Chapter 2. Commodatum A. General Concepts Art. 1933. Art. 1935.

The bailee in commodatum acquires the use of the thing loaned but not its fruits; if any compensation is to be paid by him who acquires the use, the contract ceases to be a commodatum Art. 1939. Commodatum is purely personal in character. Consequently; (1) The death of the bailor or the bailee extinguishes the contract Commodatum From the Latin commodare, to lend, or the gratuitous lending of goods to be used by the borrower and returned undamaged to the lender Under Roman Law, it is one of the contracts of neighbourliness A contract where the creditor (bailor) gratuitously delivers to the debtor (bailee) non-consumable property so that the latter may use the same for a certain time and return it. 1. Consideration in Commodatum Since it is essentially gratuitous, liberality on the part of the bailor is the consideration of the contract It is for this reason that commodatum is a purely personal in character and the death of either the bailor or the bailee extinguishes the contract. If the bailee pays any compensation for the use of the property loaned, then the contract ceases to be a commodatum and is necessarily some other contract. On the part of the bailee, permissive use of the thing loaned is the consideration for the contract. Object of commodatum

Art. 1936. Consumable goods may the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. GR: Object of commodatum is non-consumable property, whether movable or immovable Exception: Consumable property may be the object of commodatum if the purpose of the contract is not consumption of the subject. Producers Bank of the Philippines v. CA Facts: 1.

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2.

Art. 1937. Movable or immovable property may be the object of commodatum.

Private respondent Vives was asked by his friend Sanchez to help her townmate Col. Doronilla in incorporating his business, Sterela Marketing Services. Sanchez asked Vives to deposit in the bank a certain amount of money in the bank account of Sterela for its incorporation with the assurance that respondent can withdraw the money within a month. Pvt respondent issued a check worth P200,000 in favour of Sterela. Pvt respondents wife accompanied Sanchez and Doronilla in opening a savings account for Sterela where the amount was deposited. The authorized signatories of the account were Respondents wife Mrs. Vives and Sanchez. When respondent learned that Sterela was no longer holding business in the address previously given to him, he was alarmed. So he went to the bank to verify if the money deposited was still intact. Assistant bank manager informed them that the money was withdrawn by Doronilla and only P90,000 remained. They were also informed that Mrs. Vives could not withdraw the remaining amount because it had to answer for some postdated checks issued by Doronilla. Pvt respondent was able to get in touch with Doronilla through Sanchez. Doronilla assured him that his money was still intact and would be returned. A postdated check for P212,000 in favour of pvt respondent was issued by Doronilla. However, when the check was presented to the drawee bank, it was dishonored. Three times dishonored.

5. 6.

7.

Pvt respondent instituted an action for recovery of sum of money in the RTC. RTC: favoured pvt respondent and sentenced Doronilla, Dumagpi, and petitioner Producers Bank to pay jointly and severally the amount of P200,000 representing the money deposited with interest plus damages. CA: affirmed in toto the decision of the RTC

1.

Issue: WON the transaction between private respondent and Doronilla is a commodatum 2. Held: Ratio: Petitioner arguments: 1. Transaction between private respondent and Doronilla is a mutuum or simple loan. 2. All elements of mutuum are present a. What was delivered was money a consumable thing b. Onerous transaction since Doronilla had to pay interest c. Transaction was not merely gratuitious but had a business angle to it as shown when respondent sued his good friend Sanchez when he was not able to recover money from Doronilla. d. It cannot be held liable for the return of respondents P200,000 because it is not privy to the transaction between respondent and Doronilla. 3. Authority to withdraw from the savings account remained exclusively with Doronilla, the sole proprietor of Sterela and who alone has legal title to the savings account. Hence, it should not be held liable for allowing Doronilla to withdraw from Sterellas savings account. 4. No wrongful act or omission on its part, hence not liable for actual damages suffered by pvt. respondent Private respondent arguments:

Transaction between him and Doronilla is not a mutuum but an accommodation. He did not part ownership of his P200,000. a. He asked his wife to deposit the amount in the account of Sterela so that a certification can be issued to the effect that Sterela had sufficient funds for purposes of incorporation. b. He retained some degree of control over his money through his wife who was made signatory to the savings account and in whose possession a savings account passbook was given. Trial court did not err when it found Producers Bank liable for the return of his money. The Assistant branch Manager Atienza connived with Doronilla in defrauding pvt respondent. Facilitated opening of Sterelas current account and approval of the authority to debit Sterelas savings account to cover any overdrawings in its current account.

