Saura Import & Export Co., Inc.

-vs-
DBP
GR No. L-24968, 27 April 972
44 SCRA 445

FACTS
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an industrial loan to
be used for construction of factory building, for payment of the balance of the purchase price of the jute machinery and
equipment and as additional working capital. In Resolution No.145, the loan application was approved to be secured first
by mortgage on the factory buildings, the land site, and machinery and equipment to be installed.

The mortgage was registered and documents for the promissory note were executed. The cancellation of the mortgage was
requested to make way for the registration of a mortgage contract over the same property in favor of Prudential Bank
and Trust Co., the latter having issued Saura letter of credit for the release of the jute machinery. As security, Saura
execute a trust receipt in favor of the Prudential. For failure of Saura to pay said obligation, Prudential sued Saura.

After 9 years after the mortgage was cancelled, Saura sued RFc alleging failure to comply with tits obligations to release
the loan proceeds, thereby prevented it from paying the obligation to Prudential Bank.

The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties ad that the RFC
was guilty of breach thereof.

ISSUE
Whether or not there was a perfected contract between the parties.

HELD
The Court held in the affirmative. Article 1934 provides: An accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected
until delivery of the object of the contract.

There was undoubtedly offer and acceptance in the case. When an application for a loan of money was approved by
resolution of the respondent corporation and the responding mortgage was executed and registered, there arises a
perfected consensual contract.

2. Bonnevie v. CA
GR No. L-49101 October 24, 1983

Facts: Spouses Lozano mortgaged their property to secure the payment of a loan amounting to 75K with private respondent
Philippine Bank of Communication (PBCom). The deed of mortgage was executed on 12-6-66, but the loan proceeeds were
received only on 12-12-66. Two days after the execution of the deed of mortgage, the spouses sold the property to the petitioner
Bonnevie for and in consideration of 100k—25K of which payable to the spouses and 75K as payment to PBCom. Afterwhich,
Bonnevie defaulted payments to PBCom prompting the latter to auction the property after Bonnivie failed to settle despite
subsequent demands, in order to recover the amount loaned. The latter now assails the validity of the mortgage between Lozano
and Pbcom arguing that on the day the deed was executed there was yet no principal obligation to secure as the loan of
P75,000.00 was not received by the Lozano spouses, so that in the absence of a principal obligation, there is want of
consideration in the accessory contract, which consequently impairs its validity and fatally affects its very existence.

Issue: Was there a perfected contract of loan?

 Held: Yes. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and on
condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the respondent Bank the
consideration of the mortgage on the date it was executed is immaterial. A contract of loan being a consensual contract, the
herein contract of loan was perfected at the same time the contract of mortgage was executed. The promissory note executed on
December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of
its execution.

BPI Investment Corporation

-vs-

CA

GR No. 133632, 15 February 2002

377 SCRA 117

FACTS

Frank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), for the construction of his house. Said
house and lot were mortgaged to AIDC to secure the loan. Roa sold the properties to ALS and Litonjua, the latter paid in cash and
assumed the balance of Roa’s indebtedness wit AIDC. AIDC was not willing to extend the old interest to private respondents and
proposed a grant of new loan of P500,000 with higher interest to be applied to Roa’s debt, secured by the same property. Private
respondents executed a mortgage deed containing the stipulation. The loan contract was signed on 31 March 1981 and was perfected
on 13 September 1982, when the full loan was released to private respondents.

BPIIC, AIDC’s predecessor, released to private respondents P7,146.87, purporting to be what was left of their loan after full
payment of Roa’s loan. BPIIC filed for foreclosure proceedings on the ground that private respondents failed to pay the mortgage
indebtedness. Private respondents maintained that they should not be made to pay amortization before the actual release of the
P500,000 loan. The suit was dismissed and affirmed by the CA.

ISSUE

Whether or not a contract of loan is a consensual contract.

HELD

The Court held in the negative. A loan contract is not a consensual contract but a real contract. It is perfected only upon delivery
of the object of the contract. A contract o 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 is a proper manner with what is incumbent upon him
Naguiat vs CA and Queaño

GR No. 118375, 03 October 2003

412 SCRA 591

FACTS

Queaño applied with Naguiat a loan for P200,000, which the latter granted. Naguiat indorsed to Queaño Associated bank Check
No. 090990 for the amount of P95,000 and issued also her own Filmanbank Check to the order of Queaño for the amount of
P95,000. The proceeds of these checks were to constitute the loan granted by Naguiat to Queaño. To secure the loan, Queaño
executed a Deed of Real Estate Mortgage in favor of Naguiat, and surrendered the owner’s duplicates of titles of the mortgaged
properties. The deed was notarized and Queaño issued to Naguiat a promissory note for the amount of P200,000. Queaño also
issued a post-dated check amounting to P200,000 payable to the order of Naguait. The check was dishonoured for insufficiency of
funds. Demand was sent to Queaño. Shortly, Queaño, and one Ruby Reubenfeldt met with Naguiat. Queaño told Naguiat that she
did not receive the loan proceeds, adding that the checks were retained by Reubenfeldt, who purportedly was Naguiat’s agent.

