Doctrines of Cases in Credit Transactions

Naguiat vs. Court of Appeals

The mere issuance of checks did not result in the perfection of the contract of loan. For the Civil
Code provides that the delivery of bills of exchange and mercantile documents such as checks shall
produce the effect of payment only when they have been cashed. It is only after the checks have
produced the effect of payment that the contract of loan may be deemed perfected.

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

Spouses Palada vs. Solidbank Corporation

A mortgagor is allowed to take a second or subsequent mortgage on a property already
mortgaged, subject to the prior rights of the previous mortgages.

The mere fact that the date of execution was left blank does not prove bad faith. Besides, any
irregularity in the notarization or even the lack of notarization does not affect the validity of the
document. Absent any clear and convincing proof to the contrary, a notarized document enjoys the
presumption of regularity and is conclusive as to the truthfulness of its contents.

DBP vs. Guarina Agricultural & Realty Dev. Corp.

Under the law, a loan requires the delivery of money or any other consumable object by one
party to another who acquires ownership thereof, on the condition that the same amount or quality
shall be paid. Loan is a reciprocal obligation, as it arises from the same cause where one party is the
creditor, and the other the debtor. The obligation of one party in a reciprocal obligation is dependent
upon the obligation of the other, and the performance should ideally be simultaneous. This means that
in a loan, the creditor should release the full loan amount and the debtor repays it when it becomes due
and demandable.

Debtors are entitled to receive the total loan amount as agreed upon and not an incomplete
amount.

For an obligation to become due, there must generally be a demand. Default generally begins
from the moment the creditor demands the performance of the obligation. Without such demand,
judicial or extrajudicial, the effects of default will not arise.

If a party in a reciprocal contract like a loan does not perform its obligation, the other party
cannot be obliged to perform what is expected of it while the other’s obligation remains unfulfilled. In
other words, the latter party does not incur delay.

It is true that loans are often secured by a mortgage constituted on real or personal property to
protect the creditor’s interest in case of the default of the debtor. By its nature, however, a mortgage
remains an accessory contract dependent on the principal obligation, such that enforcement of the
mortgage contract will depend on whether or not there has been a violation of the principal obligation.
While a creditor and a debtor could regulate the order in which they should comply with their reciprocal
obligations, it is presupposed that in a loan the lender should perform its obligation - the release of the
full loan amount - before it could demand that the borrower repay the loaned amount.

It would only be when a demand to pay had been made and was subsequently refused that a
borrower could be considered in default, and the lender could obtain the right to collect the debt or to
foreclose the mortgage.

BPI Investment Corporation vs. Court of Appeals

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.

A perfected consensual contract does not constitute the real contract of loan.

A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each
party is the consideration for that of the other. In reciprocal obligations, 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, defaults sets in.

Spouses Ramon Sy and Anita Ng vs. Westmont Bank

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 delivery of the
object of the contract. Necessarily, the delivery of the proceeds of the loan by the lender to the
borrower is indispensable to perfect the contract of loan. Once the proceeds have been delivered, the
unilateral characteristic of the contract arises and the borrower is bound to pay the lender an amount
equal to that received.