EN BANC - The ruling of the Acting Insular Auditor was to placed no
[G.R. No. 19190. November 29, 1922.]
PEOPLE, plaintiff-appellee, vs. VENANCIO CONCEPCION,
defendant-appellant.
FACTS:
 By telegrams and a letter of confirmation to the manager of the
Aparri branch, Venancio Conception, President of PNB
authorized an extension of credit in favor of "Puno y
Conception." in the amount of P300K.
- This special authorization was essential in view of the
memo order of Pres. Conception limiting the discretional
power of the local manager at Aparri to grant loans and
discount negotiable documents to P5K, which, could
be increased to P10K.
- Pursuant to this authorization, credit aggregating P300K,
was granted the firm of "Puno y Conception” the only
security required consisting of 6 demand notes. The notes,
together with the interest, were taken up and paid by July
17, 1919.
 "Puno y Concepcion, S. en C." was a copartnership capitalized
at P100K.
 Venancio Concepcion, as President of the PNB and as member
of the BOD of this bank, was charged in the CFI of Cagayan with
a violation of Sec. 35 of Act 2747. He was found guilty by the
Honorable Filamor, Judge of First Instance, and was sentenced
to imprisonment for 1 year and 6 months, to pay a fine of P3K,
with subsidiary imprisonment in case of insolvency, and the
costs.
Section 35 of Act 2747:
- "The National Bank shall not, directly or indirectly, grant
loans to any of the members of the BOD of the bank nor
to agents of the branch banks.
Section 49
- "Any person who shall violate any of the provisions of this
Act shall be punished by a fine not to exceed 10K, or by
imprisonment not to exceed 5 years, or by both such fine
and imprisonment.
These 2 were in effect in 1919 when the alleged unlawful acts
took place, but were repealed by Act No. 2938
ISSUES:
I. Was the granting of a credit of P300K to the copartnership
"Puno y Concepcion, S. en C." by Venacio Concepcion,
President of the Philippine National Bank, a "loan" within
the meaning of section 35 of Act No. 2747? – YES.
 Counsel argue that the documents of record do not prove that
the authority to make a loan was given, but only show the
concession of a credit. In this statement of fact, counsel is
correct, for the exhibits in question speak of a "credito" (credit)
and not of a "prestamo" (loan).
- The "credit" of an individual means his ability to borrow
money by virtue of the confidence or trust reposed by a
lender that he will pay what he may promise.
- A "loan" means the delivery by one party and the receipt
by the other party of a given sum of money, upon an
agreement, express or implied, to repay the sum loaned,
with or without interest.
- The concession of a "credit" necessarily involves the
granting of "loans" up to the limit of the amount fixed
in the "credit."
II. Was the granting of a credit of P300K to the
copartnership a "loan" or a "discount." – LOAN.
 H. Parker Willis, then President of the National Bank, inquired of
the Insular Auditor whether section 37 of Act No. 2612 was
intended to apply to discounts as well as to loans.
restriction upon discount transactions.
- It becomes material, therefore, to discover the distinction
between a "loan" and a "discount," and to ascertain if the
instant transaction comes under the first or the latter
denomination.
 Discounts are favored by bankers because of their liquid nature,
growing, as they do, out of an actual, live transaction. But in its
last analysis, to discount a paper is only a mode of loaning
money, with, however, these distinctions:
1) In a discount, interest is deducted in advance, while in a loan,
interest is taken at the expiration of a credit;
2) a discount is always on double-name paper; a loan is generally
on single-name paper.
 The law covers loans and not discounts, yet the conclusion is
inevitable that the demand notes signed by the firm "Puno y
Concepcion, S. en C." were not discount paper but were mere
evidences of indebtedness, because
1) interest was not deducted from the face of the notes, but was
paid when the notes fell due;
2) they were single-name and not double-name paper.
III. Was the granting of a credit an "indirect loan" within
the meaning of section 35 of Act No. 2747? – YES.
 Counsel argue that a loan to the partnership not an "indirect
loan." In this connection, it should be recalled that the wife of the
defendant held 1/2 of the capital of this partnership.
 In the interpretation and construction of statutes, the primary rule
is to ascertain and give effect to the intention of the
Legislature.
- In this instance, the purpose of the Legislature is plainly to
erect a wall of safety against temptation for a director of the
bank.
- The prohibition against indirect loans is a recognition of the
familiar maxim that no man may serve two masters —
that where personal interest clashes with fidelity to duty the
latter almost always suffers. If, therefore, it is shown that the
husband is financially interested in the success or failure of
his wife's business venture, a loan to a partnership of
which the wife of a director is a member, falls within the
prohibition.
Various provisions of the Civil Code serve to establish the
familiar relationship called a conjugal partnership.
- A loan, therefore, to a partnership of which the wife of a director
of a bank is a member, is an indirect loan to such director.
That it was the intention of the Legislature to prohibit exactly
such an occurrence is shown by the acknowledged fact that in
this instance the defendant was tempted to mingle his personal
and family affairs with his official duties, and to permit the loan
of P300K to a partnership of no established reputation and
without asking for collateral security.
Lester and Wife vs. Howard bank (the Supreme Court of
Maryland said: "What then was the purpose of the law when it
declared that no director or officer should borrow of the bank,
and "if any director,' etc., 'shall be convicted,' etc., 'of directly or
indirectly violating this section he shall be punished by fine
imprisonment?"
- We say to protect the stockholders, depositors and creditors of
the bank, against the temptation to which the directors and
officers might be exposed would not acquire any interest hostile
or adverse to the most exact and faithful discharge of duty
People vs. Knapp relied upon in the Binalbagan Estate
decision, it was said: "We are of opinion the statute forbade the
loan to his copartnership firm as well as to himself directly. The
loan was made indirectly to him through his firm."

IV. Could Venancio Concepcion, President of the PNB, be
convicted of a violation of section 35 of Act No. 2747 in
relation with section 49 of the same Act, when these
portions of Act No. 2747 were repealed by Act No. 2938,
prior to the filing of the information and the rendition of
the judgment?
- In other words, it has been the holding, and it must again be
the holding, that where an Act of the Legislature which
penalizes an offense, such repeal does not have the effect
of thereafter depriving the courts of jurisdiction to try,
convict, and sentence offenders charged with violations of
the old law.
V. Was the granting of a credit of P300K to the
copartnership by Venancio Concepcion, President of
the PNB, in violation of section 35 of Act No. 2747,
penalized by this law? - YES.
- Counsel argue that since the prohibition contained in
section 35 of Act No. 2747 is on the bank, and since section
49 of said Act provides a punishment not on the bank when
it violates any provision of the law, but on a person violating
any provision of the law, but on a person violating any
provision of the same, and imposing imprisonment as part
of the penalty, the prohibition, contained in said 35 is
without penal sanction.
- The answer is that when the corporation itself is forbidden
to do an act, the prohibition extends to the board of
directors, and to each director separately and individually.
VI. Does the alleged good faith of Venancio Concepcion, in
extending the credit of P300K to the copartnership
"Puno y Concepcion, S. en C." constitute a legal
defense?
- Counsel argue that if defendant committed the acts of which
he was convicted, it was because he was misled by rulings
coming from the Insular Auditor. It is furthermore stated that
since the loans made to the copartnership have been paid,
no loss has been suffered by the PNB.
- Neither argument, even if conceded to be true, is
conclusive. Under the statute which the defendant has
violated, criminal intent is not necessarily material. The
doing of the inhabited act, inhibited on account of public
policy and public interest, constitutes the crime. And, in this
instance, as previously demonstrated, the acts of the
President of the Philippine National Bank do not fall within
the purview of the rulings have controlling effect.
- Morse, in his work, Banks and Banking, section 125, says:
"It is fraud for directors to secure by means of their trust,
any advantage not common to the other stockholders. The
law will not allow private profit from a trust, and will not listen
to any proof of honest intent."
JUDGMENT
- No reversible error was committed in the trial of this case,
and that the defendant has been proved guilty beyond a
reasonable doubt of the crime charged in the information.
The penalty imposed by the trial judge falls within the limits
of the punitive provisions of the law.
G.R. No. 84719 January 25, 1991
YONG CHAN KIM, petitioner,
vs. PEOPLE OF THE PHILIPPINES, HON. EDGAR D.
GUSTILO, Presiding Judge, RTC, 6th Judicial Region,
Branch 28 Iloilo City and Court of Appeals (13th
Division) respondents.
PAILLA, J.:
FACTS:
 Petitioner Yong Chan Kim was employed as a Researcher at the
Aquaculture Department of the Southeast Asian Fisheries
Development Center (SEAFDEC) with head station at Tigbauan,
Province of Iloilo.
- As Head of the Economics Unit of the Research Division,
he conducted prawn surveys which required him to travel
to various selected provinces in the country where there are
potentials for prawn culture
 YCK was issued Travel Order No. 2222 which covered his
travels to different places in Luzon from 16 June to 21 July 1982,
a period of 35 days.
- Under this travel order, he received P6,438.00 as cash
advance to defray his travel expenses.
 YCK was issued another travel order, T.O. 2268, requiring him
to travel from the Head Station at Tigbauan, Iloilo to Roxas City
from 30 June to 4 July 1982, a period of 5 days.
- For this travel order, he received a cash advance of
P495.00.
 YCK presented both travel orders for liquidation, submitting
Travel Expense Reports to the Accounting Section.
- When the Travel Expense Reports were audited, it was
discovered that there was an overlap of 4 days (30
June to 3 July 1982) in the 2 travel orders for which
petitioner collected per diems twice.
- In sum, the total amount in the form of per diems and
allowances charged and collected by petitioner under
TO 2222, when he did not actually and physically travel
as represented by his liquidation papers, was
P1,230.00.
 Petitioner was required to comment on the internal auditor's
report regarding the alleged anomalous claim for per diems. -
denied the alleged anomaly, claiming that he made make-up
trips to compensate for the trips he failed to undertake under
T.O. 2222 because he was recalled to the head office and given
another assignment.
 2 complaints for Estafa were filed against the petitioner before
the MCTC at Guimbal, Iloilo, docketed as Criminal Case Nos.
628 and 631.
MCTC Decision: guilty beyond reasonable doubt for the crime
of Estafa penalized under paragraph l(b) of Article 315, RPC.
Records disclose there is no aggravating circumstance proven
by the prosecution. Neither there is any mitigating circumstance
proven by the accused. The imposable penalty should be in the
medium period of arresto mayor in its maximum period to prision
correccional in its minimum period in accordance with Article
315, No. 3, Revised Penal Code. Consonantly, the Court hereby
sentences the accused to suffer an imprisonment ranging from
4 months as the minimum to 1 year and 6 months as the
maximum in accordance with the ISLAW and to reimburse the
amount of P1,230.00 to SEAFDEC.
RTC: affirmed in toto the trial court's decision.
CA: dismissed the petition for having been filed out of time.
Petitioner's motion for reconsideration was denied for lack of
merit.
 The Solicitor General filed his Comment after several grants of
extensions of time to file the same
- In his Comment, the Solicitor General prayed for the
dismissal of the instant petition on the ground that
under Section 22, BP 129, Section 22 of the Interim
Rules and Guidelines, and Section 3, Rule 123 of the
1985 Rules of Criminal Procedure, the petitioner
should have filed a petition for review with the then IAC
instead of a notice of appeal with the RTC, in perfecting
 his appeal from the RTC to the IAC, since the RTC
judge was rendered in the exercise of its appellate
jurisdiction over municipal trial courts. The failure of
petitioner to file the proper petition rendered the
decision of the RTC final and executory, according to
the Solicitor General
 Petitioner's counsel submitted a Reply wherein she
contended that the peculiar circumstances of a case, such
as this, should be considered in order that the principle
barring a petitioner's right of review can be made flexible in
the interest of justice and equity
 In our Resolution of 29 May 1989, we resolved to deny the
petition for failure of petitioner to sufficiently show that the
Court of Appeals had committed any reversible error in its
questioned judgment which had dismissed petitioner's
petition for review for having been filed out of time. 8
Petitioner filed a motion for reconsideration maintaining that his
petition for review did not limit itself to the issue upon which the
appellate court's decision of 29 April 1988 was based, but rather
it delved into the substance and merits of the case.9
On 10 August 1990, we resolved to set aside our resolution
dismissing this case and gave due course to the petition. In the
said resolution, we stated:
In several cases decided by this Court, it had set aside
technicalities in the Rules in order to give way to justice and
equity. In the present case, we note that the petitioner, in filing
his Notice of Appeal the very next day after receiving the
decision of the court a quo lost no time in showing his intention
to appeal, although the procedure taken was not correct. The
Court can overlook the wrong pleading filed, if strict compliance
with the rules would mean sacrificing justice to technicality. The
imminence of a person being deprived unjustly of his liberty due
to procedural lapse of counsel is a strong and compelling reason
to warrant suspension of the Rules. Hence, we shall consider
the petition for review filed in the Court of Appeals as a
Supplement to the Notice of Appeal. As the Court declared in a
recent decision, '. . . there is nothing sacred about the procedure
of pleadings. This Court may go beyond the pleadings when the
interest of justice so warrants. It has the prerogative to suspend
its rules for the same purpose. . . . Technicality, when it deserts
its proper office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from
courts. [Alonzo v. Villamor, et al., 16 Phil. 315]
Conscience cannot rest in allowing a man to go straight to jail,
closing the door to his every entreaty for a full opportunity to be
heard, even as he has made a prima facie showing of a
meritorious cause, simply because he had chosen an appeal
route, to be sure, recognized by law but made inapplicable to his
case, under altered rules of procedure. While the Court of
Appeals can not be faulted and, in fact, it has to be lauded for
correctly applying the rules of procedure in appeals to the Court
of Appeals from decisions of the RTC rendered in the exercise
of its appellate jurisdiction, yet, this Court, as the ultimate
bulwark of human rights and individual liberty, will not allow
substantial justice to be sacrified at the altar of procedural
rigor.10
In the same resolution, the parties were required to file their
respective memoranda, and in compliance with said resolution,
petitioner filed his memorandum on 25 October 1989, while
private respondent SEAFDEC filed its required memorandum on
10 April 1990. On the other hand, the Solicitor General filed on
13 March 1990 a Recommendation for Acquittal in lieu of the
required memorandum.
I. Whether Or Not The Decision of the MCTC and RTC Are
Supported By The Facts And Evidence Or Contrary To Law And
That The Two Courts A Quo Have Acted With Grave Abuse Of
Discretion Amounting To Lack Of Jurisdiction Or Have Acted
Without Or In Excess Of Jurisdiction.
Ii. WON the decision of the CA is contrary to law, established
jurisprudence, equity and due process.
The second issue has been resolved in our Resolution dated 10
August 1990, when we granted petitioner's second motion for
reconsideration. We shall now proceed to the first issue.
1st ISSUE: We find merit in the petition.
 It is undisputed that petitioner received a cash advance
from private respondent SEAFDEC to defray his travel
expenses under T.O. 2222.
- It is likewise admitted that within the period covered by
T.O. 2222, petitioner was recalled to the head station
in Iloilo and given another assignment which was
covered by T.O. 2268.
- The dispute arose when petitioner allegedly failed to
return P1,230.00 out of the cash advance which he
received under T.O. 2222. For the alleged failure of
petitioner to return the amount of P1,230.00, he was
charged with the crime of Estafa under Article 315, par.
1(b) of the Revised Penal Code
Was petitioner under obligation to return the same money
(cash advance) which he had received? We believe not. EO
10, provides as follows:
B. Cash Advance for Travel
4. All cash advances must be liquidated within 30 days after
date of projected return of the person. Otherwise,
corresponding salary deduction shall be made immediately
following the expiration day.
 Liquidation simply means the settling of an indebtedness.
An employee, such as herein petitioner, who liquidates a
cash advance is in fact paying back his debt in the form of
a loan of money advanced to him by his employer, as per
diems and allowances. Similarly, as stated in the assailed
decision of the lower court, "if the amount of the cash
advance he received is less than the amount he spent for
actual travel . . . he has the right to demand reimbursement
from his employer the amount he spent coming from his
personal funds.12 In other words, the money advanced by
either party is actually a loan to the other. Hence, petitioner
was under no legal obligation to return the same cash or
money, i.e., the bills or coins, which he received from the
private respondent.13
Article 1933 and Article 1953 of the Civil Code define the
nature of a simple loan.
Art. 1933. By the contract of loan, one of the parties delivers
to another, either something not consumable so that the latter
may use the same for a certain time and return it, in which
case the contract is called a commodatum; or money or other
consumable thing, upon the condition that the same amount
of the same kind and quality shall be paid, in which case the
contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay
interest.
In commodatum the bailor retains the ownership of the thing
loaned, while in simple loan, ownership passes to the
borrower.
Art. 1953.— A person who receives a loan of money or any
other fungible thing acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the same kind
and quality.
The ruling of the trial judge that ownership of the cash
advanced to the petitioner by private respondent was not
transferred to the latter is erroneous. Ownership of the money
was transferred to the petitioner.
Even the prosecution witness, Virgilio Hierro, testified thus:
 When you gave cash advance to the accused in this TO
2222 subject to liquidation, who owns the funds, accused or
SEAFDEC? How do you consider the funds in the
possession of the accused at the time when there is an
actual transfer of cash?
- The one drawing cash advance already owns the
money but subject to liquidation. If he will not liquidate,
be is obliged to return the amount.
 So why do you treat the itinerary of travel temporary when
in fact as of that time the accused owned already the cash
advance. You said the cash advance given to the accused
is his own money. In other words, at the time you departed
with the money it belongs already to the accused?
- Yes, but subject for liquidation. He will be only entitled
for that credence if he liquidates.
 If other words, it is a transfer of ownership subject to a
suspensive condition that he liquidates the amount of
cash advance upon return to station and completion of
the travel?
- Yes, sir.
Since ownership of the money (cash advance) was
transferred to petitioner, no fiduciary relationship was created.
- Absent this fiduciary relationship between petitioner
and private respondent, which is an essential element
of the crime of estafa by misappropriation or
conversion, petitioner could not have committed
estafa.
Additionally, it has been the policy of private respondent that all
cash advances not liquidated are to be deducted
correspondingly from the salary of the employee concerned. The
evidence shows that the corresponding salary deduction was
made in the case of petitioner vis-a-vis the cash advance in
question.
CAROLYN M. GARCIA, G.R. No. 154878
Petitioner, - v e r s u s - RICA MARIE S. THIO,
Respondent.
Promulgated:March 16, 2007
CORONA, J.:
 Sometime in February 1995, respondent Rica Marie S. Thio
received from petitioner Carolyn M. Garcia a crossed check
dated Feb 24, 1995 in the amount of US$100,000 payable
to the order of a certain Marilou Santiago.
- Thereafter, petitioner received from respondent every
month the amount of US$3,000 and P76,500
 In June 1995, respondent received from petitioner another
crossed check dated June 29, 1995 in the amount
of P500,000, also payable to the order of Marilou
Santiago. Consequently, petitioner received from
respondent the amount of P20,000 every month on August
5, September 5, October 5 and November 5, 1995.
