COMODATUM

Producer’s Bank of the Philippines v. CA, GR 115324, 19 Feb 2003

This is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated June
25, 1991 in CA-G.R. CV No. 11791 and of its Resolution 2 dated May 5, 1994, denying the
motion for reconsideration of said decision filed by petitioner Producers Bank of the
Philippines.

Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend
Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in incorporating his
business, the Sterela Marketing and Services ("Sterela" for brevity). Specifically, Sanchez asked
private respondent to deposit in a bank a certain amount of money in the bank account of
Sterela for purposes of its incorporation. She assured private respondent that he could
withdraw his money from said account within a month’s time. Private respondent asked
Sanchez to bring Doronilla to their house so that they could discuss Sanchez’s request. 3

On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi,
Doronilla’s private secretary, met and discussed the matter. Thereafter, relying on the
assurances and representations of Sanchez and Doronilla, private respondent issued a check in
the amount of Two Hundred Thousand Pesos (P200,000.00) in favor of Sterela. Private
respondent instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in
opening a savings account in the name of Sterela in the Buendia, Makati branch of Producers
Bank of the Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to
deposit the check. They had with them an authorization letter from Doronilla authorizing
Sanchez and her companions, "in coordination with Mr. Rufo Atienza," to open an account for
Sterela Marketing Services in the amount of P200,000.00. In opening the account, the
authorized signatories were Inocencia Vives and/or Angeles Sanchez. A passbook for Savings
Account No. 10-1567 was thereafter issued to Mrs. Vives. 4

Subsequently, private respondent learned that Sterela was no longer holding office in the
address previously given to him. Alarmed, he and his wife went to the Bank to verify if their
money was still intact. The bank manager referred them to Mr. Rufo Atienza, the assistant
manager, who informed them that part of the money in Savings Account No. 10-1567 had been
withdrawn by Doronilla, and that only P90,000.00 remained therein. He likewise told them that
Mrs. Vives could not withdraw said remaining amount because it had to answer for some
postdated checks issued by Doronilla. According to Atienza, after Mrs. Vives and Sanchez
opened Savings Account No. 10-1567, Doronilla opened Current Account No. 10-0320 for
Sterela and authorized the Bank to debit Savings; Account No. 10-1567 for the amounts
necessary to cover overdrawings in Current Account No. 10-0320. In opening said current
account, Sterela, through Doronilla, obtained a loan of P175,000.00 from the Bank. To cover
payment thereof, Doronilla issued three postdated checks, all of which were dishonored.
Atienza also said that Doronilla could assign or withdraw the money in Savings Account No. 10-
1567 because he was the sole proprietor of Sterela. 5
Private respondent tried to get in touch with Doronilla through Sanchez. On June 29, 1979, he
received a letter from Doronilla, assuring him that his money was intact and would be returned
to him. On August 13, 1979, Doronilla issued a postdated check for Two Hundred Twelve
Thousand Pesos (P212,000.00) in favor of private Respondent. However, upon presentment
thereof by private respondent to the drawee bank, the check was dishonored. Doronilla
requested private respondent to present the same check on September 15, 1979 but when the
latter presented the check, it was again dishonored. 6

Private respondent referred the matter to a lawyer, who made a written demand upon
Doronilla for the return of his client’s money. Doronilla issued another check for P212,000.00 in
private respondent’s favor but the check was again dishonored for insufficiency of funds. 7

Private respondent instituted an action for recovery of sum of money in the Regional Trial Court
(RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was
docketed as Civil Case No. 44485. He also filed criminal actions against Doronilla, Sanchez and
Dumagpi in the RTC. However, Sanchez passed away on March 16, 1985 while the case was
pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157, promulgated
its Decision in Civil Case No. 44485, the dispositive portion of which reads:chanrob1es virtual
1aw library

IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J.

Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin Vives
jointly and severally —

(a) the amount of P200,000.00, representing the money deposited, with interest at the legal
rate from the filing of the complaint until the same is fully paid;

(b) the sum of P50,000.00 for moral damages and a similar amount for exemplary damages;

(c) the amount of P40,000.00 for attorney’s fees; and

(d) the costs of the suit.

SO ORDERED. 8

Petitioner appealed the trial court’s decision to the Court of Appeals. In its Decision dated June
25, 1991, the appellate court affirmed in toto the decision of the RTC 9 It likewise denied with
finality petitioner’s motion for reconsideration in its Resolution dated May 5, 1994. 10

On June 30, 1994, petitioner filed the present petition, arguing that —

I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTION
BETWEEN THE DEFENDANT DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN
AND NOT ACCOMMODATION;

II.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONER’S BANK

MANAGER, MR. RUFO ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING
PETITIONER (Sic. Should be PRIVATE RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER
SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;

III.

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE
REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT APPEALED FROM, AS THE FINDINGS
OF THE REGIONAL TRIAL COURT WERE BASED ON A MISAPPREHENSION OF FACTS;

IV.

