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Introduction cases
Acme Shoe Rubber & Plastic Corp. vs. Court of Appeals, 260SCRA 714 [1996]
Navoa vs. Court of Appeals, 251 SCRA 545 [1995].
Loan cases
Republic vs. First National City Bank of New York, 3 SCRA 851 [1961].
People vs. Concepcion,44 Phil. 126 [1922].
Herrera vs. Petrophil Corporation, 146 SCRA 385 [1986].
Saura Import and Export Co., Inc. vs.Development Bank of the Phils., 44 SCRA 445 [1972];
BPI Investment Corp. vs. Court of Appeals, 377 SCRA 117 [2002].
Bonnevie vs. Court of Appeals, 125 SCRA 122[1983].
Central Bank of the Phils. vs. Court of Appeals, 139 SCRA 46 [1985].
Commodatum cases
Republic vs. Bagtas, 6 SCRA 262 [1962].
Mina vs. Pascual,25 Phil. 540 [1913].
Mercado vs. Aguilar, [C.A.] 45 O.G. Sup. 5,p. 118.
Catholic Vicar Apostolic of the Mt. Province vs. Court of Appeals, 165 SCRA 515 [1988].
Pajuyo vs. Court of Appeals, 430 SCRA 492 [2004].
Quintos and Ansaldo vs. Beck, 69 Phil. 108 [1939].

Acme Shoe Rubber & Plastic Corporation v. Court of Appeals, 260 SCRA 714 (1996)
FACTS:
- Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber & Plastic Corporation,"
executed, for and in behalf of the company, a chattel mortgage in favor of Producers Bank of the Philippines. A
provision in the chattel mortgage agreement was to this effect "In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former
note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts,
letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this
mortgage shall also stand as security for the payment of the said promissory note or notes and/or
accommodations without the necessity of executing a new contract and this mortgage shall have the same force
and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This
mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR
to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during
or after the constitution of this mortgage.
-In due time, the loan was paid by petitioner corporation. Subsequently, in 1981, it obtained from Producers
Bank additional financial accommodations These borrowings were on due date also fully paid.
-The bank yet again extended to ACME a covered by four promissory notes. Due to financial constraints, the
loan was not settled at maturity.
-The bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage, prompting ACME to
forthwith file an action for injunction, with damages and a prayer for a writ of preliminary injunction.
TC and CA:
-Dismissed the complaint and ordered the foreclosure of the chattel mortgage. ACME is bound by the
stipulations, aforequoted, of the chattel mortgage.
ISSUE:
-Whether or not chattel mortgage may secure after incurred obligations.
HELD:
-Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or a
suretyship, the faithful performance of the obligation by the principal debtor is secured by the personal
commitment of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an
antichresis, that fulfillment is secured by an encumbrance of property - in pledge, the placing of movable
property in the possession of the creditor; in chattel mortgage, by the execution of the corresponding deed
substantially in the form prescribed by law; in real estate mortgage, by the execution of a public instrument
encumbering the real property covered thereby; and in antichresis, by a written instrument granting to the
creditor the right to receive the fruits of an immovable property with the obligation to apply such fruits to the
payment of interest, if owing, and thereafter to the principal of his credit - upon the essential condition that if the
principal obligation becomes due and the debtor defaults, then the property encumbered can be alienated for the
payment of the obligation, but that should the obligation be duly paid, then the contract is automatically
extinguished proceeding from the accessory character of the agreement. As the law so puts it, once the
obligation is complied with, then the contract of security becomes, ipso facto, null and void.

