Chee Kiong Yam v.

Malik
GR No-50550-52 October 31, 1979
Facts: Petitioners filed a petition for certiorari, prohibition
and mandamus with preliminary injunction against the
respondent Judge Malik who ruled that several cases of
estafa filed against the petitioners should be admitted for
trial in his sala. It must be noted that all complainants
admitted that the money which the petitioners did not
return were obtained from them by the latter in a form of
loans.
Issue: Can there be a crime of estafa for non-payment of a
loan?
Held: No. In order that a person be convicted of Swindling
(Estafa) under Art. 315 of the Revised Penal Code, it must be
proven that he has the obligation to deliver or return the
same money, goods or personal property that he received.
Petitioners had no such obligation to return the same
money, i.e., the bills or coins, which they received from
private respondents. This is so because as clearly stated in
criminal complaints, the related civil complaints and the
supporting sworn statements, the sums of money that
petitioners received were loans. In U.S. vs. Ibaez, 19 Phil.
559, 560 (1911), the Supreme Court held that it is not estafa
for a person to refuse to pay his debt or to deny its
existence.
It is the opinion of the Court that when the relation is purely
that of debtor and creditor, the debtor can not be held liable
for the crime of estafa, under said article, by merely refusing
to pay or by denying the indebtedness.
It appeared that respondent judge failed to appreciate the
distinction between the two types of loan, mutuum and
commodatum, when he performed the questioned acts. He

mistook the transaction between petitioners and private

respondents to be commodatum wherein the borrower does
not acquire ownership over the thing borrowed and has the
duty to return the same thing to the lender.
Saura Import &Export Co., Inc v. DBP
G.R. No. L-24968 April 27, 1972
Facts: Saura Inc. applied to the Rehabilitation Finance Corp
(before its conversion to DBP) for a loan of 500k secured by
a first mortgage of the factory building to finance for the
construction of a jute mill factory and purchase of factory
implements. RFC accepted and approved the loan
application subject to some conditions which Saura admitted
it could not comply with. Without having received the
amount being loaned, and sensing that it could not at
anyway obtain the full amount of loan, Saura Inc. then asked
for cancellation of the mortgage which RFC also approved.
Nine years after the cancellation of the mortgage, Saura
sued RFC for damages for its non-fulfillment of obligations
arguing that there was indeed a perfected consensual
contract between them.
Issue: Was there a perfected consensual contract? Was there
a real contract of loan which would warrant recovery of
damages arising out of breach of such contract?
Held: On the first issue, yes, there was indeed a perfected
consensual contract, as recognized in Article 1934 of the
Civil Code. There was undoubtedly offer and acceptance in
this case: the application of Saura, Inc. for a loan of
P500,000.00 was approved by resolution of the defendant,
and the corresponding mortgage was executed and
registered. But this fact alone falls short of resolving the
second issue and the basic claim that the defendant failed
to fulfill its obligation and the plaintiff is therefore entitled to
recover damages. The action thus taken by both parties

Saura's request for cancellation and RFC's subsequent

approval of such cancellationwas in the nature of mutual
desistance what Manresa terms "mutuo disenso" which
is a mode of extinguishing obligations. It is a concept
derived from the principle that since mutual agreement can
create a contract, mutual disagreement by the parties can
cause its extinguishment. In view of such extinguishment,
said perfected consensual contract to deliver did not
constitute a real contract of loan.

Forbearance is defined as a 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. 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. We believe however, that the phrase

ESTORES V. SPOUSES SUPANGAN, (2012)

(Compensatory, Penalty or Indemnity Interest)
*Forbearance of money
ISSUE: Whether it is proper to impose interest for an obligation
that does not involve a loan or forbearance of money in the
absence of stipulation of the parties.
HELD:
YES. Interest may be imposed even in the absence of
stipulation in the contract.
Article 2210 of the Civil Code expressly provides that [i]nterest
may, in the discretion of the court, be allowed upon damages
awarded for breach of contract. In this case, there is 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. Petitioner enjoyed
the use of the money from the time it was given to her until
now. Thus, she is already in default of her obligation from the
date of demand.

