213273460 credit-transaction-cases

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G.R. No. L-19190 November 29, 1922
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,
vs. VENANCIO CONCEPCION, defendant-appellant.
By telegrams and a letter of confirmation to the manager of the Aparri branch of the Philippine National Bank,
Venancio Concepcion, President of the Philippine National Bank, between April 10, 1919, and May 7, 1919,
authorized an extension of credit in favor of "Puno y Concepcion, S. en C." in the amount of P300,000. This
special authorization was essential in view of the memorandum order of President Concepcion dated May 17,
1918, limiting the discretional power of the local manager at Aparri, Cagayan, to grant loans and discount
negotiable documents to P5,000, which, in certain cases, could be increased to P10,000. Pursuant to this
authorization, credit aggregating P300,000, was granted the firm of "Puno y Concepcion, S. en C.," the only
security required consisting of six demand notes. The notes, together with the interest, were taken up and paid
by July 17, 1919.
"Puno y Concepcion, S. en C." was a copartnership capitalized at P100,000. Anacleto Concepcion contributed
P5,000; Clara Vda. de Concepcion, P5,000; Miguel S. Concepcion, P20,000; Clemente Puno, P20,000; and
Rosario San Agustin, "casada con Gral. Venancio Concepcion," P50,000. Member Miguel S. Concepcion was
the administrator of the company.
On the facts recounted, Venancio Concepcion, as President of the Philippine National Bank and as member of
the board of directors of this bank, was charged in the Court of First Instance of Cagayan with a violation of
section 35 of Act No. 2747. He was found guilty by the Honorable Enrique V. Filamor, Judge of First Instance,
and was sentenced to imprisonment for one year and six months, to pay a fine of P3,000, with subsidiary
imprisonment in case of insolvency, and the costs.
Section 35 of Act No. 2747, effective on February 20, 1918, just mentioned, to which reference must hereafter
repeatedly be made, reads as follows: "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." Section 49 of the same
Act provides: "Any person who shall violate any of the provisions of this Act shall be punished by a fine not to
exceed ten thousand pesos, or by imprisonment not to exceed five years, or by both such fine and
imprisonment." These two sections were in effect in 1919 when the alleged unlawful acts took place, but were
repealed by Act No. 2938, approved on January 30, 1921.
Counsel for the defense assign ten errors as having been committed by the trial court. These errors they have
argued adroitly and exhaustively in their printed brief, and again in oral argument. Attorney-General Villa-Real,
in an exceptionally accurate and comprehensive brief, answers the proposition of appellant one by one.
The question presented are reduced to their simplest elements in the opinion which follows:
I. Was the granting of a credit of P300,000 to the copartnership "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?
1

Counsel 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. In this statement of fact, counsel is correct, for the exhibits in question speak
of a "credito" (credit) and not of a " prestamo" (loan).
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. (Donnell vs. Jones [1848], 13 Ala., 490; Bouvier's Law
Dictionary.) 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.
(Payne vs. Gardiner [1864], 29 N. Y., 146, 167.) The concession of a "credit" necessarily involves the granting
of "loans" up to the limit of the amount fixed in the "credit,"
II. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C.," by Venancio
Concepcion, President of the Philippine National Bank, a "loan" or a "discount"?
Counsel argue that while section 35 of Act No. 2747 prohibits the granting of a "loan," it does not prohibit what
is commonly known as a "discount."
In a letter dated August 7, 1916, H. Parker Willis, then President of the National Bank, inquired of the Insular
Auditor whether section 37 of Act No. 2612 was intended to apply to discounts as well as to loans. The ruling
of the Acting Insular Auditor, dated August 11, 1916, was to the effect that said section referred to loans alone,
and placed no restriction upon discount transactions. It becomes material, therefore, to discover the distinction
between a "loan" and a "discount," and to ascertain if the instant transaction comes under the first or the latter
denomination.
Discounts are favored by bankers because of their liquid nature, growing, as they do, out of an actual, live,
transaction. But in its last analysis, to discount a paper is only a mode of loaning money, with, however, these
distinctions: (1) In a discount, interest is deducted in advance, while in a loan, interest is taken at the expiration
of a credit; (2) a discount is always on double-name paper; a loan is generally on single-name paper.
Conceding, without deciding, that, as ruled by the Insular Auditor, the law covers loans and not discounts, yet
the conclusion is inevitable that the demand notes signed by the firm "Puno y Concepcion, S. en C." were not
discount paper but were mere evidences of indebtedness, because (1) interest was not deducted from the face
of the notes, but was paid when the notes fell due; and (2) they were single-name and not double-name paper.
The facts of the instant case having relation to this phase of the argument are not essentially different from the
facts in the Binalbagan Estate case. Just as there it was declared that the operations constituted a loan and
not a discount, so should we here lay down the same ruling.
III. Was the granting of a credit of P300,000 to the copartnership, "Puno y Concepcion, S. en C." by Venancio
Concepcion, President of the Philippine National Bank, an "indirect loan" within the meaning of section 35 of
Act No. 2747?
Counsel argue that a loan to the partnership "Puno y Concepcion, S. en C." was not an "indirect loan." In this
connection, it should be recalled that the wife of the defendant held one-half of the capital of this partnership.
In the interpretation and construction of statutes, the primary rule is to ascertain and give effect to the intention
of the Legislature. In this instance, the purpose of the Legislature is plainly to erect a wall of safety against
temptation for a director of the bank. The prohibition against indirect loans is a recognition of the familiar
maxim that no man may serve two masters — that where personal interest clashes with fidelity to duty the
latter almost always suffers. If, therefore, it is shown that the husband is financially interested in the success or
failure of his wife's business venture, a loan to partnership of which the wife of a director is a member, falls
within the prohibition.
Various provisions of the Civil serve to establish the familiar relationship called a conjugal partnership. (Articles
1315, 1393, 1401, 1407, 1408, and 1412 can be specially noted.) A loan, therefore, to a partnership of which
the wife of a director of a bank is a member, is an indirect loan to such director.
That it was the intention of the Legislature to prohibit exactly such an occurrence is shown by the
acknowledged fact that in this instance the defendant was tempted to mingle his personal and family affairs
with his official duties, and to permit the loan P300,000 to a partnership of no established reputation and
without asking for collateral security.
In the case of Lester and Wife vs. Howard Bank ([1870], 33 Md., 558; 3 Am. Rep., 211), the Supreme Court of
Maryland said:
2

What then was the purpose of the law when it declared that no director or officer should borrow of the bank,
and "if any director," etc., "shall be convicted," etc., "of directly or indirectly violating this section he shall be
punished by fine and imprisonment?" We say to protect the stockholders, depositors and creditors of the
bank, against the temptation to which the directors and officers might be exposed, and the power which as
such they must necessarily possess in the control and management of the bank, and the legislature
unwilling to rely upon the implied understanding that in assuming this relation they would not acquire any
interest hostile or adverse to the most exact and faithful discharge of duty, declared in express terms that
they should not borrow, etc., of the bank.
In the case of People vs. Knapp ([1912], 206 N. Y., 373), relied upon in the Binalbagan Estate decision, it was
said:
We are of opinion the statute forbade the loan to his copartnership firm as well as to himself directly. The
loan was made indirectly to him through his firm.
IV. Could Venancio Concepcion, President of the Philippine National Bank, be convicted of a violation of
section 35 of Act No. 2747 in relation with section 49 of the same Act, when these portions of Act No. 2747
were repealed by Act No. 2938, prior to the finding of the information and the rendition of the judgment?
As noted along toward the beginning of this opinion, section 49 of Act No. 2747, in relation to section 35 of the
same Act, provides a punishment for any person who shall violate any of the provisions of the Act. It is
contended, however, by the appellant, that the repeal of these sections of Act No. 2747 by Act No. 2938 has
served to take away the basis for criminal prosecution.
This same question has been previously submitted and has received an answer adverse to such contention in
the cases of United Stated vs. Cuna ([1908], 12 Phil., 241); People vs. Concepcion ([1922], 43 Phil., 653); and
Ong Chang Wing and Kwong Fok vs. United States ([1910], 218 U. S., 272; 40 Phil., 1046). In other words, it
has been the holding, and it must again be the holding, that where an Act of the Legislature which penalizes an
offense, such repeals a former Act which penalized the same offense, such repeal does not have the effect of
thereafter depriving the courts of jurisdiction to try, convict, and sentenced offenders charged with violations of
the old law.
V. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." by Venancio
Concepcion, President of the Philippine National Bank, in violation of section 35 of Act No. 2747, penalized by
this law?
Counsel argue that since the prohibition contained in section 35 of Act No. 2747 is on the bank, and since
section 49 of said Act provides a punishment not on the bank when it violates any provisions of the law, but on
a person violating any provisions of the same, and imposing imprisonment as a part of the penalty, the
prohibition contained in said section 35 is without penal sanction.lawph!l.net
The answer is that when the corporation itself is forbidden to do an act, the prohibition extends to the board of
directors, and to each director separately and individually. (People vs. Concepcion, supra.)
VI. Does the alleged good faith of Venancio Concepcion, President of the Philippine National Bank, in
extending the credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." constitute a legal
defense?
Counsel argue that if defendant committed the acts of which he was convicted, it was because he was misled
by rulings coming from the Insular Auditor. It is furthermore stated that since the loans made to the
copartnership "Puno y Concepcion, S. en C." have been paid, no loss has been suffered by the Philippine
National Bank.
Neither argument, even if conceded to be true, is conclusive. Under the statute which the defendant has
violated, criminal intent is not necessarily material. The doing of the inhibited act, inhibited on account of public
policy and public interest, constitutes the crime. And, in this instance, as previously demonstrated, the acts of
the President of the Philippine National Bank do not fall within the purview of the rulings of the Insular Auditor,
even conceding that such rulings have controlling effect.
Morse, in his work, Banks and Banking, section 125, says:
It is fraud for directors to secure by means of their trust, and advantage not common to the other
stockholders. The law will not allow private profit from a trust, and will not listen to any proof of honest intent.
JUDGMENT
3

