II.
Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
G.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.
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
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II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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. . . .
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II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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
FACTS:
 May 8, 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 1 year for
breeding purposes subject to a breeding fee of 10% of the book
value of the bulls
 May 7, 1949: Jose requested for a renewal for another year for
the three bulls but only one bull was approved while the others
are to be returned
 March 25, 1950: He wrote to the Director of Animal Industry that
he would pay the value of the 3 bulls
 October 17, 1950: he reiterated his desire to buy them at a value
with a deduction of yearly depreciation to be approved by the
Auditor General.
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II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
 October 19, 1950: Director of Animal Industry advised him that
either the 3 bulls are to be returned or their book value without
deductions should be paid not later than October 31, 1950 which
he was not able to do
 December 20, 1950: An action at the CFI was commenced against
Jose praying that he be ordered to return the 3 bulls or to pay
their book value of P3,241.45 and the unpaid breeding fee of
P199.62, both with interests, and costs
 July 5, 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, he could not return the animals nor pay their value
and prayed for the dismissal of the complaint.
 RTC: granted the action
 December 1958: granted an ex-parte motion for the appointment
of a special sheriff to serve the writ outside Manila
 December 6, 1958: Felicidad M. Bagtas, the surviving spouse of
Jose who died on October 23, 1951 and administratrix of his
estate, was notified
 January 7, 1959: she file a motion that the 2 bulls where returned
by his son on June 26, 1952 evidenced by recipt and the 3rd bull
died from gunshot wound inflicted during a Huk raid and
prayed that the writ of execution be quashed and that a writ of
preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the
estate should be liable for the loss due to force majeure due to delay.
HELD: YES. writ of execution appealed from is set aside, without
pronouncement as to costs
 If contract was commodatum then Bureau of Animal
Industry retained ownership or title to the bull it should suffer
its loss due to force majeure. A contract of commodatum is
essentially gratuitous. 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 if he keeps it longer than the period stipulated
 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
because it was killed while in the custody of the administratrix
of his estate
 Special proceedings for the administration and settlement of the
estate of the deceased Jose V. Bagtas having been instituted in
the CFI, 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.
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II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 Decision1 of the Court
of Appeals dated June 25, 1991 in CA-G.R. CV No. 11791 and of its
Resolution2 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 month’s time.
Private respondent asked Sanchez to bring Doronilla to their house
so that they could discuss Sanchez’s request.3
On May 9, 1979, private respondent, Sanchez, Doronilla and a certain
Estrella Dumagpi, Doronilla’s 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 (₱200,000.00) 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 ₱200,000.00.
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 ₱90,000.00 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 ₱175,000.00 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 (₱212,000.00) in favor of
private respondent. However, upon presentment thereof by private
respondent to the drawee bank, the check was dishonored. Doronilla
5
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 client’s money.
Doronilla issued another check for ₱212,000.00 in private
respondent’s 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 ₱200,000.00, 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 ₱50,000.00 for moral damages and a similar
amount for exemplary damages;
(c) the amount of ₱40,000.00 for attorney’s fees; and
(d) the costs of the suit.
SO ORDERED.8
Petitioner appealed the trial court’s 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
petitioner’s 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 PETITIONER’S 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.
6
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 ATTORNEY’S 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
petitioner’s delay in furnishing private respondent with copy of the
reply12 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
₱212,000.00, or ₱12,000 more than what private respondent
deposited in Sterela’s 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 respondent’s
₱200,000.00 because it is not privy to the transaction between the
latter and Doronilla.16
It argues further that petitioner’s 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 Doronilla’s 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 ₱200,000.00 in Sterela’s account for purposes of its
incorporation.18 Hence, petitioner should not be held liable for
allowing Doronilla to withdraw from Sterela’s savings
account.1a\^/phi1.net
Petitioner also asserts that the Court of Appeals erred in affirming
the trial court’s 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 Sterela’s 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 attorney’s fees.20
7
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 ₱200,000.00 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, Atienza’s employer, is liable for the return of his money.
He insists that Atienza, petitioner’s assistant manager, connived
with Doronilla in defrauding private respondent since it was Atienza
who facilitated the opening of Sterela’s 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 Sterela’s 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
Court’s 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
8
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 Sterela’s savings account and would be returned to
private respondent after thirty (30) days.
Doronilla’s attempts to return to private respondent the amount of
₱200,000.00 which the latter deposited in Sterela’s account together
with an additional ₱12,000.00, 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 ₱12,000.00 corresponds to the fruits of the lending of
the ₱200,000.00. 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 latter’s money
deposited with petitioner.
Neither does the Court agree with petitioner’s contention that it is
not solidarily liable for the return of private respondent’s 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
petitioner’s liability for the return of private respondent’s 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 respondent’s money and is liable for its
restitution.
Petitioner’s 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 Doronilla’s "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.
9
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
To begin with, the deposit was made in defendant’s Buendia branch
precisely because Atienza was a key officer therein. The records
show that plaintiff had suggested that the ₱200,000.00 be deposited
in his bank, the Manila Banking Corporation, but Doronilla and
Dumagpi insisted that it must be in defendant’s 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 ₱200,000.00, 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.1awphi1.nét
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 Atienza’s 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 ₱200,000.00 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
10
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
"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
employee’s 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 latter’s 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 Sterela’s Savings
Account No. 10-1567, in which account private respondent’s money
was deposited, and in transferring the money withdrawn to Sterela’s
Current Account with petitioner. Atienza’s acts of helping Doronilla,
a customer of the petitioner, were obviously done in furtherance of
petitioner’s interests34 even though in the process, Atienza violated
some of petitioner’s rules such as those stipulated in its savings
account passbook.35 It was established that the transfer of funds from
Sterela’s 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 respondent’s loss.
The foregoing shows that the Court of Appeals correctly held that
under Article 2180 of the Civil Code, petitioner is liable for private
respondent’s loss and is solidarily liable with Doronilla and
Dumagpi for the return of the ₱200,000.00 since it is clear that
petitioner failed to prove that it exercised due diligence to prevent
the unauthorized withdrawals from Sterela’s 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, attorney’s 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.
Producers Bank of the Philippines v. CA, 397 SCRA 651
Doronilla is in the process of incorporating his business and to
comply with one of the requirements of incorporation, he caused
Vives’ to issue a check which was then deposited in Doronilla’s
savings account. It was agreed that Vives can withdraw his money in
a month’s time. However, what Doronilla did was to open a current
account and instructed the bank to debit from the savings account
and deposit it in his current account. So when Vives checked the
savings account, the money was gone. Is the contract a mutuum or
commodatum?
Supreme Court held that the contract is a commodatum. Although in
a commodatum, the object is a non-consumable thing, there are
instances where a consumable thing may be the object of a
commodatum, such as when the purpose is not for consumption of
the object but merely for exhibition (Art. 1936). 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
11
 II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952

