Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare

By: 2 Manresa 2015-2016
November 18, 2015
Transcribed by: Glorybelle C. Resurreccion
We are done with commodatum. The other type of loan is
Simple Loan or Mutuum. Its a contract whereby one of the
parties delivers to another money or other consumable
thing with the understanding that the same amount, the
same kind and quality shall be paid.
We have:
Article 1953. A person who receives a loan of money or
any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of
the same kind and quality. (1753a)
Notice here, in Art. 1953, it is bound to pay not bound to
return. Why? Because what is involved here is return of the
equivalent only and not the identical thing. So, you do not
really return what you have borrowed. What you return is
something of the same amount, of the same kind and
quality that you have already borrowed. The return of the
equivalent only and not the identical thing because the
borrower acquires ownership thereof. Recall, this is one of
the main distinctions between Commodatum and Mutuum.
In Commodatum, there is no transfer of ownership unlike
that in Mutuum.

Yong Chan Kim vs. People

Petitioner Yong Chan Kim was employed as a
Researcher at SEAFDEC. Kim was issued Travel Order
No. 2222 which covered his travels to different places in
Luzon from 16 June to 21 July 1982. Under this travel
order, he received P6,438.00 as cash advance to defray
his travel expenses. Kim was issued another travel
order, T.O. 2268, requiring him to travel from the Head
Station at Tigbauan, Iloilo to Roxas City from 30 June to
4 July 1982, which he received a cash advance of
P495.00.
Later, petitioner presented both travel orders for
liquidation. When the Travel Expense Reports were
audited, it was discovered that there was an overlap of
four (4) days (30 June to 3 July 1982) in the two (2)
travel orders for which petitioner collected per diems
twice. The dispute arose when Kim allegedly failed to
return P1,230.00 out of the cash advance which he

received under T.O. 2222. For the alleged failure of

petitioner to return such amount, he was charged with
the crime of Estafa under Article 315, par. 1(b) of the
Revised Penal Code in which he was found guilty by the
trial court.
ISSUE: WON Kim was guilty of estafa; WON Kim was
under obligation to return the same money (cash
advance) which he had received
HELD:
Kim is NOT guilty of estafa and he has NO obligation to
return the money.
In order that a person can be convicted under Estafa, it
must be proven that he had the obligation to deliver or
return the same money, good or personal property that
he had received.

Liquidation simply means the settling of an

indebtedness. An employee, such as herein petitioner,
who liquidates a cash advance is in fact paying back his
debt in the form of a loan of money advanced to him by
his employer, as per diems and allowances.

Similarly, as stated in the assailed decision of the lower

court, "if the amount of the cash advance he received is
less than the amount he spent for actual travel, he has
the right to demand reimbursement from his employer
the amount he spent coming from his personal funds.

In other words, the money advanced by either party is

actually a loan to the other. Hence, petitioner was under
no legal obligation to return the same cash or
money, i.e., the bills or coins, which he received from the
private respondent. Ownership of the money was
transferred to the petitioner. It is a case of a simple loan
or mutuum.

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016

Since ownership was transferred to him, no fiduciary

relationship was created. Absent this fiduciary
relationship between petitioner and private respondent,
which is an essential element of the crime of estafa by
misappropriation or conversion, petitioner could not have
committed estafa.

Additionally, it has been the policy of private respondent

that all cash advances not liquidated are to be deducted
correspondingly from the salary of the employee
concerned.

Q1: In this case, what were those cash advances for?

A1: For his allowance for his travels.
Q2: For what period?
A2: First travel was from 16 June to 21 July 1982; and the
second from 30 June to 4 July 1982. So, there was an
overlap of four days (June 30 July 3).
Q3: So what was the effect of this overlap?
A3: A case of estafa was filed against Kim for failure to
return the allowance he collected twice for those four days.
Q4: Specifically, what is the estafa involved here?
A4: That which involves fiduciary relationship
Q5: How is it related to our topic mutuum?
A5: There was in fact no fiduciary relationship involved
here. The SC here defined what liquidation is. Liquidation
simply means the settling of indebtedness. An employee,
such as Kim, who liquidates a cash advance is in fact
paying back his debt in the form of a loan of money
advanced to him by his employer, as per diems and
allowances. Ownership of the money was transferred to
Kim.
Q6: So we have a mutuum here?
A6: Yes
Q7: What is the effect of this in relation to the criminal case
of Estafa filed against Kim? [What is the basis here in
holding that it was a simple loan and there could be no
liability of estafa?]