-While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long
as these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at
the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that
are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however,
does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt
is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the
form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as
to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing
agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts
extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed.
REPUBLIC V PHIL. NATL BANK
L-No. 16106, Dec. 30, 1961; 3 SCRA 851
~kiyo~
FACTS
-RP filed a complaint for escheat of certain unclaimed bank deposit balances against several banks under Act.
3936 which provides that unclaimed balances (w/c includes credits or deposits of money, bullion, security and
other evidence of indebtedness of any kind + interest) in favor of persons not heard from for 10 years or more,
with the increase and proceeds thereof, shall be deposited with the Insular Treasurer to the credit of the Phil.
Government. Among these banks was the First National City Bank of New York who argued that some of its
credits didnt fall within the purview of the Act. The court held that cashiers checks and demand drafts fall
under the Act but upon MFR changed its view and excluded drafts, hence this appeal.
ISSUE
WON demand drafts create a creditor-debtor relationship between drawee and payee, thus falling within the
meaning of credits in Act. 3969
HELD: NO
-A demand draft is not of the same category as a cashiers check which should fall under the Act.
In banking terminology, the term bank draft is used interchangeably with a bill of exchange. A bill of exchange
under the NIL (sec. 127) does not operate as an assignment of funds in the hands of the drawee who is not liable
on the instrument until he accepts. In fact, the law requires presentment w/in a reasonable time or else the drawer
is discharged from liability. Since it is admitted in this case that the drafts in question were never presented either
for acceptance or payment, appellee bank never became a debtor of the payees, hence the drafts never became
credits under the Act.
-Drafts must however be distinguished from cashiers checks, which is simply a bill of exchange drawn by the
bank on itself; it is equivalent to a certified check and its deposit passes to the credit of the holder who then
becomes a depositor of that amount.
Disposition TC decision modified; telegraphic transfer payment orders should be escheated to RP (see case for
telegraphic orders)
PEOPLE vs. CONCEPCION, 44 Phil. 126
FACTS:
Venancio Concepcion, President of the Philippine National Bank and a member of the Board thereof, authorized
an extension of credit in favor of "Puno y Concepcion, S. en C. to the manager of the Aparri branch of the
Philippine National Bank. "Puno y Concepcion, S. en C." was a co-partnership where Concepcion is a
partner. Subsequently, Concepcion was charged and found guilty in the Court of First Instance of
Cagayan with violation of section 35 of Act No. 2 7 4 7 . S e c t i o n 3 5 o f A c t N o . 2 7 4 7
p r o v i d e s t h a t t h e N a t i o n a l B a n k s h a l l n o t , d i r e c t l y o r indirectly, grant loans to any of

the members of the board of directors of the bank nor to agents of the branch banks. Counsel for the
defense argue that the documents of record do not prove that authority to make a loan was given, but
only show the concession of a credit. They averred that the granting of a credit to the co-partnership
"Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National
Bank, is not a "loan" within the meaning of section 35 of Act No. 2747.
ISSUE:
Whether or not the granting of a credit of P300,000 to the co-partnership "Puno y
Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank,
a"loan" within the meaning of section 35 of Act No. 2747.
HELD:
The Supreme Court ruled in the affirmative. The "credit" of an individual means his ability to
borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise.
A "loan" means the delivery by one party and the receipt by the other party of a given sum of
money, upon an agreement, express or implied, to repay the sum loaned,with or without interest. The concession
of a "credit" necessarily involves the granting of "loans"up to the limit of the amount fixed in the "credit,
HERRERA vs PETROPHIL CORP.
[G.R. No. L-48349, December 29, 1986]
CRUZ, J.
FACTS:

On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil Corp.,) entered

into a lease agreement, whereby the former leased to the latter a portion of his property for a period of 20yrs.
subject to the condition that monthly rentals should be paid and there should be an advance payment of
rentals for the first eight years of the contract, to which ESSO paid on December 31, 1969. However, ESSO
deducted the amount of 101, 010.73 as interest or discount for the eight years advance rental.

On August 20, 1970, ESSO informed Herrera that there had been a mistake in the computation of

the interest and paid an additional sum of 2,182.70; thus, it was reduced to 98, 828.03.

As such, Herrera sued ESSO for the sum of 98, 828.03, with interest, claiming that this had been

illegally deducted to him in violation of the Usury Law.

ESSO argued that amount deducted was not usurious interest but rather a discount given to it for

paying the rentals in advance. Judgment on the pleadings was rendered in favor of ESSO. Thus, the matter
was elevated to the SC for only questions of law was involve.
ISSUE: W/N the contract between the parties is one of loan or lease.

