Republic vs Bagtas

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.
2. Garcia vs Thio

16 March 2007

J. Corona

FACTS:

Petitioner – Garcia

Respondent – Thio

- In February 1995, Thio received from Garcia a crossed check amounting to $100,000 payable to
the order of Marilou Santiago. Garcia the received from Thio $3,000 for 4 months and P76,500 on July,
August, September and October (Representing interest due). In June 1995, Thio received again from
Garcia P500,000. Garcia the received from Thio P20,000 on August, September October and November.
(Represent interest due). According to Garcia, Thio failed to pay the $100,000 and P500,000 amount
opting him to file a case for sum of money and damages. Both loans are not covered by a promissory
note as the two are close friends. Thio countered that it was Marilou Santiago whom the money was
lent by Garcia. 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.RTC ruled in
favor of Garcia. CA reversed RTC.

ISSUE:

1. Who borrowed the money (Santiago or Thio)

HELD:

1. Thio

- A loan is a real contract as it is perfected upon delivery of the object. This is different from a
consensual contract which only requires consent. An accepted promise to deliver by way of
commodatum or simple loan is binding upon parties, however, the loan itself is only perfected upon
delivery of the object. Petitioner insisted that it was upon respondent’s instruction that both checks
were made payable to Santiago. It was also argued that upon delivery of the checks, respondents
acquired control and possession of it and can choose to retain or delivery it to Santiago. Factors that
supported the conclusions are: Petitioner did not know Santiago personally, Leticia Ruiz (friend of both
petitioner and respondent) testified that the plan of Thio is to borrow money from Garcia then
subsequently lend it out to Santiago. 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. She claimed, however, that Santiago would replace the checks with cash. 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. In the petition of insolvency filed by Santiago, the one listed as creditor is Thio rather than
Garcia. No corroborative evidence was presented by Thio.
Republic vs CA

FACTS:

The heirs of Domingo Baloy, represented by Ricardo Baloy, filed an application for land registration with
a possessory title acquired under the provisions of the Spanish Mortgage Law. The Court of First
Instance of Zambales, denied the application thus it was interposed on appeal to the Court of Appeals.
The appellate court, thru its Fifth Division reversed the decision and approved the application for
registration. The petitioners filed their Motion for reconsideration and was denied.

A communication/letter which contains an official statement, recognizes the fact that Domingo Baloy
and/or his heirs have been in continuous possession of the said land since 1894, as attested by an
“Informacion Possessoria” Title, which was granted by the Spanish Government. And was interrupted
only by the occupation of the land by the US Navy in 1945.

ISSUES:

Whether or not there is a need for a court order for a private land to be deemed to have become public
land.

Whether or not the private respondents’ rights by virtue of their possessory information title was lost by
prescription.

HELD:

The appealed decision is AFFIRMED.

RULING:

Under Sec 3 Act 827. Private land could be deemed to have become public land by virtue of a judicial
declaration after due process and hearing. Without a judgement or order declaring the land to be public,
its private character and the possessory information title over it must be respected.

During the interim of 57 years from November 26, 1902 to December 17, 1959 the possessory rights of
Baloy or his heirs were merely suspended and not lost by prescription. The occupancy of the US Navy
was not in the concept of owner. It partakes of the character of a commodatum. 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 transient, in which case the owner is not
divested of his title, although it cannot be exercised in the meantime.
QUINTOS VS BECK 69 PHIL 108

Facts: Quintos and Beck entered into a contract of lease, whereby the latter occupied the former’s
house. On Jan 14, 1936, the contract of lease was novated, wherein the QUintos gratuitously granted to
Beck the use of the furniture, subject to the condition that Beck should return the furnitures to Quintos
upon demand. Thereafter, Quintos sold the property to Maria and Rosario Lopez. Beck was notified of
the conveyance and given him 60 days to vacate the premises. IN addition, Quintos required Beck to
return all the furniture. Beck refused to return 3 gas heaters and 4 electric lamps since he would use
them until the lease was due to expire. Quintos refused to get the furniture since Beck had declined to
return all of them. Beck deposited all the furniture belonging to QUintos to the sheriff.

ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos when it deposited
the furnitures to the sheriff.

RULING: 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.

