PRODUCERS BANK OF THE PHILIPPINES VS.

COURT OF
APPEALS
G.R. No. 115324, Feb 19, 2003
Producers Bank of the Philippines is held liable for the loss of Franklin
Vives' money due to the actions of its employee and is ordered to
provide restitution based on the principle of employer liability.
FACTS:

➢ Franklin Vives was asked by his friend, Angeles Sanchez, to help

Arturo Doronilla incorporate his business, Sterela Marketing and
Services.
➢ Vives agreed to deposit P200,000 in Sterela's bank account for
the purpose of incorporation, with the understanding that the
money would be returned to him after 30 days.
➢ Vives issued a check in favor of Sterela and instructed his wife to
accompany Doronilla and Sanchez to open a savings account in
Sterela's name at Producers Bank.
➢ Part of the money was later withdrawn by Doronilla, who also
opened a current account and authorized the bank to debit the
savings account to cover overdrawing in the current account.
➢ Vives filed a case for recovery of the sum of money.
➢ Both the trial court and the appellate court ruled in favor of Vives,
holding Producers Bank liable for the loss of Vives' money.

ISSUE:
➢ W.O.N. the honorable Court of Appeals erred in upholding that
the transaction between the defendant Doronilla and respondent
Vives was one of simple loan and not accommodation.
HELD:
➢ No error was committed by the Court of Appeals when it ruled
that the transaction between private respondent and Doronilla was
a commodatum and not a mutuum. A circumspect examination of
the records reveals that the transaction between them was a
commodatum.
➢ Article 1933 seems to provide that if the subject of the contract is
a consumable thing, such as money, the contract would be a
mutuum. However, there are some instances where a
commodatum may have for its object a consumable thing.
(Article 1936)
➢ Consumable 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.
➢ Thus, if consumable goods are loaned only for purposes of
exhibition, or when the intention of the parties is to lend
consumable goods and to have the very same goods returned at
the end of the period agreed upon, the loan is a commodatum and
not a mutuum.
➢ As correctly pointed out by both the Court of Appeals and the trial
court, the evidence shows that private respondent agreed to
deposit his money in the savings account of Sterela specifically
for the purpose of making it appear "that said firm had sufficient
capitalization for incorporation, with the promise that the amount
shall be returned within thirty (30) days. 29 Private respondent
merely "accommodated" Doronilla by lending his money without
consideration, as a favor to his good friend Sanchez.
PAJUYO VS. COURT OF APPEALS
G.R. No. 146364, Jun 3, 2004
FACTS:

➢ The case involves a dispute over the possession of a house in

Quezon City between Colito T. Pajuyo and Eddie Guevarra.
➢ In June 1979, Pajuyo paid for the rights over a 250-square meter
lot and constructed a house on it.
➢ In December 1985, Pajuyo entered into an agreement with
Guevarra, allowing him to live in the house for free as long as he
maintained its cleanliness and orderliness.
➢ In September 1994, Pajuyo demanded that Guevarra vacate the
house, but Guevarra refused.
➢ Pajuyo filed an ejectment case against Guevarra, which was
initially decided in his favor by the Metropolitan Trial Court
(MTC) and affirmed by the Regional Trial Court (RTC).
➢ Guevarra filed a petition for review with the Court of Appeals,
which ultimately ruled in his favor, declaring the ejectment case
against him to have no legal and factual basis.

