CREDIT TRANSACTION – ATTY.

GAVINO
MALABANAN, TRIZIA
2018

REPUBLIC OF THE PHILIPPINES v JOSE V. BAGTAS

G.R. No. L-17474
October 25, 1962

FACTS:

Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry
three bulls: a Red Sindhi, a Bhagnari and a Sahiniwal, for a period of one year for breeding purposes
subject to a government charge of breeding fee of 10% of the book value of the bulls. Upon the
expiration of the contract, the borrower asked for a renewal for another period of one year. However,
the Secretary of Agriculture and Natural Resources approved a renewal thereof of only one bull for
another year from and requested the return of the other two. Jose V. Bagtas wrote to the Director of
Animal Industry that he would pay the value of the three bulls. He reiterated his desire to buy them at
a value with a deduction of yearly depreciation to be approved by the Auditor General. The Director of
Animal Industry advised him that the book value of the three bulls could not be reduced and that they
either be returned or their book value paid. Bagtas failed to pay the book value of the three bulls or to
return them.

So in the Court of First Instance of Manila the Republic of the Philippines commenced an action against
him praying that he be ordered to return the three bulls loaned to him or to pay their book value and
the unpaid breeding fee, both with interests, and costs; and that other just and equitable relief.

Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the bad peace and
order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending appeal he had
taken to the Secretary of Agriculture and Natural Resources and the President of the Philippines from
the refusal by the Director of Animal Industry to deduct from the book value of the bulls corresponding
yearly depreciation of 8% from the date of acquisition, to which depreciation the Auditor General did
not object, he could not return the animals nor pay their value and prayed for the dismissal of the
complaint.

RTC: pay the total value of the three bulls plus the breeding fees with interest on both sums of (at) the
legal rate from the filing of this complaint and costs.

The plaintiff moved ex parte for a writ of execution which the court. On granted an ex-parte motion filed
by the plaintiff for the appointment of a special sheriff to serve the writ outside Manila. Of this order
appointing a special sheriff, Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who
died and as administratrix of his estate, was notified. She file a motion alleging tha the two bull Sindhi
and Bhagnari were returned to the Bureau Animal of Industry and that the third bull, the Sahiniwal, died
from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal, and praying that the writ of
execution be quashed and that a writ of preliminary injunction be issued.

It is true that Jose M. Bagtas, Jr., son of the appellan, returned the Sindhi and Bhagnari bulls to the
Superintendent of the NVB Station, Bureau of Animal Industry, as evidenced by a memorandum receipt
signed by the latter.

ISSUE:

Whether or not they are liable to the loss of the loaned alleging that such loss was due to force majeure
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

HELD:

A contract of commodatum is essentially gratuitous. If the breeding fee be considered a 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. And even if the contract be commodatum, still the appellant 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:

(2) If he keeps it longer than the period stipulated

(3) 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 original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed
for another period of one year to end on 8 May 1950. But the appellant kept and used the bull until
November 1953 when during a Huk raid it was killed by stray bullets. Furthermore, when lent and
delivered to the deceased husband of the appellant 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.

As the appellant already had returned the two bulls to the appellee, the estate of the late defendant is
only liable for the sum of P859.63, the value of the bull which has not been returned to the appellee,
because it was killed while in the custody of the administratrix of his estate.
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

COLITO T. PAJUYO v COURT OF APPEALS and EDDIE GUEVARRA

G.R. No. 146364
June 3, 2004

FACTS:

Pajuyo paid ₱400 to a certain Pedro Perez for the rights over a 250-square meter lot in Barrio Payatas,
Quezon City. Pajuyo then constructed a house made of light materials on the lot. Pajuyo and his family
lived in the house from to 1985.

Pajuyo and private respondent Guevarra executed a Kasunduan or agreement. Pajuyo, as owner of the
house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness
and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on
Pajuyo’s demand.

Then Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate the house.
Guevarra refused. Pajuyo filed an ejectment case against Guevarra with the MTC.

In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where
the house stands because the lot is within the 150 hectares set aside by Proclamation No. 137 for
socialized housing. Guevarra pointed out that from 1985 to 1994, Pajuyo did not show up or
communicate with him. Guevarra insisted that neither he nor Pajuyo has valid title to the lot.

MTC: the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo
is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Thus, Guevarra’s
refusal to vacate the house on Pajuyo’s demand made Guevarra’s continued possession of the house
illegal.