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 nt 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.
Delos Santos v. Jarra Digest

G.R. No. L-4150 February 10, 1910

Facts: The Plaintiff Felix delos Santos filed this suit against Agustina Jarra. Jarra was the administratix of
the estate of Jimenea. Plaintiff alleged that he owned 10 1st class carabaos which he lent to his father-
in-law Jimenea to be used in the animal-power mill without compensation. This was done on the
condition of their return after the work at the latter’s mill is terminated. When delos Santos demanded
the return of the animals Jimenea refused, hence this suit.

Issue: W/N the contracts is one of a commodatum

Ruling: YES. The carabaos were given on commodatum as these were delivered to be used by defendant.
Upon failure of defendant to return the cattle upon demand, he is under the obligation to indemnify the
plaintiff by paying him their value. Since the 6 carabaos were not the property of the deceased or of any
of his descendants, it is the duty of the administratrix of the estate to either return them or indemnify
the owner thereof of their value.

MANZANO V. PEREZ

August 9, 2001

Panganiban, J.

Facts

1. Petitioner, Emilia Manzano, owns the subject property (a lot and a house). She is the sister of
Nieves Manzano, the predecessor-in-interest of the respondent.

2. Emilia alleges that Nieves BORROWED (commodatum) the property for the latter to use as
collateral to a projected loan. Emilia agreed.

3. Two deeds of conveyances for the sale of the lot and the house were executed for a
consideration of P1.00 plus OTHER VALUABLES.
4. Nieves, with her husband, succeeded in obtaining the loan from Rural Bank of Infanta, and
executed a Real Estate Mortgage of the property as collateral.

5. Na-tegui si Nieves in 1979. Her husband, Miguel and children, as heirs, allegedly refused to
return the property even after payment of the loan.

6. Emilia sought for the annulment of the deeds of sale and execution of a deed of reconveyance
of the property + damages eklat.

7. As an affirmative defense, Miguel argued that the original agreement was to resell the property
to Emilia after payment of the loan but since the property was their only memory of Emilia, they politely
refused to sell the same. Huhuhu

ISSUE: Was the agreement between the parties a COMMODATUM OR an ABSOLUTE SALE?

Held:

SC:

ABSOLUTE SALE. The Deed of Sale executed was valid. Perez is the rightful owner of the subject
property.

CA: ABSOLUTE SALE

RTC: COMMODATUM

Labanan ito ng ebidensya. SC reviewed the factual findings because of the conflicting findings of the
lower tribunals.

Ratio:

Petitioner presented no convincing proof of her OWNERSHIP of the subject property. Respondents
presented the deeds of sale were each was in consideration of P1.00 plus OTHER VALUABLES and having
been notarized, must be accorded with the presumption to have been duly executed. Also, after the
sale, Tax Declaration No.9589 which covered the property was issued in favor of NIEVES.

Findings of the CA which the Court agreed with:

1. If EMILIA maintained the ownership of the property, she would have not agreed to reacquire
one-half of the property for a consideration of 10k.
2. If indeed the agreement was to merely use the property as collateral, it was not explained why
physical possession had to be transferred to NIEVES and family.
3. Non-payment of NIEVES of real estate taxes does not prejudice them. Payment of realty tax is
not conclusive evidence of ownership. It becomes strong evidence of ownership when accompanied by
ACTUAL POSSESSION. Also, EMILIA only began paying the taxes due when the case was instituted. wais
si day.
4. NIEVES obtained a Cert of Tax Declaration as the owner and possessor of the property. The
issuance of the tax declaration number indicates that the transfer of property was based on the Deed of
Absolute Sale.
5. There is a presumption that a written contract was for a valuable consideration. The party
alleging the lack of consideration has the burden of proof.
6. Assuming that the consideration is suspiciously insufficient, it will not necessarily invalidate the
sale. Inadequacy of monetary consideration does not render a conveyance null since the vendor’s
liberality may be a sufficient cause for a valid contract.
Other points by the Court:
1. Emilia avers that the property was merely by virtue of tolerance – this allegation has not been
substantiated hence cannot stand.
2. In order to prevail over a written agreement of the parties and the presumption of regularity in
the execution thereof, there must be clear and convincing evidence that is more than merely
preponderant but EMILIA failed to come up with even a preponderance of evidence.
3. Jurisprudence on the subject matter, when applied thereto, points to the existence of a sale, not
a commodatum over the subject house and lot.

