LOAN
1. G.R. No. L-19190 November 29, 1922THE PEOPLE OF THE PHILIPPINECONCEPCION,
defendant-appellant. ISLANDS, plaintiff-appellee, vs. VENANCIO
FACTS: Venancio Concepcion, President of the Philippine National Bank, sent telegrams and
a confirmation letter to the manager of the Aparri branch of PNB, authorizing an extension
of credit in favour of Puno y Concepcion, S. en C. in the amount of P300,000.00. This special
authorization limited the discretional power of the local manager of the Aparri branch to
grant loans and discount negotiable documents to P5,000, which in certain cases, could be
increased to P10,000. Pursuant to this authorization, credit aggregating P300,000 was
granted to Puno y Concepcion, S. en C., the only security required consisting of six demand
notes. This Puno y Concepcion, S. en C., in reality is a co-partnership capitalized at P100,000
wherein, Venancio Concepcions wife owns half of the co-partnership. Venancio Concepcion
was found guilty by the CFI for violation of Section 354 of Act 2747 which provides that: :
"The National Bank shall not directly or indirectly, grant loans to any of the members of the
board of directors of the bank nor to agents of the branch banks."
ISSUES:
1. Whether or not the granting of a credit of P300,000 to the co-partnership was a loan
within the meaning of Section 35 of Act No. 2747.
YES. The "credit" of an individual means his ability to borrow money by virtue of the
confidence or trust reposed by a lender that he will pay what he may promise. A
"loan" means the delivery by one party and the receipt by the other party of a given
sum of money, upon an agreement, express or implied, to repay the sum loaned,
with or without interest. The concession of a "credit" necessarily involves the
granting of "loans" up to the limit of the amount fixed in the"credit,"
2. Whether or not the granting of a credit of P300,000 to the co-partnership was a loan
or a discount.
LOAN. Discounts are favored by bankers because of their liquid nature, growing, as
they do, out of an actual, live, transaction. But in its last analysis, to discount a paper
is only a mode of loaning money, with, however, these distinctions: (1) In a discount,
interest is deducted in advance, while in a loan, interest is taken at the expiration of
a credit; (2) a discount is always on double-name paper; a loan is generally on single-
name paper. Conceding, without deciding, the law covers loans and not discounts,
yet the conclusion is inevitable that the demand notes signed by the firm "Puno y
Concepcion, S. en C." were not discount paper but were mere evidences of
indebtedness, because (1) interest was not deducted from the face of the notes, but
was paid when the notes fell due; and (2) they were single-name and not double-
name paper.
3. Whether or not the granting of a credit of P300,000 to the co-partnership was an
indirect loan within the meaning of Section 35 of Act 2747. YES. In the interpretation
and construction of statutes, the primary rule is to ascertain and give effect to the
intention of the Legislature. In this instance, the purpose of the Legislature is plainly
to erect a wall of safety against temptation for a director of the bank. The
prohibition against indirect loans is a recognition of the familiar maxim that no man
may serve two masters that where personal interest clashes with fidelity to duty the
latter almost always suffers. If, therefore, it is shown that the husband is financially
interested in the success or failure of his wife's business venture, a loan to
partnership of which the wife of a director is a member, falls within the prohibition.
Various provisions of the Civil serve to establish the familiar relationship called a
conjugal partnership. (Articles 1315, 1393, 1401, 1407, 1408, and 1412 can be
specially noted.) A loan, therefore, to a partnership of which the wife of a director of
a bank is a member, is an indirect loan to such director. That it was the intention of
the Legislature to prohibit exactly such an occurrence is shown by the acknowledged
fact that in this instance the defendant was tempted to mingle his personal and
family affairs with his official duties, and to permit the loan P300,000 to a
partnership of no established reputation and without asking for collateral security.
2. 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-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
6carabaos 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
3. SAURA IMPORT and EXPERT CO., INC., vs DBP [G.R. No. L-24968, April 27, 1972]
FACTS: In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an
industrial loan of P500,000 to be used for the construction of a factory building, to pay the
balance of the jute mill 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. But then,
later on, was cancelled 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 almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the
latter to comply with its obligations to release the loan applied for and approved, thereby
preventing the plaintiff from completing or paying contractual commitments it had entered
into, in connection with its jute mill project. The trial court ruled in favor of Saura, ruling that
there was a perfected contract between the parties and that the RFC was guilty of breach
thereof.
ISSUE: Whether or not there was a perfected contract between the parties. YES. There was
indeed a perfected consensual contract.