RTC: upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo
and Guevarra. The terms of the Kasunduan bound Guevarra to return possession of the house on
demand. The RTC rejected Guevarra’s claim of a better right under Proclamation No. 137, the Revised
National Government Center Housing Project Code of Policies and other pertinent laws. In an ejectment
suit, the RTC has no power to decide Guevarra’s rights under these laws. The RTC declared that in an
ejectment case, the only issue for resolution is material or physical possession, not ownership.

CA: declared that Pajuyo and Guevarra are squatters. Pajuyo and Guevarra illegally occupied the
contested lot which the government owned.

Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no right or title
over the lot because it is public land. The assignment of rights between Perez and Pajuyo, and
the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo and Guevarra are
in pari delicto or in equal fault. The court will leave them where they are.

ISSUE:

Whether or not the contract entered by parties is a commodatum or contract of lease

CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

HELD:

No.

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.64 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.65 If the bailor should have urgent need of the thing, he may demand its return for temporary
use.66 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. 67 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. 69 The
tenant’s withholding of the property would then be unlawful. This is settled jurisprudence.

Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as
bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The
obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts
of commission, administration and commodatum. These contracts certainly involve the obligation to
deliver or return the thing received.

Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter.
Squatters, Guevarra pointed out, cannot enter into a contract involving the land they illegally occupy.
Guevarra insists that the contract is void.

Guevarra should know that there must be honor even between squatters. Guevarra freely entered into
the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it.
The Kasunduan binds Guevarra.

The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right
to physical possession of the contested property. The Kasunduan is the undeniable evidence of
Guevarra’s recognition of Pajuyo’s better right of physical possession. Guevarra is clearly a possessor in
bad faith. The absence of a contract would not yield a different result, as there would still be an implied
promise to vacate.
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

MARGARITA QUINTOS and ANGEL A. ANSALDO v BECK

G.R. No. L-46240
November 3, 1939

FACTS:

The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar
street, No. 1175. Upon the novation of the contract of lease between the plaintiff and the defendant,
the former gratuitously granted to the latter the use of the furniture described in the third paragraph of
the stipulation of facts, subject to the condition that the defendant would return them to the plaintiff
upon the latter's demand. The plaintiff sold the property to Maria Lopez and Rosario Lopez and these
three notified the defendant of the conveyance, giving him sixty days to vacate the premises under one
of the clauses of the contract of lease. There after the plaintiff required the defendant to return all the
furniture transferred to him for them in the house where they were found.

The defendant, through another person, wrote to the plaintiff reiterating that she may call for the
furniture in the ground floor of the house. On the 7th of the same month, the defendant wrote another
letter to the plaintiff informing her that he could not give up the three gas heaters and the four electric
lamps because he would use them until the 15th of the same month when the lease in due to expire.
The plaintiff refused to get the furniture in view of the fact that the defendant had declined to make
delivery of all of them. Before vacating the house, the defendant deposited with the Sheriff all the
furniture belonging to the plaintiff and they are now on deposit in the warehouse situated at No. 1521,
Rizal Avenue, in the custody of the said sheriff.

ISSUE:

Whether or not the contract entered into by the parties is commodatum

HELD:

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
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 eletric 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.

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
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

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.

As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment thereof
by the defendant in case of his inability to return some of the furniture because under paragraph 6 of
the stipulation of facts, the defendant has neither agreed to nor admitted the correctness of the said
value. Should the defendant fail to deliver some of the furniture, the value thereof should be latter
determined by the trial Court through evidence which the parties may desire to present.

The costs in both instances should be borne by the defendant because the plaintiff is the prevailing party
(section 487 of the Code of Civil Procedure). The defendant was the one who breached the contract
of commodatum, and without any reason he refused to return and deliver all the furniture upon the
plaintiff's demand. In these circumstances, it is just and equitable that he pay the legal expenses and
other judicial costs which the plaintiff would not have otherwise defrayed.

The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff,
in the residence to return and deliver to the plaintiff, in the residence or house of the latter, all the
furniture described.
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

DEVELOPMENT BANK OF THE PHILIPPINES v GUARIÑA AGRICULTURAL AND REALTY

DEVELOPMENT CORPORATION
G.R. No. 160758
January 15, 2014

FACTS:

Guariña Corporation applied for a loan from DBP to finance the development of its resort complex
situated in Iloilo. The loan was approved, Guariña Corporation executed a promissory not. Guariña
Corporation executed a real estate mortgage over several real properties in favor of DBP as security for
the repayment of the loan. Guariña Corporation executed a chattel mortgage over the personal
properties existing at the resort complex and those yet to be acquired out of the proceeds of the loan,
also to secure the performance of the obligation.Prior to the release of the loan, DBP required Guariña
Corporation to put up a cash equity for the construction of the buildings and other improvements on the
resort complex.