 According to petitioner, respondent failed to pay the
principal amounts of the loans (US$100,000 and P500,000)
when they fell due.
 Petitioner filed a complaint for sum of money and damages
in the RTC of Makati City, Branch 58 against respondent,
seeking to collect the sums of US$100,000, with interest
thereon at 3% a month from October 26, 1995
and P500,000, with interest thereon at 4% a month from
November 5, 1995, plus attorneys fees and actual damages
 Petitioner alleged that on February 24, 1995, respondent
borrowed from her the amount of US$100,000 with
interest thereon at the rate of 3% per month, which loan
would mature on October 26, 1995. The amount of this loan
was covered by the first check. On June 29, 1995,
respondent again borrowed the amount of P500,000 at an
agreed monthly interest of 4%, the maturity date of which
was on November 5, 1995.[14] The amount of this loan was
covered by the second check. For both loans, no
promissory note was executed since petitioner and
respondent were close friends at the time.[15] Respondent
paid the stipulated monthly interest for both loans but on
their maturity dates, she failed to pay the principal amounts
despite repeated demands.[16]
 Respondent denied that she contracted the 2 loans with
petitioner and countered that:
- it was Marilou Santiago to whom petitioner lent the
money.
- She was merely asked by petitioner to give the crossed
checks to Santiago. She issued the checks
for P76,000 and P20,000 not as payment of interest
but to accommodate petitioners request that
respondent use her own checks instead of
Santiagos.
RTC: ruled in favor of petitioner. It found that respondent
borrowed from petitioner the amounts of US$100,000 with
monthly interest of 3% and P500,000 at a monthly interest of
4%
CA: reversed the decision of the RTC and ruled that there was
no contract of loan between the parties:
- A perusal of the record of the case shows that
[petitioner] failed to substantiate her claim that
[respondent] indeed borrowed money from her.
- There is nothing in the record that shows that
[respondent] received money from [petitioner].
- What is evident is the fact that [respondent] received a
MetroBank [crossed] check dated February 24, 1995 in
the sum of US$100,000.00, payable to the order of
Marilou Santiago and a CityTrust [crossed] check
dated June 29, 1995 in the amount of P500,000.00,
again payable to the order of Marilou Santiago, both of
which were issued by [petitioner]. The checks
received by [respondent], being crossed, may not
be encashed but only deposited in the bank by the
payee thereof, that is, by Marilou Santiago herself.
It must be noted that crossing a check has the following
effects:
a) the check may not be encashed but only deposited in
the bank
b) the check may be negotiated only once to one who has
an account with the bank
c) and the act of crossing the check serves as warning to
the holder that the check has been issued for a definite
purpose so that he must inquire if he has received the
check pursuant to that purpose, otherwise, he is not a
holder in due course.
Consequently, the receipt of the [crossed] check by [respondent]
is not the issuance and delivery to the payee in
contemplation of law since the latter is not the person who
could take the checks as a holder, i.e., as a payee or indorsee
thereof, with intent to transfer title thereto. Neither could she be
deemed as an agent of Marilou Santiago with respect to the
checks because she was merely facilitating the transactions
between the former and [petitioner].
- With the foregoing circumstances, it may be fairly
inferred that there were really no contracts of loan
that existed between the parties.
RULING:
The petition is impressed with merit.

 A loan is a real contract, not consensual, and as such is
perfected only upon the delivery of the object of the
contract. This is evident in Art. 1934 of the Civil Code which
provides:
An accepted promise to deliver something by way of commodatum
or simple loan is binding upon the parties, but the commodatum or
simple loan itself shall not be perfected until the delivery of the
object of the contract.
 Upon delivery of the object of the contract of loan (in this
case the money received by the debtor when the checks
were encashed) the debtor acquires ownership of such
money or loan proceeds and is bound to pay the creditor an
equal amount
It is undisputed that the checks were delivered to
respondent. However, these checks were crossed and
payable not to the order of respondent but to the order of a
certain Marilou Santiago. Thus the main question to be
answered is: who borrowed money from Garcia? Thio or
Santiago?
- Petitioner insists that it was upon Thio’s instruction that
both checks were made payable to Santiago.
- She maintains that it was also upon Thio’s instruction
that both checks were delivered to her (respondent) so
that she could, in turn, deliver the same to Santiago
- Furthermore, she argues that once respondent
received the checks, the latter had possession and
control of them such that she had the choice to either
forward them to Santiago (who was already her
debtor), to retain them or to return them to petitioner)
We agree with petitioner. Delivery is the act by which
the res or substance thereof is placed within the actual or
constructive possession or control of another. Although
respondent did not physically receive the proceeds of the
checks, these instruments were placed in her control and
possession under an arrangement whereby she actually re-
lent the amounts to Santiago.
Several factors support this conclusion.
1) Respondent admitted that petitioner did not personally
know Santiago. It was highly improbable that petitioner
would grant 2 loans to a complete stranger without requiring
as much as promissory notes or any written
acknowledgment of the debt considering that the amounts
involved were quite big. Respondent, on the other hand,
already had transactions with Santiago at that time
2) Leticia Ruiz, a friend of both petitioner and respondent (and
whose name appeared in both parties list of witnesses)
testified that respondents plan was for Garcia to lend her
money at a monthly interest rate of 3%, after which
respondent would lend the same amount to Santiago at a
higher rate of 5% and realize a profit of 2%. This explained
why respondent instructed petitioner to make the checks
payable to Santiago. Respondent has not shown any
reason why Ruiz testimony should not be believed.
3) For the US$100,000 loan, Thio admitted issuing her own
checks in the amount of P76,000 each (peso equivalent of
US$3,000) for 8 months to cover the monthly interest. For
the P500,000 loan, she also issued her own checks in the
amount of P20,000 each for four months. According to
respondent, she merely accommodated petitioners request
for her to issue her own checks to cover the interest
payments since petitioner was not personally acquainted
with Santiago. She claimed, however, that Santiago would
replace the checks with cash. Her explanation is simply
incredible. It is difficult to believe that respondent would put
herself in a position where she would be compelled to pay
interest, from her own funds, for loans she allegedly did not
contract. We declared in one case that:
In the assessment of the testimonies of witnesses, this
Court is guided by the rule that for evidence to be believed,
it must not only proceed from the mouth of a credible
witness, but must be credible in itself such as the common
experience of mankind can approve as probable under the
circumstances. We have no test of the truth of human
testimony except its conformity to our knowledge,
observation, and experience. Whatever is repugnant to
these belongs to the miraculous, and is outside of juridical
cognizance
4) in the petition for insolvency sworn to and filed by Santiago,
it was Thio, not petitioner, who was listed as one of her
(Santiagos) creditors.
5) Thio inexplicably never presented Santiago as a witness to
corroborate her story. The presumption is that evidence
willfully suppressed would be adverse if produced.
Respondent was not able to overturn this presumption.
We hold that the CA committed reversible error when it ruled
that respondent did not borrow the amounts of US$100,000
and P500,000 from petitioner. We instead agree with the ruling
of the RTC making respondent liable for the principal
amounts of the loans.
 We do not, agree that respondent is liable for the 3% and
4% monthly interest for the US$100,000 and P500,000
loans respectively.
- There was no written proof of the interest payable
except for the verbal agreement that the loans would
earn 3% and 4% interest per month.
- Article 1956 of the Civil Code provides that no interest
shall be due unless it has been expressly
stipulated in writing.
Be that as it may, while there can be no stipulated interest, there
can be legal interest pursuant to Article 2209 of the Civil Code. It
is well-settled that:
- When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may
have been stipulated in writing.
- Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded.
- In the absence of stipulation, the rate of interest shall
be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code.
Hence, respondent is liable for the payment of legal
interest per annum to be computed from November 21, 1995,
the date when she received petitioners demand letter. From the
finality of the decision until it is fully paid, the amount due shall
earn interest at 12% per annum, the interim period being
deemed equivalent to a forbearance of credit
Respondent is directed to pay petitioner the amounts of
US$100,000 and P500,000 at 12% per annum interest
from November 21, 1995 until the finality of the decision. The
total amount due as of the date of finality will earn interest of
12% per annum until fully paid.
G.R. No. 174269 May 8, 2009
POLO S. PANTALEON, Petitioner, vs. AMERICAN EXPRESS
INTERNATIONAL, INC., Respondent.
TINGA, J.:
TOPIC: Credit; Relationship between a bank and a depositor
FACTS:
 Petitioner, lawyer Polo Pantaleon, together with his wife and
children, joined an escorted tour of Western Europe
organized by Trafalgar Tours of Europe, Ltd., in 1991. The
tour group arrived in Amsterdam on the 2nd to the last day
of the tour. As the group had arrived late in the city, they
failed to engage in any sight-seeing. Instead, it was agreed
upon that they would start early the next day to see the
entire city before ending the tour.
 The following day, the last day of the tour, the group arrived
at the Coster Diamond House in Amsterdam and agreed
that the visit to Coster should end by 9:30am, to allow
enough time to take in a guided city tour of Amsterdam.
Afterwards, the group was led to the store’s showroom to
allow them to select items for purchase. Mrs. Pantaleon had
already planned to purchase even before the tour began a
2.5 karat diamond brilliant cut, and she found a diamond
close enough in approximation that she decided to buy.
Mrs. Pantaleon also selected for purchase a pendant and a
chain, all of which totaled U.S. $13,826.00. To pay for these
purchases, Pantaleon presented his American Express
(AmexCard) credit card together with his passport to the
Coster sales clerk and took the card’s imprint, and asked
Pantaleon to sign the charge slip.
- Later on, the store clerk informed Pantaleon that his
AmexCard had not yet been approved. His son, who
had already boarded the tour bus, soon returned to
Coster and informed the other members of the
Pantaleon family that the entire tour group was waiting
for them and was already worried about further
inconveniencing the tour group thus Pantaleon asked
the store clerk to cancel the sale.
 The store manager though asked plaintiff to wait a few more
minutes but the store manager informed Pantaleon that
respondent had demanded bank references. Pantaleon
supplied the names of his depositary banks, then instructed
his daughter to return to the bus and apologize to the tour
group for the delay. Furthermore, after Pantaleon had
presented his AmexCard, Coster decided to release the
items even without respondent’s approval of the purchase.
The spouses Pantaleon returned to the bus. The tour
group’s visible irritation was aggravated when the tour guide
announced that the city tour of Amsterdam was to be
canceled due to lack of remaining time, as they had to catch
a ferry at Calais, Belgium to London. After the star-crossed
tour had ended, the Pantaleon family proceeded to the US
before returning to Manila in 1992.
 While in the US, Pantaleon continued to use his Amex card,
several times without hassle or delay, but with 2 other
incidents similar to the Amsterdam. After coming back to
Manila, Pantaleon sent a letter through counsel to the
respondent, demanding an apology for the "inconvenience,
humiliation and embarrassment he and his family thereby
suffered" for respondent’s refusal to provide credit
authorization for the aforementioned purchases.
- In response, respondent sent a letter, stating among
others that the delay in authorizing the purchase from
Coster was attributable to the circumstance that the
charged purchase of US $13,826.00 "was out of the
usual charge purchase pattern established."
The aggrieved cardholder instituted an action for damages with
the RTC of Makati. Pantaleon prayed that he be awarded for
moral damages, exemplary damages, as attorney’s fees, and
litigation expenses.
RTC: rendered a decision in favor of Pantaleon.
CA: rendered a decision reversing the award of damages in
favor of Pantaleon, holding that respondent had not breached its
obligations to petitioner.
ISSUES:
1) WON respondent had committed a breach of its obligations
to petitioner
2) WON respondent is liable for damages to petitioner
RULING:
1) Yes, the findings of the RTC, to our mind, convinced this
Court that defendants delay constitutes breach of its
contractual obligation to act on his use of the card abroad
"with special handling." Despite the popular notion that
credit card purchases are approved "within seconds," there
really is no strict, legally determinative point of demarcation
on how long must it take for a credit card company to
approve or disapprove a customer’s purchase, much less
one specifically contracted upon by the parties. Yet this is
one of those instances when "you’d know it when you’d see
it," and 1 hour appears to be an awfully long, patently
unreasonable length of time to approve or disapprove a
credit card purchase.
 It is long enough time for the customer to walk to a bank a
kilometer away, withdraw money over the counter, and
return to the store.
 Notably, petitioner frames the obligation of respondent as
"to approve or disapprove" the purchase "in timely
dispatch," and not "to approve the purchase
instantaneously or within seconds."
- Certainly, had respondent disapproved petitioner’s
purchase "within seconds" or within a timely manner,
this particular action would have never seen the light of
day. Petitioner and his family would have returned to
the bus without delay – internally humiliated perhaps
over the rejection of his card – yet spared the shame of
being held accountable by newly-made friends for
making them miss the chance to tour the city of
Amsterdam.
The culpable failure of respondent herein is not the failure to
timely approve petitioner’s purchase, but the more elemental
failure to timely act on the same, whether favorably or
unfavorably. Even assuming that respondent’s credit
authorizers did not have sufficient basis on hand to make a
judgment, we see no reason why respondent could not have
promptly informed petitioner the reason for the delay, and duly
advised him that resolving the same could take some time. In
that way, petitioner would have had informed basis on whether
or not to pursue the transaction at Coster, given the attending
circumstances. Instead, petitioner was left uncomfortably
dangling in the chilly autumn winds in a foreign land and soon
forced to confront the wrath of foreign folk.
2) Yes, Moral damages avail in cases of breach of contract
where the defendant acted fraudulently or in bad faith,
and the court should find that under the circumstances,
such damages are due. The findings of the RTC are ample
in establishing the bad faith and unjustified neglect of
respondent, attributable in particular to the "dilly-dallying" of
 respondent’s Manila credit authorizer, Edgardo Jaurique.
The delay committed by defendant was clearly attended by
unjustified neglect and bad faith, since it alleges to have
consumed more than one hour to simply go over
plaintiff’s past credit history with defendant, his
payment record and his credit and bank references,
when all such data are already stored and readily available
from its computer. This Court also takes note of the fact that
there is nothing in plaintiff’s billing history that would warrant
the imprudent suspension of action by defendant in
processing the purchase.
 It should be emphasized that the reason why petitioner is
entitled to damages is not simply because respondent
incurred delay, but because the delay, for which
culpability lies under Article 1170, led to the particular
injuries under Article 2217 of the Civil Code for which
moral damages are remunerative. Moral damages do not
avail to soothe the plaints of the simply impatient, so this
decision should not be cause for relief for those who time
the length of their credit card transactions with a stopwatch.
The somewhat unusual attending circumstances to the
purchase at Coster – that there was a deadline for the
completion of that purchase by petitioner before any delay
would redound to the injury of his several traveling
companions – gave rise to the moral shock, mental anguish,
serious anxiety, wounded feelings and social humiliation
sustained by the petitioner, as concluded by the RTC.
Those circumstances are fairly unusual, and should not give
rise to a general entitlement for damages under a more
mundane set of facts. We sustain the amount of moral
damages awarded to petitioner by the RTC.
VIII. DISPOSITIVE PORTION:
WHEREFORE, the petition is GRANTED. The assailed Decision
of the Court of Appeals is REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Makati, Branch 145 in
Civil Case No. 92-1665 is hereby REINSTATED. Costs against
respondent.
----------------------------------------------------------------------------------
[G.R. No. 133632. February 15, 2002]
BPI INVESTMENT CORPORATION, petitioner, vs. HON.
COURT OF APPEALS and ALS MANAGEMENT &
DEVELOPMENT CORPORATION, respondents.
DECISION
QUISUMBING, J.:
FACTS:
 Frank Roa obtained a loan at an interest rate of 16 1/4% per
annum from Ayala Investment and Development
Corporation (AIDC), the predecessor of petitioner BPIIC, for
the construction of a house on his lot
in New Alabang Village, Muntinlupa.
- Said house and lot were mortgaged to AIDC to secure
the loan.
 Sometime in 1980, Roa sold the house and lot to private
respondents ALS and Antonio Litonjua for P850,000. They
paid P350,000 in cash and assumed the P500,000 balance
of Roas indebtedness with AIDC.
- The latter, however, was not willing to extend the old
interest rate to private respondents and proposed to
grant them a new loan of P500k to be applied to Roas
debt and secured by the same property, at an interest
rate of 20% per annum and service fee of 1% per
annum on the outstanding principal balance payable
within 10 years in equal monthly amortization
of P9,996.58 and penalty interest at the rate of 21% per
annum per day from the date the amortization became
due and payable.
 Consequently, private respondents executed a mortgage
deed containing the above stipulations with the provision
that payment of the monthly amortization shall commence
on May 1, 1981.
 On August 13, 1982, ALS and Litonjua updated Roas
arrearages by paying BPIIC the sum of P190,601.35. This
reduced Roas principal balance to P457,204.90 which, in
turn, was liquidated when BPIIC applied thereto the
proceeds of private respondents loan of P500,000.
 On September 13, 1982, BPIIC released to private
respondents P7,146.87, purporting to be what was left of
their loan after full payment of Roas loan.
 In June 1984, BPIIC instituted foreclosure proceedings
against private respondents on the ground that they
failed to pay the mortgage indebtedness which from May
1, 1981 to June 30, 1984, amounted to P475,585.31. A
notice of sheriffs sale was published on August 13, 1984.
 On February 28, 1985, ALS and Litonjua filed Civil Case
No. 52093 against BPIIC.
- They alleged, among others, that they were not in
arrears in their payment, but in fact made an
overpayment as of June 30, 1984.
- They maintained that they should not be made to pay
amortization before the actual release of the P500k
loan in August and September 1982.
- Further, out of the P500k loan, only the total amount
of P464,351.77 was released to private respondents.
Hence, applying the effects of legal compensation, the
balance of P35,648.23 should be applied to the initial
monthly amortization for the loan.
RTC:judgment is hereby rendered in favor of ALS
Management and Development Corporation and Antonio K.
Litonjua and against BPI Investment Corporation, holding
that the amount of loan granted by BPI to ALS and Litonjua was
only in the principal sum of P464,351.77, with interest at 20%
plus service charge of 1% per annum, payable on equal monthly
and successive amortizations at P9,283.83 for ten (10) years or
one hundred twenty (120) months.
The Court further finds that ALS and Litonjua suffered
compensable damages when BPI caused their publication in a
newspaper of general circulation as defaulting debtors, and
therefore orders BPI to pay ALS and Litonjua the following sums:
a) P300,000.00 for and as moral damages;
b) P50,000.00 as and for exemplary damages;
c) P50,000.00 as and for attorneys fees and expenses of
litigation.
The foreclosure suit (Civil Case No. 11831) is hereby
DISMISSED for being premature.
CA: AFFIRM RTC
- In its decision, the Court of Appeals reasoned that a
simple loan is perfected only upon the delivery of
the object of the contract.
