CREDIT TRANSACTION LOAN
CELESTINA T. NAGUIAT vs. COURT OF APPEALS and AURORA
QUEAÑO
Facts:
 Queaño applied with Naguiat for a loan in the
amount of 200K, which Naguiat granted.
 Naguiat indorsed to Queaño - Associated Bank Check
No. 090990 (dated 11 August 1980) for the amount
95K, which was earlier issued to Naguiat by the
Corporate Resources Financing Corporation. She also
issued her own Filmanbank Check No. 065314, to the
order of Queaño, also dated 11 August 1980 and for
the amount of 95K. 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 dated 11 August 1980 in favor of
Naguiat, and surrendered to the latter the owner’s
duplicates of the titles covering the mortgaged
properties.
 The mortgage deed was notarized, and Queaño
issued to Naguiat a promissory note for the amount
of 200K, with interest at 12% per annum, payable on
11 September 1980.5
 Queaño also issued a Security Bank and Trust
Company check, postdated 11 September 1980, for
the amount of 200K and payable to the order of
Naguiat.
 Upon presentment on its maturity date, the Security
Bank check was dishonored for insufficiency of
funds.
 Queaño requested Security Bank to stop payment of
her postdated check, but the bank rejected the
request pursuant to its policy not to honor such
requests if the check is drawn against insufficient
funds.6
 On 16 October 1980, Queaño received a letter from
Naguiat’s lawyer, demanding settlement of the loan.
Shortly thereafter, Queaño and one Ruby
Ruebenfeldt met with Naguiat. At the meeting,
Queaño told Naguiat that she did not receive the
proceeds of the loan, adding that the checks were
retained by Ruebenfeldt, who purportedly was
Naguiat’s agent.7
 Naguiat applied for the extrajudicial foreclosure of
the mortgage
 Queaño filed the case seeking the annulment of the
mortgage deed. The trial court eventually stopped
the auction sale.9
 RTC rendered judgment, declaring the Deed of Real
Estate Mortgage null and void, and ordering Naguiat
to return to Queaño the owner’s duplicates of her
titles to the mortgaged lots.
 CA affirmed RTC.
Issue: WON issuance of the check resulted in the perfection
of a contract of loan
Held: No. 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. 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.20 It is only after
the checks have produced the effect of payment that the
contract of loan may be deemed perfected. Art. 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 itself 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 object of the
contract.21 In this case, the objects of the contract are the
loan proceeds which Queaño would enjoy only upon the
encashment of the checks signed or indorsed by Naguiat. If
indeed the checks were encashed or deposited, Naguiat
would have certainly presented the corresponding
documentary evidence, such as the returned checks and the
pertinent bank records. Since Naguiat presented no such
proof, it follows that the checks were not encashed or
credited to Queaño’s account.1awphi1.nét
WHEREFORE, the petition is denied and the assailed decision
is affirmed. Costs against petitioner.
CAROLYN M. GARCIA vs. RICA MARIE S. THIO
Facts:
 Thio received from Garcia a crossed
check[4] dated 02/24/95 in the amount of
US$100,000 payable to the order of a certain
Marilou Santiago.[5]
 Thereafter, Garcia received from Thio every month
the amount of US$3,000[6] and P76,500[7] on July
26,[8] August 26, September 26 and October 26,
1995.
 Garcia received from petitioner another crossed
check in the amount of 500K also payable to the
order of Marilou Santiago.[10]
 Garcia received from respondent the amount
of P20,000 every month on August 5, September 5,
October 5 and November 5, 1995.[11]
 According to Garcia, Thio failed to pay the principal
amounts of the loans (US$100,000 and P500,000)
when they fell due.
 Thus, Garcia filed a complaint for sum of money and
damages
 Petitioner alleged that on 02/24/95 respondent
borrowed from her the amount of US$100,000 with
interest thereon at the rate of 3% per month, which
loan would mature on October 26, 1995.[13]
 The amount of this loan was covered by the first
check. On June 29, 1995, respondent again
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CREDIT TRANSACTION LOAN
borrowed the amount of P500,000 at an agreed
monthly interest of 4%, the maturity date of which
was on November 5, 1995.[14] The amount of this
loan was covered by the second check. For both
loans, no promissory note was executed since
petitioner and respondent were close friends at the
time.[15] Respondent paid the stipulated monthly
interest for both loans but on their maturity dates,
she failed to pay the principal amounts despite
repeated demands.[16]
 Thio denied that she contracted the two loans with
petitioner and countered that it was Marilou
Santiago to whom petitioner lent the money. She
claimed she was merely asked by petitioner to give
the crossed checks to Santiago.[17] 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.[18]
 RTC ruled in favor of petitioner.[19] It found that
respondent borrowed from petitioner the amounts
of US$100,000 with monthly interest of 3%
and P500,000 at a monthly interest of 4%
 CA reversed the decision of the RTC and ruled that
there was no contract of loan between the parties:
[petitioner] failed to substantiate her claim that
[respondent] indeed borrowed money from
her. There is nothing in the record that shows that
[respondent] received money from [petitioner]. 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.