very same goods returned at the end of the period agreed upon, the
loan is a commodatum and not a mutuum.

o CONSIDERATION
Art. 1933: xxx Commodatum is essentially gratuitous.

Art. 1935: xxx if any compensation is to be paid by him who acquires

the use, the contract ceases to be a commodatum.

o DELIVERY
- perfects the contract

12
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
G.R. No. L-8321 October 14, 1913
ALEJANDRA MINA, ET AL., plaintiffs-appellants,
vs.
RUPERTA PASCUAL, ET AL., defendants-appellees.
ARELLANO, C.J.:
Francisco Fontanilla and Andres Fontanilla were brothers. Francisco
Fontanilla acquired during his lifetime, on March 12, 1874, a lot in
the center of the town of Laoag, the capital of the Province of Ilocos
Norte, the property having been awarded to him through its
purchase at a public auction held by the alcalde mayor of that
province. The lot has a frontage of 120 meters and a depth of 15.
Andres Fontanilla, with the consent of his brother Francisco, erected
a warehouse on a part of the said lot, embracing 14 meters of its
frontage by 11 meters of its depth.
Francisco Fontanilla, the former owner of the lot, being dead, the
herein plaintiffs, Alejandro Mina, et al., were recognized without
discussion as his heirs.
Andres Fontanilla, the former owner of the warehouse, also having
died, the children of Ruperta Pascual were recognized likes without
discussion, though it is not said how, and consequently are entitled
to the said building, or rather, as Ruperta Pascual herself stated, to
only six-sevenths of one-half of it, the other half belonging, as it
appears, to the plaintiffs themselves, and the remaining one-seventh
of the first one-half to the children of one of the plaintiffs, Elena de
Villanueva. The fact is that the plaintiffs and the defendants are
virtually, to all appearance, the owners of the warehouse; while the
plaintiffs are undoubtedly, the owners of the part of the lot occupied
by that building, as well as of the remainder thereof.
This was the state of affairs, when, on May 6, 1909, Ruperta Pascual,
as the guardian of her minor children, the herein defendants,
petitioned the Curt of First Instance of Ilocos Norte for authorization
to sell "the six-sevenths of the one-half of the warehouse, of 14 by 11
meters, together with its lot." The plaintiffs — that is Alejandra Mina,
et al. — opposed the petition of Ruperta Pascual for the reason that
the latter had included therein the lot occupied by the warehouse,
which they claimed was their exclusive property. All this action was
taken in a special proceeding in reguardianship.
The plaintiffs did more than oppose Pascual's petition; they
requested the court, through motion, to decide the question of the
ownership of the lot before it pass upon the petition for the sale of
the warehouse. But the court before determining the matter of the
ownership of the lot occupied by the warehouse, ordered the sale of
this building, saying:
While the trial continues with respect to the ownership of
the lot, the court orders the sale at public auction of the said
warehouse and of the lot on which it is built, with the
present boundaries of the land and condition of the building,
at a price of not less than P2,890 Philippine currency . . . .
So, the warehouse, together with the lot on which it stands, was sold
to Cu Joco, the other defendant in this case, for the price mentioned.
The plaintiffs insisted upon a decision of the question of the
ownership of the lot, and the court decided it by holding that this
land belonged to the owner of the warehouse which had been built
thereon thirty years before.
The plaintiffs appealed and this court reversed the judgment of the
lower court and held that the appellants were the owners of the lot
in question. 1
13
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
When the judgment became final and executory, a writ of execution
issued and the plaintiffs were given possession of the lot; but soon
thereafter the trial court annulled this possession for the reason that
it affected Cu Joco, who had not been a party to the suit in which
that writ was served.
It was then that the plaintiffs commenced the present action for the
purpose of having the sale of the said lot declared null and void and
of no force and effect.
An agreement was had ad to the facts, the ninth paragraph of which
is as follows:
9. That the herein plaintiffs excepted to the judgment and
appealed therefrom to the Supreme Court which found for
them by holding that they are the owners of the lot in
question, although there existed and still exists a
commodatum by virtue of which the guardianship (meaning
the defendants) had and has the use, and the plaintiffs the
ownership, of the property, with no finding concerning the
decree of the lower court that ordered the sale.
The obvious purport of the cause "although there existed and still
exists a commodatum," etc., appears to be that it is a part of the
decision of the Supreme Court and that, while finding the plaintiffs
to be the owners of the lot, we recognized in principle the existence
of a commodatum under which the defendants held the lot. Nothing