ISSUE:
➢ W.O.N. the Court of Appeals erred in ruling that the agreement
between Pajuyo and Guevarra was a commodatum instead of a
lease contract, and in holding that the ejectment case had no legal
and factual basis.
HELD:
➢ YES. 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. 63 An essential feature of
commodatum is that it is gratuitous. Another feature of
commodatum is that the use of the thing belonging to another is
for a certain period. 64 Thus, the bailor cannot demand the return
of the thing loaned until after expiration of the period stipulated,
or after accomplishment of the use for which the commodatum is
 constituted. 65 If the bailor should have urgent need of the thing,
he may demand its return for temporary use. 66 If the use of the
thing is merely tolerated by the bailor, he can demand the return
of the thing at will, in which case the contractual relation is called
a precarium. 67 Under the Civil Code, precarium is a kind of
commodatum.
➢ The Kasunduan reveals that the accommodation accorded by
Pajuyo to Guevarra was not essentially gratuitous. While the
Kasunduan did not require Guevarra to pay rent, it obligated him
to maintain the property in good condition. The imposition of this
obligation makes the Kasunduan a contract different from a
commodatum.The effects of the Kasunduan are also different
from that of a commodatum.Case law on ejectment has treated
relationship based on tolerance as one that is akin to a landlord-
tenant relationship where the withdrawal of permission would
result in the termination of the lease. 69 The tenant's withholding
of the property would then be unlawful. This is settled
jurisprudence.
➢ Even assuming that the relationship between Pajuyo and
Guevarra is one of commodatum,Guevarra as bailee would still
have the duty to turn over possession of the property to Pajuyo,
the bailor. The obligation to deliver or to return the thing received
attaches to contracts for safekeeping, or contracts of commission,
administration and commodatum.
TAN VS. VALDEHUEZA
G.R. No. L-38745, Aug 6, 1975
FACTS:
➢ Lucia Tan filed a lawsuit to declare ownership and recover
possession of a parcel of land.
➢ Tan acquired the land in a public auction and was declared the
highest bidder.
➢ The defendant, Arador Valdehueza, failed to redeem the land
within the one-year period prescribed by law.
➢ A Deed of Absolute Sale was executed in favor of Tan.
➢ Tan also claimed ownership of two portions of another land
through two Pacto de Retro Deeds of Sale executed by the
defendants.
➢ The defendants did not vacate the premises and continued paying
the taxes on the land.
ISSUE:
➢ W/N The contracts in the second cause of action are considered
equitable mortgages.
HELD:
➢ The imposition of legal interest on the amounts subject of the
equitable mortgages, P1,200 and P300, respectively, is without
legal basis, for, "No interest shall be due unless it has been
expressly stipulated in writing." (Article 1956, new Civil Code)
Furthermore, the plaintiff did not pray for such interest; her thesis
was a consolidation of ownership, which was properly rejected,
the contracts being equitable mortgages.
PEOPLE vs. TERESITA PUIG and ROMEO PORRAS
G.R. Nos. 173654-765, August 28, 2008
The Supreme Court reverses the dismissal of qualified theft cases
against bank employees, ruling that the Informations sufficiently
alleged all the elements of the crime and the relationship between banks
and depositors establishes a high degree of confidence that can be
abused.
FACTS:
➢ Teresita Puig and Romeo Porras were the Cashier and
Bookkeeper, respectively, of the Rural Bank of Pototan, Inc.
➢ 112 cases of Qualified Theft were filed against them by the Iloilo
Provincial Prosecutor's Office before the RTC of Dumangas,
Iloilo.
➢ The Informations alleged that the respondents conspired and
helped each other in taking money from the bank without the
knowledge and consent of the bank's management.
➢ Petitioner argues among others that the depositors who place their
money with the bank are considered creditors of the bank, and
therefore, the money taken by the respondents belongs to the
bank.
ISSUE:
➢ W/N the Informations for Qualified Theft sufficiently allege the
element of taking without the consent of the owner and the
qualifying circumstance of grave abuse of confidence.
HELD:
➢ The Supreme Court ruled in favor of the petitioner and reversed
the dismissal of the cases.
➢ The Court held that the Informations sufficiently alleged all the
elements of the crime of qualified theft.
➢ The Court emphasized that the relationship between banks and
depositors is that of creditor and debtor, and the bank is
considered the owner of the money deposited by its clients.
➢ The Court directed the RTC to proceed with the trial of the cases.
GULLAS VS PNB
G.R. No. L-43191, Nov 13, 1935
A depositor appeals a judgment after a bank prematurely applies his
funds to pay off a dishonored warrant, leading to a court ruling in favor
of the depositor and ordering the bank to pay damages and return the
deposit.
FACTS:

➢ Paulino Gullas, a depositor and member of the Philippine Bar,

appeals a judgment after the Philippine National Bank (PNB)
prematurely applies his funds to pay off a dishonored warrant.
➢ On August 2, 1933, a treasury warrant in the amount of $361,
payable to Francisco Sabectoria Bacos, was cashed by the bank
with Paulino Gullas and Pedro Lopez as indorsers.
➢ The treasury warrant was later dishonored by the Insular
Treasurer.
➢ At the time of the dishonor, Gullas had an outstanding balance of
P509 on his account with the bank.
➢ The bank applied the outstanding balance of Gullas' account to
the payment of the dishonored check without waiting for any
action by Gullas.
➢ Gullas eventually returned to Cebu and paid the unpaid balance
of the treasury warrant.
➢ Gullas experienced inconveniences and embarrassment as a result
of the bank's actions, including checks issued by him not being
paid and negative publicity in periodicals.