RULING:

Contract between the parties is one of lease and not of loan. It is clearly denominated a "LEASE

AGREEMENT." Nowhere in the contract is there any showing that the parties intended a loan rather than a
lease. The provision for the payment of rentals in advance cannot be construed as a repayment of a loan
because there was no grant or forbearance of money as to constitute an indebtedness on the part of the lessor.
On the contrary, the defendant-appellee was discharging its obligation in advance by paying the eight years
rentals, and it was for this advance payment that it was getting a rebate or discount.

There is no usury in this case because no money was given by the defendant-appellee to the

plaintiff-appellant, nor did it allow him to use its money already in his possession. There was neither loan
nor forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee to deduct
from the total payments because they were being made in advance for eight years. The discount was in effect
a reduction of the rentals which the lessor had the right to determine, and any reduction thereof, by any
amount, would not contravene the Usury Law.

The difference between a discount and a loan or forbearance is that the former does not have to be

repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on usury.

To constitute usury, "there must be loan or forbearance; the loan must be of money or something

circulating as money; it must be repayable absolutely and in all events; and something must be exacted for
the use of the money in excess of and in addition to interest allowed by law."

Saura Import &Export Co., Inc v. DBP

G.R. No. L-24968 April 27, 1972
Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before its conversion to DBP) for a loan of
500k secured by a first mortgage of the factory building to finance for the construction of a jute mill factory
and purchase of factory implements. RFC accepted and approved the loan application subject to some
conditions which Saura admitted it could not comply with. Without having received the amount being
loaned, and sensing that it could not at anyway obtain the full amount of loan, Saura Inc. then asked for
cancellation of the mortgage which RFC also approved. Nine years after the cancellation of the mortgage,
Saura sued RFC for damages for its non-fulfillment of obligations arguing that there was indeed a perfected
consensual contract between them.
Issue: Was there a perfected consensual contract? Was there a real contract of loan which would warrant
recovery of damages arising out of breach of such contract?

Held: On the first issue, yes, there was indeed a perfected consensual contract, as recognized in Article 1934
of the Civil Code. 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 second issue and the basic claim that
the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages. The
action thus taken by both partiesSaura's request for cancellation and RFC's subsequent approval of such
cancellationwas in the nature of mutual desistance what Manresa terms "mutuo disenso" which is a
mode of extinguishing obligations. It is a concept derived from the principle that since mutual agreement
can create a contract, mutual disagreement by the parties can cause its extinguishment. In view of such
extinguishment, said perfected consensual contract to deliver did not constitute a real contract of loan.

Central Bank of the Philippines v. CA (1985)

Ponente: Makasiar, C.J.
Topic: Delay (Art. 1169)
Facts:
April 28, 1965 - Island Savings Bank (ISB) approved the loan application for P80,000 of Sulpicio
Tolentino, who, as a security for the loan, also executed a real estate mortgage over his 100-ha land. The
approved loan application called for P80,000 loan, repayable in semi-annual installments for a period of
3 years, with 12% interest.
May 22, 1965 a mere P17,000 partial release of the loan was made by ISB, and Tolentino and his wife
Edita signed a promissory note for P17,000 at 12% annual interest, payable within 3 years from the date
of execution of the contract at semi-annual installments of P3,459.
An advance interest for the P80,000 loan covering a 6-mo period amounting to P4,800was deducted
from the partial release of P17,000, but this was refunded to Tolentino on July 23, 1965, after being
informed by ISB that there was no fund yet available for the release of the P63,000 balance.
Aug. 13, 1965 the Monetary Board of the Central Bank issued Resolution No. 1049, which prohibited
ISB from making new loans and investments, after finding that it was suffering liquidity problems.
June 14, 1968 the Monetary Board issued Resolution No. 967, which prohibited ISB from doing
business in the Philippines, after finding that it failed to put up the required capital to restore its
solvency.
Aug. 1, 1968 ISB, in view of non-payment of the P17,000 covered by the promissory note, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the 100-ha land; and
the sheriff scheduled auction.
Tolentino filed a petition with the CFI for injunction, specific performance or rescission and damages
with preliminary injunction, alleging that since ISB failed to deliver the P63,000 remaining balance of
the loan, he is entitled to specific performance by ordering ISB to deliver it with interest of 12% per
annum from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate mortgage.
CFI issued a TRO enjoining ISB from continuing with the foreclosure of the mortgage, however, after
finding Tolentinos petition unmeritorious, ordered the latter to pay ISB P17,000 plus legal interest and
legal charges and lifting the TRO so the sheriff may proceed with the foreclosure.
CA, on appeal by Tolentino, modified CFIs decision by affirming dismissal of Tolentinos petition for
specific performance, but ruled that ISB can neither foreclose the mortgage nor collect the P17,000 loan.
SC: The parties, in the P80,000 loan agreement, undertook reciprocal obligations, wherein the
obligation/promise of each party is the consideration for that of the other; and when one party has

