Book: Comments and Cases on Credit Transactions by de Leon
- Republic v. Bagtas, G.R. No. L-17474, October 25, 1962
Read: Personal Property Security Act
I. LOAN (General Provisions, Articles 1933-1934)
A. Commodatum (Articles 1935-1952)
FEBRUARY 1 2020
Republic v. Bagtas, G.R. No. L-17474, October 25, 1962 - Yodh
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.
D. T. Reyes, Liaison and Associates for petitioner-appellant.
Office of the Solicitor General for plaintiff-appellee.
PADILLA, J.:
SUMMARY: Bagtas borrowed 3 bulls from the Republic. Each of the three
bulls had an appraised book value. Furthermore, Bagtas was made to
pay a breeding fee of 10% of such book value.
The contract was for a period of 1 year from May 8, 1948 until May 7,
1949. After the expiration of the period, Bagtas sought to renew the
contract for a period of another year, but the republic only allowed for the
contract as regards to only 2 out of the 3 bulls.
The loan of the one bull was renewed for another period of one year to end
on 8 May 1950. However, on November 1953, the bull died due to being
hit by stray bullets from a Huk raid that occurred in the barrio where the bull
was kept.
Later on, the Republic demanded for the payment of the value of the
deceased bull.
Bagtas contends that the contract is one of commodatum, where the
ownership of the thing loaned retains to the owner (The Republic) and
since the death of the bull was due to a fortuitous event, the Republic is the
one who suffers the loss.
Issue: WON Bagtas is liable to the Republic for the payment of the Bull
(i.e., WON the Contract was Commodatum)
Held: Bagtas is liable but since he is dead, the money claim against
him should be presented at the probate court.
The contract was not a commodatum but a lease, considering that a
Commodatum is essentially a gratuitous contract, there should be no
compensation by the bailee to the bailor. In this case, Bagtas was made to
pay 10% of the book value of the bulls.
A contract of commodatum is essentially gratuitous. If the breeding fee
be considered 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 expiration of the contract.
And even if the contract be commodatum, still Bagtas is liable under Article
1942 which provides that the Bailee shall be liable for the loss of the things
2) If he keeps it longer than the period stipulated
FACTS: Jose V. Bagtas borrowed from the Republic 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
- Republic v. Court of Appeals, G.R. No. L-46145, November 26,
1986
- Pajuyo vs. Court of Appeals, G.R. No. 146364, June 03, 2004
- Quintos v. Beck, G.R. No. 46240, November 3, 1939
- De los Santos v. Jarra, G.R. No. 4150, February 10, 1910
- Manzano v. Perez, G.R. No. 112485, August 9, 2001
- Producers Bank of the Philippines v. Court of Appeals, G.R. No.
115324, February 19, 2003
government charge of breeding fee of 10% of the book value of the
bulls.
Upon the expiration on 7 May 1949 of the contract, Bagtas 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).
Jose V. Bagtas 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.
RTC: Sentenced Bagtas 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 Republic 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 and as administratrix of his estate, was notified.
On 7 January 1959 she filed a motion alleging that on 26 June 1952 the
two bull Sindhi and Bhagnari were returned to the Bureau Animal of
Industry and that sometime in November 1958 the third bull, the
Sahiniwal, died from gunshot wound inflicted during a Huk raid on
Hacienda Felicidad Intal, and praying that the writ of execution be
quashed and that a writ of preliminary injunction be issued. On 31 January
1959 the plaintiff objected to her motion. On 6 February 1959 she filed a
reply thereto. On the same day, 6 February, the Court denied her motion.
Hence, this appeal certified by the Court of Appeals to this Court as stated
at the beginning of this opinion.
It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant
by the late defendant, returned the Sindhi and Bhagnari bulls to Roman
Remorin, Superintendent of the NVB Station, Bureau of Animal Industry,
Bayombong, Nueva Vizcaya, as evidenced by a memorandum receipt
signed by the latter. 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.
CONTENTION OF PETITIONER: The Sahiniwal bull was accidentally
killed during a raid by the Huk 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.
ISSUE: WON Bagtas is liable to pay for the value of the Bull, its death due
to force majeure
HELD: YES. But the money judgment rendered in favor of the
Republic 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.
The loan by the Republic 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 Republic retained ownership or title to the bull it
should suffer its loss due to force majeure.
CONTRACT OF COMMODATUM IS ESSENTIALLY GRATUITOUS
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, 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
Republic v. Court of Appeals, G.R. No. L-46145, November 26, 1986 -
Mona
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.
Summary: Applicants' claim is anchored on their possessory information
title. 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. Pursuant to the executive order of the President of the U.S.,
the area was declared within the U.S. Naval Reservation. 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.
ISSUE: WON  the claim was lost by prescription by possession of the US
Navy of the area - NO
RULING: Private land could be deemed to have become public land only
by virtue of a judicial declaration after due notice and hearing. 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.
During the interim of 57 years from November 26, 1902 to December 17,
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.
ON THE DEATH OF BAGTAS (PARTIALLY IMPORTANT)
The appellant's contention that the demand or prayer by the appellee for the return of
the bull or the payment of its value being a money claim should be presented or filed
in the intestate proceedings of the defendant who died on 23 October 1951, is not
altogether without merit. However, the claim that his civil personality having ceased to
exist the trial court lost jurisdiction over the case against him, is untenable, because
section 17 of Rule 3 of the Rules of Court provides that —
After a party dies and the claim is not thereby extinguished, the court shall order,
upon proper notice, the legal representative of the deceased to appear and to be
substituted for the deceased, within a period of thirty (30) days, or within such time as
may be granted. . . .
and after the defendant's death on 23 October 1951 his counsel failed to comply with
section 16 of Rule 3 which provides that —
Whenever a party to a pending case dies . . . it shall be the duty of his
attorney to inform the court promptly of such death . . . and to give the
name and residence of the executory administrator, guardian, or other
legal representative of the deceased . . . .
The notice by the probate court and its publication in the Voz de Manila that Felicidad
M. Bagtas had been issue letters of administration of the estate of the late Jose
Bagtas and that "all persons having claims for monopoly against the deceased Jose
V. Bagtas, arising from contract express or implied, whether the same be due, not
due, or contingent, for funeral expenses and expenses of the last sickness of the said
decedent, and judgment for monopoly against him, to file said claims with the Clerk of
this Court at the City Hall Bldg., Highway 54, Quezon City, within six (6) months from
the date of the first publication of this order, serving a copy thereof upon the
aforementioned Felicidad M. Bagtas, the appointed administratrix of the estate of the
said deceased," is not a notice to the court and the appellee who were to be notified
of the defendant's death in accordance with the above-quoted rule, and there was no
reason for such failure to notify, because the attorney who appeared for the
defendant was the same who represented the administratrix in the special
proceedings instituted for the administration and settlement of his estate. The
appellee or its attorney or representative could not be expected to know of the death
of the defendant or of the administration proceedings of his estate instituted in
another court that if the attorney for the deceased defendant did not notify the plaintiff
or its attorney of such death as required by the rule.
As the appellant already had returned the two bulls to the appellee, the estate of
the late defendant is only liable for the sum of P859.63, the value of the bull which
has not been returned to the appellee, because it was killed while in the custody of
the administratrix of his estate. This is the amount prayed for by the appellee in its
objection on 31 January 1959 to the motion filed on 7 January 1959 by the appellant
for the quashing of the writ of execution.
Special proceedings for the administration and settlement of the estate of the
deceased Jose V. Bagtas having been instituted in the Court of First Instance of
Rizal (Q-200), the money judgment rendered in favor of the appellee cannot be
enforced by means of a writ of execution but must be presented to the probate
court for payment by the appellant, the administratrix appointed by the court.
1959 (when the U.S. Navy possessed the area) the possessory rights of
Baloy or heirs were merely suspended and not lost by prescription. 
This possession was interrupted only by the occupation of the land by the
U.S. Navy in 1945 for recreational purposes. 
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.
FACTS:
Applicants' claim is anchored on their possessory information title
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.
CFI: of Zambales in LRC Case No. 11-0, LRC Record No. N-29355,
denied respondents' application for registration.  possession of any part of the military reservation. If the person in
CA: 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 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 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.
ISSUE: WON the claim was lost by prescription by possession of the US
Navy of the area - NO
RULING: WHEREFORE, premises considered, finding no merit in the
petition the appealed decision is hereby AFFIRMED. SO ORDERED.
RATIO:
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 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 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).
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
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.

