People vs Concepcion [44 Phil 126]

Facts:
Venancio Concepcion, President of the Philippine National Bank and a member of the Board thereof,
authorized an extension of credit in favor of "Puno y Concepcion, S. en C. to the manager of the Aparri branch of
the Philippine National Bank. "Puno y Concepcion, S. en C." was a co-partnership where Concepcion is a partner.
Subsequently, Concepcion was charged and found guilty in the Court of First Instance of Cagayan with violation of
section 35 of Act No. 2747. Section 35 of Act No. 2747 provides that the National Bank shall not, directly or
indirectly, grant loans to any of the members of the board of directors of the bank nor to agents of the branch
banks. Counsel for the defense argue that the documents of record do not prove that authority to make a loan was
given, but only show the concession of a credit. They averred that the granting of a credit to the co-partnership
"Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, is not a "loan"
within the meaning of section 35 of Act No. 2747.
Issue:
Whether or not the granting of a credit of P300,000 to the co-partnership "Puno y Concepcion, S. en C."
by Venancio Concepcion, President of the Philippine National Bank, a "loan" within the meaning of section 35 of
Act No. 2747.
Held:
The Supreme Court ruled in the affirmative. The "credit" of an individual means his ability to borrow
money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. A "loan"
means the delivery by one party and the receipt by the other party of a given sum of money, upon an agreement,
express or implied, to repay the sum loaned, with or without interest. The concession of a "credit" necessarily
involves the granting of "loans" up to the limit of the amount fixed in the "credit,"
Garcie vs Thio
Facts:
Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garccia a
crossed check in the amount of $100,000.00 payable to the order of Marilou Santiago. Thereafter, Carolyn
received from Rica payments of the sum due. In June 1995, Rica received another check in the amount of
P500,000.00 from Carolyn and payable to the order of Marilou. Payments were made by Rica representing
interests. There was failure to pay the principal amount hence a complaint for sum of money with damages was
filed by Carolyn. Rica contended that she had no obligation to petitioner as it was Marilou who was indebted as
she was merely asked to deliver the checks to the latter and that the check payments she issued were merely
intended to accommodate Marilou. The RTC ruled in favor of Carolyn but the CA reversed on the ground that there
was no contract between Rica and Carolyn as there is nothing in the record that shows that respondent received
money from petitioner and that the checks received by respondent, being crossed, may not be encashed but only
deposited in the bank by the payee thereof, that is, by Marilou Santiago herself.
Issue:
Whether or not there was a contract of loan between petitioner and respondent
Held:
There Court ruled in the affirmative. A loan is a real contract, not consensual, and as such is perfected
only upon the delivery of the object of the contract. Art. 1934 of the Civil Code provides that 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 the delivery of the object of the contract. Upon delivery of the object

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. However, these checks were crossed and payable not to
the order of respondent but to the order of a certain Marilou Santiago. The Supreme Court agrees with petitioner
that delivery is the act by which the res or substance thereof is 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
amounts to Santiago. Hence, Rica is the debtor and not Marilou.
Saura Imports and Export vs DBP
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.

Producers Bank vs CA
Facts:
Sometime in 1979, private respondent Franklin Vives, upon request of his friend Angeles Sanchez and
relying on the assurance that he could withdraw his money within a months time, issued a check in the amount of
Two Hundred Thousand Pesos in favor of Sterela Marketing and Services owned by one Col. Arturo Doronilla.
Subsequently, private respondent and his wife found out that Sterela cant be found on the address previously
given to then, so they went to petitioner Producers Bank of the Philippines to verify if their money was still intact.
They were informed that part of the amount had been withdrawn by Doronilla and that the latter instructed the
bank to debit from the savings account the amount and deposit it in his current account Private respondent filed
an action for recovery of sum of money against Doronilla, Sanchez, Dumagpi and petitioner. The trial court ruled in
favour of herein private respondents. On appeal of the case, the appellate court affirmed the decision of the RTC.
Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum)
since all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla was

money, a consumable thing; and second, the transaction was onerous as Doronilla was obliged to pay interest.
Hence, petitioner argues that it cannot be held liable because it is not privy to the transaction between the latter
and Doronilla. Private respondent, on the other hand, argues that the transaction between him and Doronilla is
not a mutuum but an accommodation, since he did not actually part with the ownership of his P200,000.00 but
retained some degree of control over his money through his wife who was made a signatory to the savings account
and in whose possession the savings account passbook was given.
Issue:
Whether or not the contract between Sanchez and Doronilla and Vives is a contract of commodatum, thus
making petitioner Bank liable.
Held:
Supreme Court held that the contract is commodatum. Although in view of Article 1933 of the Civil Code,
the object in commodatum is non-consumable, but 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 commodatum and not a mutuum. The evidence shows that private respondent
merely "accommodated" Doronilla by lending his money without consideration, as a favor to his good friend
Sanchez. It was however clear to the parties to the transaction that the money would not be removed from
Sterelas savings account and would be returned to private respondent after thirty (30) days.
Republic vs Bagtas
Facts:
On May 8, 1948, Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for one year for
breeding purposes upon payment of a breeding fee of 10% of the book value of the bulls. After one year, the
contract was renewed but only for one bull. Bagtas offered to buy the bulls at book value less depreciation, but the
Bureau told him that he should either return the bulls or pay for their book value. Bagtas failed to pay the book
value, so the Republic filed an action with the CFI Manila to order the return of the bulls or the payment of the
book value. Felicidad Bagtas, the surviving spouse and administratrix of the decedents estate, said that the two
bulls have already been returned in 1952, and that the remaining one died of gunshot during a Huk raid. It was
established that the two bulls were returned, thus, there is no more obligation on the part of Bagtas. With regards
the bull not returned, Felicidad maintained that the obligation is extinguished since the contract is that of a
commodatum and that the loss through fortuitous event should be borne by the owner.
Issue:
Whether or not the contract entered into between Bagtas and the Republic is that of commodatum
making Bagtas not liable for the death of the bull.
Held:
A contract of commodatum is essentially gratuitous. If the breeding fee be considered compensation,
then the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to
the responsibilities of a possessor in bad faith because she had continued possession of the bull after the expiry of
the contract. Even if the contract be commodatum, still Bagtas is liable because article 1942 of the Civil Code
provides that a bailee in a contract of commodatum is liable for loss of the things even if it should be through a
fortuitous event if he keeps it longer than the period stipulated or if the thing loaned has been delivered with
appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous
event. The loan of one bull was renewed for another period of one year but Bagtas kept and used the bull more
than one year where during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the

