1. 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.

2. Bonnevie v. CA
GR No. L-49101 October 24, 1983

Facts: Spouses Lozano mortgaged their property to secure the payment of a loan
amounting to 75K with private respondent Philippine Bank of Communication
(PBCom). The deed of mortgage was executed on 12-6-66, but the loan
proceeeds were received only on 12-12-66. Two days after the execution of the
deed of mortgage, the spouses sold the property to the petitioner Bonnevie for
and in consideration of 100k25K of which payable to the spouses and 75K as
payment to PBCom. Afterwhich, Bonnevie defaulted payments to PBCom
 prompting the latter to auction the property after Bonnivie failed to settle despite
subsequent demands, in order to recover the amount loaned. The latter now
assails the validity of the mortgage between Lozano and Pbcom arguing that on
the day the deed was executed there was yet no principal obligation to secure as
the loan of P75,000.00 was not received by the Lozano spouses, so that in the
absence of a principal obligation, there is want of consideration in the accessory
contract, which consequently impairs its validity and fatally affects its very
existence.

Issue: Was there a perfected contract of loan?

Held: Yes. From the recitals of the mortgage deed itself, it is clearly seen that
the mortgage deed was executed for and on condition of the loan granted to the
Lozano spouses. The fact that the latter did not collect from the respondent Bank
the consideration of the mortgage on the date it was executed is immaterial. A
contract of loan being a consensual contract, the herein contract of loan was
perfected at the same time the contract of mortgage was executed. The
promissory note executed on December 12, 1966 is only an evidence of
indebtedness and does not indicate lack of consideration of the mortgage at the
time of its execution.

BPI Investment Corporation

-vs-
CA
GR No. 133632, 15 February 2002
377 SCRA 117

FACTS
Frank Roa obtained a loan from Ayala Investment and Development
Corporation (AIDC), for the construction of his house. Said house and lot
were mortgaged to AIDC to secure the loan. Roa sold the properties to ALS
and Litonjua, the latter paid in cash and assumed the balance of Roas
indebtedness wit AIDC. AIDC was not willing to extend the old interest to
private respondents and proposed a grant of new loan of P500,000 with
higher interest to be applied to Roas debt, secured by the same property.
Private respondents executed a mortgage deed containing the stipulation.
The loan contract was signed on 31 March 1981 and was perfected on 13
September 1982, when the full loan was released to private respondents.
BPIIC, AIDCs predecessor, released to private respondents P7,146.87,
purporting to be what was left of their loan after full payment of Roas loan.
BPIIC filed for foreclosure proceedings on the ground that private
respondents failed to pay the mortgage indebtedness. Private respondents
maintained that they should not be made to pay amortization before the
actual release of the P500,000 loan. The suit was dismissed and affirmed by
the CA.

ISSUE
Whether or not a contract of loan is a consensual contract.

HELD
The Court held in the negative. A loan contract is not a consensual contract
but a real contract. It is perfected only upon delivery of the object of the
contract. A contract o loan involves a reciprocal obligation, wherein the
obligation or promise of each party is the consideration for that of the other;
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 is a proper
manner with what is incumbent upon him
BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF
APPEALS and ALS MANAGEMENT & DEVELOPMENT
CORPORATION, respondents.

DECISION
QUISUMBING, J.:

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, consolidated with (b) Civil Case No. 52093, for damages
[1]

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 attorneys 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 Roas
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 Roas 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 Roas arrearages by
paying BPIIC the sum of P190,601.35. This reduced Roas principal balance
to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the
proceeds of private respondents loan of P500,000.
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 Roas 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 sheriffs 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 attorneys 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 Roas 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.
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 ATTORNEYS 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 Roas 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 Roas 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, a simple loan is perfected upon the delivery of the object of
[4]

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. Petitioner
[5]
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.
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. As averred by private respondents, the
[8]

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. Only when a party has performed his part of the contract can he
[9]

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, factual matters need not tarry us now. On these points
[10]

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. For this purpose,
[12]

the amount of P25,000 is sufficient.

 Lastly, as in SSS where we awarded attorneys fees because private
respondents were compelled to litigate, we sustain the award of P50,000 in
favor of private respondents as attorneys 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
exemplary damages in favor of private respondents is DELETED, but the
award to them of attorneys 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.