A7: The criminal case must be dismissed. Since ownership

of the money (cash advance) was transferred to petitioner,
no fiduciary relationship was created. Absent this fiduciary
relationship between petitioner and private respondent,
which is an essential element of the crime of estafa by
misappropriation or conversion, petitioner could not have
committed estafa.
Q8: Does Kim have no liability at all?
A8: He has no criminal liability but he is liable to liquidate
the cash advance. And his failure to do so would result to
salary deduction against him. So, his liability is only civil.
Atty. Lozare: For a person to be convicted under Article
315, par. 1(b) of the Revised Penal Code, he must have
the obligation to return or deliver the same money, goods
or personal property that he had received. In this case, he
was asked to liquidate which simply means settling of an
indebtedness. The employee, such as herein Kim, who
liquidates a cash advance is in fact paying back his debt in
the form of a loan of money advanced to him by his
employer. Here, what was the effect? Pag sobra yung
binigay sa kanya, he has to liquidate and pay back the
company. It could not be considered as an estafa because
when what he has received is less than what he should
have used as expenses for his travels, then he has the
right to demand from the employer. So here, if the amount
of the cash advance received is less than the amount he
spent for actual travel, he has the right to demand
reimbursement from his employer. Hence, petitioner was
under no legal obligation to return the same cash or money
which he received from his employer. Then, what we have
here is a simple loan. There is a transfer of ownership to
the petitioner. Because of that, there is no fiduciary
relationship created which would hold Kim criminally liable
for estafa. Absent this fiduciary relationship, which is an
essential element of the crime of estafa by
misappropriation or conversion, petitioner could not have
committed estafa.
Here, as a case of mutuum, the borrower can dispose of
the thing borrowed and his act cannot be considered as a
misappropriation.
Another thing you should not is the distinction between a
rent and a loan. A loan signifies delivery of some other
consumable thing to another with the promise to pay and
equivalent amount of the same kind and quality. Rent on
the other hand, signifies delivery to another some nonconsumable thing in order that the latter may use it during
a certain period and return it to the former for a
consideration. Parties in the loan obligor and obligee
while in rent landlord and tenant. In loan, creditor

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016
receives payment, rent owner receives compensation or
price either in money or provisions.
Look again in Art. 1953 on the term fungible thing. These
are things dealt by number and measurement such as rice,
grain, oil, gasoline, so that any given unit or portion is
treated as any other unit or portion. These are those
belonging to the same genus or several species of the
same kind.
Recall the distinction last time as to the subject matter. We
talk about commodatum, it generally involves nonconsumable thing. As an exemption, consumable but with
purpose of exhibition. On the other hand, we have mutuum
money or other consumable thing. Is there a difference
between consumable and fungible as used in Art. 1953?
None. When it comes to mutuum, those two are used
interchangeably. In the concept that the thing cannot be
used without being consumed under the old Civil Code is
precisely that of the consumable things that are also
considered in the contract of loan.

their loan after full payment of Roas loan.

Later, BPIIC instituted foreclosure proceedings against

private respondents on the ground that they failed to pay
the mortgage indebtedness from May 1, 1981 to June
30, 1984.

Private respondents maintained that they should not be

made to pay amortization before the actual release of
the P500,000 loan in August and September 1982.

ISSUE: When should the payment of the monthly

amortization commence?

BPI vs. CA
Sometime in 1980, Frank Roa sold a house and lot to
private respondents ALS and Antonio Litonjua
for P850,000. They paid P350k in cash and assumed
the P500k balance of Roas indebtedness with petitioner
BPI Investment Corp. (BPIIC). Said loan was mortgaged
with the said house and lot. BPIIC, however, was not
willing to extend the old interest rate (from Roas loan) to
private respondents and proposed to grant them a new
loan of P500,000 to be applied to Roas debt and
secured by the same property with new interest rate.

Consequently, private respondents executed a mortgage

deed containing the above stipulations with the provision
that payment of the monthly amortization shall
commence on May 1, 1981.

