SESSION II

Simple loan or mutuum is a contract whereby one party delivers

the money or other consumable thing to another who acquires
ownership thereof with the understanding or on condition that
the borrower shall pay the same amount of the same kind and
quality. (NCC, Art. 1933)

Unlike in Commodatum, it involves the return of the ”equivalent”

only and not the identical thing because the borrower acquires
ownership thereof.
1. As to perfection: It is a real contract – delivery is necessary for the
perfection of the contract. (Art. 1933, see also art. 1316)
2. As to person obliged: It is a unilateral contract – once the thing was
delivered, it creates an obligation on the borrower only.
3. As to nomenclature: It is a nominate contract – it has been given a specific
name by the civil code. (Art. 1307)
4. As to dependency of the contract: It is a principal contract – existence is
not dependent on another contract.
5. As to form: Informal contract – no particular form is required, delivery
perfects the contract.
6. As to cause : Gratuitous contract (if no stipulation) and/or onerous (if there
is a stipulation of interest.
JUST LIKE ANY OTHER CONTRACT, THE REQUISITES ARE
(C-O-C):

1. Consent of contracting parties;

2. Object certain which is the subject matter of the contract;
3. Cause of the obligation established.
4. Delivery of the thing.
 THERE MUST BE MEETING OF THE
OFFER AND ACCEPTANCE UPON THE
THING AND THE CAUSE WHICH ARE
TO CONSTITUTE THE CONTRACT.
1. Money; (Art. 1933) or
2. Consumable things or fungible goods(Art. 1933)

Note:
§ The object of the contract ,must be within the commerce of
men (Art. 1347)
§ The object must be determinate and not impossible ( Arts.
1347, 1348)
§ Gratuitous (art. 1933)
Note: there is no obligation to pay interest unless
expressly stipulated in writing.

§ Onerous, if there is a stipulation to pay interest

(Art. 1933)
1. CREDITOR – Person who delivers the money or
consumable things to another with the understanding
the same amount and kind will be paid back to him.

2. BORROWER – Person who received the money or the

consumable thing and promises that the same amount
and kind will be paid to the person who delivered the
same.
GENERAL RULE: No required form of contract. Only delivery
perfects the contract.
Exception:
1. If there is an interest – since under Art. 1956, no interest shall be
due unless it has been expressly stipulated in ”writing”.
2. Under Article 1358, contracts where the amount involved
exceeds Php500.00 must appear in writing, even a private one.
Note: However, this requirements are only for the convenience of
parties and will not affect the validity of the contract.
Whether fixed, savings, or current, deposits are in
the nature of a contract of mutuum. There is a debtor-
creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor
is the creditor. The depositor lends the bank money
and the bank agrees to pay the depositor on
demand.
 There is no criminal liability for failure to pay. In
mutuum, the borrower acquires ownership of the money,
goods, or personal property borrowed. Being the owner
, the borrower can dispose of the thing borrowed and
his act will not be considered misappropriation thereof.
The Supreme Court held that a person who buys rice
on credit becomes the owner of it and indebted for
its price , but is not guilty for crime of Estafa from not
paying it.
Severino Camara was an agent of Berbari Hermanos for the purchase
of copra on their order and account. On February 1, 1913, the manager
of Berbari Hermanos filed a complaint of estafa for the aforesaid sum
of P425.10. During the trial he was required to present a statement of
the accounts of Severino Camara with the firm, which he did, and that
statement now appears in evidence on page 61 of the record. The title
reads as follows: "Extract from the account current of Mr. Severino
Camara with Messrs. Berbari Hermanos, Atimonan." And at the close:
"1913 — January 31 — Balance due is from him (for this balance he
was sued in the justice of the peace court of Atimonan) P425.10."
 The record shows that from this sum of P425.10 there must be deducted the
amount of P8.50, which, according to the document presented in evidence by
the said Calixto Berbari, is the value of one sack of rice that Berbari sold to
Camara on credit. This being the actual fact, the charge made in the
complaint is unfounded, to wit, that the defendant appropriated to himself
money, goods, or other personal property received on commission for the
purchase of copra, and therefore he cannot be guilty of the crime of estafa,
but is a debtor for the price of the sale.
A person who buys rice on credit becomes the owner of it and indebted for
its price, but is not guilty of the crime of estafa by reason of not paying for it.
Hence, the sum which the defendant is alleged to have embezzled is not
P425.10, as stated in the complaint, but P416.60.
NON-PAYMENT OF LOAN ESTAFA BY
MISAPPROPRIATION
AS TO OWNERSHIP OVER THE THING
UNPAID/MISAPPROPRIATED
The borrower acquires No ownership. Subject
ownership over the thing. property was only held in
trust, or on commission or for
administration.
NON-PAYMENT OF LOAN ESTAFA BY
MISAPPROPRIATION
AS TO OBLIGATION UNDERTAKEN BY THE DEBTOR
To pay the creditor an equal An obligation involving the
amount of the same kind and duty to deliver or return the
property. same.
 NON-PAYMENT OF LOAN ESTAFA BY
MISAPPROPRIATION
AS TO LIABILITY INCURRED FOR BREACH
Civil in nature Criminal in nature

