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In the case of Francisco Osorio vs. Esteban Salutillo, the Supreme Court ruled that Osorio could not repay a loan of P6,000 before the agreed date of May 27, 1952, without the consent of Salutillo. The court cited Article 1127 of the Civil Code, emphasizing that the loan agreement was bilateral and the term was established for the benefit of both parties. Consequently, the court upheld the lower court's ruling and imposed costs against Osorio.

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case digest

In the case of Francisco Osorio vs. Esteban Salutillo, the Supreme Court ruled that Osorio could not repay a loan of P6,000 before the agreed date of May 27, 1952, without the consent of Salutillo. The court cited Article 1127 of the Civil Code, emphasizing that the loan agreement was bilateral and the term was established for the benefit of both parties. Consequently, the court upheld the lower court's ruling and imposed costs against Osorio.

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Mae Diane
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OBLIGATION: (G.R. No. L-2475) Francisco Osorio vs.

Esteban Salutillo

FACTS
On May 27, 1947, Francisco Osorio (plaintiff-appellee) borrowed P6,000 from
Esteban Salutillo (defendant-appellant), with the agreement that the loan would be
payable without interest on May 27, 1952. This loan was secured by a mortgage on
two parcels of real property. The mortgage agreement further stipulated that Esteban
Salutillo would take possession of the mortgaged properties during the term of the
mortgage, manage the land, and gather coconuts to produce copra. In exchange for
his management services, Salutillo was entitled to receive 70% of the net proceeds
from copra sales, while Osorio would retain the remaining 30%.
On or before March 31, 1948, Osorio attempted to repay the loan; however,
Salutillo refused to accept the payment. As a result, Osorio consigned the amount of
P6,500 in court and subsequently filed a complaint regarding the repayment terms.
The RTC of Davao, ruled in favor of Osorio that the contract was unilateral and
allowed him to repay the loan before the due date of May 27, 1952, reasoning that
early repayment would not harm the creditor.
ISSUE: Whether or not Francisco Osorio could legally repay the loan before the
agreed date of May 27, 1952, without Esteban Salutillo’s consent, given the terms of
their contract.
RULING
No, the Supreme Court ruled that Fransisco Osorio could not repay his loan
before the agreed date, as stipulated in their contracts without Salutillio’s consent.
Citing Article 1127 of the Civil Code, which states that “when a term is fixed in
obligations, it is presumed to be established for the benefit of both creditor or debtor
otherwise indicated by their agreement or circumstances”. According to this provision,
the term is presumed to be for the benefit of both debtor and creditor, and, the contract,
therefore is bilateral, the debtor cannot make payment before the time stipulated,
without the consent of the creditor.
The Supreme Court's final judgment absolved the defendant, affirming that
Osorio could not repay the loan before the established date, and imposed the costs
against him.

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