deceased husband of Bagtas, the bulls had each an appraised book value. It was not stipulated that in case of loss
of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.
Quintos vs Beck
Facts:
Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos house. Quintos granted
Beck the use of the furniture found on the leased house, among these were three gas heaters and 4 electric lamps,
subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. Quintos
sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the conveyance. Beck
informed Quintos that the latter can get the furniture at the ground floor of the house, however, at a later date,
Beck told Quintos that he will return only the other furniture but not the gas heaters and the electric lamps as he is
to return them only after the expiration of the lease contract. When the lease contract expires, Beck deposited the
furniture to the sheriffs warehouse. Quintos refused to get the furniture in view of the fact that the defendant had
declined to make delivery of all of them. Consequently, Quintos brought an action to compel Beck to return her
certain furniture which she lent him for his use. The trial court ruled in favour of Beck holding that Quintos failed to
comply with her obligation to get the furniture when they were offered to her. On appeal of the case, the Court of
First Instance of Manila affirmed the lower courts decision. Hence, this petition.
Issue:
Whether or not the trial court erred in ruling that Quintos failed to comply with her obligation to get the
furniture when they were offered to her.
Held:
The contract entered into between the parties is one of commadatum. 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 latters demand. 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. The trial court, therefore, erred when it came to the legal conclusion that the
plaintiff failed to comply with her obligation to get the furniture when they were offered to her.
BPI Investment Corp vs CA
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 Roas 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 Roas 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, AIDCs predecessor, released to private
respondents P7,146.87, purporting to be what was left of their loan after full payment of Roas 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
Eastern Shipping Lines vs CA
Facts:
Two fiber drums were shipped owned by Eastern Shipping from Japan. The shipment as insured with a
marine policy. Upon arrival in Manila unto the custody of metro Port Service, which excepted to one drum, said to
be in bad order and which damage was unknown the Mercantile Insurance Company. Allied Brokerage Corporation
received the shipment from Metro, one drum opened and without seal. Allied delivered the shipment to the
consignees warehouse. The latter excepted to one drum which contained spillages while the rest of the contents
was adulterated/fake. As consequence of the loss, the insurance company paid the consignee, so that it became
subrogated to all the rights of action of consignee against the defendants Eastern Shipping, Metro Port and Allied
Brokerage. The insurance company filed before the trial court. The trial court ruled in favor of plaintiff an ordered
defendants to pay the former with present legal interest of 12% per annum from the date of the filing of the
complaint. On appeal by defendants, the appellate court denied the same and affirmed in toto the decision of the
trial court.
Issue:
(1) Whether the applicable rate of legal interest is 12% or 6%.

(2) Whether the payment of legal interest on the award for loss or damage is to be computed from the
time the complaint is filed from the date the decision appealed from is rendered.
Held:
(1)

(2)

The Court held that the legal interest is 6% computed from the decision of the court a quo.
When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damaes awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty.
From the date the judgment is made. Where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or EJ but
when such certainty cannot be so reasonably established at the time the demand is made, the
interest shll begin to run only from the date of judgment of the court is made.

Medel vs CA
Facts:
Medel obtained several loans from Gonzales totalling P500,000. These were evidenced by several
promissory notes agreeing to an interest rate of 5.5% per month with additional service charge of 2% per annum,
and penalty charge of 1% per month.. On maturity, Medel failed to pay their indebtedness. Hence, Gonzales filed
with the RTC of Bulacan a complaint for collection of the full amount of the loan. RTC declared that the promissory
notes were genuine, however, it ruled that although the Usury Law had been repealed, the interest charged by
Gonzales on the loans was unconscionable. Hence, RTC applied the legal rate of interest for loan of money, goods

or credit of 12% per annum. CA reversed the ruling of the RTC holding that the Usury Law had become legally
inexistent. Hence, this petition for review on certiorari.
Issue:
Whether or not the interest rate stipulated upon was valid.
Held:
NO. SC held that the stipulated rate of interest at 5.5% per month on the P500,000 loan was excessive.
However, it could not consider the rate usurious because CB Circular No. 905 has expressly removed the interest
ceilings prescribed by the Usury Law and that said law is now legally inexistent. CB Circular 905 did not repeal nor
in any way amend the Usury Law but simply suspended the latters effectivity. A CB Circular cannot repeal a law.
Only a law can repeal another law. By virtue of this circular, the Usury Law has been rendered ineffective. Interest
can no be charged as lender and borrower may agree upon. Nevertheless, SC held that the interest of 5.5% per
month, or 66% per annum, stipulated upon by the parties in the promissory note was unconscionable, and hence,
contrary to morals, if not against the law. The stipulation is void. The courts shall reduce equitably liquidated
damages, whether intended as an indemnity or a penalty if they are iniquitous or unconscionable. SC ordered that
the interest of 12% per annum and additional 1% a month penalty charge as liquidated damages reasonable.