CREDIT TRANSACTIONS

CASES DIGEST FOR CASES 5 10

Delos Santos v. Jarra Digest

FACTS:
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-inlaw 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 latters 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.

Chee Kiong Yam v. Malik

GR No-50550-52 October 31, 1979
Facts: Petitioners filed a petition for certiorari, prohibition and mandamus with
preliminary injunction against the respondent Judge Malik who ruled that several
cases of estafa filed against the petitioners should be admitted for trial in his sala. It
must be noted that all complainants admitted that the money which the petitioners
did not return were obtained from them by the latter in a form of loans.
Issue: Can there be a crime of estafa for non-payment of a loan?
Held: No. In order that a person be convicted of Swindling (Estafa) under Art. 315 of
the Revised Penal Code, 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. In U.S. vs. Ibaez, 19 Phil. 559,
560 (1911), the Supreme Court held that it is not estafa for a person to refuse to
pay his debt or to deny its existence.
It is the opinion of the Court that when the relation is purely that of debtor and
creditor, the debtor can not be held liable for the crime of estafa, under said article,
by merely refusing to pay or by denying the indebtedness.
It appeared that respondent judge failed to appreciate the distinction between the
two types of loan, mutuum and commodatum, when he performed the questioned
acts. He mistook the transaction between petitioners and private respondents to be
commodatum wherein the borrower does not acquire ownership over the thing
borrowed and has the duty to return the same thing to the lender.

NATURE: Petition for certiorari, prohibition, and mandamus with preliminary

injunction
SUMMARY: Chee Kiong Yam and 5 co-defendants face 3 complaints for estafa
through misappropriation. After conducting a PI, the municipal judge ordered their
arrest and proceeded with trial. Chee Kiong Yam et.al. filed certiorari to stop the
proceedings and annul the complaints. SC granted, ruling that the acts complained
of did not constitute estafa through misappropriation since the sums received were
loans. The municipal judge mistook the transactions for commodatum, when in fact
the complaints stated they were simple loans. SC distinguished between mutuum
and commodatum.
DOCTRINE:
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.

When the relation is purely that of debtor and creditor, the debtor cannot be
held liable for the crime of estafa, under said article, by merely refusing to
pay or by denying the indebtedness.

FACTS:
3 complaints for estafa through misappropriation were filed against Chee
Kiong Yam and co-defendants in the Municipal Court of Jolo, Sulu, as follows:
o Against Chee Kiong Yam and Yam Yap Kieng for P50,000, received from
complainant Rosalinda Amin as a business loan;

Against Yam Chee Kiong, Jose Yam, Ampang Mah and Anita Yam, for
P30,000 received from complainant Tan Chu Kao as a simple loan. A
suit for the collection of the same amount was also pending with the
Sulu CFI.
o Against Yam Chee Kiong, Jose Yam, Anita Yam, and Richard Yam, for
P20,000 received from complainant Augusto Sajor. While not stated in
the complaint, Sajor admitted in an affidavit that the amount was a
loan.
Judge Malik of the Jolo Municipal Court conducted a preliminary investigation
and found a prima facie case.
o He also issued arrest warrants for the accused, and conducted trial on
the merits of the charges.
Chee Kiong Yam et.al. filed this petition to nullify the complaints and dismiss
the cases against them, alleging that Judge Malik acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when he allowed the
proceedings to run their course, because the facts stated in the complaints
did not constitute estafa; and the Municipal Court had no jurisdiction over the
cases.
Asked for their comments, Judge Malik and the complainants prayed that the
petition be dismissed. The Solicitor General, on the other hand, agreed with
Chee Kiong Yam et.al.
ISSUE # 1: W/N the acts complained of constituted estafa through
misappropriation (NO)
RATIO # 1:
In order for a person to be convicted of estafa through misappropriation as
defined in RPC 315, par.1, subpar.(b), it must be proven that such person has
an obligation to return or deliver the same money, goods or personal
property he received.
CASE AT BAR: Yam and his co-accused do not have such an obligation to
return the very same bills or coins they received. As clearly stated in the
complaints, the sums were given to them as loans; more specifically, simple
loans as defined in NCC 1933 and 1953. Judge Malik mistook the transactions
for commodatum where the borrower has the obligation to return the exact
same thing to the lender.
In simple loan, the borrower acquires ownership of the thing borrowed. As
owner, the borrower can dispose of the thing borrowed and his act will not be
considered misappropriation.
US v. Ibaez: Refusal to pay or acknowledge a debt is not estafa. When the
relation is purely that of debtor and creditor, the debtor cannot be held liable
for the crime of estafa, under said article, by merely refusing to pay or by
denying the indebtedness
ISSUE # 2: W/N the Municipal Court has jurisdiction over the cases (NO)
RATIO # 2:
Judiciary Act, Sec. 87: The municipal court of a provincial capital like the Jolo
Municipal Court has jurisdiction over criminal cases where the penalty
o