ISSUE:
➢ W.O.N. the Philippine National Bank has the right to apply a
deposit to the debt of a depositor.
HELD:
➢ YES. The general rule is adopted for this jurisdiction that a bank
has a right of set off of the deposit in its hands for the payment of
any indebtedness to it on the part of the depositor.
➢ The relationship between a depositor and a bank is that of creditor
and debtor.
➢ However, in this case, the bank prematurely applied Gullas'
deposit to the dishonored treasury warrant without giving him
notice of dishonor.
➢ Notice of dishonor is necessary to charge an indorser, and the
bank should have given Gullas notice before using his deposit.
➢ The court ruled in favor of Gullas and modified the judgment of
the trial court.
DE LA PAZ VS. L & J DEVELOPMENT CO.
G.R. No. 183360, Sep 8, 2014
A borrower files a complaint against a company for charging excessive
interest rates on a loan, leading to a Supreme Court ruling that
disallows the creditor from charging monetary interest without a
written stipulation and orders the return of excess payments.
FACTS:

➢ Petitioner Rolando C. De La Paz lent P350,000.00 to respondent

L & J Development Company on December 27, 2000, without
any security.
➢ The loan had no specified maturity date and carried a 6% monthly
interest rate.
➢ From December 2000 to August 2003, L&J paid Rolando a total
of P576,000.00 representing interest charges.
➢ As L&J failed to pay the remaining balance, Rolando filed a
complaint for collection of sum of money with damages against
L&J and its president, Atty. Esteban Salonga.
➢ The Metropolitan Trial Court (MeTC) ruled in favor of Rolando,
ordering L&J to pay the principal obligation plus 12% interest per
annum.
➢ The Regional Trial Court (RTC) affirmed the MeTC's decision.
➢ The Court of Appeals (CA) reversed the RTC's decision, ruling
that no interest shall be due unless it has been expressly stipulated
in writing.
➢ The CA also ordered Rolando to return the excess interest
payments made by L&J.

ISSUE:
➢ W.O.N. the 6% monthly interest rate imposed on the loan is valid.
HELD:
➢ NO. The Supreme Court affirmed the decision of the Court of
Appeals.
 The lack of a written stipulation to pay interest on the loan
disallowed the creditor from charging monetary interest.
➢ The Court cited Article 1956 of the Civil Code, which states that
"no interest shall be due unless it has been expressly stipulated in
writing."
➢ Even if the payment of interest had been reduced in writing, a 6%
monthly interest rate on a loan is unconscionable and contrary to
morals.
➢ Previous cases have declared interest rates of 3% per month and
higher as excessive, iniquitous, unconscionable, and void.
➢ The interest on the amount to be returned is set at 6% per annum
from the finality of the decision.
➢ The excess interest payments made by L&J should be applied to
its principal loan.
➢ Rolando is ordered to return the excess payment of P226,000.00
to L&J.
Republic of the Philippines vs. Grijaldo
G.R. No. L-20240, Dec 31, 1965
FACTS:

➢ In 1943, Jose Grijaldo obtained crop loans from the Bank of

Taiwan, Ltd. in Bacolod City.
➢ Grijaldo executed a chattel mortgage on the standing crops on his
land to secure the loans.
➢ After the war, the Republic of the Philippines brought a lawsuit
against Grijaldo to collect the unpaid loans.
➢ The Republic argued that it had the right to collect the loans
because the assets of the Bank of Taiwan, Ltd. were transferred to
and vested in the Republic of the Philippines.
➢ The lower court dismissed the case on the ground that the action
had prescribed.
➢ The Court of First Instance ordered Grijaldo to pay the Republic
the unpaid amount.

ISSUE:
➢ W.O.N. Grijaldo's obligation to pay the loans was extinguished due
to the loss of the crops.
➢ W.O.N the action to collect the loans had prescribed.
HELD:
➢ YES. The transaction between the appellant and the Bank of
Taiwan, Ltd. was a series of five contracts of simple loan of sums of
money. "By a contract of (simple) loan, one of the parties delivers
to another . . . money or other consumable thing upon the condition
that the same amount of the same kind and quality shall be paid."
(Article 1933, Civil Code.) The obligation of the appellant under the
five promissory notes evidencing the loans in question is to pay the
value thereof; that is, to deliver a sum of money a clear case of an
obligation to deliver a generic thing.
➢ NO. The complaint in the present case was brought by the Republic
of the Philippines not as a nominal party but in the exercise of its
sovereign functions, to protect the interests of the State over a public
property. This Court has held that the statute of limitations does not
run against the right of action of the Government of the Philippines
(Government of the Philippine Islands vs. Monte de Piedad, etc., 35
Phil. 738-751).
GUINGONA, JR. VS. CITY FISCAL OF MANILA
G.R. No. 60033, Apr 4, 1984
The court rules that the public respondents lacked jurisdiction to proceed
with the criminal investigation against the petitioners, as the contract
between the complainant and the bank was a simple loan and not a
deposit, resulting in a civil liability rather than a criminal offense.
FACTS:

➢ Private respondent Clement David invested his money on time and

savings deposits with NSLA from March 20, 1979, to March 1981.
➢ He invested a total of P1,145,546.20 on time deposits and
P13,531.94 on savings account deposits.
➢ He also made investments in the amount of US$75,000.00.
➢ NSLA was placed under receivership by the Central Bank.
➢ David filed a complaint claiming that the bank misappropriated the
balance of his investments.
➢ He alleged that the bank violated Central Bank Circular No. 364
and related regulations on foreign exchange transactions.
➢ Petitioners Teofisto Guingona, Jr., Antonio I. Martin, and Teresita
Santos, along with other directors of NSLA, were charged with
estafa and violation of Central Bank Circular No. 364.
➢ They argued that their liability was purely civil in nature and that
the allegations against them constituted a civil obligation, not a
criminal offense.