Basis: A person who receives a loan of money or any other fungible

thing acquires the ownership thereof and is bound to pay the creditor an
equal amount of the same kind and quality. (Art. 1953)
Note: No person shall be imprisoned for non-payment of debt. (CONST.
Art III, Sec. 20)
A cash advance is in the nature of a simple loan
(mutuum), hence, no fiduciary relationship is
created. Therefore, an employee who availed
of cash advances may not be held liable for
estafa for failure to return the same money
which he received.
§ Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture Department of the
Southeast Asian Fisheries Development Center (SEAFDEC) with head station at Tigbauan,
Province of Iloilo. As Head of the Economics Unit of the Research Division, he conducted prawn
surveys which required him to travel to various selected provinces in the country where there are
potentials for prawn culture.
§ On 15 June 1982, petitioner was issued Travel Order No. 2222 which covered his travels to
different places in Luzon from 16 June to 21 July 1982, a period of thirty five (35) days. Under this
travel order, he received P6,438.00 as cash advance to defray his travel expenses.
§ Within the same period, petitioner was issued another travel order, T.O. 2268, requiring him to
travel from the Head Station at Tigbauan, Iloilo to Roxas City from 30 June to 4 July 1982, a period
of five (5) days. For this travel order, petitioner received a cash advance of P495.00.
§ On 14 January 1983, petitioner presented both travel orders for liquidation, submitting Travel
Expense Reports to the Accounting Section. When the Travel Expense Reports were audited, it
was discovered that there was an overlap of four (4) days (30 June to 3 July 1982) in the two (2)
travel orders for which petitioner collected per diems twice. In sum, the total amount in the form
of per diems and allowances charged and collected by petitioner under Travel Order No. 2222,
when he did not actually and physically travel as represented by his liquidation papers, was
P1,230.00.
§ Petitioner was required to comment on the internal auditor's report regarding the
alleged anomalous claim for per diems. In his reply, petitioner denied the alleged
anomaly, claiming that he made make-up trips to compensate for the trips he failed
to undertake under T.O. 2222 because he was recalled to the head office and given
another assignment.
§ In September 1983, two (2) complaints for Estafa were filed against the petitioner
before the Municipal Circuit Trial Court at Guimbal, Iloilo, docketed as Criminal
Case Nos. 628 and 631.
MCTC; on Case No. 628 held Yong Chan Kim GUILTY BEYOND REASONABLE DOUBT
while Criminal Case No. 631 was subsequently dismissed for failure to prosecute.
RTC: Affirmed in toto.
CA: Dismiss the Petition for technicality.
ISSUE: Whether or not Yong Chan Kim is
guilty of Estafa for his failure to return the
cash advance which was transferred to him?
RULING:
In order that a person can be convicted under the above-quoted provision, it
must be proven that he had the obligation to deliver or return the same money,
good or personal property that he had received
Liquidation simply means the settling of an indebtedness. An employee, such as
herein petitioner, who liquidates a cash advance is in fact paying back his debt
in the form of a loan of money advanced to him by his employer, as per
diems and allowances. Similarly, as stated in the assailed decision of the lower
court, "if the amount of the cash advance he received is less than the amount he
spent for actual travel, he has the right to demand reimbursement from his
employer the amount he spent coming from his personal funds. In other words,
the money advanced by either party is actually a loan to the other. Hence,
petitioner was under no legal obligation to return the same cash or money, i.e.,
the bills or coins, which he received from the private respondent.
The ruling of the trial judge that ownership of the cash advanced to the
petitioner by private respondent was not transferred to the latter is erroneous.
Ownership of the money was transferred to the petitioner.
Since ownership of the money (cash advance) was transferred to petitioner, no
fiduciary relationship was created. Absent this fiduciary relationship between
petitioner and private respondent, which is an essential element of the crime of
estafa by misappropriation or conversion, petitioner could not have committed
estafa.
Additionally, it has been the policy of private respondent that all cash advances
not liquidated are to be deducted correspondingly from the salary of the
employee concerned. The evidence shows that the corresponding salary
deduction was made in the case of petitioner vis-a-vis the cash advance in
question.
 MUTUUM LEASE/RENT
AS TO DEFINITION
DELIVERY OF MONEY OR SOME DELIVERY OF SOME NON-CONSUMABLE
CONSUMABLE THINGS WITH A PROMISE THING IN ORDER THAT THE OTHER MAY
TO REPAY AN EQUIVALENT OF THE SAME USE IT DURING A CERTAIN PERIOD AND
KIND AND QUALITY RETURN IT TO THE FORMER
AS TO TRANSFER OF OWNERSHIP
THERE IS A TRANSFER OF OWNERSHIP OF THERE IS NO TRANSFER OF OWNERSHIP
THE THING DELIVERED. OF THE THING DELIVERED. LESSOR
SIMPLY LOSSES THE CONTROL OVER THE
PROPERTY DURING THE PERIOD OF THE
CONTRACT
 MUTUUM LEASE/RENT
AS TO RELATIONSHIP OF PARTIES
OBLIGOR-OBLIGEE LANDLORD-TENANT
AS TO RECEIPT OF PAYMENT
CREDITOR RECEIVES LANDLORD RECEIVES
PAYMENT FOR THE LOAN COMPENSATION EITHER IN
MONEY, PROVISIONS, CHATTEL
OR LABOR.
 MUTUUM/SIMPLE LOAN SALE
AS TO NATURE
REAL CONTRACT CONSENSUAL CONTRACT
AS TO OBLIGATION
GENERALLY UNILATERAL BECAUSE BILATERAL AND RECIPROCAL
ONLY THE BORROWER HAS
OBLIGATIONS.