SC 1. 2. No merit in this petition. No error committed by CA when it ruled that the transaction between pvt respondent and Doronilla is a commodatum and not a mutuum. 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. Rule: intention between the parties should be given primordial consideration in determining actual character of a contract. In case of doubt, contemporaneous and subsequent acts of the parties shall be considered in such determination. Evidence shows that pvt respondent agreed to deposit his money to the savings account of Sterela to make it appear that the firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within 30 days. Pvt respondent accommodated Doronilla by lending his money without consideration as a favour to his friend Sanchez. It was clear to the parties to the transaction that the money will not be removed

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4.

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from Sterelas savings account and will be returned within 30 days. Doronillas attempt to return P200,000 plus an additional P12,000 allegedly representing interest of the mutuum did not convert the transaction from a commodatum to a mutuum. It was not the intent of the parties P12,000 corresponds to the fruits of the lending of the P200,000. Art. 1935 of CC. Only proper for Doronilla to remit to pvt respondent the interest accruing to the latters money deposited with petitioner. Court also does not agree with petitioner that it is not solidarily liable for the return of pvt respondents money because it was not privy to the transaction. Nature of transaction, whether mutuum or commodatum, has no bearing on the question of petitioners liability. Factual circumstances of the case clearly shows that petitioner through its employee Mr. Atienza was partly responsible for the loss of pvt. respondents money. SC does not agree with Atienza that Doronilla had the full authority to withdraw by virtue of ownership of Sterela. o Atienza knew that the money came from Vives and was not owned by Sterela. He know that Vives was merely accommodating Doronilla. o Signature of Doronilla was not authorized. Not signed the signature card provided by the bank when a deposit is opened. o Neither Mrs. Vives nor Sanchez gave Doronilla authority to withdraw. Transfer of fund was done without the passbook having been presented. He was aware that the passbook was with Mrs. Vives and it was never surrendered. Parties to a Commodatum NCC refers to the parties: Bailor (creditor) and Bailee (debtor) Use of terms links the Roman Law concept of commodatum with the common law concept of bailment (delivery of personal property by one person to another who holds the

property for a certain purpose usually under an express or implied contract). 1. Ownership by Bailor Art. 1938. The bailor in commodatum need not be the owner of the thing loaned Art. 1933. In commodatum the bailor retains the ownership of the thing loaned. The bailor in commodatum need not be the owner of the thing loaned but as against the bailee it is the bailor who retains ownership of the property loaned.

2.

Use by Bailee

Art.1935. The bailee in commodatum acquires the use of the thing loaned but not its fruits Art.1940. A stipulation that the bailee may make use of the fruits of the thing loaned is valid. Art. 1939. Commodatum is purely personal in character. Consequently: ...(2) The bailee can neither lend nor lease the object of the contract to a third person. However, members of the bailees household may make use of the thing loaned, unless there is a stipulation to the contrary, or unless the nature of the thing forbids such use. GR: Bailee acquires permissive use of the thing loaned but not its fruits. Exception: Parties may validly stipulate that the bailee acquires the permissive use of the fruits of the property. GR: Bailee acquires the permissive use of the property only for itself and can neither lend nor lease the object of the commodatum to a third person. Exception: Members of the bailees household may make use of the property loaned Ex to Ex: Stipulation to the contrary and nature of the property forbids its use by anyone other than the bailee. 3. Solidary liability of bailees

B.

Art. 1945. When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily. C. 1. Liability for Expenses and Damages Ordinary Expenses

8.