ISSUE:
➢ W.O.N. public respondents had jurisdiction to proceed with the
criminal investigation.
HELD:
➢ NO. The public respondents lacked jurisdiction to proceed with the
criminal investigation.
➢ The contract between David and NSLA was a contract of simple
loan, not a contract of deposit.
➢ The relationship between David and NSLA was that of creditor and
debtor.
➢ The failure of the bank to return the amount deposited constituted a
civil liability, not a criminal offense.
 ➢ Any incipient criminal liability was avoided because petitioners
Guingona and Martin assumed the obligation of the bank to David
when NSLA was placed under receivership.
➢ "In order that a person can be convicted under the above-quoted
provision, it must be proven that he has the obligation to deliver or
return the same money, goods or personal property that he received.
Petitioners had no such obligation to return the same money, i.e., the
bills or coins, which they received from private respondents. This is
so because as clearly stated in criminal complaints, the related civil
complaints and the supporting sworn statements, the sums of money
that petitioners received were loans.

It can be readily noted from the above quoted provisions that in simple
loan (mutuum), as contrasted to commodatum, the borrower acquires
ownership of the money, goods or personal property borrowed. Being
the owner, the borrower can dispose of the thing borrowed (Article 248,
Civil Code) and his act will not be considered misappropriation thereof."
➢ It can be readily noted from the above quoted provisions that in
simple loan (mutuum), as contrasted to commodatum, the
borrower acquires ownership of the money, goods or personal
property borrowed. Being the owner, the borrower can dispose of
the thing borrowed (Article 248, Civil Code) and his act will not
be considered misappropriation thereof."
RAMOS VS. SARAO
G.R. No. 149756, Feb 11, 2005
A dispute over a contract for the sale of a conjugal house and lot is
resolved by the Supreme Court, ruling that the contract should be
deemed an equitable mortgage based on the parties' intention and the
surrounding circumstances, and ordering the release of the consigned
amount to the petitioner.
FACTS:

➢ The case involves a dispute over a contract for the sale of a

conjugal house and lot.
➢ The contract was denominated as a "Deed of Sale under Pacto de
Retro."
➢ The sellers continued to possess and reside in the property.
➢ The petitioner, Myrna Ramos, argues that the contract was
actually an equitable mortgage, not a sale.
➢ The petitioner made a valid tender of payment and consignation.
➢ The trial and appellate courts ruled in favor of the respondent,
Susana Sarao, finding that the contract was a bonafide pacto de
retro sale and that there was no valid tender of payment or
consignation.

ISSUE:
➢ W.O.N. the contract should be deemed an equitable mortgage
instead of a pacto de retro sale.
HELD:
➢ YES. The Court declared the contract to be an equitable mortgage
based on the parties' intention and the surrounding circumstances.
➢ The fact that the sellers continued to possess and reside in the
property indicated that the contract was meant to secure a loan,
not to transfer ownership.
➢ In a pacto de retro,ownership of the property sold is immediately
transferred to the vendee a retro,subject only to the repurchase by
the vendor a retro within the stipulated period. The vendor a
 retro's failure to exercise the right of repurchase within the agreed
time vests upon the vendee a retro, by operation of law, absolute
title to the property. Such title is not impaired even if the vendee
a retro fails to consolidate title under Article 1607 of the Civil
Code.
➢ On the other hand, an equitable mortgage is a contract that
although lacking the formality, the form or words, or other
requisites demanded by a statute nevertheless reveals the
intention of the parties to burden a piece or pieces of real property
as security for a debt. The essential requisites of such a contract
are as follows: (1) the parties enter into what appears to be a
contract of sale, but (2) their intention is to secure an existing debt
by way of a mortgage. The nonpayment of the debt when due
gives the mortgagee the right to foreclose the mortgage, sell the
property, and apply the proceeds of the sale to the satisfaction of
the loan obligation.
➢ Although the parties in the instant case denominated their
contract as a "DEED OF SALE UNDER PACTO DE RETRO,"
the "sellers" have continued to possess and to reside at the subject
house and lot up to the present. This evident factual circumstance
was plainly overlooked by the trial and the appellate courts,
thereby justifying a review of this case. This overlooked fact
clearly shows that the petitioner intended merely to secure a loan,
not to sell the property. Thus, the contract should be deemed an
equitable mortgage.