 
Pajuyo vs. Court of Appeals, G.R. No. 146364, June 03, 2004 - Jess safekeeping, or contracts of commission, administration
G.R. No. 146364. June 3, 2004. * and commodatum.  These contracts certainly involve the obligation to
70

COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and deliver or return the thing received.
71

EDDIE GUEVARRA, respondents.

Petition for review of CA decision & resolution which set aside RTC decision affirming
the MTC decision
Ponente: Carpio, J.
Note: daming procedural issues pero nilagay ko na lang ung related sa topic natin
(see last part of digest na lang for unrelated topicxzzz)
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.

Summary:
- Petitioner Pajuyo paid P400 to Pedro Perez for the rights over a 250-
square meter lot in Barrio Payatas, QC. Pajuyo then constructed a house
made of light materials on the lot. Pajuyo & his family lived in the house
rom 1979 to Dec 7 1985.
- On Dec 8 1985, Pajuyo and private respondent Guevarra executed a
Kasunduan/ agreement (Pajuyo, as owner of house, allowed Guevarra to
live in the house for free provided Guevarra would maintain the cleanliness
and orderliness of house. Guevarra promised that he would voluntarily
vacate the premises on Pajuyo’s demand). In Sept 1994, Pajuyo informed
Guevarra of his need of the house & demanded Guevarra vacate the
house. Guevarra refused. Pajuyo filed an ejectment case.
The Kasunduan reads:
Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay
nagbibigay pahintulot kay G. Eddie Guevarra, na pansamantalang manirahan sa
nasabing bahay at lote ng “walang bayad.” Kaugnay nito, kailangang panatilihin nila
ang kalinisan at kaayusan ng bahay at lote.
Sa sandaling kailangan na namin ang bahay at lote, sila’y kusang aalis ng
walang reklamo.
MTC – Pajuyo is the owner of the house; decided in favor of Pajuyo
RTC – Upheld the Kasunduan which established the landlord & tenant
relationship between Pajuyo & Guevarra, The terms of Kasunduan bound
Guevarra to return possession of house on demand.
CA – Kasunduan is not a lease contract but a commodatum because the
agreement is not for a price certain
Issue: WON the Kasunduan is one in fact a commodatum (No)
SC: Petition granted; Reversed & set aside CA decision

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 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.  The 69

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 contracts for
FACTS:
- In June 1979, petitioner Colito T. Pajuyo (“Pajuyo”) paid P400 to a
certain Pedro Perez for the rights over a 250-square meter lot in
Barrio Payatas, Quezon City. Pajuyo then constructed a house made of
light materials on the lot. Pajuyo and his family lived in the house from
1979 to 7 December 1985.
- On 8 December 1985, Pajuyo and private respondent Eddie Guevarra
(“Guevarra”) executed a Kasunduan or agreement.
- Pajuyo, as owner of the house, allowed Guevarra to live in the
house for free provided Guevarra would maintain the cleanliness
and orderliness of the house.
- Guevarra promised that he would voluntarily vacate the premises
on 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:
- Pajuyo filed an ejectment case against Guevarra with the”MTC”
Guevarra:
- 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.
MTC: Rendered decision in favor of Pajuyo
Guevarra appealed to RTC
RTC: Affirmed MTC
- Guevarra received the RTC decision on 29 Nov 1996.
- Guevarra had only until 14 Dec 1996 to file his appeal with the CA.
- Instead of filing his appeal with the CA, Guevarra filed with the SC 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 SC received the motion for
extension on 13 Dec 1996/ 1 day before the right to appeal expired.
- On 3 Jan 1997, Guevarra filed his petition for review with the SC
First Division SC:
- On 8 January 1997, issued a Resolution  referring the motion for
9
extension to the CA, which has concurrent jurisdiction over the case. The
case presented no special and important matter for the SC to take
cognizance of at the first instance.
Thirteenth Division of CA:
- On 28 January 1997, issued a Resolution  granting the motion for
10
extension conditioned on the timeliness of the filing of the motion.
- On 27 February 1997, the CA ordered Pajuyo to comment on Guevara’s
petition for review.
- On 11 April 1997, Pajuyo filed his Comment.
CA: June 21 2000, reversed RTC [ejectment case without factual & legal
basis]
- Pajuyo filed MR of the decision. Pajuyo pointed out that CA 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.
CA: Denied Pajuyo’s MR
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 PN 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/ physical possession, not ownership.
The Ruling of the CA:
- The CA 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 CA 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 CA 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 PN 137.
- President Corazon C. Aquino (“President Aquino”) issued PN 137 on 7
Sept 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 CA concluded that Guevarra is
first in the hierarchy of priority.
- In denying Pajuyo’s MR, the appellate court debunked Pajuyo’s claim that Guevarra
filed his motion for extension beyond the period to appeal.
The CA pointed out that Guevarra’s motion for extension filed before the SC was
stamped “13 December 1996 at 4:09 PM” by the SC’s Receiving Clerk. The CA
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 CA in its 28 January 1997 Resolution. The
CA explained that the 30 day extension to file the petition for review was deemed
granted because of such compliance.
- The CA 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 CA pointed out that Pajuyo did
not raise this issue in his Comment. The CA 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.
ISSUES:
Related to our topic:
WON the CA erred in ruling that the Kasunduan voluntarily entered into by
the parties was in fact a commodatum (Yes)
Other issues:
WHETHER THE CA ERRED/ 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. (No)
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. (No)
3. 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. (Yes)
4. 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 (Yes)
HELD: Petition granted; CA decision set aside; RTC affirming MTC
decision is reinstated with modification
The procedural issues Pajuyo is raising are baseless. However, we find merit in the substantive
issues Pajuyo is submitting for resolution.
WHEREFORE, we GRANT the petition. The Decision dated 21 June 2000 and Resolution dated 14
December 2000 of the CA in CA-G.R. SP No. 43129 are SET ASIDE. The Decision dated 11
November 1996 of the RTC of Quezon City, Branch 81 in Civil Case No. Q-96-26943, affirming the
Decision dated 15 December 1995 of the Metropolitan Trial Court of Quezon City, Branch 31 in Civil
Case No. 12432, is REINSTATED with MODIFICATION. The award of attorney’s fees is deleted. No
costs
RULING:
We do not subscribe to the CA’s 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.  If the bailor should have urgent
65
need of the thing, he may demand its return for temporary use.  If the use66
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
67
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.  The
69
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 contracts for
safekeeping, or contracts of commission, administration
and commodatum.  These contracts certainly involve the obligation to
70
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:
- 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.
SC: 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
Forcible entry Unlawful detainer
The plaintiff is deprived of physical The defendant unlawfully withholds
possession of his land or building by possession after the expiration or
means of force, intimidation, threat, termination of his right to possess under
strategy or stealth. Thus, he must allege any contract, express or implied. In such
and prove prior possession 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
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:
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
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.  The defendant’s
60
refusal to comply with the demand makes his continued possession of the property
unlawful.  The status of the defendant in such a case is similar to that of a lessee or
61
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.
[Not related to topic]
Procedural Issues
- Decisions of the regional trial courts in the exercise of their appellate jurisdiction are
appealable to the Court of Appeals by petition for review in cases involving questions of fact
or mixed questions of fact and law. 14 Decisions of the regional trial courts involving pure
questions of law are appealable directly to this Court by petition for review. 15 These modes of
appeal are now embodied in Section 2, Rule 41 of the 1997 Rules of Civil Procedure.
- 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 extension if filed on time. The motion for extension met this
condition.
- 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
- 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.
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.
- Clearly, the application of the principle of pari delicto to a case of ejectment between
squatters is fraught with danger. To shut out relief to squatters on the ground of  pari
delicto would openly invite mayhem and lawlessness. A squatter would oust another
squatter from possession of the lot that the latter had illegally occupied, emboldened by the
knowledge that the courts would leave them where they are. Nothing would then stand in the
way of the ousted squatter from re-claiming his prior possession at all cost.
- Petty warfare over possession of properties is precisely what ejectment cases or actions
for recovery of possession seek to prevent. 53 Even the owner who has title over the disputed
property cannot take the law into his own hands to regain possession of his property. The
owner must go to court.
- Courts must resolve the issue of possession even if the parties to the ejectment suit are
squatters. The determination of priority and superiority of possession is a serious and urgent
matter that cannot be left to the squatters to decide. To do so would make squatters receive
better treatment under the law. The law restrains property owners from taking the law into
their own hands. However, the principle of pari delicto as applied by the Court of Appeals
would give squatters free rein to dispossess fellow squatters or violently retake possession
of properties usurped from them. Courts should not leave squatters to their own devices in
cases involving recovery of possession.
Possession is the only Issue for Resolution in an Ejectment Case
- The case for review before the CA 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.
1. Guevarra did not present evidence to show that the contested lot is part of a
relocation site under PN 137. PN 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 PN 137. Guevarra
had the burden to prove that the disputed lot is within the coverage of PN 137.
He failed to do so.
2. The CA should not have given credence to Guevarra’s unsubstantiated claim
that he is the beneficiary of PN 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 PN 137.”54 Pajuyo allowed Guevarra to occupy the disputed property
in 1985. President Aquino signed PN 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 PN 137 allegedly segregated the disputed lot, Guevarra never applied as
beneficiary of PN. 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 PN 135
3. Even assuming that the disputed lot is within the coverage of PN 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.
- The CA’s determination of Pajuyo and Guevarra’s rights under PN 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
Ruling on Possession Does not Bind Title to the Land in Dispute
We are aware of our pronouncement in cases where we declared that “squatters and
intruders who clandestinely enter into titled government property cannot, by such act,
acquire any legal right to said property.” 80 We made this declaration because the person who
had title or who had the right to legal possession over the disputed property was a party in
the ejectment suit and that party instituted the case against squatters or usurpers.
- In this case, the owner of the land, which is the government, is not a party to the
ejectment case. This case is between squatters. Had the government participated in
this case, the courts could have evicted the contending squatters, Pajuyo and
Guevarra.
- Since the party that has title or a better right over the property is not impleaded in
this case, we cannot evict on our own the parties. Such a ruling would discourage
squatters from seeking the aid of the courts in settling the issue of physical possession.
Stripping both the plaintiff and the defendant of possession just because they are squatters
would have the same dangerous implications as the application of the principle of pari
delicto. Squatters would then rather settle the issue of physical possession among
themselves than seek relief from the courts if the plaintiff and defendant in the ejectment
case would both stand to lose possession of the disputed property. This would subvert the
policy underlying actions for recovery of possession.
- Since Pajuyo has in his favor priority in time in holding the property, he is entitled to
remain on the property until a person who has title or a better right lawfully ejects
him. Guevarra is certainly not that person. The ruling in this case, however, does not
preclude Pajuyo and Guevarra from introducing evidence and presenting arguments
before the proper administrative agency to establish any right to which they may be
entitled under the law.81
-
In no way should our ruling in this case be interpreted to condone squatting. The ruling on
the issue of physical possession does not affect title to the property nor constitute a binding
and conclusive adjudication on the merits on the issue of ownership. 82 The owner can still go
to court to recover lawfully the property from the person who holds the property without legal
title. Our ruling here does not diminish the power of government agencies, including
local governments, to condemn, abate, remove or demolish illegal or unauthorized
structures in accordance with existing laws.
Attorney’s Fees and Rentals
The MTC and RTC failed to justify the award of P3,000 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 P300 monthly rentals the MTC and RTC assessed against Guevarra.
Guevarra did not dispute this factual finding of the 2 courts. We find the amount reasonable
compensation to Pajuyo. The P300 monthly rental is counted from the last demand to
vacate, which was on 16 February 1995.
. 
Quintos v. Beck, G.R. No. 46240, November 3, 1939 - Alvin
G.R. No. L-46240. November 3, 1939
MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants, vs. BECK,
defendant-appellee.
Mauricio Carlos for appellants. Felipe Buencamino, Jr. for appellee.
Summary: Beck was a tenant of Margarita. Upon the novation of the
contract of lease between Margarita and the Beck, the former gratuitously
granted to the latter the use of her furniture in the leased property, subject
to the condition that Beck would return them to Margarita and Angel upon
the latter's demand. Margarita sold the property to Maria Lopez and
Rosario Lopez. These 3 notified Beck of the conveyance, giving him 60
days to vacate the premises under one of the clauses of the contract of
lease. Thereafter, Margarita required the defendant to return all the
furniture transferred to him.
 