HELD:
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. 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. The defendant failed to fulfill its obligation and the plaintiff is therefore
entitled to recover damages. 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. However, it should be noted that
RFC imposed two conditions (availability of raw materials and increased production) when it
restored the loan to the original amount of P500,000.00. Saura, Inc. obviously was in no
position to comply with RFC’s conditions. So instead of doing so and insisting that the loan
be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The action
thus taken by both parties was in the nature of mutual desistance which is a mode of
extinguishing obligations. It is a concept that derives from the principle that since mutual
agreement can create a contract, mutual disagreement by the parties can cause its
extinguishment.
·WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.
4. 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 Filman bank 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.
5. Carolyn M. Garcia -vs- Rica Marie S. Thio GR No. 154878, 16 March 2007
FACTS: Respondent Thio received from petitioner Garcia two crossed checks which amount
to US$100,000 and US$500,000, respectively, payable to the order of Marilou Santiago.
According to petitioner, respondent failed to pay the principal amounts of the loans when
they fell due and so she filed a complaint for sum of money and damages with the RTC.
Respondent denied that she contracted the two loans and countered that it was Marilou
Satiago to whom petitioner lent the money. She claimed she was merely asked y petitioner
to give the checks to Santiago. 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’s.
RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no contract
of loan between the parties.
ISSUE
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?
HELD
(1) The Court held in the affirmative. A loan is a real contract, not consensual,
and as such I perfected only upon the delivery of the object of the contract. Upon delivery of
the contract of loan (in this case the money received by the debtor when the checks were
encashed) the debtor acquires ownership of such money or loan proceeds and is bound to
pay the creditor an equal amount. It is undisputed that the checks were delivered to
respondent.
(2) However, the checks were crossed and payable not to the order of the
respondent but to the order of a certain Marilou Santiago. Delivery is the act by which
the res or substance is thereof placed within the actual or constructive possession or control
of another. Although respondent 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 amount to Santiago.
Petition granted; judgment and resolution reversed and set aside.
6. SPOUSES BATALLA, PETITIONERS, v. PRUDENTIAL BANK, et al., RESPONDENTS. G.R.
No. 200676, March 25, 2019
Nature of Action: This is an action for Rescission of Contracts and Damages against
respondent Prudential Bank and Honda Cars because of the alleged hidden defects of the
brand new car they purchased with the respondent Honda Cars thru a Car Loan Agreement
with Prudential Bank of which it was secured by a promissory note executed by the spouses
Batalla.
Facts: Spouses Batalla) purchased a brand new Honda Civic from respondent Honda Cars
San Pablo, Inc. Respondent Alicia Rantael, then acting manager of Pilipinas Bank, now
merged with respondent Prudential Bank (Prudential),brokered the deal. To finance the
purchase of the said motor vehicle, Spouses Batalla applied for a car loan with Prudential.
They executed a promissory note. The Car Loan Agreement was approved. As such,
Prudential issued a Manager's Check in the said amount payable to Honda.
Spouses Batalla received the car after Rantael informed them that it was parked near
Prudential. However, after three days, the rear right door of the car broke down. The
Spouses Batalla consulted a certain Jojo Sanchez, who claimed that the power lock of the
rear right door was defective and that the car was no longer brand new because the paint of
the roof was merely retouched.
Spouses Batalla sent a letter to the manager of Prudential notifying it of the said defects and
demanding the immediate replacement of the motor vehicle. Thereafter, the manager of
Prudential met Spouses Batalla and offered to repair the vehicle. Spouses Batalla rejected it
because they wanted the car to be replaced with a brand new one without hidden defects.
Unable to secure a brand new car in replacement of the alleged defective vehicle, Spouses
Batalla filed a Complaint for Rescission of Contracts and Damages against Prudential and
Honda.
Issue: whether or not the car loan agreement may be rescinded because the car delivered
by Honda was defective.
Held: Negative. The Court held that under Article 1561 of the Civil Code provides for an
implied warranty against hidden defects in that the vendor shall be responsible for any
hidden defects which render the thing sold unfit for the use for which it is intended, or
should they diminish its fitness for such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower price. In an
implied warranty against hidden defects vendors cannot raise the defense of ignorance as
they are responsible to the vendee for any hidden defects even if they were not aware of its
existence The transactions of Spouses Batalla with Prudential and Honda are distinct and
separate from each other. From the time Spouses Batalla accepted the loan proceeds from
Prudential, the loan agreement had been perfected. As such, they were bound to comply
with their obligations under the loan agreement regardless of the outcome of the contract
of sale with Honda. Even assuming that the car that Spouses Batalla received was not brand
new or had hidden defects, they could not renege on their obligation of paying Prudential
the loan amount.