- The contract of loan between BPIIC and ALS &
Litonjua was perfected only on Sept. 13, 1982, the
date when BPIIC released the purported balance of
theP500K loan after deducting therefrom the value
of Roas indebtedness.
- Thus, payment of the monthly amortization should
commence only a month after the said date, as can be
inferred from the stipulations in the contract. This,
despite the express agreement of the parties that
 payment shall commence on May 1, 1981. From
October 1982 to June 1984, the total amortization due
was only P194,960.43.
- Evidence showed that private respondents had an
overpayment, because as of June 1984, they already
paid a total amount of P201,791.96. Therefore, there
was no basis for BPIIC to extrajudicially foreclose
the mortgage and cause the publication in
newspapers concerning private respondents
delinquency in the payment of their loan. This fact
constituted sufficient ground for moral damages in
favor of private respondents
ISSUES:
I. WON a contract of loan is a consensual contract
in the light of the rule laid down in Bonnevie vs. CA
– NO. Real contract.
II. WON BPI should be held liable for moral and
exemplary damages and attorneys fees in the face
of irregular payments made by ALS and opposed
to the rule laid down in SSS vs. CA
1ST ISSUE:
 petitioner contends that the CA erred in ruling that because
a simple loan is perfected upon the delivery of the object of
the contract, the loan contract in this case was perfected
only on September 13, 1982.
 Petitioner claims that a contract of loan is a consensual
contract, and a loan contract is perfected at the time the
contract of mortgage is executed conformably with our
ruling in Bonnevie v. Court of Appeals. In the present case,
the loan contract was perfected on March 31, 1981, the
date when the mortgage deed was executed, hence, the
amortization and interests on the loan should be computed
from said date.
 Petitioner also argues that while the documents showed
that the loan was released only on August 1982, the loan
was actually released on March 31, 1981, when BPIIC
issued a cancellation of mortgage of Frank Roas loan.
- This finds support in the registration on March 31,
1981 of the Deed of Absolute Sale executed by Roa in
favor of ALS, transferring the title of the property to
ALS, and ALS executing the Mortgage Deed in favor of
BPIIC.
 Moreover, petitioner claims, the delay in the release of the
loan should be attributed to private respondents. As BPIIC
only agreed to extend a P500,000 loan, private respondents
were required to reduce Frank Roas loan below said
amount. According to petitioner, private respondents were
only able to do so in August 1982
RULING:
 Based on Article 1934 of the Civil Code, a simple loan is
perfected upon the delivery of the object of the
contract, hence a real contract.
- In this case, even though the loan contract was signed
on March 31, 1981, it was perfected only
on September 13, 1982, when the full loan was
released to private respondents.
- They submit that petitioner misread Bonnevie. To give
meaning to Article 1934, according to private
respondents, Bonnevie must be construed to mean
that the contract to extend the loan was perfected
on March 31, 1981 but the contract of loan itself was
only perfected upon the delivery of the full loan to
private respondents on September 13, 1982.
 Private respondents further maintain that even
granting, arguendo, that the loan contract was perfected
on March 31, 1981, and their payment did not start a
month thereafter, still no default took place. According
to private respondents, a perfected loan agreement
imposes reciprocal obligations, where the obligation or
promise of each party is the consideration of the other
party.
- In this case, the consideration for BPIIC in entering into
the loan contract is the promise of private
respondents to pay the monthly amortization.
- For the latter, it is the promise of BPIIC to deliver the
money.
- In reciprocal obligations, neither party incurs in delay
if the other does not comply or is not ready to
comply in a proper manner with what is incumbent
upon him. Therefore, private respondents conclude,
they did not incur in delay when they did not commence
paying the monthly amortization on May 1, 1981, as it
was only on September 13, 1982 when petitioner fully
complied with its obligation under the loan contract.
 We agree with private respondents. A loan contract is not a
consensual contract but a real contract. It is perfected only
upon the delivery of the object of the contract. Petitioner
misapplied Bonnevie. The contract in Bonnevie declared
by this Court as a perfected consensual contract falls under
the first clause of Article 1934, Civil Code. It is an accepted
promise to deliver something by way of simple loan.
 In Saura Import and Export Co. Inc. vs. Development
Bank of the Philippines, petitioner applied for a loan
of P500,000 with respondent bank. The latter approved the
application through a board resolution. Thereafter, the
corresponding mortgage was executed and
registered. However, because of acts attributable to
petitioner, the loan was not released. Later, petitioner
instituted an action for damages. We recognized in this
case, a perfected consensual contract which under normal
circumstances could have made the bank liable for not
releasing the loan. However, since the fault was attributable
to petitioner therein, the court did not award it damages.
 A perfected consensual contract, as shown above, can
give rise to an action for damages. However, said
contract does not constitute the real contract of loan which
requires the delivery of the object of the contract for its
perfection and which gives rise to obligations only on the
part of the borrower.
In the present case, the loan contract between BPI, on the one
hand, and ALS and Litonjua, on the other, was perfected only
on September 13, 1982, the date of the second release of
the loan. Following the intentions of the parties on the
commencement of the monthly amortization, as found by the
Court of Appeals, private respondents obligation to pay
commenced only on October 13, 1982, a month after the
perfection of the contract.[7]
 We also agree with private respondents that a contract of
loan involves a reciprocal obligation, wherein the obligation
or promise of each party is the consideration for that of the
other. As averred by private respondents, the promise of
BPIIC to extend and deliver the loan is upon the
consideration that ALS and Litonjua shall pay the monthly
amortization commencing on May 1, 1981, one month after
the supposed release of the loan. It is a basic principle in
reciprocal obligations that neither party incurs in delay, if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. Only when a
party has performed his part of the contract can he
demand that the other party also fulfills his own
 obligation and if the latter fails, default sets in.
Consequently, petitioner could only demand for the
payment of the monthly amortization after September 13,
1982 for it was only then when it complied with its obligation
under the loan contract. Therefore, in computing the
amount due as of the date when BPIIC extrajudicially
caused the foreclosure of the mortgage, the starting
date is October 13, 1982 and not May 1, 1981.
2nd ISSUE:
 Petitioner claims that it should not be held liable for moral
and exemplary damages for it did not act maliciously when
it initiated the foreclosure proceedings.
- It merely exercised its right under the mortgage
contract because private respondents were irregular in
their monthly amortization.
 It invoked our ruling in Social Security System vs. Court of
Appeals, 120 SCRA 707, where we said:
- Nor can the SSS be held liable for moral and temperate
damages. As concluded by the CA the negligence of
the appellant is not so gross as to warrant moral and
temperate damages, except that, said Court reduced
those damages by only P5,000.00 instead of
eliminating them. Neither can we agree with the
findings of both the Trial Court and respondent Court
that the SSS had acted maliciously or in bad faith. The
SSS was of the belief that it was acting in the
legitimate exercise of its right under the mortgage
contract in the face of irregular payments made by
private respondents and placed reliance on the
automatic acceleration clause in the contract. The
filing alone of the foreclosure application should not be
a ground for an award of moral damages in the same
way that a clearly unfounded civil action is not among
the grounds for moral damages.
 Private respondents counter that BPIIC was guilty of bad
faith and should be liable for said damages because it
insisted on the payment of amortization on the loan
even before it was released.
- Further, it did not make the corresponding
deduction in the monthly amortization to conform
to the actual amount of loan released, and it
immediately initiated foreclosure proceedings when
private respondents failed to make timely payment.
- But as admitted by private respondents themselves,
they were irregular in their payment of monthly
amortization. Conformably with our ruling in SSS, we
cannot properly declare BPIIC in bad faith.
Consequently, we should rule out the award of moral
and exemplary damages.
 However, in our view, BPIIC was negligent in relying
merely on the entries found in the deed of mortgage,
without checking and correspondingly adjusting its records
on the amount actually released to private respondents and
the date when it was released. Such negligence resulted
in damage to private respondents, for which an award
of nominal damages should be given in recognition of
their rights which were violated by BPIIC. For this
purpose, the amount of P25,000 is sufficient
 Lastly, as in SSS where we awarded attorneys fees
because private respondents were compelled to litigate, we
sustain the award of P50,000 in favor of private
respondents as attorneys fees.
G.R. No. L-24968 April 27, 1972
SAURA IMPORT and EXPORT CO., INC., plaintiff-
appellee, vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-
appellant.
MAKALINTAL, J.:
In Civil Case No. 55908 of the Court of First Instance of Manila,
judgment was rendered on June 28, 1965 sentencing defendant
Development Bank of the Philippines (DBP) to pay actual and
consequential damages to plaintiff Saura Import and Export Co.,
Inc. in the amount of P383,343.68, plus interest at the legal rate
from the date the complaint was filed and attorney's fees in the
amount of P5,000.00. The present appeal is from that judgment.
In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.)
applied to the Rehabilitation Finance Corporation (RFC), before
its conversion into DBP, for an industrial loan of P500,000.00, to
be used as follows: P250,000.00 for the construction of a factory
building (for the manufacture of jute sacks); P240,900.00 to pay
the balance of the purchase price of the jute mill machinery and
equipment; and P9,100.00 as additional working capital.
Parenthetically, it may be mentioned that the jute mill machinery
had already been purchased by Saura on the strength of a letter
of credit extended by the Prudential Bank and Trust Co., and
arrived in Davao City in July 1953; and that to secure its release
without first paying the draft, Saura, Inc. executed a trust receipt
in favor of the said bank.
On January 7, 1954 RFC passed Resolution No. 145 approving
the loan application for P500,000.00, to be secured by a first
mortgage on the factory building to be constructed, the land site
thereof, and the machinery and equipment to be installed.
Among the other terms spelled out in the resolution were the
following:
1. That the proceeds of the loan shall be utilized exclusively for
the following purposes:
For construction of factory building P250,000.00
For payment of the balance of purchase
price of machinery and equipment 240,900.00
For working capital 9,100.00
T O T A L P500,000.00
4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto
Caolboy and Gregoria Estabillo and China Engineers, Ltd. shall
sign the promissory notes jointly with the borrower-corporation;
5. That release shall be made at the discretion of the
Rehabilitation Finance Corporation, subject to availability of
funds, and as the construction of the factory buildings
progresses, to be certified to by an appraiser of this
Corporation;"
Saura, Inc. was officially notified of the resolution on January 9,
1954. The day before, however, evidently having otherwise
been informed of its approval, Saura, Inc. wrote a letter to RFC,
requesting a modification of the terms laid down by it, namely:
that in lieu of having China Engineers, Ltd. (which was willing to
assume liability only to the extent of its stock subscription with
Saura, Inc.) sign as co-maker on the corresponding promissory
notes, Saura, Inc. would put up a bond for P123,500.00, an
amount equivalent to such subscription; and that Maria S. Roca
would be substituted for Inocencia Arellano as one of the other
co-makers, having acquired the latter's shares in Saura, Inc.
In view of such request RFC approved Resolution No. 736 on
February 4, 1954, designating of the members of its Board of
Governors, for certain reasons stated in the resolution, "to
reexamine all the aspects of this approved loan ... with special
reference as to the advisability of financing this particular project
based on present conditions obtaining in the operations of jute
mills, and to submit his findings thereon at the next meeting of
the Board."
On March 24, 1954 Saura, Inc. wrote RFC that China Engineers,
Ltd. had again agreed to act as co-signer for the loan, and asked
that the necessary documents be prepared in accordance with
the terms and conditions specified in Resolution No. 145. In
connection with the reexamination of the project to be financed
with the loan applied for, as stated in Resolution No. 736, the
parties named their respective committees of engineers and
technical men to meet with each other and undertake the
necessary studies, although in appointing its own committee
Saura, Inc. made the observation that the same "should not be
taken as an acquiescence on (its) part to novate, or accept new
conditions to, the agreement already) entered into," referring to
its acceptance of the terms and conditions mentioned in
Resolution No. 145.
On April 13, 1954 the loan documents were executed: the
promissory note, with F.R. Halling, representing China
Engineers, Ltd., as one of the co-signers; and the corresponding
deed of mortgage, which was duly registered on the following
April 17.
It appears, however, that despite the formal execution of the
loan agreement the reexamination contemplated in Resolution
No. 736 proceeded. In a meeting of the RFC Board of Governors
on June 10, 1954, at which Ramon Saura, President of Saura,
Inc., was present, it was decided to reduce the loan from
P500,000.00 to P300,000.00. Resolution No. 3989 was
approved as follows:
RESOLUTION No. 3989. Reducing the Loan Granted Saura
Import & Export Co., Inc. under Resolution No. 145, C.S., from
P500,000.00 to P300,000.00. Pursuant to Bd. Res. No. 736,
c.s., authorizing the re-examination of all the various aspects of
the loan granted the Saura Import & Export Co. under
Resolution No. 145, c.s., for the purpose of financing the
manufacture of jute sacks in Davao, with special reference as to
the advisability of financing this particular project based on
present conditions obtaining in the operation of jute mills, and
after having heard Ramon E. Saura and after extensive
discussion on the subject the Board, upon recommendation of
the Chairman, RESOLVED that the loan granted the Saura
Import & Export Co. be REDUCED from P500,000 to P300,000
and that releases up to P100,000 may be authorized as may be
necessary from time to time to place the factory in actual
operation: PROVIDED that all terms and conditions of
Resolution No. 145, c.s., not inconsistent herewith, shall remain
in full force and effect."
On June 19, 1954 another hitch developed. F.R. Halling, who
had signed the promissory note for China Engineers Ltd. jointly
and severally with the other RFC that his company no longer to
of the loan and therefore considered the same as cancelled as
far as it was concerned. A follow-up letter dated July 2 requested
RFC that the registration of the mortgage be withdrawn.
In the meantime Saura, Inc. had written RFC requesting that the
loan of P500,000.00 be granted. The request was denied by
RFC, which added in its letter-reply that it was "constrained to
consider as cancelled the loan of P300,000.00 ... in view of a
notification ... from the China Engineers Ltd., expressing their
desire to consider the loan insofar as they are concerned."
On July 24, 1954 Saura, Inc. took exception to the cancellation
of the loan and informed RFC that China Engineers, Ltd. "will at
any time reinstate their signature as co-signer of the note if RFC
releases to us the P500,000.00 originally approved by you.".
On December 17, 1954 RFC passed Resolution No. 9083,
restoring the loan to the original amount of P500,000.00, "it
appearing that China Engineers, Ltd. is now willing to sign the
promissory notes jointly with the borrower-corporation," but with
the following proviso:
That in view of observations made of the shortage and high cost
of imported raw materials, the Department of Agriculture and
Natural Resources shall certify to the following:
1. That the raw materials needed by the borrower-corporation to
carry out its operation are available in the immediate vicinity; and
2. That there is prospect of increased production thereof to
provide adequately for the requirements of the factory."
The action thus taken was communicated to Saura, Inc. in a
letter of RFC dated December 22, 1954, wherein it was
explained that the certification by the Department of Agriculture
and Natural Resources was required "as the intention of the
original approval (of the loan) is to develop the manufacture of
sacks on the basis of locally available raw materials." This point
is important, and sheds light on the subsequent actuations of the
parties. Saura, Inc. does not deny that the factory he was
building in Davao was for the manufacture of bags from local
raw materials. The cover page of its brochure (Exh. M) describes
the project as a "Joint venture by and between the Mindanao
Industry Corporation and the Saura Import and Export Co., Inc.
to finance, manage and operate a Kenaf mill plant, to
manufacture copra and corn bags, runners, floor mattings,
carpets, draperies; out of 100% local raw materials,
principal kenaf." The explanatory note on page 1 of the same
brochure states that, the venture "is the first serious attempt in
this country to use 100% locally grown raw materials
notably kenaf which is presently grown commercially in
theIsland of Mindanao where the proposed jutemill is located ..."
This fact, according to defendant DBP, is what moved RFC to
approve the loan application in the first place, and to require, in
its Resolution No. 9083, a certification from the Department of
Agriculture and Natural Resources as to the availability of local
raw materials to provide adequately for the requirements of the
factory. Saura, Inc. itself confirmed the defendant's stand
impliedly in its letter of January 21, 1955: (1) stating that
according to a special study made by the Bureau of Forestry
"kenaf will not be available in sufficient quantity this year or
probably even next year;" (2) requesting "assurances (from
RFC) that my company and associates will be able to bring in
sufficient jute materials as may be necessary for the full
operation of the jute mill;" and (3) asking that releases of the
loan be made as follows:
a) For the payment of the receipt for jute mill
machineries with the Prudential Bank &
Trust Company P250,000.00
(For immediate release)
b) For the purchase of materials and equip-
ment per attached list to enable the jute
mill to operate 182,413.91
c) For raw materials and labor 67,586.09
1) P25,000.00 to be released on the open-
ing of the letter of credit for raw jute
for $25,000.00.
2) P25,000.00 to be released upon arrival
of raw jute.
3) P17,586.09 to be released as soon as the
mill is ready to operate.
On January 25, 1955 RFC sent to Saura, Inc. the following reply:
Dear Sirs:
This is with reference to your letter of January 21, 1955,
regarding the release of your loan under consideration of
P500,000. As stated in our letter of December 22, 1954, the
releases of the loan, if revived, are proposed to be made from
time to time, subject to availability of funds towards the end that
the sack factory shall be placed in actual operating status. We
shall be able to act on your request for revised purpose and
manner of releases upon re-appraisal of the securities offered
for the loan.
With respect to our requirement that the Department of
Agriculture and Natural Resources certify that the raw materials
needed are available in the immediate vicinity and that there is
prospect of increased production thereof to provide adequately
the requirements of the factory, we wish to reiterate that the
basis of the original approval is to develop the manufacture of
sacks on the basis of the locally available raw materials. Your
statement that you will have to rely on the importation of jute and
your request that we give you assurance that your company will
be able to bring in sufficient jute materials as may be necessary
for the operation of your factory, would not be in line with our
principle in approving the loan.
With the foregoing letter the negotiations came to a standstill.
Saura, Inc. did not pursue the matter further. Instead, it
requested RFC to cancel the mortgage, and so, on June 17,
1955 RFC executed the corresponding deed of cancellation and
delivered it to Ramon F. Saura himself as president of Saura,
Inc.
It appears that the cancellation was requested to make way for
the registration of a mortgage contract, executed on August 6,
1954, over the same property in favor of the Prudential Bank and
Trust Co., under which contract Saura, Inc. had up to December
31 of the same year within which to pay its obligation on the trust
receipt heretofore mentioned. It appears further that for failure
to pay the said obligation the Prudential Bank and Trust Co.
sued Saura, Inc. on May 15, 1955.
On January 9, 1964, ahnost 9 years after the mortgage in favor
of RFC was cancelled at the request of Saura, Inc., the latter
commenced the present suit for damages, alleging failure of
RFC (as predecessor of the defendant DBP) to comply with its
obligation to release the proceeds of the loan applied for and
approved, thereby preventing the plaintiff from completing or
paying contractual commitments it had entered into, in
connection with its jute mill project.