It must be noted that crossing a
check has the following effects: (a) the
check may not be encashed but only
deposited in the bank; (b) the check may be
negotiated only onceto one who has an
account with the bank; (c) and the act of
crossing the check serves as warning to the
holder that the check has been issued for a
definite purpose so that he must inquire if
he has received the check pursuant to that
purpose, otherwise, he is not a holder in
due course.
Issue: WON there is a contract of loan bet. Thio and Garcia
Held: Yes. A loan is a real contract, not consensual, and as
such is perfected only upon the delivery of the object of the
contract.[25] This is evident in Art. 1934 of the Civil Code which
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 the delivery of the
object of the contract. (Emphasis supplied)
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.[26]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.
Issue: who borrowed money from petitioner respondent
or Santiago?
Held: We agree with petitioner. Petitioner insists that it was
upon respondents instruction that both checks were made
payable to Santiago.[27] She maintains that it was also upon
respondents instruction that both checks were delivered to
her (respondent) so that she could, in turn, deliver the same
to Santiago.[28] Furthermore, she argues that once respondent
received the checks, the latter had possession and control of
them such that she had the choice to either forward them to
Santiago (who was already her debtor), to retain them or to
return them to petitioner.[29]
Delivery is the act by which the res or substance thereof is
placed within the actual or constructive possession or control
of another.[30] 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.
Several factors support this conclusion:
(summarized:)
(1) Respondent admitted that petitioner did not
personally know Santiago and already had transactions
with Santiago at that time.[32]
(2) Leticia Ruiz, a friend of both petitioner and
respondent testified that respondents plan was for petitioner
to lend her money at a monthly interest rate of 3%, after
which respondent would lend the same amount
to Santiago at a higher rate of 5% and realize a profit of
2%.[33] This explained why respondent instructed petitioner to
make the checks payable to Santiago. Respondent has not
shown any reason why Ruiz testimony should not be
believed.
(3) Respondent admitted issuing her own checks in
the amount of P76,000 each (peso equivalent of US$3,000)
for eight months to cover the monthly interest. For
the P500,000 loan, she also issued her own checks in the
amount of P20,000 each for four months.[34] According to
respondent, she merely accommodated petitioners request
for her to issue her own checks to cover the interest
payments since petitioner was not personally acquainted
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CREDIT TRANSACTION LOAN
with Santiago.[35] She claimed, however, that Santiago would
replace the checks with cash.[36] Her explanation is simply
incredible. It is difficult to believe that respondent would put
herself in a position where she would be compelled to pay
interest, from her own funds, for loans she allegedly did not
contract.
(4) in the petition for insolvency sworn to and filed
by Santiago, it was respondent, not petitioner, who was listed
as one of her (Santiagos) creditors.[38]
(5) respondent inexplicably never presented
Santiago as a witness to corroborate her story.[39] The
presumption is that evidence willfully suppressed would be
adverse if produced.[40] Respondent was not able to overturn
this presumption.
We hold that the CA committed reversible error
when it ruled that respondent did not borrow the amounts of
US$100,000 and P500,000 from petitioner. We instead agree
with the ruling of the RTC making respondent liable for the
principal amounts of the loans.
Thio is not liable for the 3% and 4% monthly interest
for the US$100,000 and P500,000 loans respectively. There
was no written proof of the interest payable except for
the verbal agreement that the loans would earn 3% and 4%
interest per month. Article 1956 of the Civil Code provides
that [n]o interest shall be due unless it has been expressly
stipulated in writing.
Be that as it may, while there can be no stipulated
interest, there can be legal interest pursuant to Article 2209
of the Civil Code. It is well-settled that:
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.[41]
PRODUCERS BANK OF THE PHILIPPINES (now FIRST
INTERNATIONAL BANK), petitioner, vs. HON. COURT
OF APPEALS AND FRANKLIN VIVES, respondents.
This is a petition for review on certiorari of the
Decision[1] of the Court of Appeals dated June 25, 1991 in CA-
G.R. CV No. 11791 and of its Resolution[2] dated May 5, 1994,
denying the motion for reconsideration of said decision filed
by petitioner Producers Bank of the Philippines.
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. Private respondent asked Sanchez to bring Doronilla to
their house so that they could discuss Sanchezs request.[3]
Facts:
 Vives (creditor) was asked by Sanchez to help
Doronilla (debtor) in their business (Strela)
Thereafter, Vives issued a check in the amount of
200k in favor of Sterela.