Beck, through another person, wrote to Margarita reiterating that she may
call for the furniture in the ground floor of the house. He wrote another
letter to the plaintiff informing her that he could not give up the 3 gas
heaters and the 4 electric lamps because he would use them until the
lease in due to expire. The plaintiff refused to get the furniture since the
defendant had declined to make delivery of all of them. 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. Margarita
brought this action to compel the defendant to return her certain furniture
which she lent him for his use. The CFI ordered that the defendant return
to her the gas heaters and electric lamps found in the possession of the
Sheriff, but the fees which the Sheriff may charge for the deposit of the
furniture be paid pro rata by both parties. Margarita and Angela contend
that the CFI incorrectly applied the law: in holding that they violated the
contract by not calling for all the furniture, 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;
 
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. 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. Beck did
not comply with this obligation when he merely placed them at the disposal
of Margarita, retaining for his benefit the 3 gas heaters and 4 electric
lamps. 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 3
gas heaters and 4 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. 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.
Facts:
The plaintiff brought this action to compel the defendant to return her
certain furniture which she lent him for his use. 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.
CFI of Manila: ordered that the defendant return to her the three gas 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.
Hence, this appeal.
 
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.
Issue: WON the defendant complied with his obligation to return the furniture upon
the plaintiff's demand; (NO)
WON the latter is bound to bear the deposit fees thereof, (NO)
WON she is entitled to the costs of litigation. (NO)
 
Held: 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; articles 1740, paragraph 1, and 1741 of the Civil Code).
The obligation voluntarily assumed by the defendant to return the
furniture upon the plaintiff's demand, means that he should return all
of them to the plaintiff at the latter's residence or house. The
defendant did not comply with this obligation when he merely placed
them at the disposal of the plaintiff, retaining for his benefit the three
gas heaters and the four eletric lamps.
 
The provisions of article 1169 of the Civil Code cited by counsel for the parties are not
squarely applicable. The trial court, therefore, erred when it came to the legal
conclusion that the plaintiff failed to comply with her obligation to get the furniture
when they were offered to her.
 
As the defendant had voluntarily undertaken to return all the furniture
to the plaintiff, upon the latter's demand, the Court could not legally
compel her to bear the expenses occasioned by the deposit of the
furniture at the defendant's behest. The latter, as bailee, was not
entitled to place the furniture on deposit; nor was the plaintiff under a
duty to accept the offer to return the furniture, because the defendant
wanted to retain the three gas heaters and the four electric lamps. As
to the value of the furniture, we do not believe that the plaintiff is
entitled to the payment thereof by the defendant in case of his
inability to return some of the furniture because under paragraph 6 of
the stipulation of facts, the defendant has neither agreed to nor
admitted the correctness of the said value. Should the defendant fail
to deliver some of the furniture, the value thereof should be latter
determined by the trial Court through evidence which the parties may
desire to present.
The costs in both instances should be borne by the defendant
because the plaintiff is the prevailing party (section 487 of the Code of
Civil Procedure). The defendant was the one who breached the
contract of commodatum, and without any reason he refused to
return and deliver all the furniture upon the plaintiff's demand. In
these circumstances, it is just and equitable that he pay the legal expenses
and other judicial costs which the plaintiff would not have otherwise
defrayed.
The appealed judgment is modified and the defendant is ordered to return and
deliver to the plaintiff, in the residence to return and deliver to the plaintiff, in
the residence or house of the latter, all the furniture described in paragraph 3 of
the stipulation of facts Exhibit A. The expenses which may be occasioned by the
delivery to and deposit of the furniture with the Sheriff shall be for the account of the
defendant. the defendant shall pay the costs in both instances. So ordered.
De los Santos v. Jarra, G.R. No. 4150, February 10, 1910 - Rina
G.R. No. L-4150             February 10, 1910
FELIX DE LOS SANTOS, plaintiff-appelle,
vs.
AGUSTINA JARRA, administratrix of the estate of Magdaleno
Jimenea, deceased, defendant-appellant.
 