The trial court rendered judgment for the plaintiff, ruling that
there was a perfected contract between the parties and that the
defendant was guilty of breach thereof. The defendant pleaded
below, and reiterates in this appeal: (1) that the plaintiff's cause
of action had prescribed, or that its claim had been waived or
abandoned; (2) that there was no perfected contract; and (3) that
assuming there was, the plaintiff itself did not comply with the
terms thereof.
We hold that there was indeed a perfected consensual contract,
as recognized in Article 1934 of the Civil Code, which provides:
ART. 1954. An accepted promise to deliver something,
by way of commodatum or simple loan is binding upon
the parties, but the commodatum or simple loan itself
shall not be perferted until the delivery of the object of
the contract.
There was undoubtedly offer and acceptance in this case: the
application of Saura, Inc. for a loan of P500,000.00 was
approved by resolution of the defendant, and the corresponding
mortgage was executed and registered. But this fact alone falls
short of resolving the basic claim that the defendant failed to
fulfill its obligation and the plaintiff is therefore entitled to recover
damages.
It should be noted that RFC entertained the loan application of
Saura, Inc. on the assumption that the factory to be constructed
would utilize locally grown raw materials, principally kenaf.
There is no serious dispute about this. It was in line with such
assumption that when RFC, by Resolution No. 9083 approved
on December 17, 1954, restored the loan to the original amount
of P500,000.00. it imposed two conditions, to wit: "(1) that the
raw materials needed by the borrower-corporation to carry out
its operation are available in the immediate vicinity; and (2) that
there is prospect of increased production thereof to provide
adequately for the requirements of the factory." The imposition
of those conditions was by no means a deviation from the terms
of the agreement, but rather a step in its implementation. There
was nothing in said conditions that contradicted the terms laid
down in RFC Resolution No. 145, passed on January 7, 1954,
namely — "that the proceeds of the loan shall be
utilized exclusively for the following purposes: for construction of
factory building — P250,000.00; for payment of the balance of
purchase price of machinery and equipment — P240,900.00; for
working capital — P9,100.00." Evidently Saura, Inc. realized that
it could not meet the conditions required by RFC, and so wrote
its letter of January 21, 1955, stating that local jute "will not be
able in sufficient quantity this year or probably next year," and
asking that out of the loan agreed upon the sum of P67,586.09
be released "for raw materials and labor." This was a deviation
from the terms laid down in Resolution No. 145 and embodied
in the mortgage contract, implying as it did a diversion of part of
the proceeds of the loan to purposes other than those agreed
upon.
When RFC turned down the request in its letter of January 25,
1955 the negotiations which had been going on for the
implementation of the agreement reached an impasse. Saura,
Inc. obviously was in no position to comply with RFC's
conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage
be cancelled, which was done on June 15, 1955. The action thus
taken by both parties was in the nature cf mutual desistance —
what Manresa terms "mutuo disenso"1 — which is a mode of
extinguishing obligations. It is a concept that derives from the
principle that since mutual agreement can create a contract,
mutual disagreement by the parties can cause its
extinguishment.2
The subsequent conduct of Saura, Inc. confirms this desistance.
It did not protest against any alleged breach of contract by RFC,
or even point out that the latter's stand was legally unjustified.
Its request for cancellation of the mortgage carried no
reservation of whatever rights it believed it might have against
RFC for the latter's non-compliance. In 1962 it even applied with
DBP for another loan to finance a rice and corn project, which
application was disapproved. It was only in 1964, nine years
after the loan agreement had been cancelled at its own request,
that Saura, Inc. brought this action for damages.All these
circumstances demonstrate beyond doubt that the said
agreement had been extinguished by mutual desistance — and
that on the initiative of the plaintiff-appellee itself.
With this view we take of the case, we find it unnecessary to
consider and resolve the other issues raised in the respective
briefs of the parties.
WHEREFORE, the judgment appealed from is reversed and the
complaint dismissed, with costs against the plaintiff-appellee.
[G.R. No. 115324. February 19, 2003]
PRODUCERS BANK OF THE PHILIPPINES (now FIRST
INTERNATIONAL BANK), petitioner, vs. HON. COURT OF
APPEALS AND FRANKLIN VIVES, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of
the Court of Appeals dated June 25, 1991 in CA-G.R. CV No.
11791 and of its Resolution[2] dated May 5, 1994, denying the
motion for reconsideration of said decision filed by petitioner
Producers Bank of the Philippines.
Sometime in 1979, private respondent Franklin Vives was
asked by his neighbor and friend Angeles Sanchez to help her
friend and townmate, Col. Arturo Doronilla, in incorporating his
business, the Sterela Marketing and Services (Sterela for
brevity). Specifically, Sanchez asked private respondent to
deposit in a bank a certain amount of money in the bank account
of Sterela for purposes of its incorporation. She assured private
respondent that he could withdraw his money from said account
within a months time. Private respondent asked Sanchez to
bring Doronilla to their house so that they could discuss
Sanchezs request.[3]
On May 9, 1979, private respondent, Sanchez, Doronilla
and a certain Estrella Dumagpi, Doronillas private secretary, met
and discussed the matter. Thereafter, relying on the assurances
and representations of Sanchez and Doronilla, private
respondent issued a check in the amount of Two Hundred
Thousand Pesos (P200,000.00) in favor of Sterela. Private
respondent instructed his wife, Mrs. Inocencia Vives, to
accompany Doronilla and Sanchez in opening a savings
account in the name of Sterela in the Buendia, Makati branch of
Producers Bank of the Philippines.However, only Sanchez, Mrs.
Vives and Dumagpi went to the bank to deposit the check. They
had with them an authorization letter from Doronilla authorizing
Sanchez and her companions, in coordination with Mr. Rufo
Atienza, to open an account for Sterela Marketing Services in
the amount of P200,000.00. In opening the account, the
authorized signatories were Inocencia Vives and/or Angeles
Sanchez. A passbook for Savings Account No. 10-1567 was
thereafter issued to Mrs. Vives.[4]
Subsequently, private respondent learned that Sterela was
no longer holding office in the address previously given to
him. Alarmed, he and his wife went to the Bank to verify if their
money was still intact. The bank manager referred them to Mr.
Rufo Atienza, the assistant manager, who informed them that
part of the money in Savings Account No. 10-1567 had been
withdrawn by Doronilla, and that only P90,000.00 remained
therein. He likewise told them that Mrs. Vives could not withdraw
said remaining amount because it had to answer for some
postdated checks issued by Doronilla. According to Atienza,
after Mrs. Vives and Sanchez opened Savings Account No. 10-
1567, Doronilla opened Current Account No. 10-0320 for Sterela
and authorized the Bank to debit Savings Account No. 10-1567
for the amounts necessary to cover overdrawings in Current
Account No. 10-0320. In opening said current account, Sterela,
through Doronilla, obtained a loan of P175,000.00 from the
Bank. To cover payment thereof, Doronilla issued three
postdated checks, all of which were dishonored. Atienza also
said that Doronilla could assign or withdraw the money in
Savings Account No. 10-1567 because he was the sole
proprietor of Sterela.[5]
Private respondent tried to get in touch with Doronilla
through Sanchez. On June 29, 1979, he received a letter from
Doronilla, assuring him that his money was intact and would be
returned to him. On August 13, 1979, Doronilla issued a
postdated check for Two Hundred Twelve Thousand Pesos
(P212,000.00) in favor of private respondent. However, upon
presentment thereof by private respondent to the drawee bank,
the check was dishonored. Doronilla requested private
respondent to present the same check on September 15, 1979
but when the latter presented the check, it was again
dishonored.[6]
Private respondent referred the matter to a lawyer, who
made a written demand upon Doronilla for the return of his
clients money. Doronilla issued another check for P212,000.00
in private respondents favor but the check was again dishonored
for insufficiency of funds.[7]
Private respondent instituted an action for recovery of sum
of money in the Regional Trial Court (RTC) in Pasig, Metro
Manila against Doronilla, Sanchez, Dumagpi and petitioner. The
case was docketed as Civil Case No. 44485. He also filed
criminal actions against Doronilla, Sanchez and Dumagpi in the
RTC. However, Sanchez passed away on March 16, 1985 while
the case was pending before the trial court. On October 3, 1995,
the RTC of Pasig, Branch 157, promulgated its Decision in Civil
Case No. 44485, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered
sentencing defendants Arturo J. Doronila, Estrella Dumagpi and
Producers Bank of the Philippines to pay plaintiff Franklin Vives
jointly and severally
(a) the amount of P200,000.00, representing the money
deposited, with interest at the legal rate from the filing of the
complaint until the same is fully paid;
(b) the sum of P50,000.00 for moral damages and a similar
amount for exemplary damages;
(c) the amount of P40,000.00 for attorneys fees; and
(d) the costs of the suit.
SO ORDERED.[8]
Petitioner appealed the trial courts decision to the Court of
Appeals. In its Decision dated June 25, 1991, the appellate court
affirmed in toto the decision of the RTC.[9] It likewise denied with
finality petitioners motion for reconsideration in its Resolution
dated May 5, 1994.[10]
On June 30, 1994, petitioner filed the present petition,
arguing that
I.
THE HONORABLE COURT OF APPEALS ERRED IN
UPHOLDING THAT THE TRANSACTION BETWEEN THE
DEFENDANT DORONILLA AND RESPONDENT VIVES WAS
ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;
II.
THE HONORABLE COURT OF APPEALS ERRED IN
UPHOLDING THAT PETITIONERS BANK MANAGER, MR.
RUFO ATIENZA, CONNIVED WITH THE OTHER
DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be
PRIVATE RESPONDENT) AND AS A CONSEQUENCE, THE
PETITIONER SHOULD BE HELD LIABLE UNDER THE
PRINCIPLE OF NATURAL JUSTICE;
III.
THE HONORABLE COURT OF APPEALS ERRED IN
ADOPTING THE ENTIRE RECORDS OF THE REGIONAL
TRIAL COURT AND AFFIRMING THE JUDGMENT
APPEALED FROM, AS THE FINDINGS OF THE REGIONAL
TRIAL COURT WERE BASED ON A MISAPPREHENSION OF
FACTS;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN
DECLARING THAT THE CITED DECISION IN SALUDARES
VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY
OF AN EMPLOYER FOR ACTS COMMITTED BY AN
EMPLOYEE IS APPLICABLE;
V.
THE HONORABLE COURT OF APPEALS ERRED IN
UPHOLDING THE DECISION OF THE LOWER COURT THAT
HEREIN PETITIONER BANK IS JOINTLY AND SEVERALLY
LIABLE WITH THE OTHER DEFENDANTS FOR THE
AMOUNT OF P200,000.00 REPRESENTING THE SAVINGS
ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES,
P50,000.00 FOR EXEMPLARY DAMAGES, P40,000.00 FOR
ATTORNEYS FEES AND THE COSTS OF SUIT.[11]
Private respondent filed his Comment on September 23,
1994. Petitioner filed its Reply thereto on September 25,
1995. The Court then required private respondent to submit a
rejoinder to the reply. However, said rejoinder was filed only on
April 21, 1997, due to petitioners delay in furnishing private
respondent with copy of the reply[12] and several substitutions of
counsel on the part of private respondent. [13] On January 17,
2001, the Court resolved to give due course to the petition and
required the parties to submit their respective
memoranda.[14] Petitioner filed its memorandum on April 16,
2001 while private respondent submitted his memorandum on
March 22, 2001.
Petitioner contends that the transaction between private
respondent and Doronilla is a simple loan (mutuum) since all the
elements of a mutuum are present: first, what was delivered by
private respondent to Doronilla was money, a consumable thing;
and second, the transaction was onerous as Doronilla was
obliged to pay interest, as evidenced by the check issued by
Doronilla in the amount of P212,000.00, or P12,000 more than
what private respondent deposited in Sterelas bank
account.[15] Moreover, the fact that private respondent sued his
good friend Sanchez for his failure to recover his money from
Doronilla shows that the transaction was not merely gratuitous
but had a business angle to it. Hence, petitioner argues that it
cannot be held liable for the return of private
respondents P200,000.00 because it is not privy to the
transaction between the latter and Doronilla. [16]
It argues further that petitioners Assistant Manager, Mr.
Rufo Atienza, could not be faulted for allowing Doronilla to
withdraw from the savings account of Sterela since the latter
was the sole proprietor of said company. Petitioner asserts that
Doronillas May 8, 1979 letter addressed to the bank, authorizing
Mrs. Vives and Sanchez to open a savings account for Sterela,
did not contain any authorization for these two to withdraw from
said account. Hence, the authority to withdraw therefrom
remained exclusively with Doronilla, who was the sole proprietor
of Sterela, and who alone had legal title to the savings
account.[17] Petitioner points out that no evidence other than the
testimonies of private respondent and Mrs. Vives was presented
during trial to prove that private respondent deposited
his P200,000.00 in Sterelas account for purposes of its
incorporation.[18] Hence, petitioner should not be held liable for
allowing Doronilla to withdraw from Sterelas savings account.
Petitioner also asserts that the Court of Appeals erred in
affirming the trial courts decision since the findings of fact therein
were not accord with the evidence presented by petitioner during
trial to prove that the transaction between private respondent
and Doronilla was a mutuum, and that it committed no wrong in
allowing Doronilla to withdraw from Sterelas savings account. [19]
Finally, petitioner claims that since there is no wrongful act
or omission on its part, it is not liable for the actual damages
suffered by private respondent, and neither may it be held liable
for moral and exemplary damages as well as attorneys fees. [20]
Private respondent, on the other hand, argues that the
transaction between him and Doronilla is not a mutuum but an
accommodation,[21] since he did not actually part with the
ownership of his P200,000.00 and in fact asked his wife to
deposit said amount in the account of Sterela so that a
certification can be issued to the effect that Sterela had sufficient
funds for purposes of its incorporation but at the same time, he
retained some degree of control over his money through his wife
who was made a signatory to the savings account and in whose
possession the savings account passbook was given. [22]
He likewise asserts that the trial court did not err in finding
that petitioner, Atienzas employer, is liable for the return of his
money. He insists that Atienza, petitioners assistant manager,
connived with Doronilla in defrauding private respondent since it
was Atienza who facilitated the opening of Sterelas current
account three days after Mrs. Vives and Sanchez opened a
savings account with petitioner for said company, as well as the
approval of the authority to debit Sterelas savings account to
cover any overdrawings in its current account. [23]
There is no merit in the petition.
At the outset, it must be emphasized that only questions of
law may be raised in a petition for review filed with this
Court. The Court has repeatedly held that it is not its function to
analyze and weigh all over again the evidence presented by the
parties during trial.[24] The Courts jurisdiction is in principle
limited to reviewing errors of law that might have been
committed by the Court of Appeals.[25] Moreover, factual findings
of courts, when adopted and confirmed by the Court of Appeals,
are final and conclusive on this Court unless these findings are
not supported by the evidence on record.[26] There is no showing
of any misapprehension of facts on the part of the Court of
Appeals in the case at bar that would require this Court to review
and overturn the factual findings of that court, especially since
the conclusions of fact of the Court of Appeals and the trial court
are not only consistent but are also amply supported by the
evidence on record.
No error was committed by the Court of Appeals when it
ruled that the transaction between private respondent and
Doronilla was a commodatum and not a mutuum. A circumspect
examination of the records reveals that the transaction between
them was a commodatum. Article 1933 of the Civil Code
distinguishes between the two kinds of loans in this wise:
By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the
same for a certain time and return it, in which case the contract
is called a commodatum; or money or other consumable thing,
upon the condition that the same amount of the same kind and
quality shall be paid, in which case the contract is simply called
a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay
interest.
In commodatum, the bailor retains the ownership of the thing
loaned, while in simple loan, ownership passes to the borrower.
The foregoing provision seems to imply that if the subject
of the contract is a consumable thing, such as money, the
contract would be a mutuum. However, there are some
instances where a commodatum may have for its object a
consumable thing. Article 1936 of the Civil Code provides:
Consumable goods may be the subject of commodatum if the
purpose of the contract is not the consumption of the object, as
when it is merely for exhibition.
Thus, if consumable goods are loaned only for purposes of
exhibition, or when the intention of the parties is to lend
consumable goods and to have the very same goods returned
at the end of the period agreed upon, the loan is
a commodatum and not a mutuum.
The rule is that the intention of the parties thereto shall be
accorded primordial consideration in determining the actual
character of a contract.[27] In case of doubt, the
contemporaneous and subsequent acts of the parties shall be
considered in such determination.[28]
As correctly pointed out by both the Court of Appeals and
the trial court, the evidence shows that private respondent
agreed to deposit his money in the savings account of Sterela
specifically for the purpose of making it appear that said firm had
sufficient capitalization for incorporation, with the promise that
the amount shall be returned within thirty (30) days. [29] Private
respondent merely accommodated Doronilla by lending his
money without consideration, as a favor to his good friend
Sanchez. It was however clear to the parties to the transaction
that the money would not be removed from Sterelas savings
account and would be returned to private respondent after thirty
(30) days.
Doronillas attempts to return to private respondent the
amount of P200,000.00 which the latter deposited in Sterelas
account together with an additional P12,000.00, allegedly
representing interest on the mutuum, did not convert the
transaction from a commodatum into a mutuum because such
was not the intent of the parties and because the
additional P12,000.00 corresponds to the fruits of the lending of
the P200,000.00. Article 1935 of the Civil Code expressly states
that [t]he bailee in commodatum acquires the use of the thing
loaned but not its fruits. Hence, it was only proper for Doronilla
to remit to private respondent the interest accruing to the latters
money deposited with petitioner.
Neither does the Court agree with petitioners contention
that it is not solidarily liable for the return of private respondents
money because it was not privy to the transaction between
Doronilla and private respondent. The nature of said transaction,
that is, whether it is a mutuum or a commodatum, has no
bearing on the question of petitioners liability for the return of
private respondents money because the factual circumstances
of the case clearly show that petitioner, through its employee Mr.
Atienza, was partly responsible for the loss of private
respondents money and is liable for its restitution.
Petitioners rules for savings deposits written on the
passbook it issued Mrs. Vives on behalf of Sterela for Savings
Account No. 10-1567 expressly states that
2. Deposits and withdrawals must be made by the depositor
personally or upon his written authority duly authenticated,
and neither a deposit nor a withdrawal will be permitted
except upon the production of the depositor savings bank
book in which will be entered by the Bank the amount deposited
or withdrawn.[30]
Said rule notwithstanding, Doronilla was permitted by
petitioner, through Atienza, the Assistant Branch Manager for
the Buendia Branch of petitioner, to withdraw therefrom even
without presenting the passbook (which Atienza very well knew
was in the possession of Mrs. Vives), not just once, but several
times. Both the Court of Appeals and the trial court found that
Atienza allowed said withdrawals because he was party to
Doronillas scheme of defrauding private respondent:
XXX
But the scheme could not have been executed successfully
without the knowledge, help and cooperation of Rufo Atienza,
assistant manager and cashier of the Makati (Buendia) branch
of the defendant bank. Indeed, the evidence indicates that
Atienza had not only facilitated the commission of the fraud but
he likewise helped in devising the means by which it can be done
in such manner as to make it appear that the transaction was in
accordance with banking procedure.