NOTE: IF THE PROPERTY IS SOLD BUT THE REAL INTENT IS ONLY TO GIVE THE OBJECT AS A
SECURITY FOR A DEBT ( AS WHEN THE PRICE IS COMPARATIVELY SMALL) , THERE REALLY
IS A CONTRACT OF LOAN WITH AN EQUITABLE MORTGAGE” AND NOT SALE.
MUTUUM VS. TRUST
RECEIPTS
 MUTUUM AND COMMODATUM TRUST RECEIPT
AS TO DEFINITION/MEANING
DELIVERY OF MONEY OR SOME REFERS TO THE WRITTEN OR PRINTED
CONSUMABLE THINGS WITH A PROMISE TO DOCUMENT SIGNED BY THE ENTRUSTEE IN
REPAY AN EQUIVALENT OF THE SAME KIND FAVOR OF THE ENTRUSTER CONTAINING
AND QUALITY TERMS AND CONDITION SUBSTANTIALLY
COMPLYING WITH THE DEGREE
AS TO SECURITY
IT MAY OR MAY NOT HAVE A SECURITY. IT IS A SECURITY TRANSACTION WHEREIN
THE LENDER, HAVING NO PRIOR TITLE TO
THE GOODS AND NOT HAVING POSSESSION
OF WHICH, LENDS MONEY TO THE
BORROWER ON SECURITY OF THE GOODS
WHICH THE BORROWER IS PRIVILEGED TO
SELL WITH AN OBLIGATION TO PAY ALL OR
PART FROM THE PROCEEDS.
 MUTUUM AND COMMODATUM TRUST RECEIPT
AS TO CRIMINAL LIABILITY
NO CRIMINAL LIABILITY FAILURE TO PAY THE PROCEEDS IS A
GROUND FOR ESTAFA. THE LAW PUNISHES
THE DISHONESTY AND ABUSE OF
CONFIDENCE IN HANDLING THE MONEY OR
GOODS TO THE PREJUDICE OF OTHER
REGARDLESS OF WHETHER THE LATTER IS
THE OWNER.
INTENT OF THE TRANSACTION
TO COLLECT THE SAME QUALITY OR KIND IT SEEKS TIO FULFILL AND COMPLY WITH
OF COMSUMABLE THING OR REPAY THE THE OBLIGATIONS STIPULATED IN THE
MONEY. TRUST AGREEMENT.
1. PAY THE LENDER AN EQUAL AMOUNT OF THE SAME
KIND AND QUALITY. (ART. 1953)

