Short answer. The promise binds him, but the loan itself does not yet exist. Article 1934 provides that an accepted promise to deliver something by way of commodatum or simple loan is binding upon parties, while the loan is not perfected until the delivery of the object of the contract.
What the law says
An accepted promise to deliver something by way of commodatum or simple loan is binding upon parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract.
Civil Code, Article 1934 — Loan Perfected by Delivery. Read the full provision →
Two agreements, only one of them a loan
Article 1934 provides that An accepted promise to deliver something by way of commodatum or simple loan is binding upon parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. A loan is a real contract: it comes into being when the money changes hands, not when the papers are signed. So a lender who withdrew before release has not breached a loan, because there was none. What he may have breached is the separate, and binding, promise to make one, and that is where the claim lives.
Accepted is the operative word
The promise binds only if it was accepted, so the first question is whether the two of you had actually closed on terms or were still negotiating. An approval subject to conditions is not yet a promise you accepted; it is an offer waiting on those conditions, and a lender who withdraws because a condition failed is standing on the agreement rather than departing from it. Look at what the document required before release, whether you satisfied it, and whether you communicated acceptance of the terms as they finally stood, including the amount, the tenor and the security.
What the claim is, and what it is not
Since no loan was perfected, you cannot ask a court to hand you the principal as though the contract had been performed; there is nothing to repay and no interest running. What is claimed is the loss caused by the broken promise. That points the enquiry at what you did in reliance on it: a purchase you committed to, a deposit forfeited, a supplier engaged, a refinancing you let lapse. Damages of that kind have to be proved with documents and dates, so the value of the case usually rests on what happened between the promise and the withdrawal.
Read the papers before anything else
Collect the term sheet or approval letter, your acceptance, the conditions precedent, and every message about the release date. Watch for a clause reserving the lender's right to withdraw before release, because such clauses are common and they largely answer the question. Note too that Article 1956 provides no interest shall be due unless expressly stipulated in writing, and Article 1953 confirms that a person who receives a loan of money acquires ownership of it and is bound to pay an equal amount of the same kind and quality, which is the obligation that only ever begins at delivery.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Celestina T. Naguiat vs. Court of Appeals, et al, G.R. No. 118375, October 3, 2003 — read the decision on LawPhil →
- Spouses Francisco Ong, et al. vs. BPI Family Savings Bank, Inc, G.R. No. 208638, January 24, 2018 — read the decision on LawPhil →
- Spouses Ramon Sy and Anita Ng, Richard Sy, Josie Ong, William Sy and Jackeline De Lucia vs. Westmont Bank (Now United Overseas Bank Philippines) and Philippine Deposit Insurance Corporation, as Assignee of United Overseas Bank Philippines, G.R. No. 201074, October 19, 2016 — read the decision on LawPhil →
- Carolyn M. Garcia vs. Rica Marie S. Thio, G.R. No. 154878, March 16, 2007 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1934 — Loan Perfected by Delivery
- Civil Code, Article 1933 — Loan: Commodatum and Mutuum
- Civil Code, Article 1953 — Mutuum Transfers Ownership
- Civil Code, Article 1956 — Interest Must Be Stipulated in Writing