Art. 1933. Art. 1935. Art. 1941. The bailee is obliged to pay for the ordinary expenses for the use and preservation of the thing loaned. Art. 1943. The bailee does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. It is to be expected that the property loaned will suffer ordinary wear and tear that arises from actual use by the bailee.

CA: reversed RTC Refused to rule on issue of physical possession Held that the pivotal issue in this case is who between Pajuyo and Guevarra has priority right as beneficiary of contensted land. Held that Guevarra enjoys preferential right because the Code specifies that the occupant or the caretaker is the one qualified to apply for socialized housing.

Issue: WON the Kasunduan entered into between Pajuyo and Guevarra is a commodatum Held: NO Ratio: 1. 2. 3. CAs determination was premature. Both parties were at most potential beneficiaries of the law. 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. Admitted the existence and due execution of the Kasunduan. The facts make out a case of unlawful detainer. Guevarras refusal to comply with Pajuyos demand to vacate made Guevarras continued possession of the property unlawful. An essential feature of commodatum is that it is gratuitous. Another feature is that the use of the thing belonging to another is for a certain period. Thus, the bailor cannot demand that the bailee return the thing loaned until after the expiration of the period stipulated or after the accomplishment of the use for which the commodatum is constituted. a. If bailor has urgent need of the thing, he may demand its return for temporary use. b. If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will. contractual relation of precarium, a kind of commodatum

Pajuyo v. Court of Appeals Facts: 1.

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3. 4. 5.

6. 7.

Petitioner Pajuyo paid P400 to a certain Perez for the rights over a 250 sq. meter lot in Payatas. Pajuyo then constructed a house of light materials on the lot. Pajuyo and pvt respondent Guevarra executed an agreement: As owner of the house, petitioner allowed pvt respondent to live in the house for free provided that the latter would maintain cleanliness and orderliness of the house. Pvt. respondent promised that he would vacate on pets demand. When petitioner asked pvt respondent to vacate the house, the latter refused. Petitioner filed an ejectment case in MTC. Pvt respondent: claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because it is within 150 hectares set aside by Proc No. 137 for socialized housing. Neither he nor Pajuyo had valid title to the lot. MTC: rendered decision in favour of Pajuyo RTC: affirmed MTC decision

4. 5. 6.

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Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra is not gratuitous. Although there was no payment of rent stipulated, it obligated him to maintain the property in good condition. Imposition of this obligation made the Kasunduan a contract different from a commodatum. 8. Effects of the Kasunduan are also different from that of a commodatum o Case law on ejectment has treated relationship based on tolerance as one that is akin to a landlordtenant relationship where the withdrawal of permission would result in the termination of the lease. Tenants withholding of the property would then be unlawful. 9. Guevarra insists that the contract is void. But he should know that there must be honor even between squatters. The Kasunduan binds Guevarra. 10. Kasunduan is not void for determining who between Pajuyo and Guevarra has a right to physical possession of the contested property. It is evidence of Guevarras recognition of Pajuyos better right of physical possession. 11. Absence of a contract would not yield a different result, as there would still be an implied promise to vacate... Pajuyos withdrawal of his permission to Guevarra terminated the Kasunduan 12. Pajuyo was in actual possession of the lot because Guevarra had to seek Pajuyos permission to temporarily hold the property and to follow the conditions set by Pajuyo in the Kasunduan. 2. Extraordinary Expenses

be borne equally by both the bailor and the bailee, unless there is a stipulation to the contrary. GR: Bailor is liable for extraordinary expenses for preservation of the property loaned since bailor retains ownership of property loaned. Exception: Bailee incurs expenses before informing the bailor Ex to Ex: if urgent that the reply of the bailor to the notification cannot be awaited without danger to the property loaned, then gr applies.

3.