could be more inexact. Possibly, also, the meaning of that clause is
that, notwithstanding the finding made by the Supreme Court that
the plaintiffs were the owners, these former and the defendants
agree that there existed, and still exists, a commodatum, etc. But
such an agreement would not affect the truth of the contents of the
decision of this court, and the opinions held by the litigants in regard
to this point could have no bearing whatever on the present decision.
Nor did the decree of the lower court that ordered the sale have the
least influence in our previous decision to require our making any
finding in regard thereto, for, with or without that decree, the
Supreme Court had to decide the ownership of the lot consistently
with its titles and not in accordance with the judicial acts or
proceedings had prior to the setting up of the issue in respect to the
ownership of the property that was the subject of the judicial decree.
What is essentially pertinent to the case is the fact that the defendant
agree that the plaintiffs have the ownership, and they themselves
only the use, of the said lot.
On this premise, the nullity of the sale of the lot is in all respects
quite evident, whatsoever be the manner in which the sale was
effected, whether judicially or extrajudicially.
He who has only the use of a thing cannot validly sell the thing itself.
The effect of the sale being a transfer of the ownership of the thing, it
is evident that he who has only the mere use of the thing cannot
transfer its ownership. The sale of a thing effected by one who is not
its owner is null and void. The defendants never were the owners of
the lot sold. The sale of it by them is necessarily null and void. On
cannot convey to another what he has never had himself.
The returns of the auction contain the following statements:
I, Ruperta Pascual, the guardian of the minors, etc., by virtue
of the authorization conferred upon me on the 31st of July,
1909, by the Court of First Instance of Ilocos Norte,
proceeded with the sale at public auction of the six-sevenths
part of the one-half of the warehouse constructed of rubble
stone, etc.
Whereas I, Ruperta Pascual, the guardian of the minors, etc.,
sold at public auction all the land and all the rights title,
14
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
interest, and ownership in the said property to Cu Joco, who
was the highest bidder, etc.
Therefore, . . . I cede and deliver forever to the said
purchaser, Cu Joco, his heirs and assigns, all the interest,
ownership and inheritance rights and others that, as the
guardian of the said minors, I have and may have in the said
property, etc.
The purchaser could not acquire anything more than the interest that
might be held by a person to whom realty in possession of the
vendor might be sold, for at a judicial auction nothing else is
disposed of. What the minor children of Ruperta Pascual had in their
possession was the ownership of the six-sevenths part of one-half of
the warehouse and the use of the lot occupied by his building. This,
and nothing more, could the Chinaman Cu Joco acquire at that sale:
not the ownership of the lot; neither the other half, nor the remaining
one-seventh of the said first half, of the warehouse. Consequently,
the sale made to him of this one-seventh of one-half and the entire
other half of the building was null and void, and likewise with still
more reason the sale of the lot the building occupies.
The purchaser could and should have known what it was that was
offered for sale and what it was that he purchased. There is nothing
that can justify the acquisition by the purchaser of the warehouse of
the ownership of the lot that this building occupies, since the minors
represented by Ruperta Pascual never were the owners of the said
lot, nor were they ever considered to be such.
The trial court, in the judgment rendered, held that there were no
grounds for the requested annulment of the sale, and that the
plaintiffs were entitled to the P600 deposited with the clerk of the
court as the value of the lot in question. The defendants, Ruperta
Pascual and the Chinaman Cu Joco, were absolved from the
complaint, without express finding as to costs.
The plaintiffs cannot be obliged to acquiesce in or allow the sale
made and be compelled to accept the price set on the lot by expert
appraisers, not even though the plaintiffs be considered as coowner
of the warehouse. It would be much indeed that, on the ground of
coownership, they should have to abide by and tolerate the sale of
the said building, which point this court does not decide as it is not a
question submitted to us for decision, but, as regards the sale of the
lot, it is in all respects impossible to hold that the plaintiffs must
abide by it and tolerate, it, and this conclusion is based on the fact
that they did not give their consent (art. 1261, Civil Code), and only
the contracting parties who have given it are obliged to comply (art.
1091, idem).
The sole purpose of the action in the beginning was to obtain an
annulment of the sale of the lot; but subsequently the plaintiffs,