On a review of the evidence of record, with reference to the decision of the trial court, and the errors assigned
by the appellant, and with reference to previous decisions of this court on the same subject, we are irresistibly
led to the conclusion that no reversible error was committed in the trial of this case, and that the defendant has
been proved guilty beyond a reasonable doubt of the crime charged in the information. The penalty imposed
by the trial judge falls within the limits of the punitive provisions of the law.
Judgment is affirmed, with the costs of this instance against the appellant. So ordered.
Araullo, C. J., Johnson, Street, Avanceña, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.
G.R. No. 154878 March 16, 2007
CAROLYN M. GARCIA, Petitioner,
vs. RICA MARIE S. THIO, Respondent.
Assailed in this petition for review on certiorari1 are the June 19, 2002 decision2 and August 20, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 56577 which set aside the February 28, 1997
decision of the Regional Trial Court (RTC) of Makati City, Branch 58.
Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garcia a
crossed check4 dated February 24, 1995 in the amount of US$100,000 payable to the order of a certain Marilou
Santiago.5 Thereafter, petitioner received from respondent every month (specifically, on March 24, April 26,
June 26 and July 26, all in 1995) the amount of US$3,0006 and P76,5007 on July 26,8 August 26, September 26
and October 26, 1995.
In June 1995, respondent received from petitioner another crossed check9 dated June 29, 1995 in the amount of
P500,000, also payable to the order of Marilou Santiago.10 Consequently, petitioner received from respondent
the amount of P20,000 every month on August 5, September 5, October 5 and November 5, 1995.11
According to petitioner, respondent failed to pay the principal amounts of the loans (US$100,000 and P500,000)
when they fell due. Thus, on February 22, 1996, petitioner filed a complaint for sum of money and damages in
the RTC of Makati City, Branch 58 against respondent, seeking to collect the sums of US$100,000, with
interest thereon at 3% a month from October 26, 1995 and P500,000, with interest thereon at 4% a month from
November 5, 1995, plus attorney’s fees and actual damages.12
Petitioner alleged that on February 24, 1995, 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 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.161awphi1.nét
Respondent 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
petitioner’s request that respondent use her own checks instead of Santiago’s.18
In a decision dated February 28, 1997, the 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%:20
WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby
rendered in favor of [petitioner], sentencing [respondent] to pay the former the amount of:
1. [US$100,000.00] or its peso equivalent with interest thereon at 3% per month from October 26, 1995 until
fully paid;
2. P500,000.00 with interest thereon at 4% per month from November 5, 1995 until fully paid.
3. P100,000.00 as and for attorney’s fees; and
4

4. P50,000.00 as and for actual damages.
For lack of merit, [respondent’s] counterclaim is perforce dismissed.
With costs against [respondent].
IT IS SO ORDERED.21
On appeal, the CA reversed the decision of the RTC and ruled that there was no contract of loan between the
parties:
A perusal of the record of the case shows that [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]. What is evident is the fact that [respondent] received a MetroBank [crossed] check dated
February 24, 1995 in the sum of US$100,000.00, payable to the order of Marilou Santiago and a CityTrust
[crossed] check dated June 29, 1995 in the amount of P500,000.00, again payable to the order of Marilou
Santiago, both of which were issued by [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 once—to 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.
Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and delivery to the payee in
contemplation of law since the latter is not the person who could take the checks as a holder, i.e., as a payee or
indorsee thereof, with intent to transfer title thereto. Neither could she be deemed as an agent of Marilou
Santiago with respect to the checks because she was merely facilitating the transactions between the former and
[petitioner].
With the foregoing circumstances, it may be fairly inferred that there were really no contracts of loan that
existed between the parties. x x x (emphasis supplied)22
Hence this petition.23
As a rule, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules
of Court. However, this case falls under one of the exceptions, i.e., when the factual findings of the CA (which
held that there were no contracts of loan between petitioner and respondent) and the RTC (which held that there
were contracts of loan) are contradictory.24
The petition is impressed with merit.
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. Thus the main question to be
answered is: who borrowed money from petitioner — respondent or Santiago?
Petitioner insists that it was upon respondent’s instruction that both checks were made payable to Santiago.27
She maintains that it was also upon respondent’s 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
5

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
We agree with petitioner. 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.
First, respondent admitted that petitioner did not personally know Santiago.31 It was highly improbable that
petitioner would grant two loans to a complete stranger without requiring as much as promissory notes or any
written acknowledgment of the debt considering that the amounts involved were quite big. Respondent, on the
other hand, already had transactions with Santiago at that time.32
Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both parties’ list
of witnesses) testified that respondent’s 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.
Third, for the US$100,000 loan, 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 petitioner’s request for her to issue her own checks to cover the interest payments since
petitioner was not personally acquainted 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. We declared in one case that:
In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to be
believed, it must not only proceed from the mouth of a credible witness, but must be credible in itself such as
the common experience of mankind can approve as probable under the circumstances. We have no test of the
truth of human testimony except its conformity to our knowledge, observation, and experience. Whatever is
repugnant to these belongs to the miraculous, and is outside of juridical cognizance.37
Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner, who was
listed as one of her (Santiago’s) creditors.38
Last, 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.
We do not, however, agree that respondent is 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
6