Other Expenses

Art. 1950. If, for the purpose of making use of the thing, the bailee incurs expenses, other than those referred to in Articles 1941 and 1949, he is not entitled to reimbursement. 4. Abandonment by Bailor

Art. 1952. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the bailee. 5. Right of Retention by Bailee

Art. 1944. The bailee cannot return the thing loaned on the ground that the bailor owes him something, even though it may be by reason of expenses. However, the bailee has a right of retention for damages mentioned in Article 1951. Art.1951. The bailor who, knowing the flaws of the thing loaned, does not advise the bailee of the same, shall be liable to the latter for damages which he may suffer by reason thereof. GR: Bailee has no right of retention over the property loaned if the bailor refuses to pay for expenses and damages that pertain to it. Right of action: demand payment for expenses and damages

Art. 1949. The bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger. If the extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even though he acted without fault, they shall

Exception: when the bailor knows of flaws of the property loaned and does not inform the bailee , and the bailee suffers damages because of such flaws Right of retention is accessory to a principal obligation. It is not a coercive measure but a means of obtaining compensation for the debt and as a means of extinguishing an obligation.

Republic v. Bagtas Facts: 1. Bagtas borrowed from RP through Bureau of Animal Industry three bulls for breeding purposes subject to a government charge of breeding fee of 10% of the book value of the bulls. Upon expiration of the contract, borrower asked for a renewal for another period of one year. However, Secretary of Agriculture and Natural Resources approved a renewal of only one bull and requested the return of the other two. Bagtas wrote to the Director of Animal Husbandry that he would pay for the value of the three bulls. He reiterated his desire to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor General. Director of Animal Husbandry 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. Bagtas failed to pay book value or return the bulls. RP commenced an action against him praying that he return the bulls or pay the book value and the unpaid breeding fee Bagtas: prayed for dismissal of the complaint. He could not return the bulls or pay their book value a. Bad peace and order situation in Cagayan Valley b. Pending appeal to Sec of Agriculture and Natural Resources and RP Pres from refusal of Director to reduce the book value of bulls corresponding 8% yearly depreciation from date of acquisition Trial Court: sentenced the latter to pay value + breeding fees + interest on both sums

D. Liability for Loss Art. 1933. Art. 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous event: (1) If he devotes the thing to any purpose different from that for which it has been loaned; (2) If he keeps it longer than the period stipulated , or after the accomplishment of the use for which the commodatum has been constituted (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. (4) If he lends or leases the thing to a third person, who is not a member of his household; (5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter. GR: Bailor bears the liability for loss of the property loaned due to fortuitous event Exception: Liability shifts to the bailee in the instances enumerated in Art. 1942 8. (1) Breach of conditions of the commodatum (2) Amounts to delay (3) Intention of the parties is to shift to the bailee the liability for loss due to a fortuitous event (4) Breach of conditions of the commodatum (5) Since the consideration of commodatum is liberality on the part of the bailor, this amounts to an act of ingratitude. 2.

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Issue: WON the contract for the loan of the bulls is a commodatum Held: NO Ratio:

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Son of defendant already returned the two bulls to the Bureau of Animal Industry Appellant (widow of Bagtas and administratrix of his estate): a. contends that one of the bulls was killed during a raid by the Huk and such death was due to force majeure and she is relieved from the duty of returning it or pay its value b. contract of commodatum so appellee retained ownership to the bull and should suffer its loss due to force majeure SC: contention is without merit a. If the breeding fee be considered a compensation, then the contract would be a lease on 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 even after the expiration of the contract. b. And even if contract be commodatum, the appellant is still liable under 1942 of the Civil Code Obligation to Return

(1) If neither the duration of the contract nor the use to which the thing loaned should be devoted, has been stipulated; or (2) If the use of the thing is merely tolerated by the owner. Art. 1948. The bailor may demand the immediate return of the thing if the bailee commits any act of ingratitude specified in Article 756. Primary obligation of the bailee in commodatum: to return the property loaned. Generally, the obligation to return arises only: 1. After the expiration of the period stipulated 2. After the accomplishment of the use for which the commodatum was constituted Exceptions to this rule, implying that the bailor may demand the return of the property loaned, are: 1. If the bailor has urgent need of the property loaned, in which case the bailor may: a. Demand the return of the property; extinguishing the commodatum; or b. Demand the temporary use of the property; suspending the commodatum while the property is in the possession of the bailor. 2. If the commodatum is a precarium, or a contractual relation where the bailor may demand the property loaned at will, specifically if: a. Neither the duration nor the use to which the property loaned has been stipulated; or b. Where the use by the bailee is merely tolerated by the bailor 3. Underscoring that the consideration of a commodatum is the liberality of the bailor, if the bailee commit any of the following acts of ingratitude: a. The bailee commits some offense against the person, the honor or the property of the bailor, or the bailors wife or children under parental authority;

E.