TORRES, J.:
SUMMARY:
Santos: brought suit against Jarra, the administratrix of the estate of
Magdaleno Jimenea, alleging that in the latter part of 1901 Jimenea
borrowed and obtained from him ten first-class carabaos, without
recompense or remuneration, under the sole condition that they should be
returned to Santos as soon as the work at the mill was terminated;
Jimenea did not return the carabaos; Santos presented his claim to the
commissioners of the estate of Jimenea, for the return of the said ten
carabaos, commissioners rejected his claim; therefore, Santos prayed that
judgment be entered against Jarra, ordering her to return the ten first-class
carabaos loaned to Jimenea.
 
Jarra: it was true that Jimenea asked the plaintiff to loan him ten carabaos,
but that he only obtained three second-class animals, which were
afterwards transferred by sale by Santos to Jimenea.
TC: sentenced Jarra to return to Santos, the remaining six second and
third class carabaos.
 
Jarra has admitted that Jimenea asked Santos for the loan of ten
carabaos, as shown by two letters addressed by Jimenea to Santos; but in
her answer she alleged that Jimenea only obtained three second-class
carabaos, which were subsequently sold to him by Santos.
 
Record: it has been fully proven from the testimony of a sufficient number
of witnesses that:
 
·   Santos sent in charge of various persons the ten carabaos
requested by his father-in-law Jimenea, in the two letters
produced at the trial by the plaintiff, and
·   that Jimenea received them in the presence of some of said
persons, one being a brother of Jimenea, who saw the animals
arrive at the hacienda where it was proposed to employ them.
·   Four died of rinderpest, and it is for this reason that the judgment
appealed from only deals with six surviving carabaos.
The alleged purchase of three carabaos by Jimenea from Santos is not
evidenced by any trustworthy documents such as those of transfer, nor
were the declarations of the witnesses presented by the defendant
affirming it satisfactory; for said reason it cannot be considered that
Jimenea only received three carabaos on loan from his son-in-law, and that
he afterwards kept them definitely by virtue of the purchase.
 
ISSUE: W/N the contracts is a commodatum (YES)
 
HELD:
 
The transfer of large cattle was and is still made by means of official
documents issued by the local authorities; these documents constitute the
title of ownership of the carabao or horse so acquired. Furthermore, not
only should the purchaser be provided with a new certificate or credential,
a document which has not been produced by the defendant, nor has the
loss of the same been shown in the case, but the old documents ought to
be on file in the municipality, or they should have been delivered to the new
purchaser, and in the case at bar neither did the defendant present the old
credential on which should be stated the name of the previous owner of
each of the three carabaos said to have been sold by the plaintiff.
 
From the foregoing it may be logically inferred that the carabaos
loaned or given on commodatum to Jimenea were ten in number; that
they, or at any rate the six surviving ones, have not been returned to
the owner thereof, Santos, and that it is not true that the latter sold to
the former three carabaos that the purchaser was already using;
therefore, as the said six carabaos were not the property of the deceased
nor of any of his descendants, it is the duty of the administratrix of the
estate to return them or indemnify the owner for their value.
 
The Civil Code, in dealing with loans in general, establishes prescriptions
in relation to the last-mentioned contract by the following articles:
 
ART. 1740. 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 a
certain period and return it to the former, in which case it is called
commodatum, or money or any other perishable thing, under the condition
to return an equal amount of the same kind and quality, in which case it is
merely called a loan. Commodatum is essentially gratuitous. A simple loan
may be gratuitous, or made under a stipulation to pay interest.
ART. 1741. The bailee acquires retains the ownership of the thing loaned.
The bailee acquires the use thereof, but not its fruits; if any compensation
is involved, to be paid by the person requiring the use, the agreement
ceases to be a commodatum.
 
ART. 1742. The obligations and rights which arise from the commodatum
pass to the heirs of both contracting parties, unless the loan has been in
consideration for the person of the bailee, in which case his heirs shall not
have the right to continue using the thing loaned.
 
The carabaos delivered to be used not being returned by the defendant
upon demand, there is no doubt that she is under obligation to indemnify
the owner thereof by paying him their value.
 
Article 1101: Those who in fulfilling their obligations are guilty of fraud,
negligence, or delay, and those who in any manner whatsoever act in
contravention of the stipulations of the same, shall be subjected to
indemnify for the losses and damages caused thereby.
 
Supreme tribunal of Spain: Although it is true that in a contract of
commodatum the bailor retains the ownership of the thing loaned, and at
the expiration of the period, or after the use for which it was loaned has
been accomplished, it is the imperative duty of the bailee to return the
thing itself to its owner, or to pay him damages if through the fault of the
bailee the thing should have been lost or injured, it is clear that where
public securities are involved, the trial court, in deferring to the claim of the
bailor that the amount loaned be returned him by the bailee in bonds of the
same class as those which constituted the contract, thereby properly
applies law 9 of title 11 of partida 5.
The refusal of the commissioners before whom the plaintiff unnecessarily
appeared cannot affect nor reduce the unquestionable right of ownership of
the latter, inasmuch as there is no law nor principle of justice authorizing
the successors of the late Jimenea to enrich themselves at the cost and to
the prejudice of Felix de los Santos.
FACTS:
 
Felix de los Santos brought suit against Agustina Jarra, the
administratrix of the estate of Magdaleno Jimenea, alleging that in the
latter part of 1901 Jimenea borrowed and obtained from the plaintiff
ten first-class carabaos, to be used at the animal-power mill of his
hacienda during the season of 1901-2, without recompense or
remuneration whatever for the use thereof, under the sole condition
that they should be returned to the owner as soon as the work at the
mill was terminated; that Jimenea did not return the carabaos,
notwithstanding the fact that the plaintiff claimed their return after the work
at the mill was finished; that Jimenea died on October 28, 1904, and Jarra
was appointed by the CFI of Occidental Negros administratrix of his estate
and she took over the administration of the same and is still performing her
duties as such; that the plaintiff presented his claim to the
commissioners of the estate of Jimenea, within the legal term, for the
return of the said ten carabaos, but the commissioners rejected his
claim; therefore, the plaintiff prayed that judgment be entered against
Jarra, ordering her to return the ten first-class carabaos loaned to the late
Jimenea, or their present value, and to pay the costs.
 
Jarra said that it was true that Jimenea asked the plaintiff to loan him
ten carabaos, but that he only obtained three second-class animals,
which were afterwards transferred by sale by the plaintiff to Jimenea; that
she denied the allegations contained in paragraph 3 of the complaint; for all
of which she asked the court to absolve her of the complaint with the cost
against the plaintiff.
 
Atty. Jose Felix Martinez notified the defendant and her counsel that he
had made an agreement with the plaintiff to the effect that the latter would
not compromise the controversy without his consent, and that as fees for
his professional services he was to receive ½ of the amount allowed in the
judgment if the same were entered in favor of the plaintiff.
 
TC: sentenced Agustina Jarra to return to the plaintiff, Felix de los Santos,
the remaining six second and third class carabaos, or the value thereof at
the rate of P120 each, or a total of P720 with the costs.
 
Counsel for the defendant moved for a new trial on the ground that the
findings of fact were openly and manifestly contrary to the weight of the
evidence. The motion was overruled, the defendant duly excepted, and in
due course submitted the corresponding bill of exceptions, which was
approved and submitted to this court.
Jarra has admitted that Jimenea asked the plaintiff for the loan of ten
carabaos which are now claimed by the latter, as shown by two letters
addressed by the said Jimenea to de los Santos; but in her answer she
alleged that Jimenea only obtained three second-class carabaos,
which were subsequently sold to him by Santos; therefore, in order to
decide this litigation it is indispensable that proof be forthcoming that
Jimenea only received three carabaos from his son-in-law Santos, and that
they were sold by the latter to him.
 