On September 13, 1982, BPIIC released to private

respondents P7,146.87, purporting to be what was left of

HELD: A month after the release of the loan on Sept. 13,

1982. In the present case, the loan contract between BPI
and ALS and Litonjua was perfected only on September
13, 1982, the date of the second release of the loan.

Ratio: 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 contract of loan involves a reciprocal obligation,

wherein the obligation or promise of each party is the
consideration for that of the other. As averred by private
respondents, the promise of BPIIC to extend and deliver
the loan is upon the consideration that ALS and Litonjua
shall pay the monthly amortization commencing on May
1, 1981, one month after the supposed release of the
loan.

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016

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 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,
default sets in.

Consequently, petitioner could only demand for the

payment of the monthly amortization after September 13,
1982 for it was only then when it complied with its
obligation under the loan contract.

Therefore, in computing the amount due as of the date

when BPIIC extrajudicially caused the foreclosure of the
mortgage, the starting date is October 13, 1982 and
not May 1, 1981.

Q1: How is a contract of Mutuum perfected?

A1: By delivery
Q2: For example, there is a loan of money. If I issue a
check in your name and I delivered it to you, is the simple
loan or mutuum already perfected?
A2: Not yet. It would be perfected upon encashment.
Q3: When was the contract deemed perfected in this case?
A3: It was deemed perfected on Sept. 13, 1982
Q4: Why was there a need to determine the perfection of
the contract of loan?
A4: Because it would determine whether or not BPI may
validly foreclose the properties; and if there would already
be an obligation on the part of Litonjua to pay for the
monthly amortization; and when the payment of such
should start. In this case, the monthly amortization should
start not on May 1, 1981 [as they have stipulated in the
contract] but on Sept. 13, 1982.

Atty. Lozare: Here, it emphasizes simple loan is perfected

upon the delivery of the object of the contract and therefore
it is a real contract. The contract here was perfected only
on Sept. 13, 1982 even if the loan contract was signed on
March 31, 1981. It was only on Sept. 13 when the full loan
was released to private respondents. Take note, the court
here emphasized that in a loan agreement, you have
reciprocal obligations from each party where the obligation
or promise of each party is the consideration of the other
party. The consideration for BPI in entering into the loan
contract is the promise of private respondents to pay the
monthly amortization. For the private respondents, it is the
promise of BPI to deliver the money.
In reciprocal obligations, neither of the parties incurs delay
if the other has not complied or is not ready to comply in
the proper manner with what is incumbent upon him.
Therefore, there was no delay when the private
respondents did not pay the monthly amortization on May
1, 1981 as it was only on Sept. 13, 1982 when petitioner
has fully complied with its obligation under the loan
contract.
Again, in mutuum, a loan contract is only perfected
upon delivery and that it involves reciprocal
obligations.

Sps. Tan vs. Villapaz

Villapaz issued a Philippine Bank of Communications
(PBCom) crossed check in the amount of P250,000.00,
payable to the order of petitioner Antonio Tan.
Villapaz filed a complaint for collection of sum of money
against Sps. Tan alleging that the check he issued was for
a loan to be settled in 6 months but the spouses failed to
settle the same.
Sps. Tan denied. They contended that since the alleged
loan was one with a period payable in six months and
where the amount exceeds P 500, it should have been
expressly stipulated upon in writing (under Art. 1358) by
the parties but it was not. Hence, the essential requisite for
the validity and enforceability of a loan is wanting; and the
check is inadmissible to prove the existence of a loan
Petitioners furthermore maintain that they were financially
stable, hence, there was no reason for them to borrow
money.

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016

ISSUE: WON there was a contract of loan

(2), wala namang nakalagay dyan with regard to a contract

of loan to be in writing to be enforceable.

HELD: Yes.
Sps. Tans reliance on Art. 1358 of the Civil Code is
misplaced for the requirement that contracts where the
amount involved exceeds P500.00 must appear in writing
is only for convenience. At all events, a check, the entries
of which are no doubt in writing, could prove a loan
transaction.

Shifting gears
Destruction of the thing loaned does not extinguish
ones obligation to pay. In mutuum, what is your
obligation? Your obligation is to pay the money. If the
money was lost or you became insolvent or you were
robbed, will that extinguish the obligation? No. Genus
nunquam perit. Money is a generic thing. Therefore, even if
the money that you are supposed to pay the loan for was
destroyed, obligation is not extinguished in mutuum.