2. PAY INTEREST IF EXPRESSLY STIPULATED IN

WRITING ( ART. 1956)
A. WHAT CURRENCY SHOULD THE PAYMENT BE MADE?
Answer: in the currency stipulated (Art. 1249). If the agreement is silent on the
currency, then the payment must be made in the currency in which the money
was delivered.
B. WHAT AMOUNT SHOULD BE PAID?
Answer: same amount. However, the payment payable may change under certain
circumstances, such as when there is extraordinary inflation or deflation of the
currency stipulated, provided: (Art. 1250)
a) There was an Official Declaration of extraordinary inflation or deflation from
the BSP;
b) Obligation was contractual (such as loan);
c) Parties expressly agreed to consider the effects of extraordinary inflation or
deflation.
D borrowed from C P50,000.00 payable after 5 years.
On the maturity of the obligation, the value of the
P50,000.00 dropped to P5,000.00 because of
inflation.
Thus and on assumption that the three requisites for
Art. 1250 are present, the basis of payment shall be
equivalent value of the currency today from that of
(5) five years ago. Hence, D is liable to pay C
P500,000.00 unless there is an agreement to the
contrary.
C. WHAT HAPPENS IF THE THING IS FUNGIBLE OTHER THAN MONEY?
Answer: Borrower is under obligation to pay the lender another
thing of the same kind, quantity, and quality even if it could change
in value. If it is impossible to do so, the borrower shall pay its value
at the time of perfection of the loan.
Unlike in loan of money, the borrower generally bears the risk of
change of value of the fungible thing loaned. Exception to this, the
creditor bears the risk of change of value of the thing loaned if it is
impossible for the borrower to pay such thing, here, the creditor
will receive the value of the thing at the time of the perfection of the
loan (regardless of value at the time of payment)
D borrowed from C two (2) sacks of rice of a certain kind
and quality. When the loan was perfected, the price of each
sack was P1,400.00.
D should return to C two (2) sacks of rice of the same kind
and quality although at the time of payment, the price had
increased to P1,600.00. If on the due date of the obligation,
the same kind of rice could not be delivered by D because it
was not available, then D should pay C the sum of P2,800.00
instead, the value of the rice at the time of the perfection of
the loan.
D. IS A CHECK A LEGAL TENDER?
Answer: No, check is not a legal tender and
therefore, cannot constitute a valid tender of
payment. The delivery of the bills of exchange will
produce the effect of payment only when they have
been cashed, or when through the fault of the
creditor they have been impaired. (Art. 1249)
A. WHEN SHOULD THE BORROWER PAY?
Answer:
A. Upon the end of the period of the contract or
maturity date.
B. If the parties did not agree on a date, art, 1197
applies. Here, the court may fix a period.
B. CAN THE CREDITOR DEMAND PAYMENT OR CAN THE BORROWER MAKE
PAYMENT BEFORE THE MATURITY DATE?
Answer: It depends.
I. If the loan is gratuitous, the borrower may pay before the maturity date
because as a general rule, the creditor suffers no prejudice with the
return of the money before maturity date.
II. If the loan is with interest, the creditor cannot demand the payment and
borrower cannot pay before the maturity date.
Reason: because in loans with interest, the period is established to benefit
both the creditor and borrower. The creditor placed his capital hoping to
obtain income.
A. WHERE SHOULD PAYMENT BE MADE?