forbearance of money, goods or credits is meant to have a

separate meaning from a loan, otherwise there would have been
no need to add that phrase as a loan is already sufficiently
defined in the Civil Code.
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 respondent-spouses parted with their money
even before the conditions were fulfilled. They have therefore
allowed or granted forbearance to the seller (petitioner) 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. And 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.
Government Service Insurance System v. Court of Appeals
170 SCRA 533,
February 23, 1989
Facts:
Private respondents, Mr. and Mrs. Isabelo R. Racho, together
with spouses Mr. and Mrs Flaviano Lagasca, executed a deed
of mortgage, dated November 13, 1957, in favor of
petitioner GSIS and subsequently, another deed of
mortgage, dated April 14, 1958, in connection with two
loans granted by the latter in the sums of P 11,500.00 and P
3,000.00, respectively. A parcel of land covered by Transfer
Certificate of Title No. 38989 of the Register of Deed of
Quezon City, co-owned by said mortgagor spouses, was
given as security under the two deeds. They also executed a
'promissory note".
On July 11, 1961, the Lagasca spouses executed an
instrument denominated "Assumption of Mortgage,"
obligating themselves to assume the said obligation to the
GSIS and to secure the release of the mortgage covering
that portion of the land belonging to spouses Racho and
which was mortgaged to the GSIS. This undertaking was not
fulfilled. Upon failure of the mortgagors to comply with the
conditions of the mortgage, particularly the payment of the
amortizations due, GSIS extrajudicially foreclosed the
mortgage and caused the mortgaged property to be sold at
public auction on December 3, 1962.

For more than two years, the spouses Racho filed a

complaint against the spouses Lagasca praying that the
extrajudicial foreclosure "made on, their property and all
other documents executed in relation thereto in favor of the
Government Service Insurance System" be declared null and
void.
The trial court rendered judgment on February 25, 1968
dismissing the complaint for failure to establish a cause of
action. However, said decision was reversed by the
respondent Court of Appeals, stating that, although formally
they are co-mortgagors, the GSIS required their consent to
the mortgage of the entire parcel of land which was covered
with only one certificate of title, with full knowledge that the
loans secured were solely for the benefit of the appellant
Lagasca spouses who alone applied for the loan.
Issues:
Whether the respondent court erred in annulling the
mortgage as it affected the share of private respondents in
the reconveyance of their property?
Whether private respondents benefited from the loan, the
mortgage and the extrajudicial foreclosure proceedings are
valid?
Held:
Both parties relied on the provisions of Section 29 of Act No.
2031, otherwise known as the Negotiable Instruments Law,
which provide that an accommodation party is one who has
signed an instrument as maker, drawer, acceptor of indorser
without receiving value therefor, but is held liable on the
instrument to a holder for value although the latter knew
him to be only an accommodation party.

The promissory note, as well as the mortgage deeds subject

of this case, are clearly not negotiable instruments. These
documents do not comply with the fourth requisite to be
considered as such under Section 1 of Act No. 2031 because
they are neither payable to order nor to bearer. The note is
payable to a specified party, the GSIS. Absent the aforesaid
requisite, the provisions of Act No. 2031 would not apply;
governance shall be afforded, instead, by the provisions of
the Civil Code and special laws on mortgages.
As earlier indicated, the factual findings of respondent court
are that private respondents signed the documents "only to
give their consent to the mortgage as required by GSIS",
with the latter having full knowledge that the loans secured
thereby were solely for the benefit of the Lagasca spouses.
Contrary to the holding of the respondent court, it cannot be
said that private respondents are without liability under the
aforesaid mortgage contracts. The factual context of this
case is precisely what is contemplated in the last paragraph
of Article 2085 of the Civil Code to the effect that third
persons who are not parties to the principal obligation may
secure the latter by pledging or mortgaging their own
property. So long as valid consent was given, the fact that
the loans were solely for the benefit of the Lagasca spouses
would not invalidate the mortgage with respect to private
respondents' share in the property.
The respondent court, erred in annulling the mortgage
insofar as it affected the share of private respondents or in
directing reconveyance of their property or the payment of
the value.
KIM v PEOPLE -?
Ligutan vs. CA G.R#138677

Facts: Petitioners Tolomeo Ligutan and Leonidas dela Llana o

btained a loan in the amount of P120,000.00 from respondent
Security Bank and Trust Company. Petitioners executed a promissory
note binding themselves, jointly and severally, with an interest of
15.189% per annum upon maturity and to pay a penalty of 5%
every month on the outstanding principal and interest in
case of default and also a 10% attorneys fees if the matter were
indorsed to a lawyer for collection.
The obligation matured, the petitioners were not able to settle the
obligation; the bank gave an extension, still the same happened.
Since the petitioners still defaulted, the former filed a
complaint for recovery of the due amount.
Issue: Whether the interest and penalty charge imposed
by private respondent bank on petitioners loan are
manifestly exorbitant, iniquitous and unconscionable?
Ruling: The obligor would then be bound to pay
the stipulated indemnity without the necessity of proof on
the existence and on the measure of damages caused by the breach.
Although a court may not at liberty ignore the freedom of the
parties to agree on such terms and conditions as they see fit
that contravene neither law nor morals, good customs,
public order or public policy, a stipulated penalty,
nevertheless, may be equitably reduced by the courts if it is
iniquitous or unconscionable or if the principal obligation has
been partly or irregularly complied with. The question of
whether a penalty is reasonable or iniquitous can be partly
subjective and partly objective. Its resolution would depend
on such factors as, but not necessarily confined to, the type,
extent and purpose of the penalty, the nature of the
obligation, the mode of breach and its consequences, the
supervening realities, the standing and relationship of the
parties, and the like, the application of which, by and large,
is addressed to the sound discretion of the court. The CA
exercised good judgment in reducing the stipulated penalty interest
from 5% to 3% a month. It was also been held that the 15.189% per
annum stipulated interest and the 10% attorneys is reasonable and
not excessive. The interest prescribed in loan financing