through motion, asked for an amendment by their complaint in the
sense that the action should be deemed to be one for the recovery of
possession of a lot and for the annulment of its sale. The plaintiff's
petition was opposed by the defendant's attorney, but was allowed
by the court; therefore the complaint seeks, after the judicial
annulment of the sale of the lot, to have the defendants sentenced
immediately to deliver the same to the plaintiffs.
Such a finding appears to be in harmony with the decision rendered
by the Supreme Court in previous suit, wherein it was held that the
ownership of the lot lay in the plaintiffs, and for this reason steps
were taken to give possession thereof to the defendants; but, as the
purchaser Cu Joco was not a party to that suit, the present action is
strictly one for recover against Cu Joco to compel him, once the sale
has been annulled, to deliver the lot to its lawful owners, the
plaintiffs.
As respects this action for recovery, this Supreme Court finds:
1. That it is a fact admitted by the litigating parties, both in
this and in the previous suit, that Andres Fontanilla, the
15
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
defendants' predecessor in interest, erected the warehouse
on the lot, some thirty years ago, with the explicit consent of
his brother Francisco Fontanilla, the plaintiff's predecessor in
interest.
2. That it also appears to be an admitted fact that the
plaintiffs and the defendants are the coowners of the
warehouse.
3. That it is a fact explicitly admitted in the agreement, that
neither Andres Fontanilla nor his successors paid any
consideration or price whatever for the use of the lot
occupied by the said building; whence it is, perhaps, that
both parties have denominated that use a commodatum.
Upon the premise of these facts, or even merely upon that of the first
of them, the sentencing of the defendants to deliver the lot to the
plaintiffs does not follow as a necessary corollary of the judicial
declaration of ownership made in the previous suit, nor of that of the
nullity of the sale of the lot, made in the present case.
The defendants do not hold lawful possession of the lot in
question.1awphil.net
But, although both litigating parties may have agreed in their idea of
the commodatum, on account of its not being, as indeed it is not, a
question of fact but of law, yet that denomination given by them to
the use of the lot granted by Francisco Fontanilla to his brother,
Andres Fontanilla, is not acceptable. Contracts are not to be
interpreted in conformity with the name that the parties thereto
agree to give them, but must be construed, duly considering their
constitutive elements, as they are defined and denominated by law.
By the contract of loan, one of the parties delivers to the
other, either anything not perishable, in order that the latter
may use it during the certain period and return it to the
former, in which case it is called commodatum . . . (art. 1740,
Civil Code).
It is, therefore, an essential feature of the commodatum that the use
of the thing belonging to another shall for a certain period. Francisco
Fontanilla did not fix any definite period or time during which
Andres Fontanilla could have the use of the lot whereon the latter
was to erect a stone warehouse of considerable value, and so it is that
for the past thirty years of the lot has been used by both Andres and
his successors in interest. The present contention of the plaintiffs that
Cu Joco, now in possession of the lot, should pay rent for it at the
rate of P5 a month, would destroy the theory of the commodatum
sustained by them, since, according to the second paragraph of the
aforecited article 1740, "commodatum is essentially gratuitous," and,
if what the plaintiffs themselves aver on page 7 of their brief is to be
believed, it never entered Francisco's mind to limit the period during
which his brother Andres was to have the use of the lot, because he
expected that the warehouse would eventually fall into the hands of
his son, Fructuoso Fontanilla, called the adopted son of Andres,
which did not come to pass for the reason that Fructuoso died before
his uncle Andres. With that expectation in view, it appears more
likely that Francisco intended to allow his brother Andres a surface
right; but this right supposes the payment of an annual rent, and
Andres had the gratuitous use of the lot.
Hence, as the facts aforestated only show that a building was erected
on another's ground, the question should be decided in accordance
with the statutes that, thirty years ago, governed accessions to real
estate, and which were Laws 41 and 42, title 28, of the third Partida,
nearly identical with the provisions of articles 361 and 362 of the
Civil Code. So, then, pursuant to article 361, the owner of the land on
which a building is erected in good faith has a right to appropriate
such edifice to himself, after payment of the indemnity prescribed in
articles 453 and 454, or to oblige the builder to pay him the value of
the land. Such, and no other, is the right to which the plaintiff are
entitled.
16
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952