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... Art. 1946. The bailor cannot demand the return of the thing loaned till after the expiration of the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted. However, if in the meantime, he should have urgent need of the thing, he may demand its return or temporary use. In case of temporary use by the bailor, the contract of commodatum is suspended while the thing is in possession of the bailor. Art. 1947. The bailor may demand the thing at will, and the contractual relation is called a precarium, in the following cases:

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The bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though it be proved, unless the crime or the act has been committed against the bailee, the bailees wife or children under parental authority; The bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor.

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2. 3.

Quintos v. Beck Facts:

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5. 1. 2. Defendant was a tenant of the plaintiff and as such occupied latters house. Upon novation of the contract of lease between plaintiff and defendant, the former gratuitously granted to the latter the use of the furniture, subject to condition that he would return them to the plaintiff upon latters demand. Plaintiff sold property to the Lopezes. Plaintiff required defendant to return all the furniture transferred to him in the house where they were found. Defendant wrote letter to the plaintiff that she may call for the furniture on the ground floor of the house. He also wrote another letter informing her that he could not give up the three gas heaters and the four electric lamps because he would use them th until the 15 of the same month when the lease was due to expire. Plaintiff refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. Before vacating the house, the defendant deposited with Sheriff all the furniture belonging to the plaintiff and they are now on deposit in the warehouse in the custody of the sheriff.

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Contract entered into between the parties is one of commodatum, because 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. Obligation voluntarily assumed by defendant to return the furniture upon the plaintiffs demand, means that he sh ould return all of them to the plaintiff at the latters residence or house. This was not complied with. Court could not legally compel plaintiff to bear the expenses occasioned by the deposit of the furniture at the defendants behest. The defendant 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 3 gas heaters and 4 electric lamps. Costs should be borne by defendant because plaintiff is the prevailing party. 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 plaintiffs 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.

6. 7.

Issue: Ratio:

Chapter 3. Simple Loan A. General Concepts

Art. 1933. By the contract of loan, one of the parties delivers to another... 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... Simple loan may be gratuitous or with a stipulation to pay interest. 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. Art. 1954. A contract whereby one person transfers the ownership of nonfungible things to another with the obligation on the part of the latter to give things of the same kind, quantity, and quality shall be considered a barter. Art. 1980. Fixed savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. By a contract of simple loan or mutuum, the creditor delivers to the debtor (or borrower) money or other consumable property upon the condition that the same amount of the same kind and quality shall be paid. The contract of simple loan, or loan for consumption is entered into regularly in ordinary life. But it is this type of simple loan, involving, as it does, money, that serves as basis for most commercial credit transactions. The most common of all commercial credit transactions, the deposit by a depositor of money in a fixed, savings or current deposit account with a bank, is a simple loan. As contrasted to commodatum, in simple loan, the borrower acquires ownership of the money or consumable property for the permissive use of the property loaned.

Being the owner, the borrower can dispose of the property loaned and this act of disposition will not be considered misappropriation. Use of consumable property generally results in its extinguishment, which is why the obligation of borrower in a simple loan is to pay an equal amount of the same kind and quality, effectively replacing or substituting the property loaned. It is for this reason that the provisions on simple loan refer to the object of a simple loan as fungible property, that is, property commercially interchangeable with other property of the same kind. o Act No. 2137, Sec. 58. Fungible goods means goods of which any unit is, from its nature by mercantile custom, treated as the equivalent of any other unit. Primary purpose of the contract is still permissive use of the money or consumable property. But since the use of a consumable generally results in its consumption/extinguishment, ownership is transferred as a necessary consequence of the permissive use of the property loaned. If the primary use of the contract is the transfer of ownership of a non-fungible property and payment is made by giving some thing of the same kind, quantity, and quality, it is a contract of barter.

