the soil from the day, ownership over the merchandise was already transferred to Petitioners who were to use
occupant thereof. It is defined as the return or compensation for the possession of some the materials for their construction project. It was only a day later, 31 October 1979, that they
corporeal inheritance, and is a profit issuing out of lands or tenements, in return for their use. went to the bank to apply for a loan to pay for the merchandise.
It is that, which is to paid for the use of land, whether in money, labor or other thing agreed
upon. A contract of "rent" is a contract by which one of the parties delivers to the other some This situation belies what normally obtains in a pure trust receipt transaction where goods are
nonconsumable thing, in order that the latter may use it during a certain period and return it owned by the bank and only released to the importer in trust subsequent to the grant of the
to the former; whereas a contract of "loan", as that word is used in the statute, signifies the loan. The bank acquires a "security interest" in the goods as holder of a security title for the
delivery of money or other consumable things upon condition of returning an equivalent advances it had made to the entrustee.
amount of the same kind or quantity, in which cases it is called merely a "loan." In the case of The ownership of the merchandise continues to be vested in the person who had advanced
a contract of "rent," under the civil law, it is called a "commodatum." payment until he has been paid in full, or if the merchandise has already been sold, the
proceeds of the sale should be turned over to him by the importer or by his representative or
successor-in-interest. To secure that the bank shall be paid, it takes full title to the goods at
In the present case the property in question was sold. It was an absolute sale with the very beginning and continues to hold that title as his indispensable security until the goods
the right only to repurchase. During the period of redemption the purchaser was the absolute are sold and the vendee is called upon to pay for them; hence, the importer has never owned
owner of the property. During the period of redemption the vendor was not the owner of the the goods and is not able to deliver possession. In a certain manner, trust receipts partake of
property. During the period of redemption the vendor was a tenant of the purchaser. During the nature of a conditional sale where the importer becomes absolute owner of the imported
the period of redemption the relation which existed between the vendor and the vendee was merchandise as soon as he has paid its price.
that of landlord and tenant. That relation can only be terminated by a repurchase of the
property by the vendor in accordance with the terms of the said contract. The contract was
one of rent. The contract was not a loan, as that word is used in Act No. 2655. Trust receipt transactions are intended to aid in financing importers and retail dealers who do
not have sufficient funds or resources to finance the importation or purchase of merchandise,
and who may not be able to acquire credit except through utilization, as collateral, of the
3.) Colinares vs. CA, G.R. No. 90828, September 5, 2000; merchandise imported or purchased.
COLINARES v s . COURT OF APPEALS The antecedent acts in a trust receipt transaction consist of the application and approval of
FACTS: the letter of credit, the making of the marginal deposit and the effective importation of goods
In 1979, petitioners Melvin Colinares and Lordino Veloso were contracted by the Carmelite through the efforts of the importer.
Sisters of Cagayan de Oro City to renovate the latter's convent at Camaman-an, Cagayan de Petitioner Veloso's claim that they were made to believe that the transaction was a loan was
Oro City. On 30 October 1979, petitioners obtained various construction materials from CM also not denied by PBC.
Builders Centre for the said The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the
project. The following day, petitioners applied for a commercial letter of credit with the dishonesty and abuse of confidence in the handling of money or goods to the prejudice of
Philippine Banking Corporation (PBC), Cagayan de Oro City Branch in favor of CM Builders
another regardless of whether the latter is the owner. Here, it is crystal clear that on the part 2) That if the appellee has a cause of action at all, it had prescribed
of Petitioners there was neither 3) The lower court erred in ordering the appellant to pay P2,377.23
dishonesty nor abuse of confidence in the handling of money to the prejudice of PBC. Issue:
Petitioners continually endeavored to meet their obligations, as shown by several receipts
Can RP still collect from Grijaldo?
issued by PBC acknowledging payment of the loan.
Held: Yes
The Information charges Petitioners with intent to defraud and misappropriating the money
for their personal use. The mala prohibita nature of the alleged offense notwithstanding, intent Ratio: The obligation of the contract was not to deliver a determinate thing, it was a generic
as a state of mind was not proved to be present in Petitioners' situation. Petitioners employed thing – the amount of money representing the total sum of his loans. The destruction of
no artifice in dealing with PBC and never did they evade payment of their obligation nor anything of the same kind does not extinguish the obligation. The loss of the crops did not
attempt to abscond. Instead, Petitioners sought favorable terms precisely to meet their extinguish his obligation to pay because the account could still be paid from other sources
obligation. aside from the mortgaged crops. Also, prescription does not run against the State.
Also noteworthy is the fact that Petitioners are not importers acquiring the goods for re-sale,
contrary to the express provision embodied in the trust receipt. They are contractors who 5.) Soncuya vs. Azarraga, G.R. No. 43579, June 14, 1938;
obtained the fungible goods for their construction project. At no time did title over the 6.) State Investment vs. CA, G.R. No. 90676, June 19, 1991;
construction materials pass to the bank, but directly to the Petitioners from CM Builders
Centre. This impresses upon the trust receipt in question vagueness and ambiguity, which Facts:
should not be the basis for criminal prosecution in the event of violation of its provisions. Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on
The practice of banks of making borrowers sign trust receipts to facilitate collection of loans commission, two postdated checks in the amount of fifty thousand each. Thereafter,
and place them under the threats of criminal prosecution should they be unable to pay it may Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell
be unjust and inequitable, if not reprehensible. Such agreements are contracts of adhesion the jewellry, she returned it to Victoriano before the maturity of the checks. However, the
which borrowers have no option but to sign lest their loan be disapproved. The resort to this checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic
scheme leaves poor and hapless borrowers at the mercy of banks, and is prone to withdrew her funds from the bank contesting that she incurred no obligation on the checks
misinterpretation, as had happened in this case. Eventually, PBC showed its true colors and because the jewellery was never sold and the checks are negotiated without her knowledge
admitted that it was only after collection of the money, as manifested by its Affidavit and consent. Upon presentment of for payment, the checks were dishonoured for insufficiency
ofDesistance. of funds.