For the foregoing reasons, it is only necessary to annul the sale of the
said lot which was made by Ruperta Pascual, in representation of
her minor children, to Cu Joco, and to maintain the latter in the use
of the lot until the plaintiffs shall choose one or the other of the two
rights granted them by article 361 of the Civil Code.1awphil.net

The judgment appealed from is reversed and the sale of the lot in
question is held to be null and void and of no force or effect. No
special finding is made as to the costs of both instances.

Francisco is the owner of land and he allowed his brother, Andres, to

erect a warehouse in that lot. Both Francisco and Andres died and
their children became their respective heirs: Mina for Francisco and
Pascual for Andres. Pascual sold his share of the warehouse and lot.
Mina opposed because the lot is hers because her predecessor
(Francisco) never parted with its ownership when he let Andres
construct a warehouse, hence, it was a contract of commodatum.
What is the nature of the contract between Francisco and Andres?

The Supreme Court held that it was not a commodatum. It is an

essential feature of commodatum that the use of the thing belonging
to another shall be for a certain period. The parties never fixed a
definite period during which Andres could use the lot and
afterwards return it.

17
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
G.R. No. L-46240 November 3, 1939
MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-
appellants,
vs.
BECK, defendant-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
18
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952

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.
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.

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

19
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 review1 of the 21 June 2000 Decision2 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
decision3 of the Regional Trial Court of Quezon City, Branch
81,4 affirming the 15 December 1995 decision5 of the Metropolitan
Trial Court of Quezon City, Branch 31.6
The Antecedents
In June 1979, petitioner Colito T. Pajuyo ("Pajuyo") paid ₱400 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 Pajuyo’s 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 (₱300.00) monthly as reasonable
compensation for the use of the premises starting
from the last demand;
C) pay plaintiff the sum of ₱3,000.00 as and by way
of attorney’s fees; and
D) pay the cost of suit.
20
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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
Resolution9 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 Resolution10 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 Guevara’s 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 Guevarra’s petition for review because it was filed out of
time. Moreover, it was Guevarra’s counsel and not Guevarra who
signed the certification against forum-shopping.
On 14 December 2000, the Court of Appeals issued a resolution
denying Pajuyo’s 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
21
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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, Guevarra’s refusal to vacate the house on Pajuyo’s demand
made Guevarra’s 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 Guevarra’s 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 Guevarra’s 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 commodatum because 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 Pajuyo’s motion for reconsideration, the appellate court
debunked Pajuyo’s claim that Guevarra filed his motion for
extension beyond the period to appeal.
The Court of Appeals pointed out that Guevarra’s motion for
extension filed before the Supreme Court was stamped "13
December 1996 at 4:09 PM" by the Supreme Court’s Receiving Clerk.
The Court of Appeals concluded that the motion for extension bore a
date, contrary to Pajuyo’s 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.
22
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
The Court of Appeals rejected Pajuyo’s argument that the appellate
court should have dismissed the petition for review because it was
Guevarra’s 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
Respondent’s 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 respondent’s 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 Guevarra’s petition for review because the RTC decision
had already become final and executory when the appellate court
acted on Guevarra’s 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.
23
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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.15These 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 Guevarra’s 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. Guevarra’s 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 squatter’s 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.20The 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 Liboro’sclarification
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 Guevarra’s 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
24
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 Court’s 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
Guevarra’s 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 Guevarra’s favor that Pajuyo raised the
procedural issues against Guevarra’s 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 court’s jurisdiction after
voluntarily submitting to it is against public policy.26
In his Comment before the Court of Appeals, Pajuyo also failed to
discuss Guevarra’s failure to sign the certification against forum
shopping. Instead, Pajuyo harped on Guevarra’s counsel signing the
verification, claiming that the counsel’s verification is insufficient
since it is based only on "mere information."
A party’s failure to sign the certification against forum shopping is
different from the party’s 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 party’s 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 defendant’s 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
25
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 party’s 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.41Whatever 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 Pitargue44 as squatters, strictly speaking, their entry into the
disputed land was illegal. Both the plaintiff and defendant entered
26
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
the public land without the owner’s 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
27
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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
28
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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 Code48 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.
29
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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
Guevarra’s 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 Guevarra’s
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 Pajuyo’s 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:
30
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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, sila’y 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 Pajuyo’s demand but Guevarra broke his
promise and refused to heed Pajuyo’s 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 former’s 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 defendant’s 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 Pajuyo’s 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.
Guevarra’s refusal to comply with Pajuyo’s demand to vacate made
Guevarra’s 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
tenant’s 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
31
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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
Guevarra’s recognition of Pajuyo’s 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
Pajuyo’s withdrawal of his permission to Guevarra terminated
the Kasunduan. Guevarra’s 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 Pajuyo’s 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.
Pajuyo’s 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 one’s 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
32
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
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.
Attorney’s Fees and Rentals
The MTC and RTC failed to justify the award of ₱3,000 attorney’s
fees to Pajuyo. Attorney’s fees as part of damages are awarded only
in the instances enumerated in Article 2208 of the Civil Code. 83 Thus,
the award of attorney’s fees is the exception rather than the
rule.84 Attorney’s 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 attorney’s fees awarded to
Pajuyo.
We sustain the ₱300 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 ₱300 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 REINSTATEDwith MODIFICATION. The award of attorney’s
fees is deleted. No costs.
SO ORDERED.
33
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952

Facts: different from a commodatum. The effects of the Kasunduan are also
Pajuyo entrusted a house to Guevara for the latter's use provided he different from that of a commodatum. Case law on ejectment has
should return the same upon demand and with the condition that treated relationship based on tolerance as one that is akin to a
Guevara should be responsible of the maintenance of the property. landlord-tenant relationship where the withdrawal of permission
Upon demand Guevara refused to return the property to Pajuyo. The would result in the termination of the lease. The tenant’s
petitioner then filed an ejectment case against Guevara with the withholding of the property would then be unlawful.
MTC who ruled in favor of the petitioner. On appeal with the CA,
the appellate court reversed the judgment of the lower court on the
ground that both parties are illegal settlers on the property thus have
no legal right so that the Court should leave the present situation
with respect to possession of the property as it is, and ruling further
that the contractual relationship of Pajuyo and Guevara was that of a
commodatum.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a

commodatum?

Held:
No. The Court of Appeals’ theory that the Kasunduan is one of
commodatum is devoid of merit. 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. 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. 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. If the bailor should have urgent need of
the thing, he may demand its return for temporary use. 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. Under the Civil Code, precarium is a kind of
commodatum. 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