Naguiat applied for extrajudicial foreclosure of the mortgage. RTC declared the Deed as null and void and ordered Naguiat to
return to Queaño the owner’s duplicates of titles of the mortgaged lots.

ISSUE

Whether or not the issuance of check resulted in the perfection of the loan contract.

HELD

The Court held in the negative. No evidence was submitted by Naguiat that the checks she issued or endorsed were actually
encashed or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. 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 been produced the effect of payment that the contract of loan may
have been perfected.

Article 1934 of the Civil Code provides: An accepted promise to deliver something by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itsel shall not be perfected until the delivery of the object of the
contract. A loan contract is a real contract, not consensual, and as such, is perfected only upon the delivery of the objects of the
contract.
Carolyn M. Garcia

-vs-

Rica Marie S. Thio

GR No. 154878, 16 March 2007

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 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 petitioner’s request that respondent use her own checks instead of Santiago’s.

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?

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 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 amount to Santiago.
 Petition granted; judgment and resolution reversed and set aside.

PANTALEON v AMERICAN EXPRESS

G.R. No. 174269, May 8 2009 [Credit Transaction]

FACTS:

After the Amsterdam incident that happened involving the delay of American Express Card to approve his credit card purchases
worth US$13,826.00 at the Coster store, Pantaleon commenced a complaint for moral and exemplary damages before the RTC
against American Express. He said that he and his family experienced inconvenience and humiliation due to the delays in credit
authorization. RTC rendered a decision in favor of Pantaleon. CA reversed the award of damages in favor of Pantaleon, holding
that AmEx had not breached its obligations to Pantaleon, as the purchase at Coster deviated from Pantaleon's established charge
purchase pattern.

ISSUE:

1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.

2. Whether or not AmEx is liable for damages.

RULING:

1. Yes. The popular notion that credit card purchases are approved “within seconds,” there really is no strict, legally
determinative point of demarcation on how long must it take for a credit card company to approve or disapprove a customer’s
purchase, much less one specifically contracted upon by the parties. One hour appears to be patently unreasonable length of time
to approve or disapprove a credit card purchase.

The culpable failure of AmEx herein is not the failure to timely approve petitioner’s purchase, but the more elemental failure to
timely act on the same, whether favorably or unfavorably. Even assuming that AmEx’s credit authorizers did not have sufficient
basis on hand to make a judgment, we see no reason why it could not have promptly informed Pantaleon the reason for the delay,
and duly advised him that resolving the same could take some time.

2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx incurred delay, but because the delay, for
which culpability lies under Article 1170, led to the particular injuries under Article 2217 of the Civil Code for which moral
damages are remunerative. The somewhat unusual attending circumstances to the purchase at Coster – that there was a deadline
for the completion of that purchase by petitioner before any delay would redound to the injury of his several traveling
companions – gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained
by Pantaleon, as concluded by the RTC.
COMMODATUM

Mina vs Pascual
Facts:

Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired during his lifetime, on March 12, 1874,
a lot. Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the said lot, embracing 14
meters of its frontage by 11 meters of its depth. Francisco Fontanilla, the former owner of the lot, being dead, the herein
plaintiffs, Alejandro Mina, et al., were recognized without discussion as his heirs. Andres Fontanilla, the former owner of the
warehouse, also having died, the children of Ruperta Pascual were recognized, though it is not said how, and consequently are
entitled to the said building, or rather, as Ruperta Pascual herself stated, to only six-sevenths of
one-half
of it, the other half belonging, as it appears, to the plaintiffs themselves, and the remaining one-seventh of the first one-half to
the children of one of the plaintiffs, Elena de Villanueva.
Ruperta Pascual, as the guardian of her minor children, the herein defendants, petitioned the Curt of First Instance of Ilocos Norte
for authorization to sell "the six-sevenths of the
one-half
of the warehouse, of 14 by 11 meters, together with
its
lot. The warehouse, together with the lot on which it stands, was sold to Cu Joco, the other defendant in this case
Issue: WoN
there exist a contract of commodatum
Held:
although both litigating parties may have agreed in their idea of the commodatum, on account of its not being, as indeed it is not,
a question of fact but of law Contracts are not to be interpreted in conformity with the name that the parties thereto agree to give
them, but must be construed, duly considering their constitutive elements, as they are defined and denominated by law. By the
contract of loan, one of the parties delivers to the other, either anything not perishable, in order that the latter may use it during
the
certain period
and return it to the former, in which case it is called
commodatum
It is, therefore, an essential feature of the commodatum that the use of the thing belonging to another shall BE for a
certain period.
Francisco Fontanilla did not fix any definite period or time during which Andres Fontanilla could have the use of the lot whereon
the latter was to erect a stone warehouse of considerable value, and so it is that for the past thirty years of the lot has been used by
both Andres and his successors in interest.