To begin with, the deposit was made in defendants Buendia
branch precisely because Atienza was a key officer therein. The
records show that plaintiff had suggested that the P200,000.00
be deposited in his bank, the Manila Banking Corporation, but
Doronilla and Dumagpi insisted that it must be in defendants
branch in Makati for it will be easier for them to get a
certification. In fact before he was introduced to plaintiff,
Doronilla had already prepared a letter addressed to the
Buendia branch manager authorizing Angeles B. Sanchez and
company to open a savings account for Sterela in the amount
of P200,000.00, as per coordination with Mr. Rufo Atienza,
Assistant Manager of the Bank x x x (Exh. 1). This is a clear
manifestation that the other defendants had been in consultation
with Atienza from the inception of the scheme. Significantly,
there were testimonies and admission that Atienza is the
brother-in-law of a certain Romeo Mirasol, a friend and business
associate of Doronilla.
Then there is the matter of the ownership of the fund. Because
of the coordination between Doronilla and Atienza, the latter
knew before hand that the money deposited did not belong to
Doronilla nor to Sterela. Aside from such foreknowledge, he was
explicitly told by Inocencia Vives that the money belonged to her
and her husband and the deposit was merely to accommodate
Doronilla. Atienza even declared that the money came from Mrs.
Vives.
Although the savings account was in the name of Sterela, the
bank records disclose that the only ones empowered to
withdraw the same were Inocencia Vives and Angeles B.
Sanchez. In the signature card pertaining to this account (Exh.
J), the authorized signatories were Inocencia Vives &/or Angeles
B. Sanchez. Atienza stated that it is the usual banking procedure
that withdrawals of savings deposits could only be made by
persons whose authorized signatures are in the signature cards
on file with the bank. He, however, said that this procedure was
not followed here because Sterela was owned by Doronilla. He
explained that Doronilla had the full authority to withdraw by
virtue of such ownership. The Court is not inclined to agree with
Atienza. In the first place, he was all the time aware that the
money came from Vives and did not belong to Sterela. He was
also told by Mrs. Vives that they were only accommodating
Doronilla so that a certification can be issued to the effect that
Sterela had a deposit of so much amount to be sued in the
incorporation of the firm. In the second place, the signature of
Doronilla was not authorized in so far as that account is
concerned inasmuch as he had not signed the signature card
provided by the bank whenever a deposit is opened. In the third
place, neither Mrs. Vives nor Sanchez had given Doronilla the
authority to withdraw.
Moreover, the transfer of fund was done without the passbook
having been presented. It is an accepted practice that whenever
a withdrawal is made in a savings deposit, the bank requires the
presentation of the passbook. In this case, such recognized
practice was dispensed with. The transfer from the savings
account to the current account was without the submission of
the passbook which Atienza had given to Mrs. Vives. Instead, it
was made to appear in a certification signed by Estrella
Dumagpi that a duplicate passbook was issued to Sterela
because the original passbook had been surrendered to the
Makati branch in view of a loan accommodation assigning the
savings account (Exh. C). Atienza, who undoubtedly had a hand
in the execution of this certification, was aware that the contents
of the same are not true. He knew that the passbook was in the
hands of Mrs. Vives for he was the one who gave it to
her. Besides, as assistant manager of the branch and the bank
official servicing the savings and current accounts in question,
he also was aware that the original passbook was never
surrendered. He was also cognizant that Estrella Dumagpi was
not among those authorized to withdraw so her certification had
no effect whatsoever.
The circumstance surrounding the opening of the current
account also demonstrate that Atienzas active participation in
the perpetration of the fraud and deception that caused the
loss. The records indicate that this account was opened three
days later after the P200,000.00 was deposited. In spite of his
disclaimer, the Court believes that Atienza was mindful and
posted regarding the opening of the current account considering
that Doronilla was all the while in coordination with him.That it
was he who facilitated the approval of the authority to debit the
savings account to cover any overdrawings in the current
account (Exh. 2) is not hard to comprehend.
Clearly Atienza had committed wrongful acts that had resulted
to the loss subject of this case. x x x.[31]
Under Article 2180 of the Civil Code, employers shall be
held primarily and solidarily liable for damages caused by their
employees acting within the scope of their assigned tasks. To
hold the employer liable under this provision, it must be shown
that an employer-employee relationship exists, and that the
employee was acting within the scope of his assigned task when
the act complained of was committed.[32] Case law in the United
States of America has it that a corporation that entrusts a
general duty to its employee is responsible to the injured party
for damages flowing from the employees wrongful act done in
the course of his general authority, even though in doing such
act, the employee may have failed in its duty to the employer
and disobeyed the latters instructions.[33]
There is no dispute that Atienza was an employee of
petitioner. Furthermore, petitioner did not deny that Atienza was
acting within the scope of his authority as Assistant Branch
Manager when he assisted Doronilla in withdrawing funds from
Sterelas Savings Account No. 10-1567, in which account private
respondents money was deposited, and in transferring the
money withdrawn to Sterelas Current Account with
petitioner. Atienzas acts of helping Doronilla, a customer of the
petitioner, were obviously done in furtherance of petitioners
interests[34] even though in the process, Atienza violated some
of petitioners rules such as those stipulated in its savings
account passbook.[35] It was established that the transfer of
funds from Sterelas savings account to its current account could
not have been accomplished by Doronilla without the invaluable
assistance of Atienza, and that it was their connivance which
was the cause of private respondents loss.
The foregoing shows that the Court of Appeals correctly
held that under Article 2180 of the Civil Code, petitioner is liable
for private respondents loss and is solidarily liable with Doronilla
and Dumagpi for the return of the P200,000.00 since it is clear
that petitioner failed to prove that it exercised due diligence to
prevent the unauthorized withdrawals from Sterelas savings
account, and that it was not negligent in the selection and
supervision of Atienza. Accordingly, no error was committed by
the appellate court in the award of actual, moral and exemplary
damages, attorneys fees and costs of suit to private respondent.
WHEREFORE, the petition is hereby DENIED. The
assailed Decision and Resolution of the Court of Appeals are
AFFIRMED.
SO ORDERED.
G.R. No. 80294-95 September 21, 1988
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN
PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO
AND JUAN VALDEZ, respondents.
Valdez, Ereso, Polido & Associates for petitioner.
Claustro, Claustro, Claustro Law Office collaborating counsel for
petitioner.
Jaime G. de Leon for the Heirs of Egmidio Octaviano.
Cotabato Law Office for the Heirs of Juan Valdez.
GANCAYCO, J.:
The principal issue in this case is whether or not a decision of
the Court of Appeals promulgated a long time ago can properly
be considered res judicata by respondent Court of Appeals in
the present two cases between petitioner and two private
respondents.
Petitioner questions as allegedly erroneous the Decision dated
August 31, 1987 of the Ninth Division of Respondent Court of
Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and
CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for
Recovery of Possession, which affirmed the Decision of the
Honorable Nicodemo T. Ferrer, Judge of the Regional Trial
Court of Baguio and Benguet in Civil Case No. 3607 (419) and
Civil Case No. 3655 (429), with the dispositive portion as
follows:
WHEREFORE, Judgment is hereby rendered ordering the
defendant, Catholic Vicar Apostolic of the Mountain Province to
return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs.
Heirs of Juan Valdez, and Lot 3 of the same Plan to the other
set of plaintiffs, the Heirs of Egmidio Octaviano (Leonardo
Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs'
claim or damages is hereby denied. Said defendant is ordered
to pay costs. (p. 36, Rollo)
Respondent Court of Appeals, in affirming the trial court's
decision, sustained the trial court's conclusions that the Decision
of the Court of Appeals, dated May 4,1977 in CA-G.R. No.
38830-R, in the two cases affirmed by the Supreme Court,
touched on the ownership of lots 2 and 3 in question; that the
two lots were possessed by the predecessors-in-interest of
private respondents under claim of ownership in good faith from
1906 to 1951; that petitioner had been in possession of the same
lots as bailee in commodatum up to 1951, when petitioner
repudiated the trust and when it applied for registration in 1962;
that petitioner had just been in possession as owner for eleven
years, hence there is no possibility of acquisitive prescription
which requires 10 years possession with just title and 30 years
of possession without; that the principle of res judicata on these
findings by the Court of Appeals will bar a reopening of these
questions of facts; and that those facts may no longer be altered.
Petitioner's motion for reconsideation of the respondent
appellate court's Decision in the two aforementioned cases (CA
G.R. No. CV-05418 and 05419) was denied.
The facts and background of these cases as narrated by the trail
court are as follows —
... The documents and records presented reveal that the whole
controversy started when the defendant Catholic Vicar Apostolic
of the Mountain Province (VICAR for brevity) filed with the Court
of First Instance of Baguio Benguet on September 5, 1962 an
application for registration of title over Lots 1, 2, 3, and 4 in Psu-
194357, situated at Poblacion Central, La Trinidad, Benguet,
docketed as LRC N-91, said Lots being the sites of the Catholic
Church building, convents, high school building, school
gymnasium, school dormitories, social hall, stonewalls, etc. On
March 22, 1963 the Heirs of Juan Valdez and the Heirs of
Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2
and 3, respectively, asserting ownership and title thereto. After
trial on the merits, the land registration court promulgated its
Decision, dated November 17, 1965, confirming the registrable
title of VICAR to Lots 1, 2, 3, and 4.
The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No.
3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein
Civil Case No. 3607) appealed the decision of the land
registration court to the then Court of Appeals, docketed as CA-
G.R. No. 38830-R. The Court of Appeals rendered its decision,
dated May 9, 1977, reversing the decision of the land
registration court and dismissing the VICAR's application as to
Lots 2 and 3, the lots claimed by the two sets of oppositors in
the land registration case (and two sets of plaintiffs in the two
cases now at bar), the first lot being presently occupied by the
convent and the second by the women's dormitory and the
sister's convent.
On May 9, 1977, the Heirs of Octaviano filed a motion for
reconsideration praying the Court of Appeals to order the
registration of Lot 3 in the names of the Heirs of Egmidio
Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and
Pacita Valdez filed their motion for reconsideration praying that
both Lots 2 and 3 be ordered registered in the names of the
Heirs of Juan Valdez and Pacita Valdez. On August 12,1977,
the Court of Appeals denied the motion for reconsideration filed
by the Heirs of Juan Valdez on the ground that there was "no
sufficient merit to justify reconsideration one way or the other ...,"
and likewise denied that of the Heirs of Egmidio Octaviano.
Thereupon, the VICAR filed with the Supreme Court a petition
for review on certiorari of the decision of the Court of Appeals
dismissing his (its) application for registration of Lots 2 and 3,
docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic
of the Mountain Province vs. Court of Appeals and Heirs of
Egmidio Octaviano.'
From the denial by the Court of Appeals of their motion for
reconsideration the Heirs of Juan Valdez and Pacita Valdez, on
September 8, 1977, filed with the Supreme Court a petition for
review, docketed as G.R. No. L-46872, entitled, Heirs of Juan
Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of
Egmidio Octaviano and Annable O. Valdez.
On January 13, 1978, the Supreme Court denied in a minute
resolution both petitions (of VICAR on the one hand and the
Heirs of Juan Valdez and Pacita Valdez on the other) for lack of
merit. Upon the finality of both Supreme Court resolutions in
G.R. No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano
filed with the then Court of First Instance of Baguio, Branch II, a
Motion For Execution of Judgment praying that the Heirs of
Octaviano be placed in possession of Lot 3. The Court, presided
over by Hon. Salvador J. Valdez, on December 7, 1978, denied
the motion on the ground that the Court of Appeals decision in
CA-G.R. No. 38870 did not grant the Heirs of Octaviano any
affirmative relief.
On February 7, 1979, the Heirs of Octaviano filed with the Court
of Appeals a petitioner for certiorari and mandamus, docketed
as CA-G.R. No. 08890-R, entitled Heirs of Egmidio Octaviano
vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated
May 16, 1979, the Court of Appeals dismissed the petition.
It was at that stage that the instant cases were filed. The Heirs
of Egmidio Octaviano filed Civil Case No. 3607 (419) on July 24,
1979, for recovery of possession of Lot 3; and the Heirs of Juan
Valdez filed Civil Case No. 3655 (429) on September 24, 1979,
likewise for recovery of possession of Lot 2 (Decision, pp. 199-
201, Orig. Rec.).
In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs
of Egmidio Octaviano presented one (1) witness, Fructuoso
Valdez, who testified on the alleged ownership of the land in
question (Lot 3) by their predecessor-in-interest, Egmidio
Octaviano (Exh. C ); his written demand (Exh. B—B-4 ) to
defendant Vicar for the return of the land to them; and the
reasonable rentals for the use of the land at P10,000.00 per
month. On the other hand, defendant Vicar presented the
Register of Deeds for the Province of Benguet, Atty. Nicanor
Sison, who testified that the land in question is not covered by
any title in the name of Egmidio Octaviano or any of the plaintiffs
(Exh. 8). The defendant dispensed with the testimony of
Mons.William Brasseur when the plaintiffs admitted that the
witness if called to the witness stand, would testify that
defendant Vicar has been in possession of Lot 3, for seventy-
five (75) years continuously and peacefully and has constructed
permanent structures thereon.
In Civil Case No. 3655, the parties admitting that the material
facts are not in dispute, submitted the case on the sole issue of
whether or not the decisions of the Court of Appeals and the
Supreme Court touching on the ownership of Lot 2, which in
effect declared the plaintiffs the owners of the land constitute res
judicata.
In these two cases , the plaintiffs arque that the defendant Vicar
is barred from setting up the defense of ownership and/or long
and continuous possession of the two lots in question since this
is barred by prior judgment of the Court of Appeals in CA-G.R.
No. 038830-R under the principle of res judicata. Plaintiffs
contend that the question of possession and ownership have
already been determined by the Court of Appeals (Exh. C,
Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme
Court (Exh. 1, Minute Resolution of the Supreme Court). On his
part, defendant Vicar maintains that the principle of res
judicata would not prevent them from litigating the issues of long
possession and ownership because the dispositive portion of the
prior judgment in CA-G.R. No. 038830-R merely dismissed their
application for registration and titling of lots 2 and 3. Defendant
Vicar contends that only the dispositive portion of the decision,
and not its body, is the controlling pronouncement of the Court
of Appeals. 2
The alleged errors committed by respondent Court of Appeals
according to petitioner are as follows:
1. ERROR IN APPLYING LAW OF THE CASE AND RES
JUDICATA;
2. ERROR IN FINDING THAT THE TRIAL COURT RULED
THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE BUT
WITHOUT DOCUMENTARY EVIDENCE PRESENTED;
3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT
PURCHASED LOTS 2 AND 3 FROM VALDEZ AND
OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE
FORMER OWNERS WERE VALDEZ AND OCTAVIANO;
4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF
PRIVATE RESPONDENTS WHO WERE IN POSSESSION OF
LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT
PETITIONER;
5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD
FREE PATENT APPLICATIONS AND THE PREDECESSORS
OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT
APPLICATIONS SINCE 1906;
6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS
2 AND 3 ONLY IN 1951 AND JUST TITLE IS A PRIME
NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART.
1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE
PRESCRIPTION OF 10 YEARS;
7. ERROR IN FINDING THAT THE DECISION OF THE COURT
OF APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY
THE SUPREME COURT;
8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO.
038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND
THAT PRIVATE RESPONDENTS AND THEIR
PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND
3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM
1906 TO 1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN
POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR
ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR
USE;
10. ERROR IN FINDING THAT PETITIONER IS A
POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT
RIGHTS OF RETENTION AND REIMBURSEMENT AND IS
BARRED BY THE FINALITY AND CONCLUSIVENESS OF
THE DECISION IN CA G.R. NO. 038830. 3
The petition is bereft of merit.
Petitioner questions the ruling of respondent Court of Appeals in
CA-G.R. Nos. 05148 and 05149, when it clearly held that it was
in agreement with the findings of the trial court that the Decision
of the Court of Appeals dated May 4,1977 in CA-G.R. No.
38830-R, on the question of ownership of Lots 2 and 3, declared
that the said Court of Appeals Decision CA-G.R. No. 38830-R)
did not positively declare private respondents as owners of the
land, neither was it declared that they were not owners of the
land, but it held that the predecessors of private respondents
were possessors of Lots 2 and 3, with claim of ownership in good
faith from 1906 to 1951. Petitioner was in possession as
borrower in commodatum up to 1951, when it repudiated the
trust by declaring the properties in its name for taxation
purposes. When petitioner applied for registration of Lots 2 and
3 in 1962, it had been in possession in concept of owner only for
eleven years. Ordinary acquisitive prescription requires
possession for ten years, but always with just title. Extraordinary
acquisitive prescription requires 30 years. 4
On the above findings of facts supported by evidence and
evaluated by the Court of Appeals in CA-G.R. No. 38830-R,
affirmed by this Court, We see no error in respondent appellate
court's ruling that said findings are res judicatabetween the
parties. They can no longer be altered by presentation of
evidence because those issues were resolved with finality a long
time ago. To ignore the principle of res judicata would be to open
the door to endless litigations by continuous determination of
issues without end.
An examination of the Court of Appeals Decision dated May 4,
1977, First Division 5 in CA-G.R. No. 38830-R, shows that it
reversed the trial court's Decision 6 finding petitioner to be
entitled to register the lands in question under its ownership, on
its evaluation of evidence and conclusion of facts.
The Court of Appeals found that petitioner did not meet the
requirement of 30 years possession for acquisitive prescription
over Lots 2 and 3. Neither did it satisfy the requirement of 10
years possession for ordinary acquisitive prescription because
of the absence of just title. The appellate court did not believe
the findings of the trial court that Lot 2 was acquired from Juan
Valdez by purchase and Lot 3 was acquired also by purchase
from Egmidio Octaviano by petitioner Vicar because there was
absolutely no documentary evidence to support the same and
the alleged purchases were never mentioned in the application
for registration.
By the very admission of petitioner Vicar, Lots 2 and 3 were
owned by Valdez and Octaviano. Both Valdez and Octaviano
had Free Patent Application for those lots since 1906. The
predecessors of private respondents, not petitioner Vicar, were
in possession of the questioned lots since 1906.
There is evidence that petitioner Vicar occupied Lots 1 and 4,
which are not in question, but not Lots 2 and 3, because the
 buildings standing thereon were only constructed after liberation
in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation
purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid
for by the Bishop but said Bishop was appointed only in 1947,
the church was constructed only in 1951 and the new convent
only 2 years before the trial in 1963.
When petitioner Vicar was notified of the oppositor's claims, the
parish priest offered to buy the lot from Fructuoso Valdez. Lots
2 and 3 were surveyed by request of petitioner Vicar only in
1962.
Private respondents were able to prove that their predecessors'
house was borrowed by petitioner Vicar after the church and the
convent were destroyed. They never asked for the return of the
house, but when they allowed its free use, they became bailors
in commodatum and the petitioner the bailee. The bailees'
failure to return the subject matter of commodatum to the bailor
did not mean adverse possession on the part of the borrower.