No written proof of the grant of the loan was executed was

credibly explained by respondent when he declared that
petitioners son being his godson, he, out of trust and
respect, believed that the crossed check sufficed to prove
their transaction.

Article 1954. A contract whereby one person transfers the

ownership of non-fungible things to another with the
obligation on the part of the latter to give things of the same
kind, quantity, and quality shall be considered a barter. (n)

That petitioner Antonio Tan had, an outstanding balance of

more than P950,000.00 in his account at PBCom did not
rule out petitioners securing a loan. It is pure naivete to
believe that if a businessman has such an outstanding
balance in his bank account, he would have no need to
borrow a lesser amount.

Q1: How about the allegation here of Antonio Tan that

there could be no reason that he would borrow money
because he also has money in the bank?
A1: The same reason is untenable because anybody can
loan money. Corporations enter into contracts of loan even
if they have assets.
Atty. Lozare: What you have here is a contract of loan and
it is not required that there may be a separate contract, for
example a promissory note to show that the issuance of
the check was really considered as a simple loan or
mutuum.
One of the functions of a negotiable instrument is that the
instrument is an evidence of indebtedness. So, there is no
need for a separate promissory note to show that the
issuance of a check is because of a simple loan or
mutuum.
A check, the entries of which are no doubt in writing could
prove a loan transaction. Furthermore, it is not required
that there must be a separate contract for a contract of loan
to be valid and enforceable. Art. 1358 is only for
convenience. And if you look at Statute of Frauds, Art. 1403

In here, there is a distinction between mutuum and barter.

As defined in Art. 1638 on barter:
Article 1638. By the contract of barter or exchange one of
the parties binds himself to give one thing in consideration
of the other's promise to give another thing. (1538a)
Commodatum
Subject matter is
ordinarily nonconsumable
Bailee is bound
to return the
identical
thing
borrowed
Essentially
gratuitous

Mutuum
Subject matter is
money or other
consumable thing
Same
kind,
quality
and
quantity
only
equivalent
thereof
May
be
gratuitious

Barter
Non-fungible or
non-consumable
thing
The equivalent
thing is given in
return for what
has
been
received
Always onerous

Article 1955. The obligation of a person who borrows

money shall be governed by the provisions of articles 1249
and 1250 of this Code.
If what was loaned is a fungible thing other than money, the
debtor owes another thing of the same kind, quantity and
quality, even if it should change in value. In case it is
impossible to deliver the same kind, its value at the time of
the perfection of the loan shall be paid. (1754a)

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016
If the subject of mutuum is money, apply the principles in
Art. 1249 and Art. 1250.

Article 1249. The payment of debts in money shall be

made in the currency stipulated, and if it is not possible to
deliver such currency, then in the currency which is legal
tender in the Philippines.
The delivery of promissory notes payable to order, or bills
of exchange or other mercantile documents shall produce
the effect of payment only when they have been cashed, or
when through the fault of the creditor they have been
impaired.
In the meantime, the action derived from the original
obligation shall be held in the abeyance. (1170)
Article 1250. In case an extraordinary inflation or deflation
of the currency stipulated should supervene, the value of
the currency at the time of the establishment of the
obligation shall be the basis of payment, unless there is an
agreement to the contrary. (n)
If the subject matter is a consumable thing, the obligation is
to deliver the same kind, quality and quantity (KQQ) even if
it should change in value. If it is impossible, then the value
of the thing at the time the loan was perfected. Again, this
applies only when it is IMPOSSIBLE to deliver the same
KQQ.
Now we look at:
Article 1956. No interest shall be due unless it has been
expressly stipulated in writing. (1755a)
A bulk of our discussion here in mutuum revolves around
interest. If you look at Art. 1956, you could say that we
have therein the requisites for recovery of interest. It must
be expressly stipulated and second, it must be in writing.
Art. 1956 is under this chapter on mutuum. In other words,
the requirement for interest to be expressly stipulated in
writing is only applicable for simple loan. For other
instances, there may be liability for interests, but it is not
required to be expressly stipulated in writing if its not a
loan.
Also, another requisite that is mentioned there is that the
interest must be lawful [*personal note: I dont know where
is there that this requisite has been mentioned. Lo