arrangements is a fundamental part of the banking business

and the core of a bank's existence

Eastern Shipping Lines, Inc. v CA

This is an action against defendants shipping company,
arrastre operator and broker-forwarder for damages
sustained by a shipment while in defendants' custody, filed
by the insurer-subrogee who paid the consignee the value of
such losses/damages. The losses/damages were sustained
while in the respective and/or successive custody and
possession of defendants carrier (Eastern), arrester operator
(Metro Port) and broker (Allied Brokerage).
As a consequence of the losses sustained, plaintiff was
compelled to pay the consignee P19, 032.95 under the
foretasted marine insurance policy, so that it became
subrogated to all the rights of action of said consignee
against defendants.
DECISION OF LOWER COURTS: * trial court: ordered payment
of damages, jointly and severally * CA: affirmed trial court.
ISSUES AND RULING:
(a) Whether or not a claim for damage sustained on a
shipment of goods can be a solidary, or joint and several,
liability of the common carrier, the arrastre operator and the
customs broker;
YES, it is solidary. Since it is the duty of the ARRASTRE to
take good care of the goods that are in its custody and to
deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the
obligation to deliver the goods in good condition to the
consignee.

The common carrier's duty to observe the requisite diligence

in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession
of, and received by, the carrier for transportation until
delivered to, or until the lapse of a reasonable time for their
acceptance by, the person entitled to receive them (Arts.
1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161
SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863).
When the goods shipped either are lost or arrive in damaged
condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable.
(b) whether the payment of legal interest on an award for
loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed
from is rendered; and
FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE
SUPREME COURT)
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages.
The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable
damages.
II. 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:
1. 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.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when
such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed
to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit.
(c) whether the applicable rate of interest, referred to
above, is twelve percent (12%) or six percent (6%).
SIX PERCENT (6%) on the amount due computed from the
decision, dated 03 February 1988, of the court a quo (Court
of Appeals) AND A TWELVE PERCENT (12%) interest, in lieu
of SIX PERCENT (6%), shall be imposed on such amount
upon finality of the Supreme Court decision until the
payment thereof.

RATIO: when the judgment awarding a sum of money

becomes final and executory, the monetary award shall earn
interest at 12% per annum from the date of such finality
until its satisfaction, regardless of whether the case involves
a loan or forbearance of money. The reason is that this
interim period is deemed to be by then equivalent to a
forbearance of credit.
NOTES: the Central Bank Circular imposing the 12% interest
per annum applies only to loans or forbearance of money,
goods or credits, as well as to judgments involving such loan
or forbearance of money, goods or credits, and that the 6%
interest under the Civil Code governs when the transaction
involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the
performance of obligations in general. Observe, too, that in
these cases, a common time frame in the computation of
the 6% interest per annum has been applied, i.e., from the
time the complaint is filed until the adjudged amount is fully
paid.
PRODUCERS BANK v CA
FACTS:
Sometime in 1979, private respondent Franklin Vives was
asked by his neighbor and friend Angeles Sanchez to help
her friend and townmate, Col. Arturo Doronilla, in
incorporating his business, the Sterela Marketing and
Services (Sterela for brevity). Specifically, Sanchez asked
private respondent to deposit in a bank a certain amount of
money in the bank account of Sterela for purposes of its
incorporation. She assured private respondent that he could
withdraw his money from said account within a months
time. With this, Mrs. Vivies, Sanchez and a certain Estrella
Dumagpi, secretary of Doronilla, went to the bank to open
an account with Mrs. Vives and Sanchez as signatories. A

passbook was then issued to Mrs. Vives. Subsequently,

private respondent learned that part of the money was
withdrawn without presentment of the passbook as it was
his wife got hold of such. Mrs. Vives could not also withdraw
said remaining amount because it had to answer for some
postdated checks issued by Doronilla who opened a current
account for Sterela and authorized the bank to debit
savings.
Private respondent referred the matter to a lawyer, who
made a written demand upon Doronilla for the return of his
clients money.
Doronilla issued another check for
P212,000.00 in private respondents favor but the check was
again dishonored for insufficiency of funds.