COMMODATUM
1. REPUBLIC OF THE PHILIPPINES vs. JOSE V. BAGTAS, G.R. No. L-17474, October 25,
1962
Facts:
Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal
Industry three bulls for a period of one year subject to a government charge of breeding fee
of 10% of the book value of the bulls. Upon the expiration on 7 May 1949 of the contract,
the borrower asked for a renewal for another period of one year. However, was approved a
renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and
requested the return of the other two. Jose V. Bagtas failed to pay the book value of the
three bulls or to return them. In the Court of First Instance of Manila the Republic of the
Philippines commenced an action against him praying that he be ordered to return the
three bulls loaned to him or to pay their book value in the total sum of P3,241.45 and the
unpaid breeding fee in the sum of P199.62, both with interests, and costs; and that other
just and equitable relief be granted.
Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who died on 23
October 1951 and as administratrix of his estate, was notified. On 7 January 1959 she file a
motion alleging that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the
Bureau Animal of Industry and that sometime in November 1958 the third bull, the
Sahiniwal, died from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal,
and praying that the writ of execution be quashed and that a writ of preliminary injunction
be issued. On 31 January 1959 the plaintiff objected to her motion. On 6 February 1959 she
filed a reply thereto. On the same day, 6 February, the Court denied her motion. Hence, this
appeal certified by the Court of Appeals to this Court as stated at the beginning of this
opinion.
The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the
Huk in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao,
Cagayan, where the animal was kept, and that as such death was due to force majeure she
is relieved from the duty of returning the bull or paying its value to the appellee. The
contention is without merit. The loan by the appellee to the late defendant Jose V. Bagtas of
the three bulls for breeding purposes for a period of one year from 8 May 1948 to 7 May
1949, later on renewed for another year as regards one bull, was subject to the payment by
the borrower of breeding fee of 10% of the book value of the bulls. The appellant contends
that the contract was commodatum and that, for that reason, as the appellee retained
ownership or title to the bull it should suffer its loss due to force majeure.
Issue:
Whether the borrowing of the Bull from the appellee is a commodatum contract and that,
for that reason, as the appellee retained ownership or title to the bull it should suffer its loss
due to force majeure.?
Held:
No, 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, because article 1942 of the Civil Code
provides that a bailee in a contract of commodatum is liable for loss of the things, even if it
should be through a fortuitous event:
(2) If he keeps it longer than the period stipulated.
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a
stipulation exempting the bailee from responsibility in case of a fortuitous event;
2. PRODUCERS BANK OF PHILIPPINES v. CA, GR No. 115324, 2003-02-19
FACTS:
Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend
Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in incorporating his
business, the Sterela Marketing and Services (“Sterela” for brevity). Specifically, Sanchez
asked private respondent to deposit in a bank a certain amount of money in the bank
account of Sterela for purposes of its incorporation. She assured private respondent that he
could withdraw his money from said account within a month’s time. With this, Mrs. Vivies,
Sanchez and a certain Estrella Dumagpi, secretary of Doronilla, went to the bank to open an
account with Mrs. Vives and Sanchez as signatories. A passbook was then issued to Mrs.
Vives. Subsequently, private respondent learned that part of the money was withdrawn
without presentment of the passbook as it was his wife got hold of such. Mrs. Vives could
not also withdraw said remaining amount because it had to answer for some postdated
checks issued by Doronilla who opened a current account for Sterela and authorized the
bank to debit savings.
Private respondent referred the matter to a lawyer, who made a written demand upon
Doronilla for the return of his client’s money. Doronilla issued another check for
P212,000.00 in private respondent’s favor but the check was again dishonored for
insufficiency of funds.
Private respondent instituted an action for recovery of sum of money in the Regional Trial
Court (RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The
RTC ruled in favor of the private respondent which was also affirmed in toto by the CA.
Hence this petition.
ISSUE: WON THE TRANSACTION BETWEEN THE DORONILLA AND RESPONDENT VIVES WAS
ONE OF SIMPLE LOAN.
HELD: NO. A circumspect examination of the records reveals that the transaction between
them was a commodatum. Article 1933 of the Civil Code distinguishes between the two
kinds of loans in this wise: By the contract of loan, one of the parties delivers to another,
either 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; or 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.
Commodatum is essentially gratuitous. Simple loan may be gratuitous or with a stipulation
to pay interest. In commodatum, the bailor retains the ownership of the thing loaned, while
in simple loan, ownership passes to the borrower. The foregoing provision seems to imply
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 of the Civil Code provides: 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. The rule is
that the intention of the parties thereto shall be accorded primordial consideration in
determining the actual character of a contract. In case of doubt, the contemporaneous and
subsequent acts of the parties shall be considered in such determination.
3. ALEJANDRA MINA, ET AL. V. RUPERTA PASCUAL, ET AL., G.R. No. L-8321, October
14, 1913
FACTS: Francisco Fontanilla bought a lot (120meters x 15meters) in the center of Laoag. He
let his brother, Andres, to build a warehouse on the part lot (14meters x 11meters).