Hence, respondent is liable for the payment of legal interest per annum to be computed from November 21,
1995, the date when she received petitioner’s demand letter.42 From the finality of the decision until it is fully
paid, the amount due shall earn interest at 12% per annum, the interim period being deemed equivalent to a
forbearance of credit.43
The award of actual damages in the amount of P50,000 and P100,000 attorney’s fees is deleted since the RTC
decision did not explain the factual bases for these damages.
WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20, 2002
resolution of the Court of Appeals in CA-G.R. CV No. 56577 are REVERSED and SET ASIDE. The February
28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with the
MODIFICATION that respondent is directed to pay petitioner the amounts of US$100,000 and P500,000 at
12% per annum interest from November 21, 1995 until the finality of the decision. The total amount due as of
the date of finality will earn interest of 12% per annum until fully paid. The award of actual damages and
attorney’s fees is deleted.
SO ORDERED.
G.R. No. L-24968 April 27, 1972
SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee,
vs. DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.
In Civil Case No. 55908 of the Court of First Instance of Manila, judgment was rendered on June 28, 1965
sentencing defendant Development Bank of the Philippines (DBP) to pay actual and consequential damages to
plaintiff Saura Import and Export Co., Inc. in the amount of P383,343.68, plus interest at the legal rate from the
date the complaint was filed and attorney's fees in the amount of P5,000.00. The present appeal is from that
judgment.
In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to the Rehabilitation Finance
Corporation (RFC), before its conversion into DBP, for an industrial loan of P500,000.00, to be used as follows:
P250,000.00 for the construction of a factory building (for the manufacture of jute sacks); P240,900.00 to pay
the balance of the purchase price of the jute mill machinery and equipment; and P9,100.00 as additional
working capital.
Parenthetically, it may be mentioned that the jute mill machinery had already been purchased by Saura on the
strength of a letter of credit extended by the Prudential Bank and Trust Co., and arrived in Davao City in July
1953; and that to secure its release without first paying the draft, Saura, Inc. executed a trust receipt in favor of
the said bank.
On January 7, 1954 RFC passed Resolution No. 145 approving the loan application for P500,000.00, to be
secured by a first mortgage on the factory building to be constructed, the land site thereof, and the machinery
and equipment to be installed. Among the other terms spelled out in the resolution were the following:
1. That the proceeds of the loan shall be utilized exclusively for the following purposes:
For construction of factory building P250,000.00
For payment of the balance of purchase
price of machinery and equipment 240,900.00
For working capital 9,100.00
T O T A L P500,000.00
4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto Caolboy and Gregoria Estabillo and
China Engineers, Ltd. shall sign the promissory notes jointly with the borrower-corporation;
5. That release shall be made at the discretion of the Rehabilitation Finance Corporation, subject to
availability of funds, and as the construction of the factory buildings progresses, to be certified to by an
appraiser of this Corporation;"
7

Saura, Inc. was officially notified of the resolution on January 9, 1954. The day before, however, evidently
having otherwise been informed of its approval, Saura, Inc. wrote a letter to RFC, requesting a modification of
the terms laid down by it, namely: that in lieu of having China Engineers, Ltd. (which was willing to assume
liability only to the extent of its stock subscription with Saura, Inc.) sign as co-maker on the corresponding
promissory notes, Saura, Inc. would put up a bond for P123,500.00, an amount equivalent to such subscription;
and that Maria S. Roca would be substituted for Inocencia Arellano as one of the other co-makers, having
acquired the latter's shares in Saura, Inc.
In view of such request RFC approved Resolution No. 736 on February 4, 1954, designating of the members of
its Board of Governors, for certain reasons stated in the resolution, "to reexamine all the aspects of this
approved loan ... with special reference as to the advisability of financing this particular project based on
present conditions obtaining in the operations of jute mills, and to submit his findings thereon at the next
meeting of the Board."
On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had again agreed to act as co-signer for
the loan, and asked that the necessary documents be prepared in accordance with the terms and conditions
specified in Resolution No. 145. In connection with the reexamination of the project to be financed with the
loan applied for, as stated in Resolution No. 736, the parties named their respective committees of engineers and
technical men to meet with each other and undertake the necessary studies, although in appointing its own
committee Saura, Inc. made the observation that the same "should not be taken as an acquiescence on (its) part
to novate, or accept new conditions to, the agreement already) entered into," referring to its acceptance of the
terms and conditions mentioned in Resolution No. 145.
On April 13, 1954 the loan documents were executed: the promissory note, with F.R. Halling, representing
China Engineers, Ltd., as one of the co-signers; and the corresponding deed of mortgage, which was duly
registered on the following April 17.
It appears, however, that despite the formal execution of the loan agreement the reexamination contemplated in
Resolution No. 736 proceeded. In a meeting of the RFC Board of Governors on June 10, 1954, at which Ramon
Saura, President of Saura, Inc., was present, it was decided to reduce the loan from P500,000.00 to
P300,000.00. Resolution No. 3989 was approved as follows:
RESOLUTION No. 3989. Reducing the Loan Granted Saura Import & Export Co., Inc. under Resolution No.
145, C.S., from P500,000.00 to P300,000.00. Pursuant to Bd. Res. No. 736, c.s., authorizing the re-examination
of all the various aspects of the loan granted the Saura Import & Export Co. under Resolution No. 145, c.s., for
the purpose of financing the manufacture of jute sacks in Davao, with special reference as to the advisability of
financing this particular project based on present conditions obtaining in the operation of jute mills, and after
having heard Ramon E. Saura and after extensive discussion on the subject the Board, upon recommendation of
the Chairman, RESOLVED that the loan granted the Saura Import & Export Co. be REDUCED from P500,000
to P300,000 and that releases up to P100,000 may be authorized as may be necessary from time to time to place
the factory in actual operation: PROVIDED that all terms and conditions of Resolution No. 145, c.s., not
inconsistent herewith, shall remain in full force and effect."
On June 19, 1954 another hitch developed. F.R. Halling, who had signed the promissory note for China
Engineers Ltd. jointly and severally with the other RFC that his company no longer to of the loan and therefore
considered the same as cancelled as far as it was concerned. A follow-up letter dated July 2 requested RFC that
the registration of the mortgage be withdrawn.
In the meantime Saura, Inc. had written RFC requesting that the loan of P500,000.00 be granted. The request
was denied by RFC, which added in its letter-reply that it was "constrained to consider as cancelled the loan of
P300,000.00 ... in view of a notification ... from the China Engineers Ltd., expressing their desire to consider the
loan insofar as they are concerned."
On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan and informed RFC that China
Engineers, Ltd. "will at any time reinstate their signature as co-signer of the note if RFC releases to us the
P500,000.00 originally approved by you.".
On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan to the original amount of
P500,000.00, "it appearing that China Engineers, Ltd. is now willing to sign the promissory notes jointly with
the borrower-corporation," but with the following proviso:
8

That in view of observations made of the shortage and high cost of imported raw materials, the Department of
Agriculture and Natural Resources shall certify to the following:
1. That the raw materials needed by the borrower-corporation to carry out its operation are available in the
immediate vicinity; and
2. That there is prospect of increased production thereof to provide adequately for the requirements of the
factory."
The action thus taken was communicated to Saura, Inc. in a letter of RFC dated December 22, 1954, wherein it
was explained that the certification by the Department of Agriculture and Natural Resources was required "as
the intention of the original approval (of the loan) is to develop the manufacture of sacks on the basis of locally
available raw materials." This point is important, and sheds light on the subsequent actuations of the parties.
Saura, Inc. does not deny that the factory he was building in Davao was for the manufacture of bags from local
raw materials. The cover page of its brochure (Exh. M) describes the project as a "Joint venture by and between
the Mindanao Industry Corporation and the Saura Import and Export Co., Inc. to finance, manage and operate a
Kenaf mill plant, to manufacture copra and corn bags, runners, floor mattings, carpets, draperies; out of 100%
local raw materials, principal kenaf." The explanatory note on page 1 of the same brochure states that, the
venture "is the first serious attempt in this country to use 100% locally grown raw materials notably kenaf
which is presently grown commercially in theIsland of Mindanao where the proposed jutemill is located ..."
This fact, according to defendant DBP, is what moved RFC to approve the loan application in the first place,
and to require, in its Resolution No. 9083, a certification from the Department of Agriculture and Natural
Resources as to the availability of local raw materials to provide adequately for the requirements of the factory.
Saura, Inc. itself confirmed the defendant's stand impliedly in its letter of January 21, 1955: (1) stating that
according to a special study made by the Bureau of Forestry "kenaf will not be available in sufficient quantity
this year or probably even next year;" (2) requesting "assurances (from RFC) that my company and associates
will be able to bring in sufficient jute materials as may be necessary for the full operation of the jute mill;" and
(3) asking that releases of the loan be made as follows:
a) For the payment of the receipt for jute mill
machineries with the Prudential Bank &
Trust Company P250,000.00
(For immediate release)
b) For the purchase of materials and equip-
ment per attached list to enable the jute
mill to operate 182,413.91
c) For raw materials and labor 67,586.09
1) P25,000.00 to be released on the open-
ing of the letter of credit for raw jute
for $25,000.00.
2) P25,000.00 to be released upon arrival
of raw jute.
3) P17,586.09 to be released as soon as the
mill is ready to operate.
On January 25, 1955 RFC sent to Saura, Inc. the following reply:
Dear Sirs:
This is with reference to your letter of January 21, 1955, regarding the release of your loan under consideration
of P500,000. As stated in our letter of December 22, 1954, the releases of the loan, if revived, are proposed to
be made from time to time, subject to availability of funds towards the end that the sack factory shall be placed
in actual operating status. We shall be able to act on your request for revised purpose and manner of releases
upon re-appraisal of the securities offered for the loan.
9