Record: it has been fully proven from the testimony of a sufficient number
of witnesses that:
 
·   Santos, sent in charge of various persons the ten carabaos
requested by his father-in-law Jimenea, in the two letters
produced at the trial by the plaintiff, and
·   that Jimenea received them in the presence of some of said
persons, one being a brother of Jimenea, who saw the animals
arrive at the hacienda where it was proposed to employ them.
·   Four died of rinderpest, and it is for this reason that the judgment
appealed from only deals with six surviving carabaos.
 
The alleged purchase of three carabaos by Jimenea from Santos is
not evidenced by any trustworthy documents such as those of transfer,
nor were the declarations of the witnesses presented by the defendant
affirming it satisfactory; for said reason it cannot be considered that
Jimenea only received three carabaos on loan from his son-in-law, and that
he afterwards kept them definitely by virtue of the purchase.
 
ISSUE: W/N the contracts is a commodatum (YES)
HELD: We do hereby affirm the decision with the costs against the
appellant. So ordered.
 
By the laws in force the transfer of large cattle was and is still made by
means of official documents issued by the local authorities; these
documents constitute the title of ownership of the carabao or horse so
acquired. Furthermore, not only should the purchaser be provided with a
new certificate or credential, a document which has not been produced in
evidence by the defendant, nor has the loss of the same been shown in the
case, but the old documents ought to be on file in the municipality, or they
should have been delivered to the new purchaser, and in the case at bar
neither did the defendant present the old credential on which should be
stated the name of the previous owner of each of the three carabaos said
to have been sold by the plaintiff.
 
From the foregoing it may be logically inferred that the carabaos
loaned or given on commodatum to Jimenea were ten in number; that
they, or at any rate the six surviving ones, have not been returned to
the owner thereof, Santos, and that it is not true that the latter sold to
the former three carabaos that the purchaser was already using;
therefore, as the said six carabaos were not the property of the deceased
nor of any of his descendants, it is the duty of the administratrix of the
estate to return them or indemnify the owner for their value.
 
The Civil Code, in dealing with loans in general, from which generic
denomination the specific one of commodatum is derived, establishes
prescriptions in relation to the last-mentioned contract by the following
articles:
 
ART. 1740. 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 a
certain period and return it to the former, in which case it is called
commodatum, or money or any other perishable thing, under the condition
to return an equal amount of the same kind and quality, in which case it is
merely called a loan.
Commodatum is essentially gratuitous. A simple loan may be gratuitous, or
made under a stipulation to pay interest.
 
ART. 1741. The bailee acquires retains the ownership of the thing loaned.
The bailee acquires the use thereof, but not its fruits; if any compensation
is involved, to be paid by the person requiring the use, the agreement
ceases to be a commodatum.
 
ART. 1742. The obligations and rights which arise from the commodatum
pass to the heirs of both contracting parties, unless the loan has been in
consideration for the person of the bailee, in which case his heirs shall not
have the right to continue using the thing loaned.
 
The carabaos delivered to be used not being returned by the defendant
upon demand, there is no doubt that she is under obligation to indemnify
the owner thereof by paying him their value.
 
Article 1101: Those who in fulfilling their obligations are guilty of fraud,
negligence, or delay, and those who in any manner whatsoever act in
contravention of the stipulations of the same, shall be subjected to
indemnify for the losses and damages caused thereby.
Manzano v. Perez, G.R. No. 112485, August 9, 2001 - Val
G.R. No. 112485   August 9, 2001
EMILIA MANZANO, petitioner, vs. MIGUEL PEREZ SR., LEONCIO
PEREZ, MACARIO PEREZ, FLORENCIO PEREZ, NESTOR PEREZ,
MIGUEL PEREZ JR. and GLORIA PEREZ, respondents.
 PANGANIBAN, J.:
SUMMARY: Emilia Manzano in her Complaint alleged that she is the
owner of a residential house and lot. Nieves Manzano, sister of the
[petitioner] and predecessor-in-interest of the herein [private respondents],
allegedly borrowed the property as collateral for a projected loan. The
petitioner acceded to the request of her sister upon the latter's promise that
she [would] return the property immediately upon payment of her loan.
Emilia executed two deeds of conveyance for the sale of the residential lot
and the sale of the house erected thereon, both for a consideration of
P1.00 plus other valuables. Nieves Manzano, together with her husband,
[respondent] Miguel Perez, Sr., and her son, [respondent] Macario Perez,
obtained a loan from the Rural Bank of Infanta, Inc. in the sum of
P30,000.00. To secure payment of their indebtedness, they executed a
Real Estate Mortgage over the subject property in favor of the bank.
Nieves Manzano died. The heirs, [respondents] herein, allegedly refused to
return the subject property to the Emilia even after the payment of their
loan with the Rural Bank. Emilia sought the annulment of the deeds of sale
and execution of a deed of transfer or reconveyance of the subject property
in her favor. The heirs countered that they are the owners of the property in
question being the legal heirs of Nieves Manzano who purchased the same
from the petitioner for value and in good faith. The heirs argued that what
the parties to the [sale] agreed upon was to resell the property to the
petitioner after the payment of the loan with the Rural Bank. But since the
respondents felt that the property is the only memory left by their
predecessor-in-interest, they politely informed the petitioner of their refusal
to sell the same. TC: ruled in favor of the petitioner. CA: not convinced by
petitioner's claim that there was a supposed oral agreement of
commodatum over the disputed house and lot.
 
W/N the agreement between the parties was a commodatum (NO)
SC: In the case at bar, petitioner has presented no convincing proof of her
continued ownership of the subject property. In addition to her own oral
 
The obligation of the bailee or of his successors to return either the thing
loaned or its value, is sustained by the supreme tribunal of Spain. In its
decision of March 21, 1895, it sets out with precision the legal doctrine
touching commodatum as follows:
 
Although it is true that in a contract of commodatum the bailor
retains the ownership of the thing loaned, and at the expiration
of the period, or after the use for which it was loaned has been
accomplished, it is the imperative duty of the bailee to return the
thing itself to its owner, or to pay him damages if through the
fault of the bailee the thing should have been lost or injured, it is
clear that where public securities are involved, the trial court, in
deferring to the claim of the bailor that the amount loaned be
returned him by the bailee in bonds of the same class as those
which constituted the contract, thereby properly applies law 9 of
title 11 of partida 5.
 
With regard to the third assignment of error, based on the fact that Santos
had not appealed from the decision of the commissioners rejecting his
claim for the recovery of his carabaos, it is sufficient to estate that we are
not dealing with a claim for the payment of a certain sum, the collection of
a debt from the estate, or payment for losses and damages (sec. 119,
Code of Civil Procedure), but with the exclusion from the inventory of the
property of the late Jimenea, or from his capital, of six carabaos which did
not belong to him, and which formed no part of the inheritance.
 
The demand for the exclusion of the said carabaos belonging to a third
party and which did not form part of the property of the deceased, must be
the subject of a direct decision of the court in an ordinary action, wherein
the right of the third party to the property which he seeks to have excluded
from the inheritance and the right of the deceased has been discussed,
and rendered in view of the result of the evidence adduced by the
administrator of the estate and of the claimant, since it is so provided by
the second part of section 699 and by section 703 of the Code of Civil
Procedure; the refusal of the commissioners before whom the plaintiff
unnecessarily appeared cannot affect nor reduce the unquestionable right
of ownership of the latter, inasmuch as there is no law nor principle of
justice authorizing the successors of the late Jimenea to enrich themselves
at the cost and to the prejudice of Felix de los Santos.
 
testimony, she submitted proof of payment of real property taxes. But that
payment, which was made only after her Complaint had already been
lodged before the trial court, cannot be considered in her favor for being
self-serving, as aptly explained by the CA. Neither can we give weight to
her allegation that respondent's possession of the subject property was
merely by virtue of her tolerance. Bare allegations, unsubstantiated by
evidence, are not equivalent to proof under our Rules.13
 
On the other hand, respondents presented two Deeds of Sale, which
petitioner executed in favor of the former's predecessor-in-interest. Both
Deeds - for the residential lot and for the house erected thereon - were
each in consideration of P1.00 "plus other valuables." Having been
notarized, they are presumed to have been duly executed. Also, issued in
favor of respondents' predecessor-in-interest the day after the sale was
Tax Declaration No. 9589, which covered the property.
 
