CAROLYN GARCIA V. RICA MARIE THIO, G.R. NO.

154878, MARCH 16, 2007

Category: Civil Law Jurisprudence

LOAN

In Carolyn Garcia v. Rica Marie Thio, G.R. No. 154878, March 16, 2007, Rica received from Carolyn a
crossed check in the amount of $100,000.00 payable to the order of Marilou Santiago. Thereafter,
Carolyn received from Rica payments. Again, Rica received a check in the amount of P500,000.00 from
Carolyn and payable to the order of Marilou and payments were again made by her representing
interests. There was failure to pay the principal amounts hence, a complaint for sum of money with
damages was filed. Rica contended that she had no obligation to her as it was Marilou who was
indebted as she was merely asked to deliver the checks to Marilou and that the check payments she
issued were merely intended to accommodate Marilou. The RTC ruled in favor of Carolyn but the CA
reversed on the ground that there was no contract between Rica and Carolyn. On appeal, the SC

Held: There was a contract of loan between Carolyn and Rica.

A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the
object of the contract. This is evident in Art. 1934 of the Civil Code which provides:

An accepted promise to deliver something by way of commodatum or simple loan is binding upon
the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the
object of the contract. (Emphasis supplied)

Upon delivery of the object of the contract of loan (in this case the money received by the debtor
when the checks were encashed) the debtor acquired ownership of such money or loan proceeds and is
bound to pay the creditor an equal amount. (Naguiat v. CA, G.R. No. 118375, October 3, 2003, 412 SCRA
591).

It is undisputed that the checks were delivered to Rica. However, these checks were crossed and
payable not to the order of Rica but to the order of a certain Marilou Santiago.

The Court agree with petitioner. Delivery is the act by which the res or substance thereof is
placed within the actual or constructive possession or control of another. (Buenaflor v. CA, G.R. No.
142021, November 29, 2000, 346 SCRA 563). Although Rica did not physically receive the proceeds of
the checks, these instruments were placed in her control and possession under an arrangement
whereby she actually re-lent the amounts to Marilou.

Several factors support this conclusion.

(1) Carolyn did not know personally Marilou. This was admitted by Rica, hence, it is not possible for
Carolyn to grant loans in such big sum of money even without any acknowledgment of debt. It was Rica
who had transactions with Marilou.

(2) It is unbelievable that Rica would put herself in a position where she would be compelled to pay
interest out of her own funds for loans she never contracted.

(3) When Marilou filed a petition for insolvency, it was Rica who was listed as a debtor.
Hence, Rica is the debtor and not Marilou. In People v. Mala, G.R. No.152351, September 18, 2003, 411
SCRA 327 and People v. Dayag, 155 Phil. 421 (1974), it was ruled that:

In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to
be believed, it must not only proceed from the mouth of a credible witness, but must be credible in
itself such as the common experience of mankind can approve as probable under the circumstances. We
have no test of the truth of human testimony except its conformity to our knowledge, observation, and
experience. Whatever is repugnant to these belongs to the miraculous, and is outside of juridical
cognizance.

No interest if there is no written agreement to pay it; exception.

Whether the debtor is liable to pay interest since there was no written agreement to pay interest,
the SC

Held: No, because no interest shall be due unless it has been expressly stipulated in writing. (Art. 1956,
NCC).

Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to
Article 2209 of the Civil Code. It is well-settled:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code. (Eusebio-Calderon v. People, G.R. No. 158495, October 21, 2004, 441 SCRA 137; Eastern Shipping
Lines, Inc. v. CA, G.R. No. 97412, July 12, 1994, 234 SCRA 78; Garcia v. Thio, G.R. No. 154878, March 16,
2007).

Hence, Rica is liable for the payment of legal interest per annum to be computed from the date
when she received the demand letter. From the finality of the decision until it is fully paid, the amount
due shall earn interest at 12% per annum, the interim period being deemed equivalent to a forbearance
of credit. (Cabrera v. People, G.R. 150618, July 24, 2003, 407 SCRA 247).
Credit Transactions Case Digest: BPI Investment Corp V. CA (2002)

Lessons Applicable: Simple Loan

Laws Applicable:

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.