ANSWER: IT DEPENDS:
A. If the parties agreed on the place of payment, then payment
must be made in the place stipulated.
B. If no place was stipulated, the payment shall be made at the
domicile of the borrower (Art. 1251).
1. If the debtor succeeds the creditor in the thing loaned or
confusion;
2. Condonation of the debt;
3. Compensation/payment.
4. Novation

Note: loss of the thing does not extinguish the obligation unless
otherwise provided in the contract.
 The loss of the thing loaned does not extinguish one’s
obligation to pay (unless it is stipulated) because his
obligation is not to return the thing loaned but to pay a
generic thing. Genus ninquam perit (generic thing never
perishes)
Note: if the borrower loses the money or goods, this does
not affect his obligation to repay the creditor. This is in
accordance with the rule of res perit domino.
 Mutuum involves the transmission of ownership of the
thing loaned. The Borrower becomes the owner from the
moment he receives the thing, and it is not because the
money or fungible thing loses its identity and becomes
irreplaceable but because the of the delivery and the
nature of the contract.
Facts of the Case:
§ Respondents were conspiring, confederating, and helping one another, with grave
abuse of confidence, being the Cashier and Bookkeeper of the Rural Bank of
Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the
management of the Bank and with intent of gain, did then and there willfully,
unlawfully and feloniously take, steal and carry away the sum of P15,000.00,
Philippine Currency, to the damage and prejudice of the said bank in the aforesaid
amount.
§ However, the trial court did not find the existence of probable cause because (1)
the element of ‘taking without the consent of the owners’ was missing on the
ground that it is the depositors-clients, and not the Bank, which filed the complaint
in these cases, who are the owners of the money allegedly taken by respondents
and hence, are the real parties-in-interest; and (2) the Information are bereft of the
phrase alleging "dependence, guardianship or vigilance between the respondents
and the offended party that would have created a high degree of confidence
between them which the respondents could have abused.".
Issue:
Whether or not the 112 information for qualified theft
sufficiently allege the element of taking without the
consent of the owner, and the qualifying
circumstance of grave abuse of confidence.
Ruling: Yes, the elements of of taking without the consent of the owner
and the qualifying circumstances of grave abuse of confidence is
present.
The relationship between banks and depositors has been held to be
that of creditor and debtor. Articles 1953 and 1980 of the New Civil
Code, as appropriately pointed out by petitioner, provide as follows:
§ Article 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to
the creditor an equal amount of the same kind and quality.
§ Article 1980. Fixed, savings, and current deposits of money in banks
and similar institutions shall be governed by the provisions
concerning loan.
 In a long line of cases involving Qualified Theft, this Court
has firmly established the nature of possession by the Bank
of the money deposits therein, and the duties being
performed by its employees who have custody of the money
or have come into possession of it. The Court has
consistently considered the allegations in the Information
that such employees acted with grave abuse of confidence,
to the damage and prejudice of the Bank, without
particularly referring to it as owner of the money deposits,
as sufficient to make out a case of Qualified Theft.
 In summary, the bank acquires ownership of the money
deposited by its clients, and the employees of the bank, who
are entrusted with the possession of money of the bank due
to the confidence reposed in them, occupy positions of
confidence.
§ Franco opened three accounts, namely, a current, savings, and time deposit, with BPI-FB. The current
and savings accounts were respectively funded with an initial deposit of P500,000.00 each, while the
time deposit account had P1,000,000.00 with a maturity date of August 31, 1990. The total amount of
P2,000,000.00 used to open these accounts is traceable to a check issued by Te-vesteco allegedly in
consideration of Franco’s introduction of Eladio Teves, who was looking for a conduit bank to facilitate
Tevesteco’s business transactions, to Jaime Sebastian, who was then BPI-FB SFDM’s Branch Manager. In
turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB from
FMIC’s time deposit account and credited to Tevesteco’s current account pursuant to an Authority to
Debit purportedly signed by FMIC’s officers. It appears that the signatures of FMIC’s officers on the