With respect to our requirement that the Department of Agriculture and Natural Resources certify that the raw
materials needed are available in the immediate vicinity and that there is prospect of increased production
thereof to provide adequately the requirements of the factory, we wish to reiterate that the basis of the original
approval is to develop the manufacture of sacks on the basis of the locally available raw materials. Your
statement that you will have to rely on the importation of jute and your request that we give you assurance that
your company will be able to bring in sufficient jute materials as may be necessary for the operation of your
factory, would not be in line with our principle in approving the loan.
With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursue the matter further.
Instead, it requested RFC to cancel the mortgage, and so, on June 17, 1955 RFC executed the corresponding
deed of cancellation and delivered it to Ramon F. Saura himself as president of Saura, Inc.
It appears that the cancellation was requested to make way for the registration of a mortgage contract, executed
on August 6, 1954, over the same property in favor of the Prudential Bank and Trust Co., under which contract
Saura, Inc. had up to December 31 of the same year within which to pay its obligation on the trust receipt
heretofore mentioned. It appears further that for failure to pay the said obligation the Prudential Bank and Trust
Co. sued Saura, Inc. on May 15, 1955.
On January 9, 1964, ahnost 9 years after the mortgage in favor of RFC was cancelled at the request of Saura,
Inc., the latter commenced the present suit for damages, alleging failure of RFC (as predecessor of the
defendant DBP) to comply with its obligation to release the proceeds of the loan applied for and approved,
thereby preventing the plaintiff from completing or paying contractual commitments it had entered into, in
connection with its jute mill project.
The trial court rendered judgment for the plaintiff, ruling that there was a perfected contract between the parties
and that the defendant was guilty of breach thereof. The defendant pleaded below, and reiterates in this appeal:
(1) that the plaintiff's cause of action had prescribed, or that its claim had been waived or abandoned; (2) that
there was no perfected contract; and (3) that assuming there was, the plaintiff itself did not comply with the
terms thereof.
We hold that there was indeed a perfected consensual contract, as recognized in Article 1934 of the Civil Code,
which provides:
ART. 1954. 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 perferted until the delivery of the object
of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of
P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was executed and
registered. But this fact alone falls short of resolving the basic claim that the defendant failed to fulfill its
obligation and the plaintiff is therefore entitled to recover damages.
It should be noted that RFC entertained the loan application of Saura, Inc. on the assumption that the factory to
be constructed would utilize locally grown raw materials, principally kenaf. There is no serious dispute about
this. It was in line with such assumption that when RFC, by Resolution No. 9083 approved on December 17,
1954, restored the loan to the original amount of P500,000.00. it imposed two conditions, to wit: "(1) that the
raw materials needed by the borrower-corporation to carry out its operation are available in the immediate
vicinity; and (2) that there is prospect of increased production thereof to provide adequately for the
requirements of the factory." The imposition of those conditions was by no means a deviation from the terms of
the agreement, but rather a step in its implementation. There was nothing in said conditions that contradicted the
terms laid down in RFC Resolution No. 145, passed on January 7, 1954, namely — "that the proceeds of the
loan shall be utilized exclusively for the following purposes: for construction of factory building —
P250,000.00; for payment of the balance of purchase price of machinery and equipment — P240,900.00; for
working capital — P9,100.00." Evidently Saura, Inc. realized that it could not meet the conditions required by
RFC, and so wrote its letter of January 21, 1955, stating that local jute "will not be able in sufficient quantity
this year or probably next year," and asking that out of the loan agreed upon the sum of P67,586.09 be released
"for raw materials and labor." This was a deviation from the terms laid down in Resolution No. 145 and
embodied in the mortgage contract, implying as it did a diversion of part of the proceeds of the loan to purposes
other than those agreed upon.
10

When RFC turned down the request in its letter of January 25, 1955 the negotiations which had been going on
for the implementation of the agreement reached an impasse. Saura, Inc. obviously was in no position to comply
with RFC's conditions. So instead of doing so and insisting that the loan be released as agreed upon, Saura, Inc.
asked that the mortgage be cancelled, which was done on June 15, 1955. The action thus taken by both parties
was in the nature cf mutual desistance — what Manresa terms "mutuo disenso" 1 — which is a mode of
extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can create
a contract, mutual disagreement by the parties can cause its extinguishment. 2
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged breach of
contract by RFC, or even point out that the latter's stand was legally unjustified. Its request for cancellation of
the mortgage carried no reservation of whatever rights it believed it might have against RFC for the latter's non-
compliance. In 1962 it even applied with DBP for another loan to finance a rice and corn project, which
application was disapproved. It was only in 1964, nine years after the loan agreement had been cancelled at its
own request, that Saura, Inc. brought this action for damages.All these circumstances demonstrate beyond doubt
that the said agreement had been extinguished by mutual desistance — and that on the initiative of the plaintiff-
appellee itself.
With this view we take of the case, we find it unnecessary to consider and resolve the other issues raised in the
respective briefs of the parties.
WHEREFORE, the judgment appealed from is reversed and the complaint dismissed, with costs against the
plaintiff-appellee.
[G.R. No. 133632. February 15, 2002]
BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF APPEALS and
ALS MANAGEMENT & DEVELOPMENT CORPORATION, respondents.
This petition for certiorari assails the decision dated February 28, 1997, of the Court of Appeals and its
resolution dated April 21, 1998, in CA-G.R. CV No. 38887. The appellate court affirmed the judgment of the
Regional Trial Court of Pasig City, Branch 151, in (a) Civil Case No. 11831, for foreclosure of mortgage by
petitioner BPI Investment Corporation (BPIIC for brevity) against private respondents ALS Management and
Development Corporation and Antonio K. Litonjua,[1] consolidated with (b) Civil Case No. 52093, for
damages with prayer for the issuance of a writ of preliminary injunction by the private respondents against said
petitioner.
The trial court had held that private respondents were not in default in the payment of their monthly
amortization, hence, the extrajudicial foreclosure conducted by BPIIC was premature and made in bad faith. It
awarded private respondents the amount of P300,000 for moral damages, P50,000 for exemplary damages, and
P50,000 for attorney’s fees and expenses for litigation. It likewise dismissed the foreclosure suit for being
premature.
The facts are as follows:
Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and Development
Corporation (AIDC), the predecessor of petitioner BPIIC, for the construction of a house on his lot in New
Alabang Village, Muntinlupa. Said house and lot were mortgaged to AIDC to secure the loan. Sometime in
1980, Roa sold the house and lot to private respondents ALS and Antonio Litonjua for P850,000. They paid
P350,000 in cash and assumed the P500,000 balance of Roa’s indebtedness with AIDC. The latter, however,
was not willing to extend the old interest rate to private respondents and proposed to grant them a new loan of
P500,000 to be applied to Roa’s debt and secured by the same property, at an interest rate of 20% per annum
and service fee of 1% per annum on the outstanding principal balance payable within ten years in equal monthly
amortization of P9,996.58 and penalty interest at the rate of 21% per annum per day from the date the
amortization became due and payable.
Consequently, in March 1981, 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 August 13, 1982, ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum of P190,601.35.
This reduced Roa’s principal balance to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto
the proceeds of private respondents’ loan of P500,000.
11