performed or is ready and willing to perform his part of the contract, the other party who has not
performed or is not ready and willing to perform incurs in delay (Art. 1169, CC).
When Tolentino executed a real estate mortgage, he signified his willingness to pay the P80,000 loan,
and from such date, the obligation of ISB to furnish the loan accrued. Thus, ISBs delay started on April
28, 1965 and lasted 3 years or when Resolution No. 967 was issued prohibiting ISB from doing further
business, which made it legally impossible from ISB to furnish the P63,000 of the loan.
Resolution No. 1049 cannot interrupt the default of ISB in complying with its obligation to release the
P63,000 balance because it merely prohibited ISB from making new loans and investments, not from
releasing the balance of loan agreements previously contracted.
The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract,
nor does it constitute any defense to a decree of specific performance; and the mere fact of insolvency of
a debtor is never an excuse for the nonfulfillment of an obligation, but instead, is taken as a breach of
contract.
The fact that Tolentino demanded and accepted the refund of the pre-deducted interest cannot be taken
as a waiver of his right to collect the P63,000 balance. The act of ISB in asking for the advance interest
was improper considering that only P17,000 out of the P80,000 loan was released.
The alleged discovery by ISB of the overvaluation of the loan collateral cannot exempt it from
complying with its obligation to furnish the entire P80,000 loan because bank officials/employees have
the obligation to investigate the existence and valuation of the properties being offered as a loan security
before approving the loan application.

Issues/Held/Ratio
1) WON the action of Tolenitno for specific performance can prosper. NO.
Since ISB was in default under the agreement, Tolentino may choose between specific performance or
rescission, but since ISB is now prohibited from doing further business, the only remedy left is Rescission only
for the P63,000 balance of the loan.
2) WON Tolentino is liable to pay the P17,000 debt covered by the promissory note. YES.

The bank was deemed to have complied with its reciprocal obligation to furnish a P17,000 loan. The
promissory note gave rise to Tolentinos reciprocal obligation to pay such loan when it falls due and his failure to
pay the overdue amortizations under the promissory note made him a party in default, hence not entitled to
rescission (Art. 1191, CC). ISB has the right to rescind the promissory note, being the aggrieved party.
Since both parties were in default in the performance of their reciprocal obligations, both are liable for
damages. In case both parties have committed a breach of their reciprocal obligations, the liability of the first
infractor shall be equirably tempered by the courts (Art. 1192, CC). The liability of ISB for damages in not
furnishing the entire loan is offset by the liability of Tolentino for damages (penalties and surcharges) for not
paying his overdue P17,000 debt. Since Tolentino derived some benefit for his use of the P17,000, he should
account for the interest thereon (interest was not included in the offsetting).
3) WON Tolentinos real estate mortgage can be foreclosed to satisfy the P17,000 if his liability to pay

therefor subsists. NO.

The fact that when Tolentino executed his real estate mortgage, no consideration was then in existence, as
there was no debt yet because ISB had not made any release on the loan, does not make the real estate mortgage
void for lack of consideration.
It is not necessary that any consideration should pass at the time of the execution of the contract of real
mortgage. When the consideration is subsequent to the mortgage, the latter can take effect only when the debt
secured by it is created as a binding contract to pay. And when there is partial failure of consideration, the
mortgage becomes unenforceable to the extent of such failure. Where the indebtedness actually owing to the
holder of the mortgage is less than the sum named in the mortgage, the mortgage cannot be enforced for more
than the actual sum due.
Since ISB failed to furnish the P63,000 balance, the real estate mortgage of Tolentino became unenforceable
to such extent. P63,000 is 78.75% of P80,000, hence the mortgage covering 100 ha is unenforceable to the extent

of 78.75 ha. The mortgage covering the remainder of 21.25 ha subsists as a security for the P17,000 debt.
Judgment:
1) Tolentino is ordered to pay ISB P17,000 plus P41, 210 (12% interest per annum)
2) In case Tolentino fails to pay, his real estate mortgage covering 21.25 ha shall be foreclosed to satisfy his
total indebtedness
3) The real estate mortgage covering 78.75 ha is unenforceable and ordered released in favor of Tolentino