The facts alleged by petitioner in her favor are the following: (1) she
inherited the subject house and lot from her parents, with her siblings
waiving in her favor their claim over the same; (2) the property was
mortgaged to secure a loan of P30,000 taken in the names of Nieves
Manzano Perez and Respondent Miguel Perez; (3) upon full payment of
the loan, the documents pertaining to the house and lot were returned by
Respondent Florencio Perez to petitioner; (4) three of the respondents
were signatories to a document transferring one half of the property to
Emilia Manzano in consideration of the sum of ten thousand pesos,
although the transfer did not materialize because of the refusal of the other
respondents to sign the document; and (5) petitioner hacked the stairs of
the subject house, yet no case was filed against her. 
 
These matters are not, however, convincing indicators of petitioner's
ownership of the house and lot. On the contrary, they even support the
claim of respondents. Indeed, how could one of them have obtained a
mortgage over the property, without having dominion over it? Why would
they execute a reconveyance of one half of it in favor of petitioner? Why
would the latter have to pay P10,000 for that portion if, as she claims, she
owns the whole?
Pitted against respondents' evidence, that of petitioner awfully pales. Oral
testimony cannot, as a rule, prevail over a written agreement of the
parties.14 In order to contradict the facts contained in a notarial document,
such as the two "Kasulatan ng Bilihang Tuluyan" in this case, as well as
the presumption of regularity in the execution thereof, there must be clear
and convincing evidence that is more than merely preponderant. 15 Here,
petitioner has failed to come up with even a preponderance of evidence to
prove her claim.
The evidence offered by petitioner to prove her claim is sadly lacking.
Jurisprudence on the subject matter, when applied thereto, points to the
existence of a sale, not a commodatum over the subject house and lot.
 
FACTS: Emilia Manzano in her Complaint alleged that she is the
owner of a residential house and lot, more particularly described
hereunder:
'A parcel of residential lot (Lots 1725 and 1726 of the
Cadastral Survey of Siniloan), together with all the
improvements thereon, situated at General Luna
Street, Siniloan, Laguna. Bounded on the North by
Callejon; on the East, by [a] town river; on the South
by Constancia Adofina; and on the West by Gen. Luna
Street. Containing an area of 130 square meters more
or less, covered by Tax Dec. No. 9583 and assessed
at P1,330.00.
'A residential house of strong mixed materials and G.I.
iron roofing, with a floor area of 40 square meters,
more or less. Also covered by Tax No. 9583.'
 
In 1979, Nieves Manzano, sister of the [petitioner] and predecessor-in-
interest of the herein [private respondents], allegedly borrowed the
aforementioned property as collateral for a projected loan. The
petitioner acceded to the request of her sister upon the latter's
promise that she [would] return the property immediately upon
payment of her loan.
 
Pursuant to their understanding, the petitioner executed two deeds of
conveyance for the sale of the residential lot on 22 January 1979 and
the sale of the house erected thereon on 2 February 1979, both for a
consideration of P1.00 plus other valuables allegedly received by her
from Nieves Manzano.
 
On 2 April 1979, Nieves Manzano, together with her husband,
[respondent] Miguel Perez, Sr., and her son, [respondent] Macario
Perez, obtained a loan from the Rural Bank of Infanta, Inc. in the sum
of P30,000.00. To secure payment of their indebtedness, they
executed a Real Estate Mortgage over the subject property in favor of
the bank.
 
Nieves Manzano died on 18 December 1979 leaving her husband and
children as heirs. These heirs, [respondents] herein, allegedly refused
to return the subject property to the [petitioner] even after the
payment of their loan with the Rural Bank.
The petitioner alleged that sincere efforts to settle the dispute
amicably failed and that the unwarranted refusal of the respondents to
return the property caused her sleepless nights, mental shock and social
humiliation. She was, likewise, allegedly constrained to engage the
services of a counsel to protect her proprietary rights.
 
The petitioner sought the annulment of the deeds of sale and
execution of a deed of transfer or reconveyance of the subject
property in her favor, the award of moral damages of not less than
P50,000.00, exemplary damages of P10,000.00, attorney's fees of
P10,000.00 plus P500.00 per court appearance, and costs of suit.
 
CONTENTION OF RESPONDENTS: In seeking the dismissal of the
complaint, the respondents countered that they are the owners of the
property in question being the legal heirs of Nieves Manzano who
purchased the same from the petitioner for value and in good faith, as
shown by the deeds of sale which contain the true agreements between
the parties therein; that except for the petitioner's bare allegations, she
failed to show any proof that the transaction she entered into with her sister
was a loan and not a sale. By way of special and affirmative defense, the
respondents argued that what the parties to the [sale] agreed upon
was to resell the property to the petitioner after the payment of the
loan with the Rural Bank. But since the respondents felt that the
property is the only memory left by their predecessor-in-interest, they
politely informed the petitioner of their refusal to sell the same. The
[respondents] also argued that the petitioner is now estopped from
questioning their ownership after seven (7) years from the consummation
of the sale.
 
As a proximate result of the filing of this alleged baseless and malicious
suit, the respondents prayed as counterclaim the award of moral damages
in the amount of P10,000.00 each, exemplary damages in an amount as
may be warranted by the evidence on record, attorney's fees of P10,000.00
plus P500.00 per appearance in court and costs of suit.
TC: ruled in favor of the petitioner
'First, the properties in question after [they have] been transferred to
Nieves Manzano, the same were mortgaged in favor of the Rural Bank of Infante, Inc.
(Exh. 'A') to secure payment of the loan extended to Macario Perez.'
'Second, the documents covering said properties which were given to the
bank as collateral of said loan, upon payment and [release] to the [private
respondents], were returned to [petitioner] by Florencio Perez, one of the [private
respondents].'
'[These] uncontroverted facts [are] a clear recognition [by private respondents] that
[petitioner] is the owner of the properties in question.'
'Third, [respondents'] pretense of ownership of the properties in question
is belied by their failure to present payment of real estate taxes [for] said properties,
and it is on [record] that [petitioner] has been paying the real estate taxes [on] the
same (Exh. 'T', 'V', 'V-1', 'V-2' & 'V- 3')."
'Fourth, [respondents] confirmed the fact that [petitioner] went to the
house in question and hacked the stairs. According to [petitioner] she did it for failure
of the [respondents] to return and vacate the premises. [Respondents] did not file any
action against her.'
'This is a clear indication also that they (respondents) recognized [petitioner] as owner
of said properties.'
'Fifth, the Cadastral Notice of said properties were in the name of
[petitioner] and the same was sent to her (Exh. 'F' & 'G').
'Sixth, upon request of the [petitioner] to return said properties to her,
[respondents] did promise and prepare an Extra Judicial Partition with Sale over said
properties in question, however the same did not materialize. The other heirs of
Nieves Manzano did not sign."
'Seventh, uncontroverted is the fact that the consideration [for] the alleged
sale of the properties in question is P1.00 and other things of value. [Petitioner] denies
she has received any consideration for the transfer of said properties, and the
[respondents] have not presented evidence to belie her testimony." 6
 