On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what was left of
their loan after full payment of Roa’s loan.
In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground that they
failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984, amounted to Four Hundred
Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos (P475,585.31). A notice of sheriff’s sale
was published on August 13, 1984.
On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against BPIIC. They alleged, among
others, that they were not in arrears in their payment, but in fact made an overpayment as of June 30, 1984.
They maintained that they should not be made to pay amortization before the actual release of the P500,000
loan in August and September 1982. Further, out of the P500,000 loan, only the total amount of P464,351.77
was released to private respondents. Hence, applying the effects of legal compensation, the balance of
P35,648.23 should be applied to the initial monthly amortization for the loan.
On August 31, 1988, the trial court rendered its judgment in Civil Case Nos. 11831 and 52093, thus:
WHEREFORE, judgment is hereby rendered in favor of ALS Management and Development Corporation and
Antonio K. Litonjua and against BPI Investment Corporation, holding that the amount of loan granted by BPI to
ALS and Litonjua was only in the principal sum of P464,351.77, with interest at 20% plus service charge of 1%
per annum, payable on equal monthly and successive amortizations at P9,283.83 for ten (10) years or one
hundred twenty (120) months. The amortization schedule attached as Annex “A” to the “Deed of Mortgage” is
correspondingly reformed as aforestated.
The Court further finds that ALS and Litonjua suffered compensable damages when BPI caused their
publication in a newspaper of general circulation as defaulting debtors, and therefore orders BPI to pay ALS
and Litonjua the following sums:
a) P300,000.00 for and as moral damages;
b) P50,000.00 as and for exemplary damages;
c) P50,000.00 as and for attorney’s fees and expenses of litigation.
The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for being premature.
Costs against BPI.
SO ORDERED.[2]
Both parties appealed to the Court of Appeals. However, private respondents’ appeal was dismissed for non-
payment of docket fees.
On February 28, 1997, the Court of Appeals promulgated its decision, the dispositive portion reads:
WHEREFORE, finding no error in the appealed decision the same is hereby AFFIRMED in toto.
SO ORDERED.[3]
In its decision, the Court of Appeals reasoned that a simple loan is perfected only upon the delivery of the
object of the contract. The contract of loan between BPIIC and ALS & Litonjua was perfected only on
September 13, 1982, the date when BPIIC released the purported balance of the P500,000 loan after deducting
therefrom the value of Roa’s indebtedness. Thus, payment of the monthly amortization should commence only
a month after the said date, as can be inferred from the stipulations in the contract. This, despite the express
agreement of the parties that payment shall commence on May 1, 1981. From October 1982 to June 1984, the
total amortization due was only P194,960.43. Evidence showed that private respondents had an overpayment,
because as of June 1984, they already paid a total amount of P201,791.96. Therefore, there was no basis for
BPIIC to extrajudicially foreclose the mortgage and cause the publication in newspapers concerning private
respondents’ delinquency in the payment of their loan. This fact constituted sufficient ground for moral
damages in favor of private respondents.
12

The motion for reconsideration filed by petitioner BPIIC was likewise denied, hence this petition, where BPIIC
submits for resolution the following issues:
I. WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL CONTRACT IN THE LIGHT OF
THE RULE LAID DOWN IN BONNEVIE VS. COURT OF APPEALS, 125 SCRA 122.
II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND EXEMPLARY DAMAGES
AND ATTORNEY’S FEES IN THE FACE OF IRREGULAR PAYMENTS MADE BY ALS AND OPPOSED
TO THE RULE LAID DOWN IN SOCIAL SECURITY SYSTEM VS. COURT OF APPEALS, 120 SCRA
707.
On the first issue, petitioner contends that the Court of Appeals erred in ruling that because a simple loan is
perfected upon the delivery of the object of the contract, the loan contract in this case was perfected only on
September 13, 1982. Petitioner claims that a contract of loan is a consensual contract, and a loan contract is
perfected at the time the contract of mortgage is executed conformably with our ruling in Bonnevie v. Court of
Appeals, 125 SCRA 122. In the present case, the loan contract was perfected on March 31, 1981, the date when
the mortgage deed was executed, hence, the amortization and interests on the loan should be computed from
said date.
Petitioner also argues that while the documents showed that the loan was released only on August 1982, the
loan was actually released on March 31, 1981, when BPIIC issued a cancellation of mortgage of Frank Roa’s
loan. This finds support in the registration on March 31, 1981 of the Deed of Absolute Sale executed by Roa in
favor of ALS, transferring the title of the property to ALS, and ALS executing the Mortgage Deed in favor of
BPIIC. Moreover, petitioner claims, the delay in the release of the loan should be attributed to private
respondents. As BPIIC only agreed to extend a P500,000 loan, private respondents were required to reduce
Frank Roa’s loan below said amount. According to petitioner, private respondents were only able to do so in
August 1982.
In their comment, private respondents assert that based on Article 1934 of the Civil Code,[4] a simple loan is
perfected upon the delivery of the object of the contract, hence a real contract. In this case, even though the loan
contract was signed on March 31, 1981, it was perfected only on September 13, 1982, when the full loan was
released to private respondents. They submit that petitioner misread Bonnevie. To give meaning to Article
1934, according to private respondents, Bonnevie must be construed to mean that the contract to extend the loan
was perfected on March 31, 1981 but the contract of loan itself was only perfected upon the delivery of the full
loan to private respondents on September 13, 1982.
Private respondents further maintain that even granting, arguendo, that the loan contract was perfected on
March 31, 1981, and their payment did not start a month thereafter, still no default took place. According to
private respondents, a perfected loan agreement imposes reciprocal obligations, where the obligation or promise
of each party is the consideration of the other party. In this case, the consideration for BPIIC in entering into
the loan contract is the promise of private respondents to pay the monthly amortization. For the latter, it is the
promise of BPIIC to deliver the money. In reciprocal obligations, 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. Therefore, private
respondents conclude, they did not incur in delay when they did not commence paying the monthly
amortization on May 1, 1981, as it was only on September 13, 1982 when petitioner fully complied with its
obligation under the loan contract.
We agree with private respondents. 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.[5] Petitioner misapplied Bonnevie. The contract
in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause of Article
1934, Civil Code. It is an accepted promise to deliver something by way of simple loan.
In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines, 44 SCRA 445, petitioner applied
for a loan of P500,000 with respondent bank. The latter approved the application through a board resolution.
Thereafter, the corresponding mortgage was executed and registered. However, because of acts attributable to
petitioner, the loan was not released. Later, petitioner instituted an action for damages. We recognized in this
case, a perfected consensual contract which under normal circumstances could have made the bank liable for
not releasing the loan. However, since the fault was attributable to petitioner therein, the court did not award it
damages.
13

A perfected consensual contract, as shown above, can give rise to an action for damages. However, said
contract does not constitute the real contract of loan which requires the delivery of the object of the contract for
its perfection and which gives rise to obligations only on the part of the borrower.[6]
In the present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on the other, was
perfected only on September 13, 1982, the date of the second release of the loan. Following the intentions of
the parties on the commencement of the monthly amortization, as found by the Court of Appeals, private
respondents’ obligation to pay commenced only on October 13, 1982, a month after the perfection of the
contract.[7]
We also agree with private respondents that a contract of loan involves a reciprocal obligation, wherein the
obligation or promise of each party is the consideration for that of the other.[8] 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. 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.[9] 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.
Other points raised by petitioner in connection with the first issue, such as the date of actual release of the loan
and whether private respondents were the cause of the delay in the release of the loan, are factual. Since
petitioner has not shown that the instant case is one of the exceptions to the basic rule that only questions of law
can be raised in a petition for review under Rule 45 of the Rules of Court,[10] factual matters need not tarry us
now. On these points we are bound by the findings of the appellate and trial courts.
On the second issue, petitioner claims that it should not be held liable for moral and exemplary damages for it
did not act maliciously when it initiated the foreclosure proceedings. It merely exercised its right under the
mortgage contract because private respondents were irregular in their monthly amortization. It invoked our
ruling in Social Security System vs. Court of Appeals, 120 SCRA 707, where we said:
Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals “the
negligence of the appellant is not so gross as to warrant moral and temperate damages,” except that, said Court
reduced those damages by only P5,000.00 instead of eliminating them. Neither can we agree with the findings
of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS was of
the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of
irregular payments made by private respondents and placed reliance on the automatic acceleration clause in the
contract. The filing alone of the foreclosure application should not be a ground for an award of moral damages
in the same way that a clearly unfounded civil action is not among the grounds for moral damages.
Private respondents counter that BPIIC was guilty of bad faith and should be liable for said damages because it
insisted on the payment of amortization on the loan even before it was released. Further, it did not make the
corresponding deduction in the monthly amortization to conform to the actual amount of loan released, and it
immediately initiated foreclosure proceedings when private respondents failed to make timely payment.
But as admitted by private respondents themselves, they were irregular in their payment of monthly
amortization. Conformably with our ruling in SSS, we can not properly declare BPIIC in bad faith.
Consequently, we should rule out the award of moral and exemplary damages.[11]
However, in our view, BPIIC was negligent in relying merely on the entries found in the deed of mortgage,
without checking and correspondingly adjusting its records on the amount actually released to private
respondents and the date when it was released. Such negligence resulted in damage to private respondents, for
which an award of nominal damages should be given in recognition of their rights which were violated by
BPIIC.[12] For this purpose, the amount of P25,000 is sufficient.
Lastly, as in SSS where we awarded attorney’s fees because private respondents were compelled to litigate, we
sustain the award of P50,000 in favor of private respondents as attorney’s fees.
WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals and its resolution dated April 21,
1998, are AFFIRMED WITH MODIFICATION as to the award of damages. The award of moral and
14