siento!]. But considering that the usury law has already

been suspended, then you do not simply follow it anymore.
What is applied nowadays is that the interest rate must be
conscionable. Otherwise, if it is unconscionable and
iniquitous, the courts may reduce it. Also recall in ObliCon,
contracting parties may stipulate freely on any adjustment
on the interest rate as one of their stipulations on the loan
or forbearance of money. But the law does not authorize
increase of interest rate by one party without the other
partys consent. Any change must be mutually agreed by
the parties as one of the principles emphasized in ObliCon.
Now, we have the term forbearance.
PNB vs. Ibarrola
As payments for the purchase of medicines,
the Province of Isabela issued several checks drawn
against its accounts with petitioner Philippine National
Bank (PNB) in favor of the seller, private respondent
Ibarrola.
Ibarrola failed to receive the full payment, thus she filed an
action for a sum of money and damages against
the Province of Isabela and PNB among others.
RTC ruled in her favor ordering that she be paid with
interest thereon at the legal rate from the date of the filing
of the complaint until the entire amount is fully paid. CA
and SC affirmed. However, the three courts did not specify
whether the legal rate of interest referred to in the
judgment is 6% or 12%.
ISSUE: Whether in an action for damages, the legal rate of
interest is 6% as provided by Article 2209 of the New Civil
Code or 12% as provided by CB Circular 416 series of
1974
HELD:
The case at bench does not involve a loan. When an
obligation arises from a contract of purchase and sale and
not from a contract of loan or mutuum, the applicable rate
is 6% per annum as provided in Article 2209 of the NCC
and not the rate of 12% per annum as provided in (CB) Cir.
No. 416.

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016
The rate of 12% interest referred to in Cir. 416 applies only
to:
Loan or forbearance of money, or to cases where money is
transferred from one person to another and the obligation
to return the same or a portion thereof is adjudged. Any
other monetary judgment which does not involve or which
has nothing to do with loans or forbearance of any money,
goods or credit does not fall within its coverage for such
imposition is not within the ambit of the authority granted to
the Central Bank.
Therefore, the proper rate of interest referred to in the
judgment under execution is only 6%. However, once the
judgment becomes final and executory, the "interim period
from the finality of judgment awarding a monetary claim
and until payment thereof, is deemed to be equivalent to a
forbearance of credit. Thus, the rate of 12% p.a. should be
imposed, and to be computed from the time the judgment
became final and executory until fully satisfied.
Q1: How is the term forbearance defined in this case?
A1: In this case, forbearance of credit may mean to be or is
equivalent to the interim period from the finality of judgment
awarding a monetary claim until payment thereof
[*Forbearance is a refraining from the enforcement of
something (as a debt, right, or obligation) that is
due, as defined by Merriam-Webster]
Q2: In this case, do we have a loan or forbearance of
money?
A2: There was none. It was merely a contract of sale
Q3: So what is the interest rate that should be imposed?
A3: The proper rate of interest is only 6%. However, once
the judgment becomes final and executory, in the interim
period from the finality of judgment awarding a monetary
claim and until payment thereof, the rate of 12% p.a.
should be imposed.

What do you have here? The liability arose from a contract

of sale. It did not involve a loan, forbearance of money or a
judgment involving a loan or forbearance of money. That is
why the applicable rate is 6% per annum. Again, the
obligation here did not constitute a breach of a loan.
However, the interim period from the finality of judgment
awarding a monetary claim and until payment thereof, is
deemed to be equivalent to a forbearance of credit wherein
the 12% interest rate should be imposed. So here, the rate
shall be 6% per annum from the time the complaint was
filed until full payment before finality of judgment. If the
amount adjudged remains unpaid, interest rate shall be
12% per annum computed from the time the judgment
became final and executory until fully satisfied.

Estores vs. Sps. Supangan

Petitioner Hermojina Estores and respondent-spouses
Arturo and Laura Supangan entered into a Conditional
Deed of Sale whereby petitioner offered to sell a parcel of
land.
After almost seven years from the time of the execution of
the contract and notwithstanding payment of P3.5 million
on the part of spouses, petitioner still failed to comply with
her obligation as expressly provided in the contract.
Spouses demanded the return of the amount of P3.5
million but Estores failed to do so, thus the complaint for
collection of sum of money.
Estores averred that she is willing to return the principal
amount of P3.5 million but without any interest since the
Conditional Deed of Sale provided only for the return of the
downpayment in case of breach, hence she cannot be held
liable to pay legal interest as well.
ISSUE: WON Sps. Supangan are entitled of interest

Q4: The 12% interest rate will commence at what period?

