G.R. No. 160892 . November 22, 2005.
SPOUSES ANTONIO and LOLITA TAN, Petitioners, vs. CARMELITO VILLAPAZ, Respondent.

FACTS

On February 6, 1992, respondent Carmelito Villapaz issued a Philippine Bank of Communications (PBCom) crossed check for ₱250,000.00, payable to petitioner Antonio “Tony” Tan. The check was deposited on the same date at the PBCom Davao City branch to Antonio Tan’s account. Respondent filed a Complaint for sum of money before the Regional Trial Court (RTC) of Digos, Davao del Sur on November 7, 1994, alleging that petitioners-spouses went to his place of business in Malita, Davao on February 6, 1992, and obtained a loan of ₱250,000.00, which was to be settled interest-free in six months. He claimed that despite the maturity of the loan on August 6, 1992, and repeated demands, petitioners failed to pay. Petitioners, in their Answer, denied going to Malita or obtaining a loan. They asserted that the check was issued by respondent in Davao City “in exchange for equivalent cash,” that they received no demand for payment, and that the alleged loan, being payable in six months, lacked the required written stipulation for validity. The RTC dismissed the complaint, crediting petitioners’ version and awarding them damages on their counterclaim. The Court of Appeals reversed the RTC decision, crediting respondent’s version and finding the existence of a loan.

ISSUE

Whether the Court of Appeals erred in reversing the RTC and finding that a contract of loan existed between the parties based on the evidence presented.

RULING

The Supreme Court DENIED the petition and AFFIRMED the decision of the Court of Appeals. The Court held that the existence of a contract of loan cannot be denied merely because it is not reduced in writing. Contracts are obligatory whether oral or written, provided all essential requisites for validity are present. A loan (mutuum) is perfected by the delivery of the money or fungible thing. The requirement under Article 1358 of the Civil Code that contracts involving more than five hundred pesos must appear in writing is for convenience, not for validity or enforceability. The Court found petitioners’ claim that the check was issued in exchange for cash unsupported by evidence, noting that respondent, who had a funded checking account near petitioners’ store, would have had no need to exchange a check for cash. The relationship of trust between the parties (as compadres) explained the lack of a written document. The Court also held that a party’s financial capability is immaterial to the fact of borrowing. Thus, the Court of Appeals correctly ruled that a loan existed and that petitioners were obligated to pay respondent the amount of ₱250,000.00.