The bailee held in trust the property subject matter of
commodatum. The adverse claim of petitioner came only in
1951 when it declared the lots for taxation purposes. The action
of petitioner Vicar by such adverse claim could not ripen into title
by way of ordinary acquisitive prescription because of the
absence of just title.
The Court of Appeals found that the predecessors-in-interest
and private respondents were possessors under claim of
ownership in good faith from 1906; that petitioner Vicar was only
a bailee in commodatum; and that the adverse claim and
repudiation of trust came only in 1951.
We find no reason to disregard or reverse the ruling of the Court
of Appeals in CA-G.R. No. 38830-R. Its findings of fact have
become incontestible. This Court declined to review said
decision, thereby in effect, affirming it. It has become final and
executory a long time ago.
Respondent appellate court did not commit any reversible error,
much less grave abuse of discretion, when it held that the
Decision of the Court of Appeals in CA-G.R. No. 38830-R is
governing, under the principle of res judicata, hence the rule, in
the present cases CA-G.R. No. 05148 and CA-G.R. No. 05149.
The facts as supported by evidence established in that decision
may no longer be altered.
WHEREFORE AND BY REASON OF THE FOREGOING, this
petition is DENIED for lack of merit, the Decision dated Aug. 31,
1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court
of Appeals is AFFIRMED, with costs against petitioner.
SO ORDERED.
[G.R. No. 146364. June 3, 2004]
COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE
GUEVARRA, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review[1] of the 21 June 2000
Decision[2] and 14 December 2000 Resolution of the Court of
Appeals in CA-G.R. SP No. 43129. The Court of Appeals set
aside the 11 November 1996 decision[3] of the Regional Trial
Court of Quezon City, Branch 81,[4] affirming the 15 December
1995 decision[5] of the Metropolitan Trial Court of Quezon City,
Branch 31.[6]
The Antecedents
In June 1979, petitioner Colito T. Pajuyo (Pajuyo)
paid P400 to a certain Pedro Perez for the rights over a 250-
square meter lot in Barrio Payatas, Quezon City. Pajuyo then
constructed a house made of light materials on the lot. Pajuyo
and his family lived in the house from 1979 to 7 December 1985.
On 8 December 1985, Pajuyo and private respondent
Eddie Guevarra (Guevarra) executed a Kasunduan or
agreement. Pajuyo, as owner of the house, allowed Guevarra to
live in the house for free provided Guevarra would maintain the
cleanliness and orderliness of the house. Guevarra promised
that he would voluntarily vacate the premises on Pajuyos
demand.
In September 1994, Pajuyo informed Guevarra of his need
of the house and demanded that Guevarra vacate the
house. Guevarra refused.
Pajuyo filed an ejectment case against Guevarra with the
Metropolitan Trial Court of Quezon City, Branch 31 (MTC).
In his Answer, Guevarra claimed that Pajuyo had no valid
title or right of possession over the lot where the house stands
because the lot is within the 150 hectares set aside by
Proclamation No. 137 for socialized housing. Guevarra pointed
out that from December 1985 to September 1994, Pajuyo did
not show up or communicate with him. Guevarra insisted that
neither he nor Pajuyo has valid title to the lot.
On 15 December 1995, the MTC rendered its decision in
favor of Pajuyo. The dispositive portion of the MTC decision
reads:
WHEREFORE, premises considered, judgment is hereby
rendered for the plaintiff and against defendant, ordering the
latter to:
A) vacate the house and lot occupied by the defendant or any other
person or persons claiming any right under him;
B) pay unto plaintiff the sum of THREE HUNDRED PESOS
(P300.00) monthly as reasonable compensation for the use of
the premises starting from the last demand;
C) pay plaintiff the sum of P3,000.00 as and by way of attorneys
fees; and
D) pay the cost of suit.
SO ORDERED.[7]
Aggrieved, Guevarra appealed to the Regional Trial Court
of Quezon City, Branch 81 (RTC).
On 11 November 1996, the RTC affirmed the MTC
decision. The dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, the Court finds no
reversible error in the decision appealed from, being in accord
with the law and evidence presented, and the same is hereby
affirmed en toto.
SO ORDERED.[8]
Guevarra received the RTC decision on 29 November
1996. Guevarra had only until 14 December 1996 to file his
appeal with the Court of Appeals. Instead of filing his appeal with
the Court of Appeals, Guevarra filed with the Supreme Court a
Motion for Extension of Time to File Appeal by Certiorari Based
on Rule 42 (motion for extension). Guevarra theorized that his
appeal raised pure questions of law. The Receiving Clerk of the
Supreme Court received the motion for extension on 13
December 1996 or one day before the right to appeal expired.
On 3 January 1997, Guevarra filed his petition for review
with the Supreme Court.
On 8 January 1997, the First Division of the Supreme Court
issued a Resolution[9] referring the motion for extension to the
Court of Appeals which has concurrent jurisdiction over the
case. The case presented no special and important matter for
the Supreme Court to take cognizance of at the first instance.
On 28 January 1997, the Thirteenth Division of the Court
of Appeals issued a Resolution[10] granting the motion for
extension conditioned on the timeliness of the filing of the
motion.
On 27 February 1997, the Court of Appeals ordered Pajuyo
to comment on Guevaras petition for review. On 11 April 1997,
Pajuyo filed his Comment.
On 21 June 2000, the Court of Appeals issued its decision
reversing the RTC decision. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, the assailed Decision of
the court a quo in Civil Case No. Q-96-26943
is REVERSED and SET ASIDE; and it is hereby declared that
the ejectment case filed against defendant-appellant is without
factual and legal basis.
SO ORDERED.[11]
Pajuyo filed a motion for reconsideration of the
decision. Pajuyo pointed out that the Court of Appeals should
have dismissed outright Guevarras petition for review because
it was filed out of time. Moreover, it was Guevarras counsel and
not Guevarra who signed the certification against forum-
shopping.
On 14 December 2000, the Court of Appeals issued a
resolution denying Pajuyos motion for reconsideration. The
dispositive portion of the resolution reads:
WHEREFORE, for lack of merit, the motion for reconsideration
is hereby DENIED. No costs.
SO ORDERED.[12]
The Ruling of the MTC
The MTC ruled that the subject of the agreement between
Pajuyo and Guevarra is the house and not the lot. Pajuyo is the
owner of the house, and he allowed Guevarra to use the house
only by tolerance. Thus, Guevarras refusal to vacate the house
on Pajuyos demand made Guevarras continued possession of
the house illegal.
The Ruling of the RTC
The RTC upheld the Kasunduan, which established the
landlord and tenant relationship between Pajuyo and Guevarra.
The terms of the Kasunduan bound Guevarra to return
possession of the house on demand.
The RTC rejected Guevarras claim of a better right under
Proclamation No. 137, the Revised National Government Center
Housing Project Code of Policies and other pertinent laws. In an
ejectment suit, the RTC has no power to decide Guevarras
rights under these laws. The RTC declared that in an ejectment
case, the only issue for resolution is material or physical
possession, not ownership.
The Ruling of the Court of Appeals
The Court of Appeals declared that Pajuyo and Guevarra
are squatters. Pajuyo and Guevarra illegally occupied the
contested lot which the government owned.
Perez, the person from whom Pajuyo acquired his rights,
was also a squatter. Perez had no right or title over the lot
because it is public land.The assignment of rights between
Perez and Pajuyo, and the Kasunduan between Pajuyo and
Guevarra, did not have any legal effect. Pajuyo and Guevarra
are in pari delicto or in equal fault. The court will leave them
where they are.
The Court of Appeals reversed the MTC and RTC rulings,
which held that the Kasunduan between Pajuyo and Guevarra
created a legal tie akin to that of a landlord and tenant
relationship. The Court of Appeals ruled that the Kasunduan is
not a lease contract but a commodatumbecause the agreement
is not for a price certain.
Since Pajuyo admitted that he resurfaced only in 1994 to
claim the property, the appellate court held that Guevarra has a
better right over the property under Proclamation No.
137. President Corazon C. Aquino (President Aquino) issued
Proclamation No. 137 on 7 September 1987. At that time,
Guevarra was in physical possession of the property. Under
Article VI of the Code of Policies Beneficiary Selection and
Disposition of Homelots and Structures in the National Housing
Project (the Code), the actual occupant or caretaker of the lot
shall have first priority as beneficiary of the project. The Court of
Appeals concluded that Guevarra is first in the hierarchy of
priority.
In denying Pajuyos motion for reconsideration, the
appellate court debunked Pajuyos claim that Guevarra filed his
motion for extension beyond the period to appeal.
The Court of Appeals pointed out that Guevarras motion
for extension filed before the Supreme Court was stamped 13
December 1996 at 4:09 PM by the Supreme Courts Receiving
Clerk. The Court of Appeals concluded that the motion for
extension bore a date, contrary to Pajuyos claim that the motion
for extension was undated. Guevarra filed the motion for
extension on time on 13 December 1996 since he filed the
motion one day before the expiration of the reglementary period
on 14 December 1996. Thus, the motion for extension properly
complied with the condition imposed by the Court of Appeals in
its 28 January 1997 Resolution. The Court of Appeals explained
that the thirty-day extension to file the petition for review was
deemed granted because of such compliance.
The Court of Appeals rejected Pajuyos argument that the
appellate court should have dismissed the petition for review
because it was Guevarras counsel and not Guevarra who
signed the certification against forum-shopping. The Court of
Appeals pointed out that Pajuyo did not raise this issue in his
Comment. The Court of Appeals held that Pajuyo could not now
seek the dismissal of the case after he had extensively argued
on the merits of the case. This technicality, the appellate court
opined, was clearly an afterthought.
The Issues
Pajuyo raises the following issues for resolution:
WHETHER THE COURT OF APPEALS ERRED OR ABUSED
ITS AUTHORITY AND DISCRETION TANTAMOUNT TO LACK
OF JURISDICTION:
1) in GRANTING, instead of denying, Private Respondents Motion
for an Extension of thirty days to file petition for review at the
time when there was no more period to extend as the decision
of the Regional Trial Court had already become final and
executory.
2) in giving due course, instead of dismissing, private
respondents Petition for Review even though the certification
against forum-shopping was signed only by counsel instead of
by petitioner himself.
3) in ruling that the Kasunduan voluntarily entered into by the parties
was in fact a commodatum, instead of a Contract of Lease as
found by the Metropolitan Trial Court and in holding that the
ejectment case filed against defendant-appellant is without legal
and factual basis.
4) in reversing and setting aside the Decision of the Regional Trial
Court in Civil Case No. Q-96-26943 and in holding that the
parties are in pari delicto being both squatters, therefore, illegal
occupants of the contested parcel of land.
5) in deciding the unlawful detainer case based on the so-called
Code of Policies of the National Government Center Housing
Project instead of deciding the same under the Kasunduan
voluntarily executed by the parties, the terms and conditions of
which are the laws between themselves.[13]
The Ruling of the Court
The procedural issues Pajuyo is raising are
baseless. However, we find merit in the substantive issues
Pajuyo is submitting for resolution.
Procedural Issues
Pajuyo insists that the Court of Appeals should have
dismissed outright Guevarras petition for review because the
RTC decision had already become final and executory when the
appellate court acted on Guevarras motion for extension to file
the petition. Pajuyo points out that Guevarra had only one day
before the expiry of his period to appeal the RTC
decision. Instead of filing the petition for review with the Court of
Appeals, Guevarra filed with this Court an undated motion for
extension of 30 days to file a petition for review. This Court
merely referred the motion to the Court of Appeals. Pajuyo
believes that the filing of the motion for extension with this Court
did not toll the running of the period to perfect the appeal. Hence,
when the Court of Appeals received the motion, the period to
appeal had already expired.
We are not persuaded.
Decisions of the regional trial courts in the exercise of their
appellate jurisdiction are appealable to the Court of Appeals by
petition for review in cases involving questions of fact or mixed
questions of fact and law.[14] Decisions of the regional trial courts
involving pure questions of law are appealable directly to this
Court by petition for review.[15] These modes of appeal are now
embodied in Section 2, Rule 41 of the 1997 Rules of Civil
Procedure.
Guevarra believed that his appeal of the RTC decision
involved only questions of law. Guevarra thus filed his motion for
extension to file petition for review before this Court on 14
December 1996. On 3 January 1997, Guevarra then filed his
petition for review with this Court. A perusal of Guevarras
petition for review gives the impression that the issues he raised
were pure questions of law. There is a question of law when the
doubt or difference is on what the law is on a certain state of
facts.[16] There is a question of fact when the doubt or difference
is on the truth or falsity of the facts alleged.[17]
In his petition for review before this Court, Guevarra no
longer disputed the facts. Guevarras petition for review raised
these questions: (1) Do ejectment cases pertain only to
possession of a structure, and not the lot on which the structure
stands? (2) Does a suit by a squatter against a fellow squatter
constitute a valid case for ejectment? (3) Should a Presidential
Proclamation governing the lot on which a squatters structure
stands be considered in an ejectment suit filed by the owner of
the structure?
These questions call for the evaluation of the rights of the
parties under the law on ejectment and the Presidential
Proclamation. At first glance, the questions Guevarra raised
appeared purely legal. However, some factual questions still
have to be resolved because they have a bearing on the legal
questions raised in the petition for review. These factual matters
refer to the metes and bounds of the disputed property and the
application of Guevarra as beneficiary of Proclamation No. 137.
The Court of Appeals has the power to grant an extension
of time to file a petition for review. In Lacsamana v. Second
Special Cases Division of the Intermediate Appellate
Court,[18] we declared that the Court of Appeals could grant
extension of time in appeals by petition for review. In Liboro v.
Court of Appeals,[19] we clarified that the prohibition against
granting an extension of time applies only in a case where
ordinary appeal is perfected by a mere notice of appeal. The
prohibition does not apply in a petition for review where the
pleading needs verification. A petition for review, unlike an
ordinary appeal, requires preparation and research to present a
persuasive position.[20] The drafting of the petition for review
entails more time and effort than filing a notice of
appeal.[21] Hence, the Court of Appeals may allow an extension
of time to file a petition for review.
In the more recent case of Commissioner of Internal
Revenue v. Court of Appeals,[22] we held that Liboros
clarification of Lacsamana is consistent with the Revised
Internal Rules of the Court of Appeals and Supreme Court
Circular No. 1-91. They all allow an extension of time for filing
petitions for review with the Court of Appeals. The extension,
however, should be limited to only fifteen days save in
exceptionally meritorious cases where the Court of Appeals may
grant a longer period.
A judgment becomes final and executory by operation of
law. Finality of judgment becomes a fact on the lapse of the
reglementary period to appeal if no appeal is perfected. [23] The
RTC decision could not have gained finality because the Court
of Appeals granted the 30-day extension to Guevarra.
The Court of Appeals did not commit grave abuse of
discretion when it approved Guevarras motion for extension.
The Court of Appeals gave due course to the motion for
extension because it complied with the condition set by the
appellate court in its resolution dated 28 January 1997.The
resolution stated that the Court of Appeals would only give due
course to the motion for extension if filed on time. The motion for
extension met this condition.
The material dates to consider in determining the
timeliness of the filing of the motion for extension are (1) the date
of receipt of the judgment or final order or resolution subject of
the petition, and (2) the date of filing of the motion for
extension.[24] It is the date of the filing of the motion or pleading,
and not the date of execution, that determines the timeliness of
the filing of that motion or pleading. Thus, even if the motion for
extension bears no date, the date of filing stamped on it is the
reckoning point for determining the timeliness of its filing.
Guevarra had until 14 December 1996 to file an appeal
from the RTC decision. Guevarra filed his motion for extension
before this Court on 13 December 1996, the date stamped by
this Courts Receiving Clerk on the motion for extension. Clearly,
Guevarra filed the motion for extension exactly one day before
the lapse of the reglementary period to appeal.
Assuming that the Court of Appeals should have dismissed
Guevarras appeal on technical grounds, Pajuyo did not ask the
appellate court to deny the motion for extension and dismiss the
petition for review at the earliest opportunity. Instead, Pajuyo
vigorously discussed the merits of the case. It was only when
the Court of Appeals ruled in Guevarras favor that Pajuyo raised
the procedural issues against Guevarras petition for review.
A party who, after voluntarily submitting a dispute for
resolution, receives an adverse decision on the merits, is
estopped from attacking the jurisdiction of the court. [25] Estoppel
sets in not because the judgment of the court is a valid and
conclusive adjudication, but because the practice of attacking
the courts jurisdiction after voluntarily submitting to it is against
public policy.[26]
In his Comment before the Court of Appeals, Pajuyo also
failed to discuss Guevarras failure to sign the certification
against forum shopping.Instead, Pajuyo harped on Guevarras
counsel signing the verification, claiming that the counsels
verification is insufficient since it is based only on mere
information.
A partys failure to sign the certification against forum
shopping is different from the partys failure to sign personally the
verification. The certificate of non-forum shopping must be
signed by the party, and not by counsel.[27] The certification of
counsel renders the petition defective.[28]
On the other hand, the requirement on verification of a
pleading is a formal and not a jurisdictional requisite. [29] It is
intended simply to secure an assurance that what are alleged in
the pleading are true and correct and not the product of the
imagination or a matter of speculation, and that the pleading is
filed in good faith.[30] The party need not sign the verification. A
partys representative, lawyer or any person who personally
knows the truth of the facts alleged in the pleading may sign the
verification.[31]
We agree with the Court of Appeals that the issue on the
certificate against forum shopping was merely an afterthought.
Pajuyo did not call the Court of Appeals attention to this defect
at the early stage of the proceedings. Pajuyo raised this
procedural issue too late in the proceedings.
Absence of Title over the Disputed Property will not Divest
the Courts of Jurisdiction to Resolve the Issue of
Possession
Settled is the rule that the defendants claim of ownership
of the disputed property will not divest the inferior court of its
jurisdiction over the ejectment case.[32] Even if the pleadings
raise the issue of ownership, the court may pass on such issue
to determine only the question of possession, especially if the
ownership is inseparably linked with the possession. [33] The
adjudication on the issue of ownership is only provisional and
will not bar an action between the same parties involving title to
the land.[34] This doctrine is a necessary consequence of the
nature of the two summary actions of ejectment, forcible entry
and unlawful detainer, where the only issue for adjudication is
the physical or material possession over the real property. [35]
 In this case, what Guevarra raised before the courts was
that he and Pajuyo are not the owners of the contested property
and that they are mere squatters. Will the defense that the
parties to the ejectment case are not the owners of the disputed
lot allow the courts to renounce their jurisdiction over the
case? The Court of Appeals believed so and held that it would
just leave the parties where they are since they are in pari
delicto.
We do not agree with the Court of Appeals.