imposed by law does not exceed prision correccional or imprisonment for not
more than 6 years, or fine not exceeding P6,000 or both.
CASE AT BAR: The amounts in question range from P20K-50K. Under RPC
315, the penalty for such a degree of misappropriation exceeds prision
correccional or 6 years imprisonment. Assuming then that the acts
complained of constituted estafa, the Municipal Court has no jurisdiction to
try them on the merits. Jurisdiction rests with the CFI.
DISPOSITION: Petition granted. Cases ordered dismissed. Respondent judge
rebuked for manifest ignorance of elementary law.

Simple Loan (Mutuum) Defined

Art. 1933: By a contract of loan, one of the parties delivers to another xxx money or
other consumable thing, upon the condition that the same amount of the same kind
and quality shall be paid, in which case the contract is simply called a loan or
mutuum.
Tolentino vs. Gonzalez Sy Chiam 50 Phil 558

Tolentino purchased land from Luzon Rice Mills for Php25,000 payable in three
installments. Tolentino defaulted on the balance so the owner sent a letter of
demand to him. To pay, Tolentino applied for loan from Gonzalez on condition that
he would execute a pacto de retro sale on the property in favor of Gonzalez. Upon
maturation of loan, Tolentino defaulted so Gonzalez is demanding recovery of the
land. Tolentino contends that the pacto de retro sale is a mortgage and not an
absolute
sale.
The Supreme Court held that upon its terms, the deed of pacto de retro sale is an
absolute sale with right of repurchase and not a mortgage. Thus, Gonzalez is the
owner of the land and Tolentino is only holding it as a tenant by virtue of a contract
of
lease.
**LOAN: A contract of loan signifies the giving of a sum of money, goods or credits
to another, with a promise to repay, but not a promise to return the same thing. It
has been defined as an advancement of money, goods, or credits upon a contract or
stipulation to repay, not to return, the thing loaned at some future day in
accordance with the terms of the contract. The moment the contract is completed,

the money, goods or chattels given cease to be the property of the former owner
and become the property of the obligor to be used according to his own will, unless
the contract itself expressly provides for a special or specific use of the same. At all
events, the money, goods or chattels, the moment the contract is executed, cease
to be the property of the former owner and become the sole property of the obligor.

Commodatum

Defined

Art. 1933: By the contract of loan, 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,
in
which
case
the
contract
is
called
a
commodatum.
xxx
- the bailee acquires the use of the thing loaned but not its fruits (Art. 1935),
EXCEPT if the parties stipulate use of fruits (Art. 1940)

LIWANAG v. CA
G.R. No. 114398; October 24, 1997

Ponente: J. Romero

FACTS:

Petitioner Carmen Liwanag and a certain Thelma Tabligan went to the house
of complainant Isidora Rosales (Rosales) and asked her to join them in the business
of buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales
readily agreed. Under their agreement, Rosales would give the money needed to
buy the cigarettes while Liwanag and Tabligan would act as her agents, with a
corresponding 40% commission to her if the goods are sold; otherwise the money
would be returned to Rosales. Consequently, Rosales gave several cash advances to
Liwanag and Tabligan amounting to P633,650.00

Alarmed that Liwanag was no longer visiting her regarding their business and
believing that the amounts she advanced were being misappropriated, Rosales filed
a case of estafa against Liwanag.