 Vives instructed his wife, Inocencia to accompany
Doronilla and Sanchez in opening a savings account
in the name of Sterela in the a branch of Producers
Bank of the Philippines.
 Only Sanchez, Mrs. Vives and Dumagpi went to the
bank to deposit the check. They had with them an
authorization letter from Doronilla authorizing
Sanchez and her companions, in coordination with
Mr. Rufo Atienza, to open an account for Sterela
Marketing Services.
 In opening the account, the authorized signatories
were Inocencia Vives and/or Angeles Sanchez. A
passbook for Savings Account No. 10-1567 was
thereafter issued to Mrs. Vives.[4]
 Vives learned that Sterela was no longer holding
office in the address previously given to him. He and
his wife went to the Bank to verify if their money
was still intact. The bank manager referred them to
Mr. Rufo Atienza, the assistant manager, who
informed them that part of the money in Savings
Account No. 10-1567 had been withdrawn by
Doronilla, and that only 90k remained therein.
 Mrs. Vives could not withdraw said remaining
amount because it had to answer for some
postdated checks issued by Doronilla.
 According to Atienza, after Mrs. Vives and Sanchez
opened Savings Account No. 10-1567, Doronilla
opened Current Account No. 10-0320 for Sterela and
authorized the Bank to debit Savings Account No. 10-
1567 for the amounts necessary to cover
overdrawings in Current Account No. 10-0320. In
opening said current account, Sterela, through
Doronilla, obtained a loan of P175,000.00 from the
Bank.
 To cover payment thereof, Doronilla issued three
postdated checks, all of which were
dishonored. Atienza also said that Doronilla could
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CREDIT TRANSACTION LOAN
assign or withdraw the money in Savings Account
No. 10-1567 because he was the sole proprietor of
Sterela.[5]
 Vives tried to contact Doronilla through Sanchez.
 On June 29, 1979, he received a letter from
Doronilla, assuring him that his money was intact
and would be returned to him.
 On August 13, 1979, Doronilla issued a postdated
check for Two Hundred Twelve Thousand Pesos
(P212,000.00) in favor of private respondent.
 However, upon presentment by Vives t to the
drawee bank, the check was dishonored. Doronilla
requested Vives to present the same check on
September 15, 1979 but when the latter presented
the check, it was again dishonored.[6]
 Vives 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.[7]
 Vives instituted an action for recovery of sum of
money in RTC against Doronilla, Sanchez, Dumagpi
and petitioner. He also filed criminal actions against
Doronilla, Sanchez and Dumagpi in the RTC.
 Sanchez died while the case was pending before the
trial court.
 RTC- judgment is hereby rendered sentencing
defendants Arturo J. Doronila, Estrella Dumagpi and
Producers Bank of the Philippines to pay plaintiff
Franklin Vives jointly and severally
 CA affirmed in toto the decision of the RTC.
o Petitioner contends that the transaction between
private respondent and Doronilla is a simple loan
(mutuum) since all the elements of a mutuum are
present: 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, as evidenced by the
check issued by Doronilla in the amount of 212K,
or 12K more than what private respondent
deposited in Sterelas bank account.[15] Moreover, the
fact that private respondent sued his good friend
Sanchez for his failure to recover his money from
Doronilla shows that the transaction was not merely
gratuitous but had a business angle to it. Hence,
petitioner argues that it cannot be held liable for the
return of private respondents P200,000.00 because
it is not privy to the transaction between the latter
and Doronilla.[16]
o Producers Bank also asserts that the CA erred in
affirming the trial courts decision since the findings
of fact therein were not accord with the evidence
presented by petitioner during trial to prove that the
transaction between private respondent and
Doronilla was a mutuum, and that it committed no
wrong in allowing Doronilla to withdraw from
Sterelas savings account.[19]
o Private respondent, on the other hand, argues that
the transaction between him and Doronilla is not
a mutuum but an accommodation,[21] since he did
not actually part with the ownership of
his P200,000.00 and in fact asked his wife to deposit
said amount in the account of Sterela so that a
certification can be issued to the effect that Sterela
had sufficient funds for purposes of its incorporation
but at the same time, he 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.[22]
Issue: WON the transaction was a commodatum or mutuum
Held: Commodatum. No error was committed by the Court of
Appeals when it ruled that the transaction between private
respondent and Doronilla was a commodatum and not
a mutuum. 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.
4
CREDIT TRANSACTION LOAN
The rule is that the intention of the parties thereto shall
be accorded primordial consideration in determining the
actual character of a contract.[27] In case of doubt, the
contemporaneous and subsequent acts of the parties shall be
considered in such determination.[28]