Credit Transactions Case Digest: Republic V. Bagtas (1962)

FACTS:
May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal
Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a
Sahiniwal, of P744.46, for a period of 1 year for breeding purposes subject to a breeding fee of 10% of the
book value of the bulls
May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one bull was
approved while the others are to be returned
March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of the 3 bulls
October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly depreciation to
be approved by the Auditor General.
October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be returned or their
book value without deductions should be paid not later than October 31, 1950 which he was not able to do
December 20, 1950: An action at the CFI was commenced against Jose praying that he be ordered to return
the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee of P199.62, both with
interests, and costs
July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the
bad peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending
appeal he had taken to the Secretary of Agriculture and Natural Resources and the President of the
Philippines, he could not return the animals nor pay their value and prayed for the dismissal of the
complaint.
RTC: granted the action
December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve the writ
outside Manila
December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October 23, 1951 and
administratrix of his estate, was notified
January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26, 1952 evidenced by
recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid and prayed that the writ of
execution be quashed and that a writ of preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the loss due to
force majeure due to delay.

HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs
If contract was commodatum then Bureau of Animal Industry retained ownership or title to the bull it should
suffer its loss due to force majeure. A contract of commodatum is essentially gratuitous. If the breeding fee
be considered a compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil
Code the lessee would be subject to the responsibilities of a possessor in bad faith, because she had
continued possession of the bull after the expiry of the contract. And even if the contract be commodatum,
still the appellant is liable if he keeps it longer than the period stipulated
the estate of the late defendant is only liable for the sum of P859.63, the value of the bull which has not been
returned because it was killed while in the custody of the administratrix of his estate
Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having
been instituted in the CFI, the money judgment rendered in favor of the appellee cannot be enforced by
means of a writ of execution but must be presented to the probate court for payment by the appellant, the
administratrix appointed by the court.

Mina vs Pascual 25 Phil 540

Francisco is the owner of land and he allowed his brother, Andres, to erect a warehouse in that lot. Both
Francisco and Andres died and their children became their respective heirs: Mina for Francisco and Pascual
for Andres. Pascual sold his share of the warehouse and lot. Mina opposed because the lot is hers because
her predecessor (Francisco) never parted with its ownership when he let Andres construct a warehouse,
hence, it was a contract of commodatum.
Issue: What is the nature of the contract between Francisco and Andres?
The Supreme Court held that it was not a commodatum. It is an essential feature of commodatum that the
use of the thing belonging to another shall be for a certain period. The parties never fixed a definite period
during which Andres could use the lot and afterwards return it.
NOTA BENE: It would seem that the Supreme Court failed to consider the possibility of a contract of
precardium between Francisco and Andres. Precardium is a kind of commodatum wherein the bailor may
demand the object at will if the contract does not stipulate a period or use to which the thing is devoted.

CATHOLIC VICAR APOSTOLIC V CA 165 SCRA 515 (1988)