People v. Puig and Porras Facts: 1. Iloilo Provincial Prosecutors Office filed 112 cases of Qualified Theft against respondents Puig and Porras who were cashier and bookkeeper of private complainant Rural Bank of Pototan, Inc. Allegations in the Informations: a. Respondents without the knowledge and/or consent of the management of the Bank and with intent of gain take , steal and carry away the sum of 15,000 pesos.

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4. Issue: Held:

Trial Court did not find existence of probable cause that would have necessitated the issuance of a warrant of arrest based on the following grounds a. Element of taking without the consent of the owners was missing on the ground that it is the depositorsclients, and not the Bank, which filed the complaint in these cases, who are the owners of the money allegedly taken by respondents and hence, are the real parties-ininterest MR was filed but was denied. Petitioner went directly to SC for review on certiorari under rule 45.

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Banks, where monies are deposited, are considered the owners thereof. Relationship between banks and depositors have been held to be that of creditor and debtor. In summary, the Bank acquires ownership of the money deposited by its clients; and the employees of the Bank, who are entrusted with the possession of money of the Bank due to the confidence repose din them, occupy positions of confidence. The Informations sufficiently allege all the essential elements constituting the crime of Qualified Theft Dispositive: warrants of arrest issue against respondents and RTC Judge is directed to proceed with the trial of criminal cases

BPI Family Bank v. Franco Facts: 1. Tevesteco Arrastre-Stevedoring Co. opened a savings and current account with BPI-FB. First Metro Investment Corporation (FMIC) also opened a time deposit account with same branch of BPI-FB with a deposit of 100 Million pesos to mature one year. Franco opened three accounts, a current, savings and time deposit with BPI-FB. Current and savings account were respectively funded with an initial deposit of 500,000 each while time deposit account had 1 million. The total amount of 2 million used to open these accounts is traceable to a check issued by Tevesteco allegedly in consideration of Francos introduction of Eladio Teves, who was looking for a conduit bank to facilitate Tevestecos business transactions, to Jamie Sebastian, who was then BPI-FB SFMs Branch Manager. Funding for the 2 million check was part of the 80 million debited by BPI-FB from FMICs time deposit account and credited to Tevestecos current account pursuant to an Authority to Debit purportedly signed by FMICs officers. Appears however that the signatures of FMICs officers on the Authority to Debit were forged. BPI-FB through is Senior VicePresident, Severino Coronacion, instructed Arangorin to debit Francos savings and current accounts for the amounts remaining

Argument of Petitioner: 1. Petitioner explains that under Art. 1980 of the NCC, fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans. 2. Corollary thereto, Art. 1953 of the same Code provides that 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. 3. Posits that depositors who place their money with the bank are considered creditors of the bank. The bank acquires ownership of the money deposited by its clients, making the money taken by respondents as belonging to the bank. SC: 1. Theft as defined in Art. 308 of the RPC requires the physical taking of anothers property without violence or intimidation against person or force upon things. Beyond doubt that tellers, cashiers, bookkeepers and other employees of a Bank who come into possession of the monies deposited therein enjoy the confidence reposed in them by their employer.

2.

3.

2.