Liwanag advances the theory that the intention of the parties was to enter into a
contract of partnership, wherein Rosales would contribute the funds while she would
buy and sell the cigarettes, and later divide the profits between them. She also
argues that the transaction can also be interpreted as a simple loan, with Rosales
lending to her the amount stated on an installment basis.
RTC found Liwanag
guilty for the crime of estafa. The Court of Appeals affirmed the lower courts
decision

ISSUE:

Whether Liwanag can be acquitted from the crime of estafa because she and
Rosales formed a partnership

HELD:

No, Liwanag could not be acquitted from the crime of estafa.

The Supreme Court held that Estafa is a crime committed by a person who
defrauds another causing him to suffer damages, by means of unfaithfulness or
abuse of confidence, or of false pretenses or fraudulent acts.

In the case at hand, even assuming that a contract of partnership was indeed
entered into by and between the parties, we have ruled that when money or
property have been received by a partner for a specific purpose (such as that
obtaining in the instant case) and he later misappropriated it, such partner is guilty
of estafa.

Saura
G.R.

Import
No.

&Export
L-24968

Co.,
April

Inc

v.
27,

DBP
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 parties
Saura's request for cancellation and RFC's subsequent approval of such cancellation
was 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.

G.R. No. L-1927

May 31, 1949
CRISTOBAL ROO, petitioner, vs. JOSE L. GOMEZ, ET AL., respondents.
*Usurious Transactions
#6 (round 2)
STATEMENT OF FACTS: On October 5, 1944, Cristobal Roo received as a loan from
Jose L. Gomez P4,000.00 in Japanese fiat money (mickey mouse money). The contract
of loan is under the condition that said loan will not earn interest and that it will be paid
in the currency then prevailing one year after the execution of the contract. After a
year, a collection suit was filed by respondent Gomez against petitioner Rono to collect
the latters debt. Subsequently, the trial court ruled in favor of Gomez. The court
ordered Rono to pay the respondent an amount of P4,000.00 in Philippine currency
which was then the prevailing currency at the time of payment. Contending such
decision, Rono insists that the contract taken in favor of respondent is contrary to law,
public order and good morals since his loan then of P4,000.00 mickey mouse money
is equivalent only to P100.00 of the Philippine currency which is the prevailing currency
at the time of payment.
CONTENTION OF THE PETITIONER: Roo asserts that the decision of the trial court
ruling in favor of respondent is contrary to the Usury law, because on the basis of
calculations by Government experts he only received the equivalent of P100 Philippine

pesos and now he is required to give four thousand pesos or interest greatly in excess
of the lawful rates.
CONTENTION OF THE RESPONDENT: That both parties agreed that the loaned
amount of P4,000.00 mickey mouse money be paid in the currency prevailing by the
end of one year. The civil code supports such agreement when it says "obligations
arising from contracts shall have the force of law between the contracting parties and
must be performed in accordance with their stipulations" (Article 1091).
RESOLUTION OF SC:
The SC ruled that that the contract between the parties is an aleatoty contract.
The eventual gain of Gomez is not interest within the meaning of the Usury law.
In the first place, Rono is not paying an interest. Such is evidenced by the fact that in his
promissory note, he indicated that the money loaned will not earn any interest.
Furthermore, both parties clearly agreed at the time of the execution of the
contract that the loaned money (P4,000.00 mickey mouse) will be paid in the currency
prevailing by the end of the stipulated period of one year.
The devaluation of the Mickey mouse money is due to an event unforseable by
any man; that the increased intrinsic value and purchasing power of the current money
is consequence of an event (change of currency) which at the time of the contract
neither party knew would certainly happen within the period of one year. However, both
parties subjected their rights and obligations to that contingency. Thus, the contract in
question is legal and obligatory and is not subject to the operation of the Usury law.