34
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
G.R. No. L-46145 November 26, 1986
REPUBLIC OF THE PHILIPPINES (BUREAU OF
LANDS), petitioner,
vs.
THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P.
BALOY, represented by RICARDO BALOY, ET AL., respondents.
PARAS, J.:p
This case originally emanated from a decision of the then Court of
First Instance of Zambales in LRC Case No. 11-0, LRC Record No. N-
29355, denying respondents' application for registration. From said
order of denial the applicants, heirs of Domingo Baloy, represented
by Ricardo P. Baloy, (herein private respondents) interposed on
appeal to the Court of Appeals which was docketed as CA-G.R. No.
52039-R. The appellate court, thru its Fifth Division with the Hon.
Justice Magno Gatmaitan as ponente, rendered a decision dated
February 3, 1977 reversing the decision appealed from and thus
approving the application for registration. Oppositors (petitioners
herein) filed their Motion for Reconsideration alleging among other
things that applicants' possessory information title can no longer be
invoked and that they were not able to prove a registerable title over
the land. Said Motion for Reconsideration was denied, hence this
petition for review on certiorari.
Applicants' claim is anchored on their possessory information title
(Exhibit F which had been translated in Exhibit F-1) coupled with
their continuous, adverse and public possession over the land in
question. An examination of the possessory information title shows
that the description and the area of the land stated therein
substantially coincides with the land applied for and that said
possessory information title had been regularly issued having been
acquired by applicants' predecessor, Domingo Baloy, under the
provisions of the Spanish Mortgage Law. Applicants presented their
tax declaration on said lands on April 8, 1965.
The Director of Lands opposed the registration alleging that this
land had become public land thru the operation of Act 627 of the
Philippine Commission. On November 26, 1902 pursuant to the
executive order of the President of the U.S., the area was declared
within the U.S. Naval Reservation. Under Act 627 as amended by
Act 1138, a period was fixed within which persons affected thereby
could file their application, (that is within 6 months from July 8,
1905) otherwise "the said lands or interest therein will be
conclusively adjudged to be public lands and all claims on the part
of private individuals for such lands or interests therein not to
presented will be forever barred." Petitioner argues that since
Domingo Baloy failed to file his claim within the prescribed period,
the land had become irrevocably public and could not be the subject
of a valid registration for private ownership.
Considering the foregoing facts respondents Court of Appeals ruled
as follows:
... perhaps, the consequence was that upon failure of
Domingo Baloy to have filed his application within
that period the land had become irrevocably public;
but perhaps also, for the reason that warning was
from the Clerk of the Court of Land Registration,
named J.R. Wilson and there has not been presented
a formal order or decision of the said Court of Land
Registration so declaring the land public because of
that failure, it can with plausibility be said that after
all, there was no judicial declaration to that effect, it
is true that the U.S. Navy did occupy it apparently
for some time, as a recreation area, as this Court
understands from the communication of the
Department of Foreign Affairs to the U.S. Embassy
exhibited in the record, but the very tenor of the
communication apparently seeks to justify the title
of herein applicants, in other words, what this Court
has taken from the occupation by the U.S. Navy is
that during the interim, the title of applicants was in
35
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
a state of suspended animation so to speak but it
had not died either; and the fact being that this land
was really originally private from and after the
issuance and inscription of the possessory
information Exh. F during the Spanish times, it
would be most difficult to sustain position of
Director of Lands that it was land of no private
owner; open to public disposition, and over which
he has control; and since immediately after U.S.
Navy had abandoned the area, applicant came in
and asserted title once again, only to be troubled by
first Crispiniano Blanco who however in due time,
quitclaimed in favor of applicants, and then by
private oppositors now, apparently originally
tenants of Blanco, but that entry of private
oppositors sought to be given color of ownership
when they sought to and did file tax declaration in
1965, should not prejudice the original rights of
applicants thru their possessory information secured
regularly so long ago, the conclusion must have to
be that after all, applicants had succeeded in
bringing themselves within the provisions of Sec. 19
of Act 496, the land should be registered in their
favor;
IN VIEW WHEREOF, this Court is constrained to
reverse, as it now reverses, judgment appealed from
the application is approved, and once this decision
shall have become final, if ever it would be, let
decree issue in favor of applicants with the personal
circumstances outlined in the application, costs
against private oppositors.
Petitioner now comes to Us with the following:
ASSIGNMENT OF ERRORS:
1. Respondent court erred in holding that to bar
private respondents from asserting any right under
their possessory information title there is need for a
court order to that effect.
2. Respondent court erred in not holding that private
respondents' rights by virtue of their possessory