 
CA: not convinced by petitioner's claim that there was a supposed
oral agreement of commodatum over the disputed house and lot.
Neither was it persuaded by her allegation that respondents' predecessor-
in-interest had given no consideration for the sale of the property in the
latter's favor. It explained as follows:
"To begin with, if the plaintiff-appellee remained as the rightful owner of the subject
property, she would not have agreed to reacquire one-half thereof for a consideration
of P10,000.00 (Exhibit 'U-1'). This is especially true if we are to accept her assertion
that Nieves Manzano did not purchase the property for value. More importantly, if the
agreement was to merely use plaintiff's property as collateral in a mortgage loan, it
was not explained why physical possession of the house and lot had to be with the
supposed vendee and her family who even built a pigpen on the lot (p. 6, TSN, June
11, 1990). A mere execution of the document transferring title in the latter's name
would suffice for the purpose.
"The alleged failure of the defendants-appellants to present evidence of payment of
real estate taxes cannot prejudice their cause. Realty tax payment of property is not
conclusive evidence of ownership (Director of Lands vs. Intermediate Appellate Court,
195 SCRA 38). Tax receipts only become strong evidence of ownership when
accompanied by proof of actual possession of the property (Tabuena vs. Court of
Appeals, 196 SCRA 650).
"In this case, plaintiff-appell[ee] was not in possession of the subject property. The
defendant-appellants were the ones in actual occupation of the house and lot which
as aforestated was unnecessary if the real agreement was merely to lend the property
to be used as collateral. Moreover, the plaintiff-appellee began paying her taxes only
in 1986 after the instant complaint ha[d] been instituted (Exhibits 'V', 'V-1', 'V-2', 'V-3'
and 'T'), and are, therefore, self-serving.
"Significantly, while plaintiff-appellee was still the owner of the subject property in
1979 (Exhibit 'I'), the Certificate of Tax Declaration issued by the Office of the
Municipal Treasurer on 8 August 1990 upon the request of the plaintiff-appellee
herself (Exhibit 'W') named Nieves Manzano as the owner and possessor of the
property in question. Moreover, Tax Declaration No. 9589 in the name of Nieves
Manzano (Exhibits 'D' and 'D-1 ') indicates that the transfer of the subject property was
based on the Absolute Sale executed before Notary Public Alfonso Sanvictores, duly
recorded in his notarial book as Document No. 3157, Page 157, Book No. II. Tax
Declaration No[s]. 9633 (Exhibit 'H'), 1994 (Exhibit 'P'), 1993 (Exhibit 'Q') are all in the
name of Nieves Manzano.
"There is always the presumption that a written contract [is] for a valuable
consideration (Section 5 (r), Rule 131 of the Rules of Court; Gamaitan vs. Court of
Appeals, 200 SCRA 37). The execution of a deed purporting to convey ownership of a
realty is in itself prima facie evidence of the existence of a valuable consideration and
xxx the party alleging lack of consideration has the burden of proving such allegation
(Caballero, et al. vs. Caballero, et al., C.A. 45 O.G. 2536).
"The consideration [for] the questioned [sale] is not the One (P1.00) Peso alone but
also the other valuable considerations. Assuming that such consideration is
suspiciously insufficient, this circumstance alone, is not sufficient to invalidate the sale.
The inadequacy of the monetary consideration does not render a conveyance null and
void, for the vendor's liberality may be a sufficient cause for a valid contract (Ong vs.
Ong, 139 SCRA 133)." 7
 
ISSUE: W/N the agreement between the parties was a commodatum (NO)
 
RULING: WHEREFORE, the Petition is hereby DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
 
RATIO: The Petition has no merit.
Obviously, the issue in this case is enveloped by a conflict in factual
perception, which is ordinarily not reviewable in a petition under Rule 45.
But the Court is constrained to resolve it, because the factual findings of
the Court of Appeals are contrary to those of the trial court.
11
 
Preliminarily, petitioner contends that the CA erred in rejecting the
introduction of her parol evidence. A reading of the assailed Decision
shows, however, that an elaborate discussion of the parol evidence rule
and its exceptions was merely given as a preface by the appellate court.
Nowhere therein did it consider petitioner's evidence as improper under the
said rule. On the contrary, it considered and weighed each and every piece
thereof. Nonetheless, it was not persuaded, as explained in the multitude
of reasons explicitly stated in its Decision.
 
This Court finds no cogent reason to disturb the findings and conclusions
of the Court of Appeals. Upon close examination of the records, we find
that petitioner has failed to discharge her burden of proving her case by a
preponderance of evidence. This concept refers to evidence that has
greater weight or is more convincing than that which is offered in
opposition; at bottom, it means probability of truth.
12
 
In the case at bar, petitioner has presented no convincing proof of her
continued ownership of the subject property. In addition to her own
oral testimony, she submitted proof of payment of real property
taxes. But that payment, which was made only after her Complaint
had already been lodged before the trial court, cannot be considered
in her favor for being self-serving, as aptly explained by the CA.
Neither can we give weight to her allegation that respondent's
possession of the subject property was merely by virtue of her
tolerance. Bare allegations, unsubstantiated by evidence, are not
equivalent to proof under our Rules.13
 
On the other hand, respondents presented two Deeds of Sale, which
petitioner executed in favor of the former's predecessor-in-interest.
Both Deeds - for the residential lot and for the house erected thereon
- were each in consideration of P1.00 "plus other valuables." Having
been notarized, they are presumed to have been duly executed. Also,
issued in favor of respondents' predecessor-in-interest the day after
the sale was Tax Declaration No. 9589, which covered the property.
Producers Bank of the Philippines v. Court of Appeals, G.R. No. 115324,
February 19, 2003 – PIA
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.
SUMMARY: Franklin Vives was asked by his friend Angeles Sanchez to
help her friend Arturo Doronilla in incorporating his business, Sterela
Marketing and Services, specifically by depositing the amount of P200,000
in the bank account of Sterela with the assurance that he may withdraw the
money in 30 days. Vives, relying on such assurance, issued a check in the
said amount in favor of Sterela and then instructed his wife to accompany
Doronilla and Sanchez in opening a savings account in the name of Sterela
in the Makati branch of Producers Bank Philippines. However, only
Sanchez, Mrs. Vives and Dumagpi, Doronilla’s secretary, went to the bank
to deposit the check, with only Doronilla’s authorization letter. Vives
learned that Sterela was no longer holding office in the address given to
him and went to the bank to verify if their money was still intact. Mr. Rufo
Atienza, the assistant manager, informed them that part of the money had
been withdrawn by Doronilla, and that only ₱90,000 remained and that
such amount cannot be withdrawn because it had to answer for some post-
dated checks issued by Doronilla. Vives got in contact with Doronilla who
issued a postdated check for ₱212,000 in favor of Vives. However, upon
presentment to the drawee bank, the check was dishonored. Several
similar checks were afterwards issued but were all dishonored. Vives
instituted an action for recovery of sum of money in the RTC in Pasig which
ruled in his favor, ordering them to pay back the P200,000 and other
damages. CA affirmed the decision in toto. For the current petition,
Producers Bank argues that transaction between Vives and Doronilla is a
simple loan (mutuum) since all the elements of a mutuum are present: first,
what was delivered to Doronilla was money, a consumable thing; second,
the transaction was onerous as Doronilla was obliged to pay interest. Vives
contended that such transaction was not a mutuum but an accommodation
since he did not actually part with the ownership of his ₱200,000.
ISSUE: WON the transaction between Vives and Doronilla was one of
simple loan (mutuum)  without consideration, as a favor to his good friend Sanchez. It was
 
The facts alleged by petitioner in her favor are the following: (1) she
inherited the subject house and lot from her parents, with her siblings
waiving in her favor their claim over the same; (2) the property was
mortgaged to secure a loan of P30,000 taken in the names of Nieves
Manzano Perez and Respondent Miguel Perez; (3) upon full payment of the
loan, the documents pertaining to the house and lot were returned by
Respondent Florencio Perez to petitioner; (4) three of the respondents
were signatories to a document transferring one half of the property to
Emilia Manzano in consideration of the sum of ten thousand pesos,
although the transfer did not materialize because of the refusal of the
other respondents to sign the document; and (5) petitioner hacked the
stairs of the subject house, yet no case was filed against her. 
 
These matters are not, however, convincing indicators of petitioner's
ownership of the house and lot. On the contrary, they even support the
claim of respondents. Indeed, how could one of them have obtained a
mortgage over the property, without having dominion over it? Why would
they execute a reconveyance of one half of it in favor of petitioner? Why
would the latter have to pay P10,000 for that portion if, as she claims, she
owns the whole?
Pitted against respondents' evidence, that of petitioner awfully pales. Oral
testimony cannot, as a rule, prevail over a written agreement of the
parties.14 In order to contradict the facts contained in a notarial document,
such as the two "Kasulatan ng Bilihang Tuluyan" in this case, as well as
the presumption of regularity in the execution thereof, there must be clear
and convincing evidence that is more than merely preponderant. 15 Here,
petitioner has failed to come up with even a preponderance of evidence to
prove her claim.
 