Private respondent instituted an action for recovery of sum

of money in the Regional Trial Court (RTC) in Pasig, Metro
Manila against Doronilla, Sanchez, Dumagpi and petitioner.
The RTC ruled in favor of the private respondent which was
also affirmed in toto by the CA. Hence this petition.

ISSUE: WON THE TRANSACTION BETWEEN THE DORONILLA

AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN.

HELD: NO.
A circumspect examination of the records reveals that the
transaction between them was a commodatum. Article
1933 of the Civil Code distinguishes between the two kinds
of loans in this wise:

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.

The foregoing provision seems to imply that if the subject of

the contract is a consumable thing, such as money, the
contract would be a mutuum. However, there are some
instances where a commodatum may have for its object a
consumable thing. Article 1936 of the Civil Code provides:

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.

Thus, if consumable goods are loaned only for purposes of

exhibition, or when the intention of the parties is to lend
consumable goods and to have the very same goods
returned at the end of the period agreed upon, the loan is a
commodatum and not a mutuum.

The rule is that the intention of the parties thereto shall be

accorded primordial consideration in determining the actual
character of a contract. In case of doubt, the
contemporaneous and subsequent acts of the parties shall
be considered in such determination.
GARCIA v THIO
FACTS
Respondent Thio received from petitioner Garcia two
crossed checks which amount to US$100,000 and
US$500,000, respectively, payable to the order of Marilou
Santiago. According to petitioner, respondent failed to pay
the principal amounts of the loans when they fell due and so
HELD
(1)
The Court held in the affirmative. A loan is
a real contract, not consensual, and as such I perfected only
upon the delivery of the object of the contract. Upon
delivery 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. It is
undisputed that the checks were delivered to respondent.
(2)
However, the checks were crossed and
payable not to the order of the respondent but to the order
of a certain Marilou Santiago. Delivery is the act by which
the res or substance is thereof placed within the actual or

she filed a complaint for sum of money and damages with

the RTC. Respondent denied that she contracted the two
loans and countered that it was Marilou Satiago to whom
petitioner lent the money. She claimed she was merely
asked y petitioner to give the checks to Santiago. She issued
the checks for P76,000 and P20,000 not as payment of
interest but to accommodate petitioners request that
respondent use her own checks instead of Santiagos.
RTC ruled in favor of petitioner. CA reversed RTC and
ruled that there was no contract of loan between the
parties.
ISSUE
(1) Whether or not there was a contract of loan between
petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or
Marilou Santiago?

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 relent the amount to Santiago.
Petition granted; judgment and resolution reversed and set
aside.
PAJUYO v CA
Facts: Pajuyo entrusted a house to Guevara for the latter's
use provided he should return the same upon demand and
with the condition that Guevara should be responsible of the

maintenance of the property. Upon demand Guevara refused

to return the property to Pajuyo. The petitioner then filed an
ejectment case against Guevara with the MTC who ruled in
favor of the petitioner. On appeal with the CA, the appellate
court reversed the judgment of the lower court on the
ground that both parties are illegal settlers on the property
thus have no legal right so that the Court should leave the
present situation with respect to possession of the property
as it is, and ruling further that the contractual relationship of
Pajuyo and Guevara was that of a commodatum.
Issue: Is the contractual relationship of Pajuyo and Guevara
that
of
a
commodatum?
Held: No. The Court of Appeals theory that the Kasunduan
is one of commodatum is devoid of merit. In a contract of
commodatum, one of the parties delivers to another
something not consumable so that the latter may use the
same for a certain time and return it. An essential feature of
commodatum is that it is gratuitous. Another feature of
commodatum is that the use of the thing belonging to
another is for a certain period. Thus, the bailor cannot
demand the return of the thing loaned until after expiration

of the period stipulated, or after accomplishment of the use

for which the commodatum is constituted. If the bailor
should have urgent need of the thing, he may demand its
return for temporary use. If the use of the thing is merely
tolerated by the bailor, he can demand the return of the
thing at will, in which case the contractual relation is called
a precarium. Under the Civil Code, precarium is a kind of
commodatum.
The
Kasunduan
reveals
that
the
accommodation accorded by Pajuyo to Guevarra was not
essentially gratuitous. While the Kasunduan did not require
Guevarra to pay rent, it obligated him to maintain the
property in good condition. The imposition of this obligation
makes the Kasunduan a contract different from a
commodatum. The effects of the Kasunduan are also
different from that of a commodatum. 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 the termination of
the lease. The tenants withholding of the property would
then
be
unlawful.