exemplary damages in favor of private respondents is DELETED, but the award to them of attorney’s fees in
the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay private respondents P25,000
as nominal damages. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
[1] While Antonio K. Litonjua was not included in the caption of the petition before this court, apparently, the
intention of petitioner was to include Litonjua as private respondent for he was a party in all stages of the case
both before the Regional Trial Court and the Court of Appeals and it was clearly indicated in the petition that
“ALS” collectively referred to as ALS Management and Development Corporation and Antonio K. Litonjua.
[2] RTC Records, p. 278.
[3] Rollo, p. 32.
[4] Art. 1934. 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.
[5] Art. 1934, Civil Code of the Philippines; Monte de Piedad vs. Javier, et al., 36 OG 2176; A. Padilla, Civil
Code of the Philippines Annotated, Vol. VI, pp. 474-475 (1987); E. Paras, Civil Code of the Philippines
Annotated, Vol. V, p. 885 (1995).
[6] A. Tolentino, Civil Code of the Philippines, V. 5, p. 443 (1992).
[7] Supra, note 3 at 30.
[8] Rose Packing Co. Inc. vs. Court of Appeals, No. L-33084, 167 SCRA 309, 318-319 (1988).
[9] Art. 1169, Civil Code:
x x x
In reciprocal obligations, 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. From the moment one of the parties fulfills his obligation,
delay by the other begins.
[10] American President Lines, Ltd. vs. Court of Appeals, G.R. No. 110853, 336 SCRA 582, 586 (2000).
[11] Art. 2234, Civil Code: While the amount of the exemplary damages need not be proved, the plaintiff must
show that he is entitled to moral, temperate or compensatory damages before the court may consider the
question of whether or not exemplary damages should be awarded. In case liquidated damages have been
agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered,
nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated
damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were
it not for the stipulation for liquidated damages.
[12] Art. 2221, Civil Code: Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
G.R. No. 174269
POLO S. PANTALEON - versus
AMERICAN EXPRESS
INTERNATIONAL, INC.,
15

The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and son Adrian
Roberto, joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in October of
1991. The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the second to the last day of
the tour. As the group had arrived late in the city, they failed to engage in any sight-seeing. Instead, it was
agreed upon that they would start early the next day to see the entire city before ending the tour.
The following day, the last day of the tour, the group arrived at the Coster Diamond House in Amsterdam
around 10 minutes before 9:00 a.m. The group had agreed that the visit to Coster should end by 9:30 a.m. to
allow enough time to take in a guided city tour of Amsterdam. The group was ushered into Coster shortly before
9:00 a.m., and listened to a lecture on the art of diamond polishing that lasted for around ten minutes.[1]
Afterwards, the group was led to the store’s showroom to allow them to select items for purchase. Mrs.
Pantaleon had already planned to purchase even before the tour began a 2.5 karat diamond brilliant cut, and she
found a diamond close enough in approximation that she decided to buy.[2] Mrs. Pantaleon also selected for
purchase a pendant and a chain,[3] all of which totaled U.S. $13,826.00.
To pay for these purchases, Pantaleon presented his American Express credit card together with his passport to
the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the tour group was slated to
depart from the store. The sales clerk took the card’s imprint, and asked Pantaleon to sign the charge slip. The
charge purchase was then referred electronically to respondent’s Amsterdam office at 9:20 a.m.
Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet been approved. His son,
who had already boarded the tour bus, soon returned to Coster and informed the other members of the Pantaleon
family that the entire tour group was waiting for them. As it was already 9:40 a.m., and he was already worried
about further inconveniencing the tour group, Pantaleon asked the store clerk to cancel the sale. The store
manager though asked plaintiff to wait a few more minutes. After 15 minutes, the store manager informed
Pantaleon that respondent had demanded bank references. Pantaleon supplied the names of his depositary
banks, then instructed his daughter to return to the bus and apologize to the tour group for the delay.
At around 10:00 a.m, or around 45 minutes after Pantaleon had presented his AmexCard, and 30 minutes after
the tour group was supposed to have left the store, Coster decided to release the items even without
respondent’s approval of the purchase. The spouses Pantaleon returned to the bus. It is alleged that their offers
of apology were met by their tourmates with stony silence.[4] The tour group’s visible irritation was aggravated
when the tour guide announced that the city tour of Amsterdam was to be canceled due to lack of remaining
time, as they had to catch a 3:00 p.m. ferry at Calais, Belgium to London.[5] Mrs. Pantaleon ended up weeping,
while her husband had to take a tranquilizer to calm his nerves.
It later emerged that Pantaleon’s purchase was first transmitted for approval to respondent’s Amsterdam office
at 9:20 a.m., Amsterdam time, then referred to respondent’s Manila office at 9:33 a.m, then finally approved at
10:19 a.m., Amsterdam time.[6] The Approval Code was transmitted to respondent’s Amsterdam office at 10:38
a.m., several minutes after petitioner had already left Coster, and 78 minutes from the time the purchases were
electronically transmitted by the jewelry store to respondent’s Amsterdam office.
After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before
returning to Manila on 12 November 1992. While in the United States, Pantaleon continued to use his AmEx
card, several times without hassle or delay, but with two other incidents similar to the Amsterdam brouhaha. On
30 October 1991, Pantaleon purchased golf equipment amounting to US $1,475.00 using his AmEx card, but he
cancelled his credit card purchase and borrowed money instead from a friend, after more than 30 minutes had
transpired without the purchase having been approved. On 3 November 1991, Pantaleon used the card to
purchase children’s shoes worth $87.00 at a store in Boston, and it took 20 minutes before this transaction was
approved by respondent.
On 4 March 1992, after coming back to Manila, Pantaleon sent a letter[7] through counsel to the
respondent, demanding an apology for the “inconvenience, humiliation and embarrassment he and his family
thereby suffered” for respondent’s refusal to provide credit authorization for the aforementioned purchases.[8]
In response, respondent sent a letter dated 24 March 1992,[9] stating among others that the delay in authorizing
the purchase from Coster was attributable to the circumstance that the charged purchase of US $13,826.00 “was
16