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therein. However, Francos time deposit account could not be debited due to the capacity limitations of BPI-FBs computer. 5. In the meantime, two checks drawn by Franco against his BPI-FB current account were dishonored upon presentment for payment, and stamped with a notation account under garnishment. a. Francos current account was garnished by virtue of an Order of Attachment. b. Dishonored checks were issued by Franco and presented for payment at BPI-FB prior to Francos receipt of notice that his accounts were under garnishment. 6. Franco was impleaded in the Makati case. Upon receipt of such copy, Franco filed a Motion to Discharge Attachment which Makati RTC granted. 7. Order lifting the Order of Attachment was served on BPI-FB with Franco demanding the release to him of funds in his savings and current accounts. 8. In light of BPI-FBs refusal to heed Francos demands to unfreeze his accounts and release his deposits therein, he filed a suit in the Manila RTC. a. Interest on the remaining balance of his current account which was eventually released to him b. Balance on his savings account plus interest c. Advance interest paid to him which had been deducted hen he pre-terminated his time deposit account d. Payment of actual, moral and exemplary damages 9. BPI insists that it was correct in freezing the accounts of Franco and refusing to release his deposits, claiming that it had a better right to the amounts which consisted of part of the money allegedly fraudulently withdrawn from it by Tevesteco and ending up in Francos accounts. 10. BPI declared that the claimed consideration of 2 million for the introduction facilitated by Franco between George Daantos and Eladio Teves, on one hand, and Jaime Sebastian, on the other, spoke volumes of Francos participation in the fraudulent transation. 11. Manila RTC: judgment favoured Franco and against BPI 12. CA: affirmed decision and modified ordering BPI-FB to pay Franco damages

Issue: Held: Ratio: SC is in full accord with the common ruling of the lower courts that BPI-FB cannot unilaterally freeze Francos accounts and prevent him from withdrawing his deposits. However, contrary to CAs ruling, Franco is not entitled to unearned interest on the time deposit as well as to moral and exemplary damages

1.

2.

Issue of who has a better right to the deposits in Francos accounts 1. BPI-FB urges that the legal consequence of FMICs forgery claim is that the money transferred by BPI-FB to Tevesteco is its own, and considering that it was able to recover possession of the same when the money was redeposited by Franco, it had the right to set up its ownership thereon and freeze Francos account. Contends that its position is like that of an owner of personal property who regains possession after it is stolen. It even gave the ff example: a. Where Xs television set is stolen by Y who thereafter sells it to Z and where Z unwittingly entrust possession of the TV set to X, the latter would have the right to keep possession of the property and preclude Z from recovering possession thereof. b. Cited Art. 559 of NCC to bolster its position: One who was lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. BPIs argument is unsound. a. Movable property mentioned in Art 559 of the NCC pertains to a specific or determinate thing. b. In this case, the deposit in Francos accounts consists of money, which is generic and fungible.

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5.

6.

While Art. 559 permits an owner who has lost or has been unlawfully depived of a movable to recover the same thing from the current possessor, BPI-FB simply claims ownership of the equivalent amount of money i. The value thereof, which it had mistakenly debited from FMICs account and credited to Tevestecos and subsequently traced to Francos account. ii. It bears emphasizing that money bears no earmarks of peculiar ownership, and this characteristic is all the more manifest in the instant case which involves money in a banking transaction gone awry. Primary function is to pass from hand to hand as a medium of exchange, without other evidence of its title. iii. Inasmuch as what is involved is not a specific or determinate personal property, BPI-FBs illustrative example, based on Article 559, is inapplicable to the instant case. No doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal consequence of its unauthorized transfer of FMICs deposits to Tevestecos account. BPI-FB forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan/mutuum. As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Francos deposits, but such ownership is coupled with a corresponding obligation to pay him an equal amount on demand. Although BPI-FB owns the deposits in Francos accounts, it cannot prevent him from demanding payment of BPI-FBs obligation by drawing checks against his current account, or asking for the release of the funds in his savings account. Thus when Franco issued checks drawn against his current account, he had every right as creditor to expect that those checks would be honoured by BPI-FB as debtor. BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its mere suspicion that the funds were proceeds of the multi-million peso scam Franco was allegedly involved in. To grant BPI-FB or any bank for that matter the right to take

c.

7.

8.

whatever action it pleases on deposits which it supposes are derived from shady transactions would open the floodgates of public distrust in the banking industry. BPI-FB, as the trustee in the fiduciary relationship is duty bound to know the signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in the process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability to Franco and the other payees of checks issued by Tevesteco or prevent withdrawals from their respective accounts without appropriate corut writ or a favourable final judgment. Since there is no evidence establishing Francos participation in the forgery, he remains an innocent party. As between him and BPI-FB, the latter, which made possible the present predicament must bear the resulting loss or inconvenience.