The loan was released in several instalments, and Guariña Corporation used the proceeds to defray the
cost of additional improvements in the resort complex.

Guariña Corporation demanded the release of the balance of the loan, but DBP refused. Instead, DBP
directly paid some suppliers of Guariña Corporation over the latter's objection. DBP found upon
inspection of the resort project, its developments and improvements that Guariña Corporation had not
completed the construction works. DBP thus demanded that Guariña Corporation expedite the
completion of the project, and warned that it would initiate foreclosure proceedings should Guariña
Corporation not do so.

Unsatisfied with the non-action and objection of Guariña Corporation, DBP initiated extrajudicial
foreclosure proceedings. A notice of foreclosure sale was sent to Guariña Corporation. The notice was
eventually published, leading the clients and patrons of Guariña Corporation to think that its business
operation had slowed down, and that its resort had already closed.

Guariña Corporation sued DBP in the RTC to demand specific performance of the latter's obligations
under the loan agreement, and to stop the foreclosure of the mortgages. However, DBP moved for the
dismissal of the complaint, stating that the mortgaged properties had already been sold to satisfy the
obligation of Guariña Corporation at a public auction. Due to this, Guariña Corporation amended the
complaint to seek the nullification of the foreclosure proceedings and the cancellation of the certificate
of sale.

ISSUE:

Whether or not Guarina was in delay in performing its obligation making DBP’s action to foreclose the
mortgage proper.

HELD:

No.

The Court held that the foreclosure of a mortgage prior to the mortgagor’s default on the principal
obligation is premature, and should be undone for being void and ineffectual. The mortgagee who has
been meanwhile given possession of the mortgaged property by virtue of a writ of possession issued to
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018
it as the purchaser at the foreclosure sale may be required to restore the possession of the property to
the mortgagor and to pay reasonable rent for the use of the property during the intervening period.

The agreement between DBP and Guariña Corporation was a loan. Under the law, a loan
requires the delivery of money or any other consumable object by one party to another who acquires
ownership thereof, on the condition that the same amount or quality shall be paid. Loan is a reciprocal
obligation, as it arises from the same cause where one party is the creditor, and the other the debtor.
The obligation of one party in a reciprocal obligation is dependent upon the obligation of the other, and
the performance should ideally be simultaneous. This means that in a loan, the creditor should release
the full loan amount and the debtor repays it when it becomes due and demandable.

The loan agreement between the parties is a reciprocal obligation. Appellant in the instant
case bound itself to grant appellee the loan amount of P3,387,000.00 condition on appellee’s payment
of the amount when it falls due. The appellant did not release the total amount of the approved loan.
Appellant therefore could not have made a demand for payment of the loan since it had yet to fulfil its
own obligation. Moreover, the fact that appellee was not yet in default rendered the foreclosure
proceedings premature and improper.

By its failure to release the proceeds of the loan in their entirety, DBP had no right yet to
exact on Guariña Corporation the latter’s compliance with its own obligation under the loan. Indeed, if
a party in a reciprocal contract like a loan does not perform its obligation, the other party cannot be
obliged to perform what is expected of it while the other’s obligation remains unfulfilled. In other words,
the latter party does not incur delay.
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

PEOPLE OF THE PHILIPPINES v TERESITA PUIG and ROMEO PORRAS

G.R. Nos. 173654-765
August 28, 2008

FACTS:

Iloilo Provincial Prosecutor’s Office filed 112 cases of Qualified Theft against respondents Teresita Puig
and Romeo Porras who were the Cashier and Bookkeeper, respectively, of private complainant Rural
Bank of Pototan, Inc.

It is alleged that Puig and Porras were conspiring, confederating, and helping one another, with
grave abuse of confidence, being the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc.,
Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank and with intent
of gain, did then and there willfully, unlawfully and feloniously take, steal and carry away the sum of
FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency, to the damage and prejudice of the
said bank in the aforesaid amount.

After perusing the Informations in these cases, the trial court did not find the existence of probable
cause that would have necessitated the issuance of a warrant of arrest.

The RTC dismissed the case for insufficiency of the information ruling that the real parties in interest
are the depositors-clients and not the bank because the bank does not acquire ownership of the money
deposited in it. It added that allowing the 112 cases for Qualified Theft filed against the respondents to
push through would be violative of the right of the respondents under Section 14(2), Article III of the
1987 Constitution which states that in all criminal prosecutions, the accused shall enjoy the right to be
informed of the nature and cause of the accusation against him. Subsequently, a motion for
reconsideration was filed but was denied by the same. Hence, this petition.

Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and current deposits
of money in banks and similar institutions shall be governed by the provisions concerning simple loans."
Corollary thereto, Article 1953 of the same Code provides that "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." Thus, it posits that the depositors who place their money with
the bank are considered creditors of the bank. The bank acquires ownership of the money deposited by
its clients, making the money taken by respondents as belonging to the bank.

ISSUE:

WON the 112 information for qualified theft sufficiently allege the element of taking without the consent
of the owner, and the qualifying circumstance of grave abuse of discretion

HELD:

Yes.

The Court has held that the Information merely alleged the positions of the respondents; that the crime
was committed with grave abuse of confidence, with intent to gain and without the knowledge and
consent of the Bank, without necessarily stating the phrase being assiduously insisted upon by
respondents, “of a relation by reason of dependence, guardianship or vigilance, between the
respondents and the offended party that has created a high degree of confidence between them, which
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018
respondents abused,” and without employing the word “owner” in lieu of the “Bank” were considered to
have satisfied the test of sufficiency of allegations. Allegations in the Information that such employees
acted with grave abuse of confidence, to the damage and prejudice of the Bank, without particularly
referring to it as owner of the money deposits, as sufficient to make out a case of Qualified Theft.

Depositors who place their money with the bank are considered creditors of the bank. Tellers, Cashiers,
Bookkeepers and other employees of a Bank who come into possession of the monies deposited therein
enjoy the confidence reposed in them by their employer. Banks, on the other hand, where monies are
deposited, are considered the owners thereof.

The relationship between banks and depositors has been held to be that of creditor and debtor, by virtue
of Art. 1980, CC, which provides that “fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loans,” and corollarily thereto, Art.
1953, CC provides that “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.”
CREDIT TRANSACTION – ATTY. GAVINO
MALABANAN, TRIZIA
2018

BPI FAMILY BANK VS. FRANCO

G.R. No. 123498
November 23, 2007

FACTS:

On August 15, 1989, Tevesteco opened a savings and current account with BPI-FB. Soon
thereafter, FMIC also opened a time deposit account with the same branch of BPI-FB

On August 31, 1989, Franco opened three accounts, namely, a current, savings, and time deposit, with
BPI-FB. The total amount of P2,000,000.00 used to open these accounts is traceable to a check issued
by Tevesteco allegedly in consideration of Franco’s introduction of Eladio Teves, to Jaime Sebastian,
who was then BPI-FB SFDM’s Branch Manager. In turn, the funding for the P2,000,000.00 check was
part of the P80,000,000.00 debited by BPI-FB from FMIC’s time deposit account and credited to
Tevesteco’s current account pursuant to an Authority to Debit purportedly signed by FMIC’s officers.

It appears, however, that the signatures of FMIC’s officers on the Authority to Debit were forged.
BPI-FB, debited Franco’s savings and current accounts for the amounts remaining therein. In the
meantime, two checks drawn by Franco against his BPI-FB current account were dishonored and
stamped with a notation “account under garnishment.” Apparently, Franco’s current account was
garnished by virtue of an Order of

Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB
prior to Franco’s receipt of notice that his accounts were under garnishment. It was only on May 15,
1990, that Franco was impleaded in the Makati case. Immediately, upon receipt of such copy, Franco
filed a Motion to Discharge Attachment. On May 17, 1990, Franco pre-terminated his time deposit
account.

BPI-FB deducted the amount of P63,189.00 from the remaining balance of the time deposit
account representing advance interest paid to him. Consequently, in light of BPI-FB’s refusal to heed
Franco’s demands to unfreeze his accounts and release his deposits therein, Franco filed on June 4,
1990 with the Manila RTC the subject suit.

ISSUE:

Whether or not Respondent had better right to the deposits in the subject accounts which are part of
the proceeds of a forged Authority to Debit

HELD:

NO.

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal
consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. BPI-FB conveniently
forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan or
mutuum. As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately
acquired ownership of Franco’s deposits, but such ownership is coupled with a corresponding obligation
to pay him an equal amount on demand. Although BPI-FB owns the deposits in Franco’s accounts, it
cannot prevent him from demanding payment of BPI-FB’s obligation by drawing checks against his
current account, or asking for the release of the funds in his savings account. Thus, when Franco issued
checks drawn against his current account, he had every right as creditor to expect that those checks
would be honored by BPI-FB as debtor.

More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its
mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was allegedly
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MALABANAN, TRIZIA
2018

involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it pleases
on deposits which it supposes are derived from shady transactions, would open the floodgates of public
distrust in the banking industry.

Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the
signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in the
process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon to
Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their respective
accounts without the appropriate court writ or a favorable final judgment.