Issues:
4.) Republic vs. Grijaldo, G.R. No. L-20240, December 31, 1965; 1. Whether or not State Investment House inc. was a holder of the check in due course
Facts: 2. Whether or not Moulic can set up against the petitioner the defense that there was failure
or absence of consideration
· Grijaldo obtained five loans from the Bank of Taiwan in the total sum of P1,281.97 with
interest at the rats of 6% per annum compounded quarterly. These were evidenced by five
promissory notes.
Held:
· These loans were crop loans and was considered to be due one year after they were
incurred.
Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence
· As a security for the payment of the loans, a chattel mortgage was executed on the shows that: on the faces of the post dated checks were complete and regular; that State
standing crops of his land. Investment House Inc. bought the checks from Victoriano before the due dates; that it was
· The assets in the Bank of Taiwan were vested in the US Gov’t which were subsequently taken in good faith and for value; and there was no knowledge with regard that the checks
transferred to the Republic of the Philippines were issued as security and not for value. A prima facie presumption exists that a holder of a
· RP is now demanding the payment of the account. negotiable instrument is a holder in due course. Moulic failed to prove the contrary.
· Justice of Peace dismisses the case on the ground of prescription. CA rendered a decision No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose
ordering the appellant to pay the appellee for which they were issued and therefore is not a holder in due course.
Defendant’s contentions:
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke
1) The appellee has no cause of action against appellant since the transaction was with paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic
Taiwan Bank. failed to get back the possession of the checks as provided by paragraph c, intentional
cancellation of instrument is impossible. As provided by paragraph d, the acts which will delivery of the object of the contract. Necessarily, the delivery of the proceeds of the loan by
discharge a simple contract of payment of money will discharge the instrument. Correlating the lender to the borrower is indispensable to perfect the contract of loan. Once the proceeds
Article 1231 of the Civil Code which enumerates the modes of extinguishing obligation, none have been delivered, the unilateral characteristic of the contract arises and the borrower is
of those modes outlined therein is applicable in the instant case.Thus, Moulic may not bound to pay the lender an amount equal to that received.
unilaterally discharge herself from her liability by mere expediency of withdrawing her funds Here, there were purported contracts of loan entered between Westmont and petitioners for
from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability the amounts of P2,429,500.00 and P4,000,000.00, respectively. The promissory notes
on her check to a holder in due course. Moreover, the fact that the petitioner failed to give evidencing such loans were denied by petitioners, thus, the genuineness and due execution of
notice of dishonor is of no moment. The need for such notice is not absolute; there are such documents were not admitted. Petitioners averred that they never received such loans
exceptions provided by Sec 114 of NIL. because the bank disapproved their applications and they had to acquire loans from other
persons. They presented a cashier's check, in the amount of P2,429,500.00, obtained from
7.) Osmeña-Jalandoni v. Encomienda, G.R. No. 205578, March 1, 2017 Chua, which showed that the latter personally provided the loan, and not the bank. As the
bank did not deliver the proceeds of the loan, petitioners stressed that there was no perfected
contract of loan. In addition, they doubt the reliability of the promissory notes as their original
8.) Spouses Sy v. Westmont Bank, G.R. No. 201074, October 19, 2016
copies were not presented before the RTC.
DOCTRINE
The Court finds that Westmont miserably failed to establish that it released and delivered the
A simple loan is a real contract and it shall not be perfected until the delivery of theobject of proceeds of the loans in the total amount of P6,429,500.00 to petitioners. Westmont could
the contract. have easily presented a receipt, a ledger, a loan release manifold, or a statement of loan
FACTS release to indubitably prove that the proceeds were actually released and received by
petitioners. During trial, Westmont committed to the RTC that it would submit as evidence a
Spouses Sy, et al., doing business under the tradename of Moondrops General
loan manifold indicating the names of petitioners as recipients of the loans, but these
Merchandising (“Moondrops”), obtained a loan with Westmont Bank in the amount of
purported documents were never presented, identified or offered.
P2,429,500 evidenced by a Promissory Note No. GP-5280.
They obtained another loan from Westmont Bank in the amount of As Westmont failed to prove that it had delivered the loan proceeds to respondents, then
P4,000,000evidenced by a Promissory Note No. GP-5285. there is no perfected contract of loan.
A Continuing Suretyship Agreement was executed between Westmont and Sps. Sy, et al.
for the purpose of securing any future indebtedness of Moondrops.
Westmont filed a complaint when Sps. Sy, et al. allegedly defaulted in the payment of
their loan obligations.
Sps. Sy, et al., however, countered that Westmont, through its bank manager, Lao,
required them to sign blank forms of promissory notes and disclosure statements and
promised that he would notify them immediately regarding the status of their loan
application.
The loan applications were disapproved but Lao offered to help them secure a loan
through a certain Chua, who lend them the amounts of P2,500,000 and P4,000,000,
which Sps. Sy, et al. accepted.
ISSUE
Whether or not there is a perfected contract of loan
HELD
NO.
Sps. Sy, et al., have shown the Court that their loan applications with Westmont were
disapproved.
On the other hand, Westmont failed to prove that it delivered the proceeds of the loan to
petitioners.
A simple loan or mutuum is a contract where one of the parties delivers to another, either
money or other consumable thing, upon the condition that the same amount of the same kind
and quality shall be paid. A simple loan is a real contract and it shall not be perfected until the