Courts are not blessed with the ability to read what goes on in the minds of
people. That is why parties to a case are given all the opportunity to present
evidence to help the courts decide on who are telling the truth and who are
lying, who are entitled to their claim and who are not. The Supreme Court
cannot depart from these guidelines and decide on the basis of compassion
alone because, aside from being contrary to the rule of law and our judicial
system, this course of action would ultimately lead to anarchy.
 
We reiterate, the evidence offered by petitioner to prove her claim is sadly
lacking. Jurisprudence on the subject matter, when applied thereto, points
to the existence of a sale, not a commodatum over the subject house and
lot.
The SC held that the transaction between them was a commodatum.
Article 1933 of the Civil Code distinguishes between the two kinds of loans
in this wise:
By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the
same for a certain time and return it, in which case the contract
is called a commodatum; or money or other consumable thing,
upon the condition that the same amount of the same kind and
quality shall be paid, in which case the contract is simply called a
loan or mutuum. Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay
interest.
In commodatum, the bailor retains the ownership of the thing
loaned, while in simple loan, ownership passes to the borrower.
The foregoing provision seems to imply that if the subject of the contract is
a consumable thing, such as money, the contract would be a mutuum.
However, there are some instances where a commodatum may have for its
object a consumable thing. Article 1936 of the Civil Code provides:
Consumable goods may be the subject of commodatum if the
purpose of the contract is not the consumption of the object, as
when it is merely for exhibition.
Thus, if consumable goods are loaned only for purposes of exhibition, or
when the intention of the parties is to lend consumable goods and to have
the very same goods returned at the end of the period agreed upon, the
loan is a commodatum and not a mutuum. The rule is that the intention of
the parties thereto shall be accorded primordial consideration in
determining the actual character of a contract. In case of doubt, the
contemporaneous and subsequent acts of the parties shall be considered
in such determination. As correctly pointed out by both the Court of
Appeals and the trial court, the evidence shows that Vives 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 30
days. Vives merely "accommodated" Doronilla by lending his money
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 30 days. Doronilla’s attempts to return to private
respondent the amount of ₱200,000 which the latter deposited in Sterela’s
account together with an additional ₱12,000, 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 "the bailee in commodatum acquires the use of the thing loaned but
not its fruits." Hence, it was only proper for Doronilla to remit to Vives the
interest accruing to the latter’s money deposited with petitioner.
FACTS: Sometime in 1979, Franklin Vives was asked by his neighbor
and friend Angeles Sanchez to help her friend, Col. Arturo Doronilla,
in incorporating his business, the Sterela Marketing and Services.
Specifically, Sanchez asked Vives to deposit in a bank a certain
amount of money in the bank account of Sterela for purposes of its
incorporation. She assured him that he could withdraw his money
from said account within a month’s time. Vives asked Sanchez to bring
Doronilla to their house so that they could discuss Sanchez’s request.
On May 9, 1979, Vives, 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, Vives issued a check in the amount of ₱200,000 in
favor of Sterela. Vives instructed his wife 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.
Subsequently, Vives 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 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.
Vives 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 ₱212,000 in favor of Vives.
However, upon presentment to the drawee bank, the check was
dishonored. Doronilla requested private respondent to present the same
check on September 15, 1979 but when the latter presented the check, it
was again dishonored. Vives 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 but the check was again
dishonored for insufficiency of funds.
Vives instituted an action for recovery of sum of money in the RTC in
Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner.
He also filed criminal actions against Doronilla, Sanchez and Dumagpi in
the RTC. However, Sanchez passed away while the case was pending
before the trial court.  RATIO: A circumspect examination of the records reveals that the
RTC: ruled in favor of vives, ordering Arturo J. Doronila, Estrella
Dumagpi and Producers Bank of the Philippines to pay Vives 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;
₱50,000 for moral damages and a similar amount for exemplary damages;
₱40,000.00 for attorney’s fees; and costs of the suit.
CA: affirmed in toto the decision of the RTC. It likewise denied with finality
petitioner’s motion for reconsideration.
PRODUCERS BANK: transaction between Vives and Doronilla is a
simple loan (mutuum) since all the elements of a mutuum are
present: 
first, what was delivered to Doronilla was money, a consumable
thing;
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 was
deposited in Sterela’s bank account.
Moreover, the fact that Vives 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, it cannot be held
liable for the return of ₱200,000 because it is not privy to the transaction
between the latter and Doronilla. 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 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. Petitioner points out
that no evidence other than the testimonies of Vives and his wife was
presented during trial to prove that he deposited his ₱200,000 in Sterela’s
account for purposes of its incorporation. Hence, petitioner should not be
held liable for allowing Doronilla to withdraw from Sterela’s savings
account.
Petitioner also asserts that the Court of Appeals erred in affirming the trial
court’s decision since the findings of fact were not in accord with the
evidence presented by petitioner during trial to prove that the transaction
between Vives and Doronilla was a mutuum, and that it committed no
wrong in allowing Doronilla to withdraw from Sterela’s savings account.
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 Vives, and neither
may it be held liable for moral/exemplary damages as well as attorney’s
fees.
VIVES: the transaction between him and Doronilla is not a mutuum
but an accommodation, since he did not actually part with the
ownership of his ₱200,000 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. He likewise asserts that the trial court did not err in finding that
petitioner is liable for the return of his money. He insists that Atienza,
petitioner’s assistant manager, connived with Doronilla in defrauding him
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.
ISSUE: WON the transaction between Vives and Doronilla was one of
simple loan (mutuum) 
HELD: NO. WHEREFORE, the petition is hereby DENIED. The assailed
Decision and Resolution of the Court of Appeals are AFFIRMED.
transaction between them was a commodatum. Article 1933 of the Civil
Code distinguishes between the two kinds of loans in this wise:
By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the
same for a certain time and return it, in which case the contract
is called a commodatum; or money or other consumable thing,
upon the condition that the same amount of the same kind and
 quality shall be paid, in which case the contract is simply called a
loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to
pay interest.
In commodatum, the bailor retains the ownership of
the thing loaned, while in simple loan, ownership
passes to the borrower.
The foregoing provision seems to imply that if the subject of the contract is
a consumable thing, such as money, the contract would be a mutuum.
However, there are some instances where a commodatum may have
for its object a consumable thing. Article 1936 of the Civil Code
provides:
Consumable goods may be the subject of commodatum if the
purpose of the contract is not the consumption of the object, as
when it is merely for exhibition.
Thus, if consumable goods are loaned only for purposes of
exhibition, or when the intention of the parties is to lend consumable
goods and to have the very same goods returned at the end of the
period agreed upon, the loan is a commodatum and not a mutuum.
The rule is that the intention of the parties thereto shall be accorded
primordial consideration in determining the actual character of a
contract. In case of doubt, the contemporaneous and subsequent acts of
the parties shall be considered in such determination.
As correctly pointed out by both the Court of Appeals and the trial court,
the evidence shows that Vives 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 30 days. Vives
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 30 days.
Doronilla’s attempts to return to private respondent the amount of
₱200,000 which the latter deposited in Sterela’s account together with
an additional ₱12,000, 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 "the
bailee in commodatum acquires the use of the thing loaned but not its
fruits." Hence, it was only proper for Doronilla to remit to Vives 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 Vives’ money because it was not privy to
the transaction between Doronilla and Vives The nature of said transaction,
that is, whether it is a mutuum or a commodatum, has no bearing on the
question of the liability for the return of Vives’ money because the factual
circumstances of the case clearly show that petitioner, through its
employee Mr. Atienza, was partly responsible for the loss of the 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."
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:
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 branch of the 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 procedures.
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 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, as "per coordination with Mr. Rufo
Atienza. This is a clear manifestation that the other defendants had been in
consultation with Atienza from the inception of the scheme. Significantly,
there were testimonies and admission that Atienza is the brother-in-law of
a certain Romeo Mirasol, a friend and business associate of Doronilla.
Then there is the matter of the ownership of the fund. Because of the
"coordination" between Doronilla and Atienza, the latter knew beforehand
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, 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). 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 circumstances 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 "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 is not hard to comprehend.
Clearly Atienza had committed wrongful acts that had resulted in the loss
subject of this case. 

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. 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.

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 interests
even though in the process, Atienza violated some of petitioner’s
rules such as those stipulated in its savings account passbook. 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 Vives’ 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.