out of the usual charge purchase pattern established.”[10] Since respondent refused to accede to Pantaleon’s
demand for an apology, the aggrieved cardholder instituted an action for damages with the Regional Trial Court
(RTC) of Makati City, Branch 145.[11] Pantaleon prayed that he be awarded P2,000,000.00, as moral damages;
P500,000.00, as exemplary damages; P100,000.00, as attorney’s fees; and P50,000.00 as litigation expenses.
[12]
On 5 August 1996, the Makati City RTC rendered a decision[13] in favor of Pantaleon, awarding him
P500,000.00 as moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorney’s fees, and
P85,233.01 as expenses of litigation. Respondent filed a Notice of Appeal, while Pantaleon moved for partial
reconsideration, praying that the trial court award the increased amount of moral and exemplary damages he
had prayed for.[14] The RTC denied Pantaleon’s motion for partial reconsideration, and thereafter gave due
course to respondent’s Notice of Appeal.[15]
On 18 August 2006, the Court of Appeals rendered a decision[16] reversing the award of damages in
favor of Pantaleon, holding that respondent had not breached its obligations to petitioner. Hence, this petition.
The key question is whether respondent, in connection with the aforementioned transactions, had
committed a breach of its obligations to Pantaleon. In addition, Pantaleon submits that even assuming that
respondent had not been in breach of its obligations, it still remained liable for damages under Article 21 of the
Civil Code.
The RTC had concluded, based on the testimonial representations of Pantaleon and respondent’s credit
authorizer, Edgardo Jaurigue, that the normal approval time for purchases was “a matter of seconds.” Based on
that standard, respondent had been in clear delay with respect to the three subject transactions. As it appears, the
Court of Appeals conceded that there had been delay on the part of respondent in approving the purchases.
However, it made two critical conclusions in favor of respondent. First, the appellate court ruled that the delay
was not attended by bad faith, malice, or gross negligence. Second, it ruled that respondent “had exercised
diligent efforts to effect the approval” of the purchases, which were “not in accordance with the charge pattern”
petitioner had established for himself, as exemplified by the fact that at Coster, he was “making his very first
single charge purchase of US$13,826,” and “the record of [petitioner]’s past spending with [respondent] at the
time does not favorably support his ability to pay for such purchase.”[17]
On the premise that there was an obligation on the part of respondent “to approve or disapprove with
dispatch the charge purchase,” petitioner argues that the failure to timely approve or disapprove the purchase
constituted mora solvendi on the part of respondent in the performance of its obligation. For its part, respondent
characterizes the depiction by petitioner of its obligation to him as “to approve purchases instantaneously or in a
matter of seconds.”
Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default are that the
obligation is demandable and liquidated; the debtor delays performance; and the creditor judicially or
extrajudicially requires the debtor’s performance.[18] Petitioner asserts that the Court of Appeals had wrongly
applied the principle of mora accipiendi, which relates to delay on the part of the obligee in accepting the
performance of the obligation by the obligor. The requisites of mora accipiendi are: an offer of performance by
the debtor who has the required capacity; the offer must be to comply with the prestation as it should be
performed; and the creditor refuses the performance without just cause.[19] The error of the appellate court,
argues petitioner, is in relying on the invocation by respondent of “just cause” for the delay, since while just
cause is determinative of mora accipiendi, it is not so with the case of mora solvendi.
We can see the possible source of confusion as to which type of mora to appreciate. Generally, the relationship
between a credit card provider and its card holders is that of creditor-debtor,[20] with the card company as the
creditor extending loans and credit to the card holder, who as debtor is obliged to repay the creditor. This
relationship already takes exception to the general rule that as between a bank and its depositors, the bank is
deemed as the debtor while the depositor is considered as the creditor.[21] Petitioner is asking us, not
baselessly, to again shift perspectives and again see the credit card company as the debtor/obligor, insofar as it
has the obligation to the customer as creditor/obligee to act promptly on its purchases on credit.
Ultimately, petitioner’s perspective appears more sensible than if we were to still regard respondent as the
creditor in the context of this cause of action. If there was delay on the part of respondent in its normal role as
creditor to the cardholder, such delay would not have been in the acceptance of the performance of the debtor’s
obligation (i.e., the repayment of the debt), but it would be delay in the extension of the credit in the first place.
Such delay would not fall under mora accipiendi, which contemplates that the obligation of the debtor, such as
the actual purchases on credit, has already been constituted. Herein, the establishment of the debt itself
17

(purchases on credit of the jewelry) had not yet been perfected, as it remained pending the approval or consent
of the respondent credit card company.
Still, in order for us to appreciate that respondent was in mora solvendi, we will have to first recognize that
there was indeed an obligation on the part of respondent to act on petitioner’s purchases with “timely dispatch,”
or for the purposes of this case, within a period significantly less than the one hour it apparently took before the
purchase at Coster was finally approved.
The findings of the trial court, to our mind, amply established that the tardiness on the part of respondent in
acting on petitioner’s purchase at Coster did constitute culpable delay on its part in complying with its
obligation to act promptly on its customer’s purchase request, whether such action be favorable or unfavorable.
We quote the trial court, thus:
As to the first issue, both parties have testified that normal approval time for purchases was a matter of seconds.
Plaintiff testified that his personal experience with the use of the card was that except for the three charge
purchases subject of this case, approvals of his charge purchases were always obtained in a matter of seconds.
Defendant’s credit authorizer Edgardo Jaurique likewise testified:
Q. – You also testified that on normal occasions, the normal approval time for charges would be 3 to 4 seconds?
A. – Yes, Ma’am.
Both parties likewise presented evidence that the processing and approval of plaintiff’s charge purchase at the
Coster Diamond House was way beyond the normal approval time of a “matter of seconds”.
Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15 a.m. and by the time he
had to leave the store at 10:05 a.m., no approval had yet been received. In fact, the Credit Authorization System
(CAS) record of defendant at Phoenix Amex shows that defendant’s Amsterdam office received the request to
approve plaintiff’s charge purchase at 9:20 a.m., Amsterdam time or 01:20, Phoenix time, and that the
defendant relayed its approval to Coster at 10:38 a.m., Amsterdam time, or 2:38, Phoenix time, or a total time
lapse of one hour and [18] minutes. And even then, the approval was conditional as it directed in computerese
[sic] “Positive Identification of Card holder necessary further charges require bank information due to high
exposure. By Jack Manila.”
The delay in the processing is apparent to be undue as shown from the frantic successive queries of Amexco
Amsterdam which reads: “US$13,826. Cardmember buying jewels. ID seen. Advise how long will this take?”
They were sent at 01:33, 01:37, 01:40, 01:45, 01:52 and 02:08, all times Phoenix. Manila Amexco could be
unaware of the need for speed in resolving the charge purchase referred to it, yet it sat on its hand, unconcerned.
x x x
To repeat, the Credit Authorization System (CAS) record on the Amsterdam transaction shows how Amexco
Netherlands viewed the delay as unusually frustrating. In sequence expressed in Phoenix time from 01:20 when
the charge purchased was referred for authorization, defendants own record shows:
01:22 – the authorization is referred to Manila Amexco
01:32 – Netherlands gives information that the identification of the cardmember has been presented and he is
buying jewelries worth US $13,826.
01:33 – Netherlands asks “How long will this take?”
02:08 – Netherlands is still asking “How long will this take?”
The Court is convinced that defendants delay constitute[s] breach of its contractual obligation to act on his use
of the card abroad “with special handling.”[22] (Citations omitted)
xxx
18

Notwithstanding the popular notion that credit card purchases are approved “within seconds,” there really
is no strict, legally determinative point of demarcation on how long must it take for a credit card company to
approve or disapprove a customer’s purchase, much less one specifically contracted upon by the parties. Yet
this is one of those instances when “you’d know it when you’d see it,” and one hour appears to be an awfully
long, patently unreasonable length of time to approve or disapprove a credit card purchase. It is long enough
time for the customer to walk to a bank a kilometer away, withdraw money over the counter, and return to the
store.
Notably, petitioner frames the obligation of respondent as “to approve or disapprove” the purchase “in timely
dispatch,” and not “to approve the purchase instantaneously or within seconds.” Certainly, had respondent
disapproved petitioner’s purchase “within seconds” or within a timely manner, this particular action would have
never seen the light of day. Petitioner and his family would have returned to the bus without delay – internally
humiliated perhaps over the rejection of his card – yet spared the shame of being held accountable by newly-
made friends for making them miss the chance to tour the city of Amsterdam.
We do not wish do dispute that respondent has the right, if not the obligation, to verify whether the credit it is
extending upon on a particular purchase was indeed contracted by the cardholder, and that the cardholder is
within his means to make such transaction. The culpable failure of respondent herein is not the failure to timely
approve petitioner’s purchase, but the more elemental failure to timely act on the same, whether favorably or
unfavorably. Even assuming that respondent’s credit authorizers did not have sufficient basis on hand to make a
judgment, we see no reason why respondent could not have promptly informed petitioner the reason for the
delay, and duly advised him that resolving the same could take some time. In that way, petitioner would have
had informed basis on whether or not to pursue the transaction at Coster, given the attending circumstances.
Instead, petitioner was left uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced
to confront the wrath of foreign folk.
Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad faith, and
the court should find that under the circumstances, such damages are due. The findings of the trial court are
ample in establishing the bad faith and unjustified neglect of respondent, attributable in particular to the “dilly-
dallying” of respondent’s Manila credit authorizer, Edgardo Jaurique.[23] Wrote the trial court:
While it is true that the Cardmembership Agreement, which defendant prepared, is silent as to the amount of
time it should take defendant to grant authorization for a charge purchase, defendant acknowledged that the
normal time for approval should only be three to four seconds. Specially so with cards used abroad which
requires “special handling”, meaning with priority. Otherwise, the object of credit or charge cards would be
lost; it would be so inconvenient to use that buyers and consumers would be better off carrying bundles of
currency or traveller’s checks, which can be delivered and accepted quickly. Such right was not accorded to
plaintiff in the instances complained off for reasons known only to defendant at that time. This, to the Court’s
mind, amounts to a wanton and deliberate refusal to comply with its contractual obligations, or at least abuse of
its rights, under the contract.[24]
x x x
The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it alleges to
have consumed more than one hour to simply go over plaintiff’s past credit history with defendant, his payment
record and his credit and bank references, when all such data are already stored and readily available from its
computer. This Court also takes note of the fact that there is nothing in plaintiff’s billing history that would
warrant the imprudent suspension of action by defendant in processing the purchase. Defendant’s witness
Jaurique admits:
Q. – But did you discover that he did not have any outstanding account?
A. – Nothing in arrears at that time.
Q. – You were well aware of this fact on this very date?
A. – Yes, sir.
Mr. Jaurique further testified that there were no “delinquencies” in plaintiff’s account.[25]
It should be emphasized that the reason why petitioner is entitled to damages is not simply because respondent
incurred delay, but because the delay, for which culpability lies under Article 1170, led to the particular injuries
19