information title was lost by prescription.
3. Respondent court erred in concluding that
applicants have registerable title.
A cursory reading of Sec. 3, Act 627 reveals that several steps are to
be followed before any affected land can "be conclusively adjudged to
be public land." Sec. 3, Act 627 reads as follows:
SEC. 3. Immediately upon receipt of the notice from
the civil Governor in the preceeding section
mentioned it shall be the duty of the judge of the
Court of Land Registration to issue a notice, stating
that the lands within the limits aforesaid have been
reserved for military purposes, and announced and
declared to be military reservations, and that claims
for all private lands, buildings, and interests therein,
within the limits aforesaid, must be presented for
registration under the Land Registration Act within
six calendar months from the date of issuing the
notice, and that all lands, buildings, and interests
therein within the limits aforesaid not so presented
within the time therein limited will be conclusively
adjudged to be public lands and all claims on the
part of private individuals for such lands, buildings,
or an interest therein not so presented will be
forever barred. The clerk of the Court of Land
Registration shall immediately upon the issuing of
such notice by the judge cause the same to be
36
II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952
published once a week for three successive weeks in
two newspapers, one of which newspapers shall be
in the English Language, and one in the Spanish
language in the city or province where the land lies,
if there be no such Spanish or English newspapers
having a general circulation in the city or province
wherein the land lies, then it shall be a sufficient
compliance with this section if the notice be
published as herein provided, in a daily newspaper
in the Spanish language and one in the English
language, in the City of Manila, having a general
circulation. The clerk shall also cause a duly attested
copy of the notice in the Spanish language to be
posted in conspicuous place at each angle formed by
the lines of the limits of the land reserved. The clerk
shall also issue and cause to be personally served the
notice in the Spanish language upon every person
living upon or in visible possession of any part of
the military reservation. If the person in possession
is the head of the family living upon the hand, it
shall be sufficient to serve the notice upon him, and
if he is absent it shall be sufficient to leave a copy at
his usual place of residence. The clerk shall certify
the manner in which the notices have been
published, posted, and served, and his certificate
shall be conclusive proof of such publication,
posting, and service, but the court shall have the
power to cause such further notice to be given as in
its opinion may be necessary.
Clearly under said provisions, private land could be deemed to have
become public land only by virtue of a judicial declaration after due
notice and hearing. It runs contrary therefore to the contention of
petitioners that failure to present claims set forth under Sec. 2 of Act
627 made the land ipso facto public without any deed of judicial
pronouncement. Petitioner in making such declaration relied on Sec.
4 of Act 627 alone. But in construing a statute the entire provisions of
the law must be considered in order to establish the correct
interpretation as intended by the law-making body. Act 627 by its
terms is not self-executory and requires implementation by the Court
of Land Registration. Act 627, to the extent that it creates a forfeiture,
is a penal statute in derogation of private rights, so it must be strictly
construed so as to safeguard private respondents' rights.
Significantly, petitioner does not even allege the existence of any
judgment of the Land Registration court with respect to the land in
question. Without a judgment or order declaring the land to be
public, its private character and the possessory information title over
it must be respected. Since no such order has been rendered by the
Land Registration Court it necessarily follows that it never became
public land thru the operation of Act 627. To assume otherwise is to
deprive private respondents of their property without due process of
law. In fact it can be presumed that the notice required by law to be
given by publication and by personal service did not include the
name of Domingo Baloy and the subject land, and hence he and his
lane were never brought within the operation of Act 627 as
amended. The procedure laid down in Sec. 3 is a requirement of due
process. "Due process requires that the statutes which under it is
attempted to deprive a citizen of private property without or against
his consent must, as in expropriation cases, be strictly complied with,
because such statutes are in derogation of general rights." (Arriete vs.
Director of Public Works, 58 Phil. 507, 508, 511).
We also find with favor private respondents' views that court
judgments are not to be presumed. It would be absurd to speak of a
judgment by presumption. If it could be contended that such a
judgment may be presumed, it could equally be contended that
applicants' predecessor Domingo Baloy presumably seasonably filed
a claim, in accordance with the legal presumption that a person takes
ordinary care of his concerns, and that a judgment in his favor was
rendered.
The finding of respondent court that during the interim of 57 years
from November 26, 1902 to December 17, 1959 (when the U.S. Navy
possessed the area) the possessory rights of Baloy or heirs were
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II. Loan – Articles 1935 to 1961
A. Commodatum – Articles 1935 to 1952

