CELESTINA T. NAGUIAT, petitioner, vs.
COURT OF APPEALS and produced the effect of payment that the contract of loan may be deemed
AURORA QUEAÑO, respondents.
G.R. No. 118375             October 3, 2003
Facts: Queaño applied with Naguiat for a loan in the amount of
P200,000.00, which Naguiat granted. Naguiat indorsed to Queaño
Associated Bank Check for the amount P95,000.00, which was earlier
issued to Naguiat by the Corporate Resources Financing Corporation. She
also issued her own Filmanbank Check, to the order of Queaño, and for the
amount of P95,000.00. 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 to the
latter the owner’s duplicates of the titles covering the mortgaged properties.
Queaño issued to Naguiat a promissory note for the amount of P200,000.00,
with interest at 12% per annum. Queaño also issued a Security Bank and
Trust Company check, postdated for the amount of P200,000.00 and
payable to the order of Naguiat.
Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. Queaño received a letter from
Naguiat’s lawyer, demanding settlement of the loan. Queaño and one Ruby
Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queaño told
Naguiat that she did not receive the proceeds of the loan, adding that the
checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent.
Naguiat applied for the extrajudicial foreclosure of the mortgage. Before the
scheduled sale, Queaño filed annulment of the mortgage deed.
Issues: (1) Whether or not petitioner can foreclose the mortgage
properties.
(2) Agency by estoppel between petitioner and Ruebenfeldt.
Rulings: (1) Absolutely 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. For 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
perfected. A loan contract is a real contract, not consensual, and, as such, is
perfected only upon the delivery of the object of the contract. In this case,
the objects of the contract are the loan proceeds which Queaño would enjoy
only upon the encashment of the checks signed or indorsed by Naguiat.
Since Naguiat presented no such proof, it follows that the checks were not
encashed or credited to Queaño’s account. No compelling reason to disturb
the finding of the courts a quo that the lender did not remit and the borrower
did not receive the proceeds of the loan. That being the case, it follows that
the mortgage which is supposed to secure the loan is null and void.
(2) The existence of an agency relationship between Naguiat and
Ruebenfeldt is supported by ample evidence. Naguiat instructed
Ruebenfeldt to withhold from Queaño the checks she issued or indorsed to
Queaño, pending delivery by the latter of additional collateral. It was also
Ruebenfeldt who accompanied Queaño in her meeting with Naguiat.
There is an existence of an "agency by estoppels citing Article 1873
of the Civil Code. Apparently, it considered that at the very least, as a
consequence of the interaction between Naguiat and Ruebenfeldt, Queaño
got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat
did nothing to correct Queaño’s impression. In that situation, the rule is
clear. One who clothes another with apparent authority as his agent, and
holds him out to the public as such, cannot be permitted to deny the
authority of such person to act as his agent, to the prejudice of innocent
third parties dealing with such person in good faith, and in the honest belief
that he is what he appears to be.
SAURA IMPORT and EXPERT CO., INC., vs DBP   However, it should be noted that RFC imposed two conditions (availability of raw materials
[G.R. No. L-24968, April 27, 1972] MAKALINTAL, J. 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
FACTS: 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
 In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now mutual desistance which is a mode of extinguishing obligations. It is a concept that
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 derives from the principle that since mutual agreement can create a contract, mutual
and as additional working capital.  In Resolution No.145, the loan application disagreement by the parties can cause its extinguishment.
was approved to be secured first by mortgage on the factory buildings, the land
site, and machinery and equipment to be installed. WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.
 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.
 the start of the amortization and since only P464,351.77 was released applying legal
BPI Investment Corp V. CA (2002) G.R. No. 133632  February 15, 2002
compensation the balance of P35,648.23 should be applied to the monthly
amortizations
Lessons Applicable: Simple Loan
 RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI
Facts: 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
 Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala
 CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object
Investment and Development Corporation (AIDC), the predecessor of BPI Investment
of the contract which is on September 13, 1982
Corp. (BPIIC), for the construction of a house on his lot in New Alabang Village,
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second
Muntinlupa.
release of the loan?
 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 HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages.  The award of
Antonio Litonjua for P850K who paid P350K in cash and assumed the P500K moral and exemplary damages in favor of private respondents is DELETED, but the award
indebtness of ROA with AIDC. to them of attorney’s fees in the amount of P50,000 is UPHELD. Additionally, petitioner is
 AIDC proposed to grant ALS and Litonjua a new loan for P500K with ORDERED to pay private respondents P25,000 as nominal damages. Costs against
interested rate of 20%/annum and service fee of 1%/annum on the outstanding balance petitioner.
payable within 10 years through equal monthly amortization of P9,996.58 and penalty
 obligation to pay commenced only on October 13, 1982, a month after the
interest of 21%/annum/day from the date the amortization becomes due and payable.
perfection of the contract
 March 1981: ALS and Litonjua executed a mortgage deed containing the new
 contract of loan involves a reciprocal obligation, wherein the obligation or promise
stipulation with the provision that the monthly amortization will commence on May 1,
of each party is the consideration for that of the other.  It is a basic principle in
1981
reciprocal obligations that neither party incurs in delay, if the other does not comply or
 August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K
is not ready to comply in a proper manner with what is incumbent upon him.
principal loan to P457,204.90.
Consequently, petitioner could only demand for the payment of the monthly
 September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to
amortization after September 13, 1982 for it was only then when it complied with its
be what was left of their loan after full payment of Roa’s loan
obligation under the loan contract.  
 June 1984: BPIIC instituted foreclosure proceedings against  ALS and Litonjua on
 BPIIC was negligent in relying merely on the entries found in the deed of
the ground that they failed to pay the mortgage indebtedness which from May 1, 1981
mortgage, without checking and correspondingly adjusting its records on the amount
to June 30, 1984 amounting to P475,585.31
actually released and the date when it was released.  Such negligence resulted in
 August 13, 1984: Notice of sheriff's sale was published
damage for which an award of nominal damages should be given 
 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
 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