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

MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants,

vs.
BECK, defendant-appellee.

Mauricio Carlos for appellants.

Felipe Buencamino, Jr. for appellee.

IMPERIAL, J.:

The plaintiff brought this action to compel the defendant to return her certain furniture which she lent
him for his use. She appealed from the judgment of the Court of First Instance of Manila which
ordered that the defendant return to her the three has heaters and the four electric lamps found in
the possession of the Sheriff of said city, that she call for the other furniture from the said sheriff of
Manila at her own expense, and that the fees which the Sheriff may charge for the deposit of the
furniture be paid pro rata by both parties, without pronouncement as to the costs.

The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar
street, No. 1175. On January 14, 1936, upon the novation of the contract of lease between the
plaintiff and the defendant, the former gratuitously granted to the latter the use of the furniture
described in the third paragraph of the stipulation of facts, subject to the condition that the defendant
would return them to the plaintiff upon the latter's demand. The plaintiff sold the property to Maria
Lopez and Rosario Lopez and on September 14, 1936, these three notified the defendant of the
conveyance, giving him sixty days to vacate the premises under one of the clauses of the contract of
lease. There after the plaintiff required the defendant to return all the furniture transferred to him for
them in the house where they were found. On November 5, 1936, the defendant, through
another person, wrote to the plaintiff reiterating that she may call for the furniture in the ground floor
of the house. On the 7th of the same month, the defendant wrote another letter to the plaintiff
informing her that he could not give up the three gas heaters and the four electric lamps because he
would use them until the 15th of the same month when the lease in due to expire. The plaintiff
refused to get the furniture in view of the fact that the defendant had declined to make delivery of all
of them. On November 15th, before vacating the house, the defendant deposited with the
Sheriff all the furniture belonging to the plaintiff and they are now on deposit in the warehouse
situated at No. 1521, Rizal Avenue, in the custody of the said sheriff.

In their seven assigned errors the plaintiffs contend that the trial court incorrectly applied the law: in
holding that they violated the contract by not calling for all the furniture on November 5, 1936, when
the defendant placed them at their disposal; in not ordering the defendant to pay them the value of
the furniture in case they are not delivered; in holding that they should get all the furniture from the
Sheriff at their expenses; in ordering them to pay-half of the expenses claimed by the Sheriff for the
deposit of the furniture; in ruling that both parties should pay their respective legal expenses or the
costs; and in denying pay their respective legal expenses or the costs; and in denying the motions
for reconsideration and new trial. To dispose of the case, it is only necessary to decide whether the
defendant complied with his obligation to return the furniture upon the plaintiff's demand; whether the
latter is bound to bear the deposit fees thereof, and whether she is entitled to the costs of litigation.
lawphi1.net

The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership
thereof; by this contract the defendant bound himself to return the furniture to the plaintiff, upon the
latters demand (clause 7 of the contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil
Code). The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's
demand, means that he should return all of them to the plaintiff at the latter's residence or house.
The defendant did not comply with this obligation when he merely placed them at the disposal of the
plaintiff, retaining for his benefit the three gas heaters and the four eletric lamps. The provisions of
article 1169 of the Civil Code cited by counsel for the parties are not squarely applicable. The trial
court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her
obligation to get the furniture when they were offered to her.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's
demand, the Court could not legally compel her to bear the expenses occasioned by the deposit of
the furniture at the defendant's behest. The latter, as bailee, was not entitled to place the furniture on
deposit; nor was the plaintiff under a duty to accept the offer to return the furniture, because the
defendant wanted to retain the three gas heaters and the four electric lamps.

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

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

The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff,
in the residence to return and deliver to the plaintiff, in the residence or house of the latter, all the
furniture described in paragraph 3 of the stipulation of facts Exhibit A. The expenses which may be
occasioned by the delivery to and deposit of the furniture with the Sheriff shall be for the account of
the defendant. the defendant shall pay the costs in both instances. So ordered.
 Republic vs CA 146 scra 15

FACTS: The Heirs of Domingo Baloy, (private respondents), applied for a

registration of title for their land. Their claim is based on their possessory
information title acquired by Domingo Baloy through the Spanish Mortgage
Law, coupled with their continuous, adverse and public possession of the
land in question. The Director of Lands opposed the registration alleging
that such land became public land through the operation of Act 627 of the
Philippine Commission. On Nov 26, 1902, pursuant to the executive order
of the President of U.S., the area was declared within the US Naval
Reservation.