A4: From the time the judgment became final and
executory until fully satisfied.

HELD: Yes.
Interest may be imposed even in the absence of stipulation
in the contract.

Atty. Lozare: So in this case, SC mentioned that the 12%

interest rate referred to in BSP Cir. No. 416 applies only to
a loan or forbearance of money. In cases where money is
transferred from one person to another and the obligation
to return the same or the portion thereof is adjudged.

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 fulfil the

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016
obligation under the Conditional Deed of Sale, despite
demand. She has in fact admitted that the conditions were
not fulfilled and that she was willing to return the full
amount of P3.5 million but has not actually done so.
Petitioner enjoyed the use of the money from the time it
was given to her until this moment.
The interest at the rate of 12% is applicable in the instant
case. The contract involved in this case is admittedly not a
loan but a Conditional Deed of Sale. However, the contract
provides that the seller must return the payment made by
the buyer if the conditions are not fulfilled, which happened
in this case. Petitioners unwarranted withholding of the
money which rightfully pertains to respondent-spouses
amounts to forbearance of money which can be considered
as an involuntary loan. Thus, the applicable rate of interest
is 12% per annum.
Q1: How is forbearance of money defined here?
*A1: Forbearance of money, goods or credits refers 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 fulfilment of
certain conditions.
Q2: Is interest imposable here?
A2: Yes, even if the contract in this case does not stipulate
any interest to be imposed.
Q3: In this case, there was no loan. What is then the basis
of the claim of interest? What article [in NCC] did the SC
cite in its decision? Did it cite Art. 1956?
A3: No, it cited: Article 2210. Interest may, in the
discretion of the court, be allowed upon damages
awarded for breach of contract.
[Therefore, the claim of interest is based on Art. 2210 on
damages awarded for breach of contract since in this case,
there was a breach.]
Q4: In this case, you have a conditional deed of sale. So
what is the rate of interest that should be imposed?
A4: The 12% rate per annum
Q5: Why not the 6% rate? Isnt it that this is also a deed of
sale and as decided in Ibarrola case, SC ruled that the rate
should be 6%?
A5: Because the rate of 12% per annum is applied when
the contract is of loan or of forbearance of money. In this
case, there was a forbearance of money.

Q6: Why was it considered as a forbearance of money

even if it is based on a contract of sale?
A6: Because of the lapse of time (7 years), it would fall
under forbearance of money. During those times, the seller
already made use of the buyers money.
Atty. Lozare: Here, it is proper to impose interest
notwithstanding the absence of stipulation in the contract.
In this case, there is no loan or mutuum, so there is no
requirement that it should be expressly stipulated in writing.
The basis of the interest is Art. 2210.
As a general rule, interest shall be computed in accordance
with the stipulation of the parties. Absent such stipulation,
rate of interest shall be 12% per annum when the
obligation arises out of a loan or forbearance of money,
goods, or credits. In other cases, it shall be 6%.
While the SC recognizes the previous definition of
forbearance as "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"; in this case and other subsequent cases, the
definition of forbearance of money, goods, or credit was
expounded. It should now refer to arrangements other than
loan agreements. Why? The phrase "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.
Hence, definition of forbearance of money is [refer to
*A1]
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 [which
is interest].
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.
Petitioners unwarranted withholding of the money which
rightfully pertains to respondent-spouses amounts to
forbearance of money which can be considered as an

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Credit transactions - TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty. lozare
By: 2 Manresa 2015-2016
involuntary loan. Thus, the applicable rate of interest is
12% per annum.
*With regard to these cases we have already discussed,
notice the importance of the distinction when to apply 6%
or 12%. However, effective July 1, 2013, the legal interest

rate is already 6%. In other words, there is no need to

distinguish anymore. But we still need to discuss this
because for obligations with any interest that is due prior
July 1, 2013, we still have to make the distinction whether
to apply 6% or 12% on the interest rate.

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