Ownership or the right to possess arising from ownership
is not at issue in an action for recovery of possession. The
parties cannot present evidence to prove ownership or right to
legal possession except to prove the nature of the possession
when necessary to resolve the issue of physical
possession.[36] The same is true when the defendant asserts the
absence of title over the property. The absence of title over the
contested lot is not a ground for the courts to withhold relief from
the parties in an ejectment case.
The only question that the courts must resolve in ejectment
proceedings is - who is entitled to the physical possession of the
premises, that is, to the possession de facto and not to the
possession de jure.[37] It does not even matter if a partys title to
the property is questionable,[38] or when both parties intruded
into public land and their applications to own the land have yet
to be approved by the proper government agency.[39]Regardless
of the actual condition of the title to the property, the party in
peaceable quiet possession shall not be thrown out by a strong
hand, violence or terror.[40] Neither is the unlawful withholding of
property allowed. Courts will always uphold respect for prior
possession.
Thus, a party who can prove prior possession can recover
such possession even against the owner himself. [41] Whatever
may be the character of his possession, if he has in his favor
prior possession in time, he has the security that entitles him to
remain on the property until a person with a better right lawfully
ejects him.[42] To repeat, the only issue that the court has to
settle in an ejectment suit is the right to physical possession.
In Pitargue v. Sorilla,[43] the government owned the land
in dispute. The government did not authorize either the plaintiff
or the defendant in the case of forcible entry case to occupy the
land. The plaintiff had prior possession and had already
introduced improvements on the public land.The plaintiff had a
pending application for the land with the Bureau of Lands when
the defendant ousted him from possession. The plaintiff filed the
action of forcible entry against the defendant. The government
was not a party in the case of forcible entry.
The defendant questioned the jurisdiction of the courts to
settle the issue of possession because while the application of
the plaintiff was still pending, title remained with the government,
and the Bureau of Public Lands had jurisdiction over the
case. We disagreed with the defendant. We ruled that courts
have jurisdiction to entertain ejectment suits even before the
resolution of the application. The plaintiff, by priority of his
application and of his entry, acquired prior physical possession
over the public land applied for as against other private
claimants. That prior physical possession enjoys legal protection
against other private claimants because only a court can take
away such physical possession in an ejectment case.
While the Court did not brand the plaintiff and the
defendant in Pitargue[44] as squatters, strictly speaking, their
entry into the disputed land was illegal. Both the plaintiff and
defendant entered the public land without the owners
permission. Title to the land remained with the government
because it had not awarded to anyone ownership of the
contested public land. Both the plaintiff and the defendant were
in effect squatting on government property. Yet, we upheld the
courts jurisdiction to resolve the issue of possession even if the
plaintiff and the defendant in the ejectment case did not have
any title over the contested land.
Courts must not abdicate their jurisdiction to resolve the
issue of physical possession because of the public need to
preserve the basic policy behind the summary actions of forcible
entry and unlawful detainer. The underlying philosophy behind
ejectment suits is to prevent breach of the peace and criminal
disorder and to compel the party out of possession to respect
and resort to the law alone to obtain what he claims is his.[45] The
party deprived of possession must not take the law into his own
hands.[46] Ejectment proceedings are summary in nature so the
authorities can settle speedily actions to recover possession
because of the overriding need to quell social disturbances. [47]
We further explained in Pitargue the greater interest that
is at stake in actions for recovery of possession. We made the
following pronouncements in Pitargue:
The question that is before this Court is: Are courts without
jurisdiction to take cognizance of possessory actions involving
these public lands before final award is made by the Lands
Department, and before title is given any of the conflicting
claimants? It is one of utmost importance, as there are public
lands everywhere and there are thousands of settlers, especially
in newly opened regions. It also involves a matter of policy, as it
requires the determination of the respective authorities and
functions of two coordinate branches of the Government in
connection with public land conflicts.
Our problem is made simple by the fact that under the Civil
Code, either in the old, which was in force in this country before
the American occupation, or in the new, we have a possessory
action, the aim and purpose of which is the recovery of the
physical possession of real property, irrespective of the question
as to who has the title thereto. Under the Spanish Civil Code we
had the accion interdictal, a summary proceeding which could
be brought within one year from dispossession (Roman Catholic
Bishop of Cebu vs. Mangaron, 6 Phil. 286, 291); and as early as
October 1, 1901, upon the enactment of the Code of Civil
Procedure (Act No. 190 of the Philippine Commission) we
implanted the common law action of forcible entry (section 80 of
Act No. 190), the object of which has been stated by this Court
to be to prevent breaches of the peace and criminal disorder
which would ensue from the withdrawal of the remedy, and
the reasonable hope such withdrawal would create that
some advantage must accrue to those persons who,
believing themselves entitled to the possession of property,
resort to force to gain possession rather than to some
appropriate action in the court to assert their claims. (Supia
and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) So
before the enactment of the first Public Land Act (Act No. 926)
the action of forcible entry was already available in the courts of
the country. So the question to be resolved is, Did the
Legislature intend, when it vested the power and authority to
alienate and dispose of the public lands in the Lands
Department, to exclude the courts from entertaining the
possessory action of forcible entry between rival claimants or
occupants of any land before award thereof to any of the
parties? Did Congress intend that the lands applied for, or all
public lands for that matter, be removed from the jurisdiction of
the judicial Branch of the Government, so that any troubles
arising therefrom, or any breaches of the peace or disorders
caused by rival claimants, could be inquired into only by the
Lands Department to the exclusion of the courts? The answer to
this question seems to us evident. The Lands Department does
not have the means to police public lands; neither does it have
the means to prevent disorders arising therefrom, or contain
breaches of the peace among settlers; or to pass promptly upon
conflicts of possession. Then its power is clearly limited to
disposition and alienation, and while it may decide conflicts
of possession in order to make proper award, the
settlement of conflicts of possession which is recognized
in the court herein has another ultimate purpose, i.e., the
protection of actual possessors and occupants with a view
to the prevention of breaches of the peace.The power to
dispose and alienate could not have been intended to
include the power to prevent or settle disorders or breaches
of the peace among rival settlers or claimants prior to the
final award. As to this, therefore, the corresponding branches
of the Government must continue to exercise power and
jurisdiction within the limits of their respective functions. The
vesting of the Lands Department with authority to
administer, dispose, and alienate public lands, therefore,
must not be understood as depriving the other branches of
the Government of the exercise of the respective functions
or powers thereon, such as the authority to stop disorders
and quell breaches of the peace by the police, the authority
on the part of the courts to take jurisdiction over
possessory actions arising therefrom not involving,
directly or indirectly, alienation and disposition.
Our attention has been called to a principle enunciated in
American courts to the effect that courts have no jurisdiction to
determine the rights of claimants to public lands, and that until
the disposition of the land has passed from the control of the
Federal Government, the courts will not interfere with the
administration of matters concerning the same. (50 C. J. 1093-
1094.) We have no quarrel with this principle. The determination
of the respective rights of rival claimants to public lands is
different from the determination of who has the actual physical
possession or occupation with a view to protecting the same and
preventing disorder and breaches of the peace. A judgment of
the court ordering restitution of the possession of a parcel of land
to the actual occupant, who has been deprived thereof by
another through the use of force or in any other illegal manner,
can never be prejudicial interference with the disposition or
alienation of public lands. On the other hand, if courts were
deprived of jurisdiction of cases involving conflicts of
possession, that threat of judicial action against breaches
of the peace committed on public lands would be
eliminated, and a state of lawlessness would probably be
produced between applicants, occupants or squatters,
where force or might, not right or justice, would rule.
It must be borne in mind that the action that would be used to
solve conflicts of possession between rivals or conflicting
applicants or claimants would be no other than that of forcible
entry. This action, both in England and the United States and in
our jurisdiction, is a summary and expeditious remedy whereby
one in peaceful and quiet possession may recover the
possession of which he has been deprived by a stronger hand,
by violence or terror; its ultimate object being to prevent breach
of the peace and criminal disorder. (Supia and Batioco vs.
Quintero and Ayala, 59 Phil. 312, 314.) The basis of the remedy
is mere possession as a fact, of physical possession, not a legal
possession. (Mediran vs. Villanueva, 37 Phil. 752.) The title or
right to possession is never in issue in an action of forcible entry;
as a matter of fact, evidence thereof is expressly banned, except
to prove the nature of the possession. (Second 4, Rule 72, Rules
of Court.) With this nature of the action in mind, by no stretch of
the imagination can conclusion be arrived at that the use of the
remedy in the courts of justice would constitute an interference
with the alienation, disposition, and control of public lands. To
limit ourselves to the case at bar can it be pretended at all that
its result would in any way interfere with the manner of the
alienation or disposition of the land contested? On the contrary,
it would facilitate adjudication, for the question of priority of
possession having been decided in a final manner by the courts,
said question need no longer waste the time of the land officers
making the adjudication or award.(Emphasis ours)
The Principle of Pari Delicto is not Applicable to Ejectment
Cases
The Court of Appeals erroneously applied the principle
of pari delicto to this case.
Articles 1411 and 1412 of the Civil Code[48] embody the
principle of pari delicto. We explained the principle of pari
delicto in these words:
The rule of pari delicto is expressed in the maxims ex dolo malo
non eritur actio and in pari delicto potior est conditio defedentis.
The law will not aid either party to an illegal agreement. It leaves
the parties where it finds them.[49]
The application of the pari delicto principle is not absolute,
as there are exceptions to its application. One of these
exceptions is where the application of the pari delicto rule would
violate well-established public policy.[50]
In Drilon v. Gaurana,[51] we reiterated the basic policy
behind the summary actions of forcible entry and unlawful
detainer. We held that:
It must be stated that the purpose of an action of forcible entry
and detainer is that, regardless of the actual condition of the title
to the property, the party in peaceable quiet possession shall not
be turned out by strong hand, violence or terror. In affording this
remedy of restitution the object of the statute is to prevent
breaches of the peace and criminal disorder which would ensue
from the withdrawal of the remedy, and the reasonable hope
such withdrawal would create that some advantage must accrue
to those persons who, believing themselves entitled to the
possession of property, resort to force to gain possession rather
than to some appropriate action in the courts to assert their
claims. This is the philosophy at the foundation of all these
actions of forcible entry and detainer which are designed to
compel the party out of possession to respect and resort to the
law alone to obtain what he claims is his.[52]
Clearly, the application of the principle of pari delicto to a
case of ejectment between squatters is fraught with danger. To
shut out relief to squatters on the ground of pari delicto would
openly invite mayhem and lawlessness. A squatter would oust
another squatter from possession of the lot that the latter had
illegally occupied, emboldened by the knowledge that the courts
would leave them where they are. Nothing would then stand in
the way of the ousted squatter from re-claiming his prior
possession at all cost.
Petty warfare over possession of properties is precisely
what ejectment cases or actions for recovery of possession seek
to prevent.[53] Even the owner who has title over the disputed
property cannot take the law into his own hands to regain
possession of his property. The owner must go to court.
Courts must resolve the issue of possession even if the
parties to the ejectment suit are squatters. The determination of
priority and superiority of possession is a serious and urgent
matter that cannot be left to the squatters to decide. To do so
would make squatters receive better treatment under the
law. The law restrains property owners from taking the law into
their own hands. However, the principle of pari delicto as
applied by the Court of Appeals would give squatters free rein to
dispossess fellow squatters or violently retake possession of
properties usurped from them. Courts should not leave squatters
to their own devices in cases involving recovery of possession.
Possession is the only Issue for Resolution in an Ejectment
Case
The case for review before the Court of Appeals was a
simple case of ejectment. The Court of Appeals refused to rule
on the issue of physical possession. Nevertheless, the appellate
court held that the pivotal issue in this case is who between
Pajuyo and Guevarra has the priority right as beneficiary of the
contested land under Proclamation No. 137.[54] According to the
Court of Appeals, Guevarra enjoys preferential right under
Proclamation No. 137 because Article VI of the Code declares
that the actual occupant or caretaker is the one qualified to apply
for socialized housing.
The ruling of the Court of Appeals has no factual and legal
basis.
 First. Guevarra did not present evidence to show that the
contested lot is part of a relocation site under Proclamation No.
137. Proclamation No. 137 laid down the metes and bounds of
the land that it declared open for disposition to bona
fide residents.
The records do not show that the contested lot is within the
land specified by Proclamation No. 137. Guevarra had the
burden to prove that the disputed lot is within the coverage of
Proclamation No. 137. He failed to do so.
Second. The Court of Appeals should not have given
credence to Guevarras unsubstantiated claim that he is the
beneficiary of Proclamation No. 137. Guevarra merely alleged
that in the survey the project administrator conducted, he and
not Pajuyo appeared as the actual occupant of the lot.
There is no proof that Guevarra actually availed of the
benefits of Proclamation No. 137. Pajuyo allowed Guevarra to
occupy the disputed property in 1985. President Aquino signed
Proclamation No. 137 into law on 11 March 1986. Pajuyo made
his earliest demand for Guevarra to vacate the property in
September 1994.
During the time that Guevarra temporarily held the property
up to the time that Proclamation No. 137 allegedly segregated
the disputed lot, Guevarra never applied as beneficiary of
Proclamation No. 137. Even when Guevarra already knew that
Pajuyo was reclaiming possession of the property, Guevarra did
not take any step to comply with the requirements of
Proclamation No. 137.
Third. Even assuming that the disputed lot is within the
coverage of Proclamation No. 137 and Guevarra has a pending
application over the lot, courts should still assume jurisdiction
and resolve the issue of possession. However, the jurisdiction of
the courts would be limited to the issue of physical possession
only.
In Pitargue,[55] we ruled that courts have jurisdiction over
possessory actions involving public land to determine the issue
of physical possession. The determination of the respective
rights of rival claimants to public land is, however, distinct from
the determination of who has the actual physical possession or
who has a better right of physical possession. [56] The
administrative disposition and alienation of public lands should
be threshed out in the proper government agency. [57]
The Court of Appeals determination of Pajuyo and
Guevarras rights under Proclamation No. 137 was
premature. Pajuyo and Guevarra were at most merely potential
beneficiaries of the law. Courts should not preempt the decision
of the administrative agency mandated by law to determine the
qualifications of applicants for the acquisition of public
lands. Instead, courts should expeditiously resolve the issue of
physical possession in ejectment cases to prevent disorder and
breaches of peace.[58]
Pajuyo is Entitled to Physical Possession of the Disputed
Property
Guevarra does not dispute Pajuyos prior possession of the
lot and ownership of the house built on it. Guevarra expressly
admitted the existence and due execution of
the Kasunduan. The Kasunduan reads:
Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo.
Payatas, Quezon City, ay nagbibigay pahintulot kay G. Eddie
Guevarra, na pansamantalang manirahan sa nasabing bahay at
lote ng walang bayad. Kaugnay nito, kailangang panatilihin nila
ang kalinisan at kaayusan ng bahay at lote.
Sa sandaling kailangan na namin ang bahay at lote, silay
kusang aalis ng walang reklamo.
Based on the Kasunduan, Pajuyo permitted Guevarra to
reside in the house and lot free of rent, but Guevarra was under
obligation to maintain the premises in good condition. Guevarra
promised to vacate the premises on Pajuyos demand but
Guevarra broke his promise and refused to heed Pajuyos
demand to vacate.
These facts make out a case for unlawful detainer.
Unlawful detainer involves the withholding by a person from
another of the possession of real property to which the latter is
entitled after the expiration or termination of the formers right to
hold possession under a contract, express or implied.[59]
Where the plaintiff allows the defendant to use his property
by tolerance without any contract, the defendant is necessarily
bound by an implied promise that he will vacate on demand,
failing which, an action for unlawful detainer will lie. [60] The
defendants refusal to comply with the demand makes his
continued possession of the property unlawful. [61] The status of
the defendant in such a case is similar to that of a lessee or
tenant whose term of lease has expired but whose occupancy
continues by tolerance of the owner.[62]
This principle should apply with greater force in cases
where a contract embodies the permission or tolerance to use
the property. The Kasunduan expressly articulated Pajuyos
forbearance. Pajuyo did not require Guevarra to pay any rent but
only to maintain the house and lot in good condition. Guevarra
expressly vowed in the Kasunduan that he would vacate the
property on demand. Guevarras refusal to comply with Pajuyos
demand to vacate made Guevarras continued possession of the
property unlawful.
We do not subscribe to the Court of Appeals theory that
the Kasunduan is one of commodatum.
In a contract of commodatum, one of the parties delivers
to another something not consumable so that the latter may use
the same for a certain time and return it.[63] An essential feature
of commodatum is that it is gratuitous. Another feature
of commodatum is that the use of the thing belonging to another
is for a certain period.[64] Thus, the bailor cannot demand the
return of the thing loaned until after expiration of the period
stipulated, or after accomplishment of the use for which
the commodatum is constituted.[65] If the bailor should have
urgent need of the thing, he may demand its return for temporary
use.[66] If the use of the thing is merely tolerated by the bailor, he
can demand the return of the thing at will, in which case the
contractual relation is called a precarium.[67] Under the Civil
Code, precarium is a kind of commodatum.[68]
The Kasunduan reveals that the accommodation accorded
by Pajuyo to Guevarra was not essentially gratuitous. While
the Kasunduan did not require Guevarra to pay rent, it obligated
him to maintain the property in good condition. The imposition of
this obligation makes the Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are also different
from that of a commodatum. Case law on ejectment has treated
relationship based on tolerance as one that is akin to a landlord-
tenant relationship where the withdrawal of permission would
result in the termination of the lease.[69] The tenants withholding
of the property would then be unlawful. This is settled
jurisprudence.
Even assuming that the relationship between Pajuyo and
Guevarra is one of commodatum, Guevarra as bailee would still
have the duty to turn over possession of the property to Pajuyo,
the bailor. The obligation to deliver or to return the thing received
attaches to contracts for safekeeping, or contracts of
commission, administration and commodatum.[70] These
contracts certainly involve the obligation to deliver or return the
thing received.[71]
Guevarra turned his back on the Kasunduan on the sole
ground that like him, Pajuyo is also a squatter. Squatters,
Guevarra pointed out, cannot enter into a contract involving the
land they illegally occupy. Guevarra insists that the contract is
void.
Guevarra should know that there must be honor even
between squatters. Guevarra freely entered into
the Kasunduan. Guevarra cannot now impugn
the Kasunduan after he had benefited from
it. The Kasunduan binds Guevarra.
 The Kasunduan is not void for purposes of determining
who between Pajuyo and Guevarra has a right to physical
possession of the contested property. The Kasunduan is the
undeniable evidence of Guevarras recognition of Pajuyos better
right of physical possession. Guevarra is clearly a possessor in
bad faith. The absence of a contract would not yield a different
result, as there would still be an implied promise to vacate.
Guevarra contends that there is a pernicious evil that is
sought to be avoided, and that is allowing an absentee squatter
who (sic) makes (sic) a profit out of his illegal act.[72] Guevarra
bases his argument on the preferential right given to the actual
occupant or caretaker under Proclamation No. 137 on socialized
housing.
We are not convinced.