Authority to Debit were forged. Unfortunately, Tevesteco had already effected several withdrawals from
its current account (to which had been credited the P80,000,000.00 covered by the forged Authority to
Debit) amounting to P37,455,410.54, including the P2,000,000.00 paid to Franco.
§ On September 8, 1989, impelled by the need to protect its interests in light of FMIC’s forgery claim,
BPI-FB instructed Jesus Arangorin to debit Franco’s savings and current accounts for the amounts
remaining therein. In the meantime, two checks drawn by Franco against his BPI-FB current account
were dishonored upon presentment for payment, and stamped with a notation “account under
garnishment.” BPI-FB urges the court that the legal consequence of FMIC’s forgery claim is that the
money transferred by BPI-FB to Tevesteco is its own, and considering that it was able to recover
possession of the same when the money was redeposited by Franco, it had the right to set up its
ownership thereon and freeze Franco’s accounts. To bolster its position, BPI-FB cites Article 559 of the
Civil Code.
ISSUE: Whether Franco had a better right to
the deposits in the subject accounts which
are part of the proceeds of a forged
Authority to Debit.
Ruling: The court held in the affirmative and that BPI’s position is unsound.
§ The court held that the movable property mentioned in Article 559 of the Civil Code
pertains to a specific or determinate thing. A determinate or specific thing is one that is
individualized and can be identified or distinguished from others of the same kind.
§ Here, the court held that the deposit in Franco’s accounts consists of money which, albeit
characterized as a movable, is generic and fungible. The quality of being fungible depends
upon the possibility of the property, because of its nature or the will of the parties, being
substituted by others of the same kind, not having a distinct individuality. Moreover, BPI-FB
conveniently forgets that the deposit of money in banks is governed by the Civil Code
provisions on simple loan or mutuum. As there is a debtor-creditor relationship between a
bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s deposits, but such
ownership is coupled with a corresponding obligation to pay him an equal amount on
demand. Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent him
from demanding payment of BPI-FB’s obligation by drawing checks against his current
account, or asking for the release of the funds in his savings account. Thus, when Franco
issued checks drawn against his current account, he had every right as creditor to expect
that those checks would be honored by BPI-FB as debtor.
It is the borrower who suffers the risk of loss
once the delivery was already made.
Risk problem do not arise as both ownership
and possession pass on the borrower and the
contractual obligation do not come into
existence without the delivery taking place.
Facts:
In the year 1943, Jose Grijaldo obtained five loans from the Bank of Taiwan, LTD., in
Bacolod City, in the total sum of 1281.97, with interest at 6% per annum, compounded
quarterly. The said loans were evidenced by promissory notes executed by Grijaldo
in favor of Bank of Taiwan. To secure payment of the loans, Grijaldo executed a chattel
mortgage on the standing crops on his land, known as Hacienda Campugas in
Hinigiran, Negros Occidental which was later on destroyed through enemy action . By
virtue of Vesting Order P-4, and under the authority providing for in the Trading with
the Enemy Act, the assets in the Phils., of Bank of Taiwan were vested in the
Government of the United States. Pursuant to the Phil. Property Act of 1946 of the
United States, these assets, including the loans in question were subsequently
transferred to the Republic of the Phils. The Republic of the Phils, filed a complaint in
the Justice of the Peace to collect the unpaid account in question. The Justice of the
Peace, after hearing, dismissed the case on the ground that the action had prescribed.
On appeal, the Court of First Instance, ordered Grijaldo to pay the Republic the total
amount of the loans plus interests. Grijaldo appealed directly of the Supreme Court.
ISSUE:
§Whether or not the obligation of
Grijaldo to pay the loan was
extinguished upon the destruction of
the mortgaged crops
§ Ruling: NO. The SC held that the destruction of the crops
did not extinguish Grijaldo’s obligation to pay. The
appellant maintains, in support of his contention that the
appellee has no cause of of action, that because the loans
were secured by a chattel mortgage on the standing crops
on a land owned by him and these crops were lost or
destroyed through enemy action his obligation to pay the
loans was thereby extinguished.
§ The chattel mortgage simply stood as as security for
fulfilling his obligation.