Claims of EMILIA:
1.She inherited the subject house from her parents; her siblings waived claim over the same. 2. The
property was mortgaged to secure a loan of 30k in the name of Nieves.3. Upon full payment of the loan,
the documents pertaining to the house were returned to her 4. Three of the respondents signed a
document transferring one half of the property to her for 0k did not materialize because of the refusal
of the other respondents to sign 5. EMILIA hacked the stairs of the house yet no case was filed against
her. For the Court, these claims even buttress the claim of the Miguel Perez: Indeed, how could one of
them have obtained a mortgage over the property, without having dominion over it? Why would they
execute a reconveyance of one half of it in favor of petitioner? Why would the latter have to pay
P10,000 for that portion if, as she claims, she owns the whole? NOTE: There was no discussion or
anything said about a COMMODATUM and SALE. Yun lang.

Producers Bank of the Philippines vs CA (2003)

Facts:
 Vives (will be the creditor in this case) was asked by his friend Sanchez to help the latter’s friend, Doronilla
(will be the debtor in this case) in incorporating Doronilla’s business “Strela”. This “help” basically involved
Vives depositing a certain amount of money in Strela’s 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 Strela’s 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 Producer’s 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 Producer’s 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 Strela’s 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.
(3) Atienza, the Branch Manager of Producer’s 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
along). Hence, this only proves to show that Atienza allowed the withdrawals because he was party to
Doronilla’s scheme of defrauding Vives. By virtue of CC 2180, PNB, as employer, is held primarily and
solidarily liable for damages caused by their employees acting within the scope of their assigned tasks.
Atienza’s acts, in helpong Doronilla, a customer of the bank, were obviously done in furtherance of the
business of the bank, even though in the process, Atienza violated some rules.
Saura Import & Export Co., Inc.
-vs-
DBP
GR No. L-24968, 27 April 972
44 SCRA 445

FACTS
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion into
DBP, for an industrial loan to be used for construction of factory building, for payment of
the balance of the purchase price of the jute machinery and equipment and as additional
working capital. In Resolution No.145, the loan application was approved to be secured first
by mortgage on the factory buildings, the land site, and machinery and equipment to be
installed.
The mortgage was registered and documents for the promissory note were executed. The
cancellation of the mortgage was requested to make way for the registration of a mortgage
contract over the same property in favor of Prudential Bank and Trust Co., the latter having
issued Saura letter of credit for the release of the jute machinery. As security, Saura
execute a trust receipt in favor of the Prudential. For failure of Saura to pay said obligation,
Prudential sued Saura.

After 9 years after the mortgage was cancelled, Saura sued RFc alleging failure to comply
with tits obligations to release the loan proceeds, thereby prevented it from paying the
obligation to Prudential Bank.

The trial court ruled in favor of Saura, ruling that there was a perfected contract between
the parties ad that the RFC was guilty of breach thereof.

ISSUE
Whether or not there was a perfected contract between the parties.

HELD
The Court held in the affirmative. Article 1934 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 delivery of the object of the
contract.

There was undoubtedly offer and acceptance in the case. When an application for a loan of
money was approved by resolution of the respondent corporation and the responding
mortgage was executed and registered, there arises a perfected consensual contract.

BPI Investment Corporation vs CA

Facts:

 Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the
construction of a house on his lot in New Alabang Village, Muntinlupa.
 He mortgaged the house and lot to AIDC as security for the loan.
 1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio
Litonjua for P850K who paid P350K in cash and assumed the P500K indebtness of ROA with
AIDC.
  AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of
20%/annum and service fee of 1%/annum on the outstanding balance payable within 10
years through equal monthly amortization of P9,996.58 and penalty interest of
21%/annum/day from the date the amortization becomes due and payable.
 March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with
the provision that the monthly amortization will commence on May 1, 1981
 August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal loan to
P457,204.90.
 September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what was
left of their loan after full payment of Roa’s loan
 June 1984: BPIIC instituted foreclosure proceedings against ALS and Litonjua on the ground that
they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984
amounting to P475,585.31
 August 13, 1984: Notice of sheriff's sale was published
 February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that they
are not in arrears and instead they made an overpayment as of June 30, 1984 since the P500K
loan was only released September 13, 1982 which marked the start of the amortization and
since only P464,351.77 was released applying legal compensation the balance of P35,648.23
should be applied to the monthly amortizations
 RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and
Litonjua was only in the principal sum of P464,351.77 and awarding moral damages, exemplary
damages and attorneys fees for the publication
 CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the
contract which is on September 13, 1982
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the
loan?