Pajuyo did not profit from his arrangement with Guevarra
because Guevarra stayed in the property without paying any
rent. There is also no proof that Pajuyo is a professional squatter
who rents out usurped properties to other squatters. Moreover,
it is for the proper government agency to decide who between
Pajuyo and Guevarra qualifies for socialized housing. The only
issue that we are addressing is physical possession.
Prior possession is not always a condition sine qua non in
ejectment.[73] This is one of the distinctions between forcible
entry and unlawful detainer.[74] In forcible entry, the plaintiff is
deprived of physical possession of his land or building by means
of force, intimidation, threat, strategy or stealth. Thus, he must
allege and prove prior possession.[75] But in unlawful detainer,
the defendant unlawfully withholds possession after the
expiration or termination of his right to possess under any
contract, express or implied. In such a case, prior physical
possession is not required.[76]
Pajuyos withdrawal of his permission to Guevarra
terminated the Kasunduan. Guevarras transient right to possess
the property ended as well.Moreover, it was Pajuyo who was in
actual possession of the property because Guevarra had to seek
Pajuyos permission to temporarily hold the property and
Guevarra had to follow the conditions set by Pajuyo in
the Kasunduan. Control over the property still rested with Pajuyo
and this is evidence of actual possession.
Pajuyos absence did not affect his actual possession of the
disputed property. Possession in the eyes of the law does not
mean that a man has to have his feet on every square meter of
the ground before he is deemed in possession. [77] One may
acquire possession not only by physical occupation, but also by
the fact that a thing is subject to the action of ones will. [78] Actual
or physical occupation is not always necessary.[79]
Ruling on Possession Does not Bind Title to the Land in
Dispute
We are aware of our pronouncement in cases where we
declared that squatters and intruders who clandestinely enter
into titled government property cannot, by such act, acquire any
legal right to said property.[80] We made this declaration because
the person who had title or who had the right to legal possession
over the disputed property was a party in the ejectment suit and
that party instituted the case against squatters or usurpers.
In this case, the owner of the land, which is the
government, is not a party to the ejectment case. This case is
between squatters. Had the government participated in this
case, the courts could have evicted the contending squatters,
Pajuyo and Guevarra.
Since the party that has title or a better right over the
property is not impleaded in this case, we cannot evict on our
own the parties. Such a ruling would discourage squatters from
seeking the aid of the courts in settling the issue of physical
possession. Stripping both the plaintiff and the defendant of
possession just because they are squatters would have the
same dangerous implications as the application of the principle
of pari delicto. Squatters would then rather settle the issue of
physical possession among themselves than seek relief from the
courts if the plaintiff and defendant in the ejectment case would
both stand to lose possession of the disputed property. This
would subvert the policy underlying actions for recovery of
possession.
Since Pajuyo has in his favor priority in time in holding the
property, he is entitled to remain on the property until a person
who has title or a better right lawfully ejects him. Guevarra is
certainly not that person. The ruling in this case, however, does
not preclude Pajuyo and Guevarra from introducing evidence
and presenting arguments before the proper administrative
agency to establish any right to which they may be entitled under
the law.[81]
In no way should our ruling in this case be interpreted to
condone squatting. The ruling on the issue of physical
possession does not affect title to the property nor constitute a
binding and conclusive adjudication on the merits on the issue
of ownership.[82] The owner can still go to court to recover
lawfully the property from the person who holds the property
without legal title. Our ruling here does not diminish the power
of government agencies, including local governments, to
condemn, abate, remove or demolish illegal or unauthorized
structures in accordance with existing laws.
Attorneys Fees and Rentals
The MTC and RTC failed to justify the award of P3,000
attorneys fees to Pajuyo. Attorneys fees as part of damages are
awarded only in the instances enumerated in Article 2208 of the
Civil Code.[83] Thus, the award of attorneys fees is the exception
rather than the rule.[84] Attorneys fees are not awarded every
time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate.[85] We
therefore delete the attorneys fees awarded to Pajuyo.
We sustain the P300 monthly rentals the MTC and RTC
assessed against Guevarra. Guevarra did not dispute this
factual finding of the two courts. We find the amount reasonable
compensation to Pajuyo. The P300 monthly rental is counted
from the last demand to vacate, which was on 16 February 1995.
WHEREFORE, we GRANT the petition. The Decision
dated 21 June 2000 and Resolution dated 14 December 2000
of the Court of Appeals in CA-G.R. SP No. 43129 are SET
ASIDE. The Decision dated 11 November 1996 of the Regional
Trial Court of Quezon City, Branch 81 in Civil Case No. Q-96-
26943, affirming the Decision dated 15 December 1995 of the
Metropolitan Trial Court of Quezon City, Branch 31 in Civil Case
No. 12432, is REINSTATED with MODIFICATION. The award
of attorneys fees is deleted. No costs.
SO ORDERED.
.R. No. L-17474 October 25, 1962
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
JOSE V. BAGTAS, defendant,
FELICIDAD M. BAGTAS, Administratrix of the Intestate
Estate left by the late Jose V. Bagtas, petitioner-appellant.
D. T. Reyes, Liaison and Associates for petitioner-appellant.
Office of the Solicitor General for plaintiff-appellee.
PADILLA, J.:
The Court of Appeals certified this case to this Court because
only questions of law are raised.
On 8 May 1948 Jose V. Bagtas borrowed from the Republic of
the Philippines through the Bureau of Animal Industry three
bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari,
of P1,320.56 and a Sahiniwal, of P744.46, for a period of one
year from 8 May 1948 to 7 May 1949 for breeding purposes
subject to a government charge of breeding fee of 10% of the
book value of the bulls. Upon the expiration on 7 May 1949 of
the contract, the borrower asked for a renewal for another period
of one year. However, the Secretary of Agriculture and Natural
Resources approved a renewal thereof of only one bull for
another year from 8 May 1949 to 7 May 1950 and requested the
return of the other two. On 25 March 1950 Jose V. Bagtas wrote
to the Director of Animal Industry that he would pay the value of
the three bulls. On 17 October 1950 he reiterated his desire to
buy them at a value with a deduction of yearly depreciation to be
approved by the Auditor General. On 19 October 1950 the
Director of Animal Industry advised him that the book value of
the three bulls could not be reduced and that they either be
returned or their book value paid not later than 31 October 1950.
Jose V. Bagtas failed to pay the book value of the three bulls or
to return them. So, on 20 December 1950 in the Court of First
Instance of Manila the Republic of the Philippines commenced
an action against him praying that he be ordered to return the
three bulls loaned to him or to pay their book value in the total
sum of P3,241.45 and the unpaid breeding fee in the sum of
P199.62, both with interests, and costs; and that other just and
equitable relief be granted in (civil No. 12818).
On 5 July 1951 Jose V. Bagtas, through counsel Navarro,
Rosete and Manalo, answered that because of the bad peace
and order situation in Cagayan Valley, particularly in the barrio
of Baggao, and of the pending appeal he had taken to the
Secretary of Agriculture and Natural Resources and the
President of the Philippines from the refusal by the Director of
Animal Industry to deduct from the book value of the bulls
corresponding yearly depreciation of 8% from the date of
acquisition, to which depreciation the Auditor General did not
object, he could not return the animals nor pay their value and
prayed for the dismissal of the complaint.
After hearing, on 30 July 1956 the trial court render judgment —
. . . sentencing the latter (defendant) to pay the sum of P3,625.09
the total value of the three bulls plus the breeding fees in the
amount of P626.17 with interest on both sums of (at) the legal
rate from the filing of this complaint and costs.
On 9 October 1958 the plaintiff moved ex parte for a writ of
execution which the court granted on 18 October and issued on
11 November 1958. On 2 December 1958 granted an ex-parte
motion filed by the plaintiff on November 1958 for the
appointment of a special sheriff to serve the writ outside Manila.
Of this order appointing a special sheriff, on 6 December 1958,
Felicidad M. Bagtas, the surviving spouse of the defendant Jose
Bagtas who died on 23 October 1951 and as administratrix of
his estate, was notified. On 7 January 1959 she file a motion
alleging that on 26 June 1952 the two bull Sindhi and Bhagnari
were returned to the Bureau Animal of Industry and that
sometime in November 1958 the third bull, the Sahiniwal, died
from gunshot wound inflicted during a Huk raid on Hacienda
Felicidad Intal, and praying that the writ of execution be quashed
and that a writ of preliminary injunction be issued. On 31 January
1959 the plaintiff objected to her motion. On 6 February 1959
she filed a reply thereto. On the same day, 6 February, the Court
denied her motion. Hence, this appeal certified by the Court of
Appeals to this Court as stated at the beginning of this opinion.
It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the
appellant by the late defendant, returned the Sindhi and
Bhagnari bulls to Roman Remorin, Superintendent of the NVB
Station, Bureau of Animal Industry, Bayombong, Nueva
Vizcaya, as evidenced by a memorandum receipt signed by the
latter (Exhibit 2). That is why in its objection of 31 January 1959
to the appellant's motion to quash the writ of execution the
appellee prays "that another writ of execution in the sum of
P859.53 be issued against the estate of defendant deceased
Jose V. Bagtas." She cannot be held liable for the two bulls
which already had been returned to and received by the
appellee.
The appellant contends that the Sahiniwal bull was accidentally
killed during a raid by the Huk in November 1953 upon the
surrounding barrios of Hacienda Felicidad Intal, Baggao,
Cagayan, where the animal was kept, and that as such death
was due to force majeure she is relieved from the duty of
returning the bull or paying its value to the appellee. The
contention is without merit. The loan by the appellee to the late
defendant Jose V. Bagtas of the three bulls for breeding
purposes for a period of one year from 8 May 1948 to 7 May
1949, later on renewed for another year as regards one bull, was
subject to the payment by the borrower of breeding fee of 10%
of the book value of the bulls. The appellant contends that the
contract was commodatum and that, for that reason, as the
appellee retained ownership or title to the bull it should suffer its
loss due to force majeure. A contract of commodatum is
essentially gratuitous.1 If the breeding fee be considered a
compensation, then the contract would be a lease of the bull.
Under article 1671 of the Civil Code the lessee would be subject
to the responsibilities of a possessor in bad faith, because she
had continued possession of the bull after the expiry of the
contract. And even if the contract be commodatum, still the
appellant is liable, because article 1942 of the Civil Code
provides that a bailee in a contract of commodatum —
. . . is liable for loss of the things, even if it should be through a
fortuitous event:
(2) If he keeps it longer than the period stipulated . . .
(3) If the thing loaned has been delivered with appraisal of its
value, unless there is a stipulation exempting the bailee from
responsibility in case of a fortuitous event;
The original period of the loan was from 8 May 1948 to 7 May
1949. The loan of one bull was renewed for another period of
one year to end on 8 May 1950. But the appellant kept and used
the bull until November 1953 when during a Huk raid it was killed
by stray bullets. Furthermore, when lent and delivered to the
deceased husband of the appellant the bulls had each an
appraised book value, to with: the Sindhi, at P1,176.46, the
Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not
stipulated that in case of loss of the bull due to fortuitous event
the late husband of the appellant would be exempt from liability.
The appellant's contention that the demand or prayer by the
appellee for the return of the bull or the payment of its value
being a money claim should be presented or filed in the intestate
proceedings of the defendant who died on 23 October 1951, is
not altogether without merit. However, the claim that his civil
personality having ceased to exist the trial court lost jurisdiction
over the case against him, is untenable, because section 17 of
Rule 3 of the Rules of Court provides that —
After a party dies and the claim is not thereby extinguished, the
court shall order, upon proper notice, the legal representative of
the deceased to appear and to be substituted for the deceased,
within a period of thirty (30) days, or within such time as may be
granted. . . .
and after the defendant's death on 23 October 1951 his counsel
failed to comply with section 16 of Rule 3 which provides that —
Whenever a party to a pending case dies . . . it shall be the duty
of his attorney to inform the court promptly of such death . . . and
to give the name and residence of the executory administrator,
guardian, or other legal representative of the deceased . . . .
The notice by the probate court and its publication in the Voz de
Manila that Felicidad M. Bagtas had been issue letters of
administration of the estate of the late Jose Bagtas and that "all
persons having claims for monopoly against the deceased Jose
V. Bagtas, arising from contract express or implied, whether the
same be due, not due, or contingent, for funeral expenses and
expenses of the last sickness of the said decedent, and
judgment for monopoly against him, to file said claims with the
Clerk of this Court at the City Hall Bldg., Highway 54, Quezon
City, within six (6) months from the date of the first publication of
this order, serving a copy thereof upon the aforementioned
Felicidad M. Bagtas, the appointed administratrix of the estate
of the said deceased," is not a notice to the court and the
appellee who were to be notified of the defendant's death in
accordance with the above-quoted rule, and there was no
reason for such failure to notify, because the attorney who
appeared for the defendant was the same who represented the
administratrix in the special proceedings instituted for the
administration and settlement of his estate. The appellee or its
attorney or representative could not be expected to know of the
death of the defendant or of the administration proceedings of
his estate instituted in another court that if the attorney for the
deceased defendant did not notify the plaintiff or its attorney of
such death as required by the rule.
As the appellant already had returned the two bulls to the
appellee, the estate of the late defendant is only liable for the
sum of P859.63, the value of the bull which has not been
returned to the appellee, because it was killed while in the
custody of the administratrix of his estate. This is the amount
prayed for by the appellee in its objection on 31 January 1959 to
the motion filed on 7 January 1959 by the appellant for the
quashing of the writ of execution.
Special proceedings for the administration and settlement of the
estate of the deceased Jose V. Bagtas having been instituted in
the Court of First Instance of Rizal (Q-200), the money judgment
rendered in favor of the appellee cannot be enforced by means
of a writ of execution but must be presented to the probate court
for payment by the appellant, the administratrix appointed by the
court.
ACCORDINGLY, the writ of execution appealed from is set
aside, without pronouncement as to costs.
G.R. No. L-46240 November 3, 1939
MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-
appellants,
vs.
BECK, defendant-appellee.
Mauricio Carlos for appellants.
Felipe Buencamino, Jr. for appellee.
IMPERIAL, J.:
The plaintiff brought this action to compel the defendant to return
her certain furniture which she lent him for his use. She appealed
from the judgment of the Court of First Instance of Manila which
ordered that the defendant return to her the three has heaters
and the four electric lamps found in the possession of the Sheriff
of said city, that she call for the other furniture from the said
sheriff of Manila at her own expense, and that the fees which the
Sheriff may charge for the deposit of the furniture be paid pro
rata by both parties, without pronouncement as to the costs.
The defendant was a tenant of the plaintiff and as such occupied
the latter's house on M. H. del Pilar street, No. 1175. On January
14, 1936, upon the novation of the contract of lease between the
plaintiff and the defendant, the former gratuitously granted to the
latter the use of the furniture described in the third paragraph of
the stipulation of facts, subject to the condition that the
defendant would return them to the plaintiff upon the latter's
demand. The plaintiff sold the property to Maria Lopez and
Rosario Lopez and on September 14, 1936, these three notified
the defendant of the conveyance, giving him sixty days to vacate
the premises under one of the clauses of the contract of lease.
There after the plaintiff required the defendant to return all the
furniture transferred to him for them in the house where they
were found. On November 5, 1936, the defendant,
through another person, wrote to the plaintiff reiterating that she
may call for the furniture in the ground floor of the house. On the
7th of the same month, the defendant wrote another letter to the
plaintiff informing her that he could not give up the three gas
heaters and the four electric lamps because he would use them
until the 15th of the same month when the lease in due to expire.
The plaintiff refused to get the furniture in view of the fact that
the defendant had declined to make delivery of all of them.
On November 15th, before vacating the house, the
defendant deposited with the Sheriff all the furniture belonging
to the plaintiff and they are now on deposit in the warehouse
situated at No. 1521, Rizal Avenue, in the custody of the said
sheriff.
In their seven assigned errors the plaintiffs contend that the trial
court incorrectly applied the law: in holding that they violated the
contract by not calling for all the furniture on November 5, 1936,
when the defendant placed them at their disposal; in not
ordering the defendant to pay them the value of the furniture in
case they are not delivered; in holding that they should get all
the furniture from the Sheriff at their expenses; in ordering them
to pay-half of the expenses claimed by the Sheriff for the deposit
of the furniture; in ruling that both parties should pay their
respective legal expenses or the costs; and in denying pay their
respective legal expenses or the costs; and in denying the
motions for reconsideration and new trial. To dispose of the
case, it is only necessary to decide whether the defendant
complied with his obligation to return the furniture upon the
plaintiff's demand; whether the latter is bound to bear the deposit
fees thereof, and whether she is entitled to the costs of
litigation.lawphi1.net
The contract entered into between the parties is one
of commadatum, because under it the plaintiff gratuitously
granted the use of the furniture to the defendant, reserving for
herself the ownership thereof; by this contract the defendant
bound himself to return the furniture to the plaintiff, upon the
latters demand (clause 7 of the contract, Exhibit A; articles 1740,
paragraph 1, and 1741 of the Civil Code). The obligation
voluntarily assumed by the defendant to return the furniture
upon the plaintiff's demand, means that he should return all of
them to the plaintiff at the latter's residence or house. The
defendant did not comply with this obligation when he merely
placed them at the disposal of the plaintiff, retaining for his
benefit the three gas heaters and the four eletric lamps. The
provisions of article 1169 of the Civil Code cited by counsel for
the parties are not squarely applicable. The trial court, therefore,
erred when it came to the legal conclusion that the plaintiff failed
to comply with her obligation to get the furniture when they were
offered to her.
As the defendant had voluntarily undertaken to return all the
furniture to the plaintiff, upon the latter's demand, the Court
could not legally compel her to bear the expenses occasioned
by the deposit of the furniture at the defendant's behest. The
latter, as bailee, was not entitled to place the furniture on
deposit; nor was the plaintiff under a duty to accept the offer to
return the furniture, because the defendant wanted to retain the
three gas heaters and the four electric lamps.
As to the value of the furniture, we do not believe that the plaintiff
is entitled to the payment thereof by the defendant in case of his
inability to return some of the furniture because under paragraph
6 of the stipulation of facts, the defendant has neither agreed to
nor admitted the correctness of the said value. Should the
defendant fail to deliver some of the furniture, the value thereof
should be latter determined by the trial Court through evidence
which the parties may desire to present.
The costs in both instances should be borne by the defendant
because the plaintiff is the prevailing party (section 487 of the
Code of Civil Procedure). The defendant was the one who
breached the contract of commodatum, and without any reason
he refused to return and deliver all the furniture upon the
plaintiff's demand. In these circumstances, it is just and
equitable that he pay the legal expenses and other judicial costs
which the plaintiff would not have otherwise defrayed.
The appealed judgment is modified and the defendant is ordered
to return and deliver to the plaintiff, in the residence to return and
deliver to the plaintiff, in the residence or house of the latter, all
the furniture described in paragraph 3 of the stipulation of facts
Exhibit A. The expenses which may be occasioned by the
delivery to and deposit of the furniture with the Sheriff shall be
for the account of the defendant. the defendant shall pay the
costs in both instances. So ordered.