Spouses Tan V Villapaz

G.R. No.
160892
SPOUSES ANTONIO and LOLITA TAN vs.
CARMELITO VILLAPAZ
Facts:
On February 6, 1992, respondent Villapaz issued a Philippine Bank of Communications (PBCom)
crossed check in the amount of P250,000.00, payable to the order of petitioner Tony Tan. On that
date, the check was deposited at the drawee bank, PBCom Davao City branch at Monteverde
Avenue, to the account of petitioner Antonio Tan also at said bank.
On November 7, 1994 respondent filed a Complaint for sum of money against the spouses, alleging
that on February 6, 1992, the spouses went to his place of business at Malita, Davao and obtained a
loan of P250,000.00, hence, his issuance of the February 6, 1992 PBCom crossed check which loan
was to be settled interest-free in six (6) months.
On the maturity date of the loan or on August 6, 1992, petitioner Antonio Tan failed to settle the
same, and despite repeated demands, petitioners never did, drawing Villapaz to file the complaint;
and on account of the willful refusal of petitioners to honor their obligation, he suffered moral
damages in the amount of P50,000.00, among other things.
The spouses denied having gone to Malita and having obtained a loan from respondent, alleging
that the check was issued by respondent in Davao City on February 6, 1992 "in exchange for
equivalent cash"; they never received from respondent any demand for payment, be it verbal or
written, respecting the alleged loan; since the alleged loan was one with a period payable in six
months, it should have been expressly stipulated upon in writing by the parties but it was not,
hence, the essential requisite for the validity and enforceability of a loan is wanting; and the check
is inadmissible to prove the existence of a loan for P250,000.00.
Petitioners maintain that they did not secure a loan from respondent, insisting that they encashed in
Davao City respondent's February 6, 1992 crossed check; in the ordinary course of business,
prudence dictates that a contract of loan must be in writing as in fact the New Civil Code provides
that to be enforceable "contracts where the amount involved exceed[s] P500.00 must appear in
writing even a private one," hence, respondent's "self-serving" claim does not suffice to prove the
existence of a loan; respondent's allegation that no memorandum in writing of the transaction was
executed because he and they are "kumpadres" does not inspire belief for respondent, being a
businessman himself, was with more reason expected to be more prudent; and the mere encashment
of the check is not a contractual transaction such as a sale or a loan which ordinarily requires a
receipt and that explains why they did not issue a receipt when they encashed the check of
respondent.
Petitioners furthermore maintain that they were financially stable on February 6, 1992 as shown by
the entries of their bank passbook hence, there was no reason for them to go to a distant place like
Malita to borrow money.
The lower Court gave four reasons for ruling out a loan:
(a) the defense of spouses Tan that they did not go to Villapaz's place on February 6, 1992, date the
check was given to them;
(b) Spouses Tan could not have borrowed money on that date because from January to March, 1992,
they had an average daily deposit of P700,000 and on February 6, 1992, they had P1,211,400.64 in
the bank, hence, they had "surely no reason nor logic" to borrow money from Villapaz;
(c) the alleged loan was not reduced in writing and
(d) the check could not be a competent evidence of loan.
Issue:
Whether or not the transaction in dispute was a contract of loan and not a mere matter of check
encashment as found by the trial court. YES.
Held:
The four-fold reasoning cannot be sustained. They are faulty and do not accord either with law or
ordinary conduct of men. For one thing, the first two given reasons partake more of alibi and
speculation, hence, deserve scant consideration. For another, the last two miss the applicable
provisions of law.
The existence of a contract of loan cannot be denied merely because it is not reduced in writing.
Surely, there can be a verbal loan. Contracts are binding between the parties, whether oral or
written. The law is explicit that contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present. A loan (simple loan or
mutuum) exists when a person receives a loan of money or any other fungible thing and acquires
the ownership thereof. He is bound to pay to the creditor the equal amount of the same kind and
quality.
Contracts are perfected by mere consent, and from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which, according
to their nature, maybe in keeping with good faith, usage and law.
The lower Court misplaced its reliance on Article 1358 of the Civil Code providing that to be
enforceable, contracts where the amount involved exceed five hundred pesos, must appear in
writing. Such requirement, it has been held, is only for convenience, not for validity. It bears
emphasis that at the time Villapaz delivered the crossed-check to the petitioner spouses, Villapaz
had no account whatsoever with them. Spouses' contention that they did not obtain any loan but
merely exchanged the latter's check for cash is not borne by any evidence.
That apart from the check, no written proof of the grant of the loan was executed was credibly
explained by respondent when he declared that petitioners' son being his godson, he, out of trust and
respect, believed that the crossed check sufficed to prove their transaction.
As for petitioners' reliance on Art. 1358[22] of the Civil Code, the same is misplaced for the
requirement that contracts where the amount involved exceeds P500.00 must appear in writing is
only for convenience.
At all events, a check, the entries of which are no doubt in writing, could prove a loan transaction.

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