HELD: YES. 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 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.
 obligation to pay commenced only on October 13, 1982, a month after the perfection of the
contract
 contract of 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 in a proper
manner with what is incumbent upon him. 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.
 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 and the date
 when it was released. Such negligence resulted in damage for which an award of nominal
damages should be given
 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

Naguiat vs CA and Queaño

GR No. 118375, 03 October 2003
412 SCRA 591

FACTS
Queaño applied with Naguiat a loan for P200,000, which the latter granted.
Naguiat indorsed to Queaño Associated bank Check No. 090990 for the
amount of P95,000 and issued also her own Filmanbank Check to the order
of Queaño for the amount of P95,000. The proceeds of these checks were to
constitute the loan granted by Naguiat to Queaño. To secure the loan,
Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat, and
surrendered the owner’s duplicates of titles of the mortgaged properties. The
deed was notarized and Queaño issued to Naguiat a promissory note for the
amount of P200,000. Queaño also issued a post-dated check amounting to
P200,000 payable to the order of Naguait. The check was dishonoured for
insufficiency of funds. Demand was sent to Queaño. Shortly, Queaño, and
one Ruby Reubenfeldt met with Naguiat. Queaño told Naguiat that she did
not receive the loan proceeds, adding that the checks were retained by
Reubenfeldt, who purportedly was Naguiat’s agent.

Naguiat applied for extrajudicial foreclosure of the mortgage. RTC declared

the Deed as null and void and ordered Naguiat to return to Queaño the
owner’s duplicates of titles of the mortgaged lots.

ISSUE
Whether or not the issuance of check resulted in the perfection of the loan
contract.

HELD
The Court held in the negative. No evidence was submitted by Naguiat that
the checks she issued or endorsed were actually encashed or deposited. The
mere issuance of the checks did not result in the perfection of the contract of
loan. The Civil Code provides that the delivery of bills of exchange and
mercantile documents such as checks shall produce the effect of payment
only when they have been cashed. It is only after the checks have been
produced the effect of payment that the contract of loan may have been
perfected.

Article 1934 of the Civil Code 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 itsel shall not be perfected until
the delivery of the object of the contract. A loan contract is a real contract,
not consensual, and as such, is perfected only upon the delivery of the
objects of the contract.

Cebu Financial vs CA and Alegre

GR No. 123031, 12 October 1999
316 SCRA 488

FACTS
Vicente Alegre invested with Cebu International Finance Corporation (CIFC)
P500,000 in cash. CIFC issued promissory note which covered private
respondent’s placement. CIFC issued BPI Check No. 513397 (the Check) in
favor of private respondent as proceeds of his matured investment. Mrs.
Alegre deposited the Check with RCBC but BPI dishonoured it, annotating
therein that the “Check is subject of an investigation”. BPI took possession
of the Check pending investigation of several counterfeit checks drawn
against CIFC’s checking account. Private respondent demanded from CIFC
that he be paid in cash but the latter refused. Private respondent Alegre filed
a case for recovery of a sum of money against CIFC.

CIFC asserts that since BPI accepted the instrument, the bank became
primarily liable for the payment of the Check. When BPI offset the value of
the Check against the losses from the forged cheks allegedly committed by
private respondent, the Check was deemed paid.

ISSUE
Whether or not petitioner CIFC is discharged from the liability of paying the
value of the Check.

HELD
The Court held in the negative. In a money market transaction, the investor
is a lender who loans his money to a borrower through a middleman or
dealer. A check is not legal tender, and therefore cannot constitute valid
tender of payment. Since a negotiable instrument is only substitute for
money and not money, the delivery of such an instrument does not by itself,
operate as payment. Mere delivery of checks does not discharge the
obligation under a judgment. The obligation is not extinguished and remains
suspended until the payment by commercial document is actually realized.
(Article 1249)

Pantaleon vs American Express Bank (2010)

Facts:
AMEX is a corporation engaged in providing credit services through the operation of a charge card system.
Pantaleon was a cardholder since 1980.