under Article 2217 of the Civil Code for which moral damages are remunerative.[26] Moral damages do not
avail to soothe the plaints of the simply impatient, so this decision should not be cause for relief for those who
time the length of their credit card transactions with a stopwatch. The somewhat unusual attending
circumstances to the purchase at Coster – that there was a deadline for the completion of that purchase by
petitioner before any delay would redound to the injury of his several traveling companions – gave rise to the
moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained by the
petitioner, as concluded by the RTC.[27] Those circumstances are fairly unusual, and should not give rise to a
general entitlement for damages under a more mundane set of facts.
We sustain the amount of moral damages awarded to petitioner by the RTC. There is no hard-and-fast rule in
determining what would be a fair and reasonable amount of moral damages, since each case must be governed
by its own peculiar facts, however, it must be commensurate to the loss or injury suffered.[28] Petitioner’s
original prayer for P5,000,000.00 for moral damages is excessive under the circumstances, and the amount
awarded by the trial court of P500,000.00 in moral damages more seemly.
Likewise, we deem exemplary damages available under the circumstances, and the amount of P300,000.00
appropriate. There is similarly no cause though to disturb the determined award of P100,000.00 as attorney’s
fees, and P85,233.01 as expenses of litigation.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED and
SET ASIDE. The Decision of the Regional Trial Court of Makati, Branch 145 in Civil Case No. 92-1665 is
hereby REINSTATED. Costs against respondent.
SO ORDERED.
G.R. No. 115324 February 19, 2003
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 Decision1 of the Court of Appeals dated June 25, 1991 in CA-G.R. CV
No. 11791 and of its Resolution2 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 month’s time. Private respondent asked Sanchez to bring Doronilla to their house so
that they could discuss Sanchez’s request.3
On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi, Doronilla’s private secretary,
met and discussed the matter. Thereafter, relying on the assurances and representations of Sanchez and Doronilla,
private respondent issued a check in the amount of Two Hundred Thousand Pesos (P200,000.00) in favor of Sterela.
Private respondent instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in opening a savings
account in the name of Sterela in the Buendia, Makati branch of Producers Bank of the Philippines. However, 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 the amount of P200,000.00. 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
Subsequently, private respondent learned that Sterela was no longer holding office in the address previously given to
him. Alarmed, 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 P90,000.00 remained therein. He likewise told them that 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
20

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 assign or withdraw the money in Savings
Account No. 10-1567 because he was the sole proprietor of Sterela.5
Private respondent tried to get in touch with 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 thereof by private respondent to the drawee bank, the check was dishonored. Doronilla requested private
respondent to present the same check on September 15, 1979 but when the latter presented the check, it was again
dishonored.6
Private respondent referred the matter to a lawyer, who made a written demand upon Doronilla for the return of his
client’s money. Doronilla issued another check for P212,000.00 in private respondent’s favor but the check was again
dishonored for insufficiency of funds.7
Private respondent instituted an action for recovery of sum of money in the Regional Trial Court (RTC) in Pasig, Metro
Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was docketed as Civil Case No. 44485. He also filed
criminal actions against Doronilla, Sanchez and Dumagpi in the RTC. However, Sanchez passed away on March 16, 1985
while the case was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157, promulgated its
Decision in Civil Case No. 44485, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, 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 –
(a) the amount of P200,000.00, representing the money deposited, with interest at the legal rate from the filing of the
complaint until the same is fully paid;
(b) the sum of P50,000.00 for moral damages and a similar amount for exemplary damages;
(c) the amount of P40,000.00 for attorney’s fees; and
(d) the costs of the suit.
SO ORDERED.8
Petitioner appealed the trial court’s decision to the Court of Appeals. In its Decision dated June 25, 1991, the appellate
court affirmed in toto the decision of the RTC.9 It likewise denied with finality petitioner’s motion for reconsideration in
its Resolution dated May 5, 1994.10
On June 30, 1994, petitioner filed the present petition, arguing that –
I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTION BETWEEN THE DEFENDANT
DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONER’S BANK MANAGER, MR. RUFO
ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be PRIVATE
RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF NATURAL
JUSTICE;
III.
THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE REGIONAL TRIAL COURT
AND AFFIRMING THE JUDGMENT APPEALED FROM, AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE BASED ON
A MISAPPREHENSION OF FACTS;
IV.
21

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN SALUDARES VS.
MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS
APPLICABLE;
V.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE LOWER COURT THAT HEREIN
PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER DEFENDANTS FOR THE AMOUNT OF P200,000.00
REPRESENTING THE SAVINGS ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARY
DAMAGES, P40,000.00 FOR ATTORNEY’S FEES AND THE COSTS OF SUIT.11
Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto on September 25,
1995. The Court then required private respondent to submit a rejoinder to the reply. However, said rejoinder was filed
only on April 21, 1997, due to petitioner’s delay in furnishing private respondent with copy of the reply12 and several
substitutions of counsel on the part of private respondent.13 On January 17, 2001, the Court resolved to give due course
to the petition and required the parties to submit their respective memoranda.14 Petitioner filed its memorandum on
April 16, 2001 while private respondent submitted his memorandum on March 22, 2001.
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, as evidenced by
the check issued by Doronilla in the amount of P212,000.00, or P12,000 more than what private respondent deposited
in Sterela’s 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 respondent’s P200,000.00 because it is not
privy to the transaction between the latter and Doronilla.16
It argues further that petitioner’s Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing Doronilla to
withdraw from the savings account of Sterela since the latter was the sole proprietor of said company. Petitioner asserts
that Doronilla’s May 8, 1979 letter addressed to the bank, authorizing Mrs. Vives and Sanchez to open a savings account
for Sterela, did not contain any authorization for these two to withdraw from said account. Hence, the authority to
withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of Sterela, and who alone had
legal title to the savings account.17 Petitioner points out that no evidence other than the testimonies of private
respondent and Mrs. Vives was presented during trial to prove that private respondent deposited his P200,000.00 in
Sterela’s account for purposes of its incorporation.18 Hence, petitioner should not be held liable for allowing Doronilla
to withdraw from Sterela’s savings account.1a^/phi1.net
Petitioner also asserts that the Court of Appeals erred in affirming the trial court’s 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 Sterela’s savings account.19
Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the actual
damages suffered by private respondent, and neither may it be held liable for moral and exemplary damages as well as
attorney’s fees.20
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
He likewise asserts that the trial court did not err in finding that petitioner, Atienza’s employer, is liable for the return
of his money. He insists that Atienza, petitioner’s assistant manager, connived with Doronilla in defrauding private
respondent since it was Atienza who facilitated the opening of Sterela’s current account three days after Mrs. Vives and
Sanchez opened a savings account with petitioner for said company, as well as the approval of the authority to debit
Sterela’s savings account to cover any overdrawings in its current account.23
There is no merit in the petition.
At the outset, it must be emphasized that only questions of law may be raised in a petition for review filed with this
Court. The Court has repeatedly held that it is not its function to analyze and weigh all over again the evidence
22

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