The whole controversy started when Catholic Vicar of the Mountain Province (Vicar for brevity) filed with the
CFI of Baguio, Benguet
an application for registration of title for Lots 1,2,3 and 4 of Psu-194357 situated
at Poblacion Central, La Trinidad, Benguet. Said lots being the sites of the Catholic Church building, convents,
school, etc., Upon learning of the application, the Heirs of Juan Valdez and the Heirs of Emigdio Octaviano filed
an Answer/Opposition thereto on Lots 2 and 3,respectively, asserting ownership and title thereto. The land
registration court promulgated its decision confirming the registrable title to Vicar. Both heirs of Valdez and
Octaviano appealed to the Court of Appeals. The CA modified the decision of the land registration court and
found that Lots 2 and 3 were possessed by the predecessors-in-interest of private respondents under claim of
ownership in good faith from 1906 to 1951; that Vicar has been in possession of the same lots as bailee in
commodatum up to 1951, when Vicar repudiated the trust and when it applied for registration in1962; that Vicar
had just been in possession as owner for 11years, hence there is no possibility of acquisitive prescription which
requires 10 years possession with just title and 30 years possession without.
ISSUE: WON the failure of Vicar to return the subject property to private respondents would constitute an
adverse possession that would entitle Vicar to have a just title in order for ordinary acquisitive prescription to set
in.
RULING:
Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar
after the church and the convent were destroyed. They never asked for the return of the house, but when
they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees'
failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the
part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse
claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of
petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive
prescription because of the absence of just title.

The Court of Appeals found that the predecessors-in-interest and private respondents were possessors
under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee in commodatum;
and that the adverse claim and repudiation of trust came only in 1951.
Pajuyo v. CA
GR No. 146364 June 3, 2004
Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he should return the same upon
demand and with the condition that Guevara should be responsible of the maintenance of the property. Upon
demand Guevara refused to return the property to Pajuyo. The petitioner then filed an ejectment case against
Guevara with the MTC who ruled in favor of the petitioner. On appeal with the CA, the appellate court
reversed the judgment of the lower court on the ground that both parties are illegal settlers on the property
thus have no legal right so that the Court should leave the present situation with respect to possession of the
property as it is, and ruling further that the contractual relationship of Pajuyo and Guevara was that of a
commodatum.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a commodatum?

Held: No. The Court of Appeals theory that the Kasunduan is one of commodatum is devoid of merit. In a
contract of commodatum, one of the parties delivers to another something not consumable so that the latter
may use the same for a certain time and return it. An essential feature of commodatum is that it is gratuitous.
Another feature of commodatum is that the use of the thing belonging to another is for a certain period.
Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated,
or after accomplishment of the use for which the commodatum is constituted. If the bailor should have
urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely
tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is
called a precarium. Under the Civil Code, precarium is a kind of commodatum. The Kasunduan reveals that
the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan
did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The
imposition of this obligation makes the Kasunduan a contract different from a commodatum. The effects of
the Kasunduan are also different from that of a commodatum. Case law on ejectment has treated relationship
based on tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of permission
would result in the termination of the lease. The tenants withholding of the property would then be
unlawful.
QUINTOS vs. BECK, 69 Phil 108
FACTS: Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos house. Quintos
granted Beck the use of the furniture found on the leased house, among these were three gas heaters and 4
electric lamps, subject to the condition that the defendant would return them to the plaintiff upon the latter's
demand. Quintos sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of
the conveyance. Beck informed Quintos that the latter can get the furniture at the ground floor of the house,
however, at a later date, Beck told Quintos that he will return only the other furniture but not the gas heaters and
the electric lamps as he is to return them only after the expiration of the lease contract. When the lease contract
expires, Beck deposited the furniture to the sheriffs warehouse. Quintos refused to get the furniture in view of
the fact that the defendant had declined to make delivery of all of them. Consequently, Quintos brought an action
to compel Beck to return her certain furniture which she lent him for his use. The trial court ruled in favour of
Beck holding that Quintos failed to comply with her obligation to get the furniture when they were offered to
her. On appeal of the case, the Court of First Instance of Manila affirmed the lower courts decision. Hence, this
petition.

ISSUE: Whether or not the trial court erred in ruling that Quintos failed to comply with her obligation to get the
furniture when they were offered to her.
HELD: The contract entered into between the parties is one of commadatum. Under it the plaintiff gratuitously
granted the use of the furniture to the defendant, reserving for herself the ownership thereof. By this contract the
defendant bound himself to return the furniture to the plaintiff, upon the latters demand. The obligation
voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand, means that he should
return all of them to the plaintiff at the latter's residence or house. The defendant did not comply with this
obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas
heaters and the four electric lamps. The trial court, therefore, erred when it came to the legal conclusion that the
plaintiff failed to comply with her obligation to get the furniture when they were offered to her.