Pantaleon, his wife, daughter and son went on a guided European tour and subsequently arrived in
Amsterdam. While in Coster Diamond House, his wife wanted to purchase some diamond pieces,
amounting to $13, 826. Pantaleon presented his credit card which was swiped. He was then asked to sign
the charge slip which was electronically transferred to AMEX’s Amsterdam office. However, Coster was not
able to receive approval from AMEX for the purchase so Pantaleon asked the clerk to cancel the sale. The
store manager convinced Pantaleon to wait for a few minutes and subsequently told Pantaleon that AMEX
was asking for bank references and Pantaleon responded by giving names of his Phil. depository banks.
Still, it was not approved. But Coster decided to release the items even without AMEX’s approval since the
tour couldn’t go on without them.

In all, it took AMEX a total of 78 minutes to approve Pantaleon’s purchase and to transmit the approval to
the jewelry store.

This was followed by two similar incidents when the family then had another trip to the US. They also
experienced inconvenience using the AMEX credit card in purchasing golf equipment and children’s shoes.

When they got to Manila, Pantaleon sent a letter to AMEX, demanding an apology for the humiliation and
inconvenience. AMEX responded that the delay in Amsterdam was due to the amount involved, saying
that the purchase deviated from his established charge purchase pattern. Dissatisfied, Pantaleon filed an
action for damages in RTC.

The testimony of AMEX’s credit authorizer Edgardo Jaurique, the approval time for credit card charges
would be three to four seconds under regular circumstances. Here, it took AMEX 78 minutes to approve
the Amsterdam purchase. SC attributed the unwarranted delay to Jaurique, who had to go over Pantaleon’s
past credit history, his payment record and his credit and bank references before he approved the purchase.
In 2009, the SC reversed the ruling in CA; and said that AMEX was guilty of mora solvendi or debtor’s
default. AMEX as debtor had an obligation as the credit provider to act on Pantaleon’s purchase requests,
whether to approve or disapprove them, with "timely dispatch."

Hence, this motion for reconsideration.

Issue: WON AMEX is liable for breach of its contractual obligations and is liable for damages.

Ruling:
No, AMEX is not liable for breach of contractual obligation with Pantaleon and is not liable for damages.
The Court had the occasion to present the nature of credit card transactions which involves three (3)
contracts. (a) the sales contract between the credit card holder and the merchant; (b) the loan agreement
between the credit card issuer and holder; and (c) the promise to pay between the credit card issuer and
the merchant.

Philippine jurisdiction generally adheres to the Gray ruling, recognizing the relationship between the credit
card issuer and holder as a contractual one that is governed by the terms and conditions found in the card
membership agreement. A card membership agreement is a contract of adhesion.

With regard to AMEX’s obligations, Pantaleon assumes that since his credit card has no pre-set spending
limit, AMEX has to approve all charge requests. However, the Court said that there is first a need to
distinguish a relationship between credit card issuer-holder to a creditor-debtor relationship. In an issuer-
holder relationship, it relates merely to an agreement providing for credit facility to the holder. On the other
hand, in a creditor-debtor relationship, it involves the actual credit on loan agreement involving three
contracts.

When cardholders use their cards to pay, they merely offer to enter into loan agreements with the company.
It is only after the approval do the parties enter into binding loan contracts, in keeping with NCC 1319.This
is supported in the reservation found in the card membership agreement which clearly states that AMEX
"reserves the right to deny authorization for any requested Charge."

Thus, since AMEX has no obligation to approve purchase requests, Pantaleon can’t claim that AMEX
defaulted. In this case, there is no demandable obligation. Before the credit card issuer accepts this offer,
no obligation relating to the loan agreement exists between them. A demand presupposes the existence
of an obligation between the parties. Moreover, AMEX is not bound or obligated to act on its cardholders’
purchase requests within any specific period of time.

Since there is no legal injury or breach of any contractual obligation on the part of AMEX, it is not liable to
pay damages to Pantaleon.