The CFI denied respondents' application for registration. CA, reversed the
decision. Petitioners herein filed their Motion for Reconsideration, said MR
was denied, hence this petition for review on certiorari.

ISSUE: Whether or not private respondents' rights by virtue of their

possessory information title was lost by prescription.

RULING: No. A communication which contains an official statement of the

position of the Republic of the Philippines with regard to the status of the
land in question recognizes the fact that Domingo Baloy and/or his heirs
have been in continuous possession of said land since 1894 as attested by
an "Informacion Possessoria" Title, which was granted by the Spanish
Government. Hence, the disputed property is private land and this
possession was interrupted only by the occupation of the land by the U.S.
Navy in 1945. The heirs of the late Domingo P. Baloy, are now in actual
possession, and this has been so since the abandonment by the U.S.
Navy.

The occupancy of the U.S. Navy was not in the concept of owner. It holds
of the character of a commodatum. It cannot affect the title of Domingo
Baloy. One's ownership of a thing may be lost by prescription by reason of
another's possession if such possession be under claim of ownership, not
where the possession is only intended to be temporary, as in the case of
the U.S. Navy's occupation of the land concerned, in which case the owner
is not divested of his title, although it cannot be exercised in the meantime.
Credit - 6
Producers Bank of the Philippines vs CA (2003)

Doctrine:

Facts:
Vives (will be the creditor in this case) was asked by his friend Sanchez to help the latters friend, Doronilla
(will be the debtor in this case) in incorporating Doronillas business Strela. This help basically involved
Vives depositing a certain amount of money in Strelas bank account for purposes of incorporation (rationale:
Doronilla had to show that he had sufficient funds for incorporation). This amount shall later be returned to
Vives.
Relying on the assurances and representations of Sanchez and Doronilla, Vives issued a check of P200,00 in
favor of Strela and deposited the same into Strelas newly-opened bank account (the passbook was given to
the wife of Vives and the passbook had an instruction that no withdrawals/deposits will be allowed unless the
passbook is presented).
Later on, Vives learned that Strela was no longer holding office in the address previously given to him. He
later found out that the funds had already been withdrawn leaving only a balance of P90,000. The Vives
spouses tried to withdraw the amount, but it was unable to since the balance had to answer for certain
postdated checks issued by Doronilla.
Doronilla made various tenders of check in favor of Vives in order to pay his debt. All of which were
dishonored.
Hence, Vives filed an action for recovery of sum against Doronilla, Sanchez, Dumagpi and Producers Bank.
TC & CA: ruled in favor of Vives.

Issue/s:
(1) WON the transaction is a commodatum or a mutuum. COMMODATUM.
(2) WON the fact that there is an additional P 12,000 (allegedly representing interest) in the amount to be
returned to Vives converts the transaction from commodatum to mutuum. NO.
(3) WON Producers Bank is solidarily liable to Vives, considering that it was not privy to the transaction
between Vives and Doronilla. YES.

Held/Ratio:
(1) The transaction is a commodatum.
CC 1933 (the provision distinguishing between the two kinds of loans) seem to imply that if the subject of the
contract is a consummable thing, such as money, the contract would be a mutuum. However, there are
instances when a commodatum may have for its object a consummable thing. Such can be found in CC 1936
which states that consummable goods may be the subject of commodatum if the purpose of the contract is
not the consumption of the object, as when it is merely for exhibition. In this case, the intention of the
parties was merely for exhibition. Vives agreed to deposit his money in Strelas account specifically for
purpose of making it appear that Streal had sufficient capitalization for incorporation, with the promise that
the amount should be returned withing 30 days.
(2) CC 1935 states that the bailee in commodatum acquires the use of the thing loaned but not its fruits. In this
case, the additional P 12,000 corresponds to the fruits of the lending of the P 200,000.
Atienza, the Branch Manager of Producers Bank, allowed the withdrawals on the account of Strela despite the rule
written in the passbook that neither a deposit, nor a withdrawal will be permitted except upon the production of
the passbook (recall in this case that the passbook was in the possession of the wife of Vives all