Francisco and Andres were now dead. The petitioners in this case were recognized without
discussion as Francisco’s heirs. The defendants were claiming that they were entitled to the
warehouse although there’s no basis for their claim.
Pascual et al. petitioned the court for an authority to sell the warehouse and the lot. Mina et
al. opposed the petition and motion the court to decide first on the question of ownership
before the sale of the property. The Court, still, ordered for the sale of the property. The
warehouse and the lot were sold to Cu Joco.
The petitioners questioned the decision, claiming that by allowing the defendants to sell the
property, the court decided that Pascual et al were the owners of both land and warehouse.
What is essentially pertinent to the case is the fact that the defendant agrees that the
plaintiffs have the ownership, and they themselves only use, of the said lot.
ISSUE: Whether or not a contract of commodatum exists.
RULING: What is essentially pertinent to the case is the fact that the defendant agrees that
the plaintiffs have the ownership, and they themselves only use, of the said lot. On this
premise, the nullity of the sale of the lot is in all respects quite evident. He who has only the
use of a thing cannot validly sell the thing itself.
Although both parties may have agreed in their idea of the commodatum, on account of its
not being, as indeed it is not, a question of fact but of law, yet that denomination given by
them to the use of the lot granted by Francisco Fontanilla to his brother, Andres Fontanilla,
is not acceptable.
By the contract of loan, one of the parties delivers to the other, either anything not
perishable, in order that the latter may use it during the certain period and return it to the
former , in which case it is called commodatum . . . (art. 1740, Civil Code) ● Francisco did not
fix any definite period or time during which Andres could have the use of the lot where the
warehouse was built, and so it is that for the past thirty years the lot has been used by both
Andres and his successors in interest. The present contention of the plaintiffs that Cu Joco,
now in possession of the lot, should pay rent for it at the rate of P5 a month, would destroy
the theory of the commodatum sustained by them, since, according to article 1740,
"commodatum is essentially gratuitous”.
Sale of the lot made by Pascual was annulled.
4. Quintos v. Beck, G.R. No. L-46240; November 3, 1939.
FACTS: The defendant was a tenant of the plaintiff. The latter gratuitously granted to the
former the use of the furniture subject to the condition that the defendant would return
them to the plaintiff upon the latter's demand. The plaintiff sold the property. There after
the plaintiff required the defendant to return all the furniture transferred to him for the
new owners in the house where they were found.
On November 5, 1936, the defendant wrote to the plaintiff reiterating that she may call for
the furniture in the ground floor of the house. On the 7th of the same month, the defendant
wrote another letter to the plaintiff informing her that he could not give up the three gas
heaters and the four electric lamps because he would use them until the 15th of the same
month when the lease in due to expire. The plaintiff refused to get the furniture in view of
the fact that the defendant had declined to make delivery of all of them. On November
15th, before vacating the house, the defendant deposited with the Sheriff all the furniture
belonging to the plaintiff and they are now on deposit in the custody of the sheriff.
ISSUE: Whether or not defendant complied with his obligation to return the furniture upon
the plaintiff’s demand.
HELD: NO.
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 not 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.
5. Pajuyo v. CA, G.R. No. 146364 ; June 3, 2004.
TOPIC/DOCTRINE: An essential feature of commodatum is that it is gratuitous, while another
feature is that the use of the thing belonging to another is for a certain period; 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; Precarium is a kind of
commodatum.
FACTS: On 8 December 1985, Pajuyo and private respondent Eddie Guevarra (“Guevarra”)
executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to
live in the house for free provided Guevarra would maintain the cleanliness and orderliness
of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyo’s
demand.
In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that
Guevarra vacate the house. Guevarra refused. Guevarra turned his back on the Kasunduan
on the sole ground that like him, Pajuyo is also a squatter. Squatters, Guevarra pointed out,
cannot enter into a contract involving the land they illegally occupy. Guevarra insists that
the contract is void.
ISSUE
Whether the contract is that of a commudatum.
Whether Guiverra should be ejected from the property.
RULING: 1. On the first issue, court ruled in the negative.
The court held that an essential feature of commodatum is that it is gratuitous, while
another feature is that the use of the thing belonging to another is for a certain period; 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; Precarium is a kind of
commodatum.
Here, the court held that 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.
2. On the second issue of ejectment, the court held in the affirmative.
The court ruled here that the plaintiff allows the defendant to use his property by tolerance
without any contract, the defendant is necessarily bound by an implied promise that he will
vacate on demand, failing which, an action for unlawful detainer will lie.60 The defendant’s
refusal to comply with the demand makes his continued possession of the property
unlawful.