merely suspended and not lost by prescription, is supported by

Exhibit "U," a communication or letter No. 1108-63, dated June 24,
1963, which contains an official statement of the position of the
Republic of the Philippines with regard to the status of the land in
question. Said letter recognizes the fact that Domingo Baloy and/or
his heirs have been in continuous possession of said land since 1894
as attested by an "Informacion Possessoria" Title, which was granted
by the Spanish Government. Hence, the disputed property is private
land and this possession was interrupted only by the occupation of
the land by the U.S. Navy in 1945 for recreational purposes. The U.S.
Navy eventually abandoned the premises. The heirs of the late
Domingo P. Baloy, are now in actual possession, and this has been so
since the abandonment by the U.S. Navy. A new recreation area is
now being used by the U.S. Navy personnel and this place is remote
from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept of
owner. It partakes of the character of a commodatum. It cannot
therefore militate against the title of Domingo Baloy and his
successors-in-interest. One's ownership of a thing may be lost by
prescription by reason of another's possession if such possession be
under claim of ownership, not where the possession is only intended
to be transient, as in the case of the U.S. Navy's occupation of the
land concerned, in which case the owner is not divested of his title,
although it cannot be exercised in the meantime.

WHEREFORE, premises considered, finding no merit in the petition

the appealed decision is hereby AFFIRMED.

SO ORDERED.

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