QUINTOS vs BECK

FACTS: Quintos and Beck entered into a contract of lease, whereby the latter occupied the former’s house. On Jan 14, 1936, the
contract of lease was novated, wherein the Quintos gratuitously granted to Beck the use of the furniture, subject to the condition
that Beck should return the furniture to Quintos upon demand. Thereafter, Quintos sold the property to Maria and Rosario Lopez.
Beck was notified of the conveyance and given him 60 days to vacate the premises. IN addition, Quintos required Beck to return
all the furniture. Beck refused to return 3 gas heaters and 4 electric lamps since he would use them until the lease was due to
expire. Quintos refused to get the furniture since Beck had declined to return all of them. Beck deposited all the furniture
belonging to Quintos to the sheriff.

ISSUE: WON Beck complied with his obligation of returning the furniture to Quintos when it deposited the furniture to the
sheriff.

RULING: The contract entered into between the parties is one of commadatum, because under it the plaintiff gratuitously granted
the use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract the defendant bound himself
to return the furniture to the plaintiff, upon the latter’s demand (clause 7 of the contract, Exhibit A; articles 1740, paragraph 1,
and 1741 of the Civil Code). The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's
demand, means that he should return all of them to the plaintiff at the latter's residence or house. The defendant did not comply
with this obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and
the four electric lamps. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's
demand, the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the defendant's
behest. The latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the
offer to return the furniture, because the
defendant wanted to retain the three gas heaters and the four electric lamps.

Catholic Vicar V. CA

G.R. No. L-4150 February 10, 1910

Facts: The Plaintiff Felix delos Santos filed this suit against Agustina Jarra. Jarra was the
administratix of the estate of Jimenea. Plaintiff alleged that he owned 10 1st class
carabaos which he lent to his father-in-law Jimenea to be used in the animal-power mill
without compensation. This was done on the condition of their return after the work at
the latter’s mill is terminated. When delos Santos demanded the return of the animals
Jimenea refused, hence this suit.
Issue: W/N the contracts is one of a commodatum
Ruling: YES. The carabaos were given on commodatum as these were delivered to be used
by defendant. Upon failure of defendant to return the cattle upon demand, he is under
the obligation to indemnify the plaintiff by paying him their value. Since the 6 carabaos
were not the property of the deceased or of any of his descendants, it is the duty of the
administratrix of the estate to either return them or indemnify the owner thereof of their
value.

Facts:
- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with the court
an application for the registration of title over lots 1, 2, 3 and 4 situated in Poblacion Central,
Benguet, said lots being used as sites of the Catholic Church, building, convents, high school
building, school gymnasium, dormitories, social hall and stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have ownership
over lots 1, 2 and 3. (2 separate civil cases)
- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3 and 4.
Upon appeal by the private respondents (heirs), the decision of the lower court was reversed. Title
for lots 2 and 3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the
Court of Appeals dismissing his application for registration of Lots 2 and 3.
- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the alleged
ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano; his
written demand to Vicar for the return of the land to them; and the reasonable rentals for the use
of the land at P10,000 per month. On the other hand, Vicar presented the Register of Deeds for the
Province of Benguet, Atty. Sison, who testified that the land in question is not covered by any title
in the name of Egmidio Octaviano or any of the heirs. Vicar dispensed with the testimony of Mons.
Brasseur when the heirs admitted that the witness if called to the witness stand, would testify that
Vicar has been in possession of Lot 3, for 75 years continuously and peacefully and has constructed
permanent structures thereon.

Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in
commodatum, a gratuitous loan for use.

Held: YES.

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 petitioner Vicar did not meet the requirement of 30 years
possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement 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 Juan
Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by
petitioner Vicar because there was absolutely no documentary evidence to support the same and
the alleged purchases were never mentioned in the application for registration.
4. Pajuyo v. CA
GR No. 146364 June 3, 2004

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 tenant’s withholding of the
property would then be unlawful.