Garcia v. Thio
REITERATIONFacts
The Antecedents: Petitioner Carolyn M. Garcia filed a complaint for sum of money against respondent Rica Marie S. Thio for alleged unpaid loans of US$100,000 and ₱500,000. Garcia claimed that Thio borrowed these amounts with stipulated monthly interests of 3% and 4%, respectively. Thio denied contracting the loans, asserting that the crossed checks issued by Garcia, payable to Marilou Santiago, were merely given to her to be handed over to Santiago, and that her subsequent payments were to accommodate Garcia. Procedural History: The Regional Trial Court (RTC) ruled in favor of Garcia, finding that Thio indeed borrowed the money and was liable for the principal amounts and stipulated interests. The Court of Appeals (CA) reversed the RTC decision, holding that no contract of loan existed between Garcia and Thio, as the crossed checks were payable to Santiago and Thio merely facilitated the transaction. The Petition: Garcia filed a petition for review on certiorari with the Supreme Court, assailing the CA's decision.
Issue(s)
Whether a contract of loan was perfected between petitioner Garcia and respondent Thio. Whether respondent Thio is liable for the stipulated monthly interests on the alleged loans.
Ruling
The Supreme Court granted the petition, reversed the Court of Appeals' decision, and affirmed the Regional Trial Court's decision with modifications. Respondent Thio was directed to pay petitioner Garcia the principal amounts of US$100,000 and ₱500,000 with 12% per annum interest from November 21, 1995, until finality of the decision. The total amount due as of finality will earn 12% per annum interest until fully paid. The awards for actual damages and attorney's fees were deleted.
Ratio Decidendi
On the perfection of the contract of loan: A loan is a real contract, perfected only upon the delivery of the object. While the checks were crossed and payable to Marilou Santiago, the Court found that respondent Thio exercised control and possession over them. Petitioner Garcia did not personally know Santiago, making it improbable to grant loans to a stranger without any written acknowledgment. Evidence, including the testimony of a mutual friend, indicated that Thio intended to borrow money from Garcia and re-lend it to Santiago at a profit. Thio's issuance of her own checks for interest payments, despite claiming she did not contract the loans, was deemed incredible. Furthermore, Santiago listed Thio as a creditor in her insolvency petition, and Thio's failure to present Santiago as a witness created a presumption that such evidence would be adverse. Therefore, the delivery of the checks to Thio constituted delivery of the loan proceeds to her, perfecting the contract of loan. On the stipulated monthly interests: The Court ruled that respondent Thio is not liable for the stipulated 3% and 4% monthly interests. Article 1956 of the Civil Code requires that no interest shall be due unless it has been expressly stipulated in writing. The agreement for monthly interest was merely verbal. However, the Court held that respondent is liable for legal interest pursuant to Article 2209 of the Civil Code. Legal interest of 12% per annum is due on loans or forbearance of money when no interest has been stipulated in writing, to be computed from the time of default, which in this case was from the date of judicial or extrajudicial demand. The Court specified that legal interest of 12% per annum is to be computed from November 21, 1995, the date of the demand letter, until the finality of the decision. Thereafter, the total amount due shall earn interest at 12% per annum until fully paid.
Main Doctrine
A loan is a real contract, perfected upon the delivery of the object. Crossed checks payable to a third party, when delivered to an intermediary who exercises control over them, constitute delivery of the loan proceeds to the intermediary, making them liable for the loan.