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN
SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYER FOR
ACTS COMMITTED BY AN EMPLOYEE IS APPLICABLE;

V.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE LOWER
COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER
DEFENDANTS FOR THE AMOUNT OF P200,000.00 REPRESENTING THE SAVINGS ACCOUNT
DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARY DAMAGES,
P40,000.00 FOR ATTORNEY’S FEES AND THE COSTS OF SUIT. 11

Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto
on September 25, 1995. The Court then required private respondent to submit a rejoinder to
the reply. However, said rejoinder was filed only on April 21, 1997, due to petitioner’s delay in
furnishing private respondent with copy of the reply 12 and several substitutions of counsel on
the part of private Respondent. 13 On January 17, 2001, the Court resolved to give due course
to the petition and required the parties to submit their respective memoranda. 14 Petitioner
filed its memorandum on April 16, 2001 while private respondent submitted his memorandum
on March 22, 2001.chanrob1es virtua1 1aw 1ibrary
Petitioner contends that the transaction between private respondent and Doronilla is a simple
loan (mutuum) since all the elements of a mutuum are present: first, what was delivered by
private respondent to Doronilla was money, a consumable thing; and second, the transaction
was onerous as Doronilla was obliged to pay interest, as evidenced by the check issued by
Doronilla in the amount of P212,000.00, or P12,000 more than what private respondent
deposited in Sterela’s bank account. 15 Moreover, the fact that private respondent sued his
good friend Sanchez for his failure to recover his money from Doronilla shows that the
transaction was not merely gratuitous but "had a business angle" to it. Hence, petitioner argues
that it cannot be held liable for the return of private respondent’s P200,000.00 because it is not
privy to the transaction between the latter and Doronilla. 16

It argues further that petitioner’s Assistant Manager, Mr. Rufo Atienza, could not be faulted for
allowing Doronilla to withdraw from the savings account of Sterela since the latter was the sole
proprietor of said company. Petitioner asserts that Doronilla’s May 8, 1979 letter addressed to
the bank, authorizing Mrs. Vives and Sanchez to open a savings account for Sterela, did not
contain any authorization for these two to withdraw from said account. Hence, the authority to
withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of
Sterela, and who alone had legal title to the savings account. 17 Petitioner points out that no
evidence other than the testimonies of private respondent and Mrs. Vives was presented
during trial to prove that private respondent deposited his P200,000.00 in Sterela’s account for
purposes of its incorporation. 18 Hence, petitioner should not be held liable for allowing
Doronilla to withdraw from Sterela’s savings account.

Petitioner also asserts that the Court of Appeals erred in affirming the trial court’s decision
since the findings of fact therein were not accord with the evidence presented by petitioner
during trial to prove that the transaction between private respondent and Doronilla was a
mutuum, and that it committed no wrong in allowing Doronilla to withdraw from Sterela’s
savings account. 19

Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not
liable for the actual damages suffered by private respondent, and neither may it be held liable
for moral and exemplary damages as well as attorney’s fees. 20

Private respondent, on the other hand, argues that the transaction between him and Doronilla
is not a mutuum but an accommodation, 21 since he did not actually part with the ownership of
his P200,000.00 and in fact asked his wife to deposit said amount in the account of Sterela so
that a certification can be issued to the effect that Sterela had sufficient funds for purposes of
its incorporation but at the same time, he retained some degree of control over his money
through his wife who was made a signatory to the savings account and in whose possession the
savings account passbook was given. 22

He likewise asserts that the trial court did not err in finding that petitioner, Atienza’s employer,
is liable for the return of his money. He insists that Atienza, petitioner’s assistant manager,
connived with Doronilla in defrauding private respondent since it was Atienza who facilitated
the opening of Sterela’s current account three days after Mrs. Vives and Sanchez opened a
savings account with petitioner for said company, as well as the approval of the authority to
debit Sterela’s savings account to cover any overdrawings in its current account. 23

There is no merit in the petition.

At the outset, it must be emphasized that only questions of law may be raised in a petition for
review filed with this Court. The Court has repeatedly held that it is not its function to analyze
and weigh all over again the evidence presented by the parties during trial. 24 The Court’s
jurisdiction is in principle limited to reviewing errors of law that might have been committed by
the Court of Appeals. 25 Moreover, factual findings of courts, when adopted and confirmed by
the Court of Appeals, are final and conclusive on this Court unless these findings are not
supported by the evidence on record. 26 There is no showing of any misapprehension of facts
on the part of the Court of Appeals in the case at bar that would require this Court to review
and overturn the factual findings of that court, especially since the conclusions of fact of the
Court of Appeals and the trial court are not only consistent but are also amply supported by the
evidence on record.chanrob1es virtua1 1aw 1ibrary

No error was committed by the Court of Appeals when it ruled that the transaction between
private respondent and Doronilla was a commodatum and not a mutuum. A circumspect
examination of the records reveals that the transaction between them was a commodatum.
Article 1933 of the Civil Code distinguishes between the two kinds of loans in this
wise:chanrob1es virtual 1aw library

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:chanrob1es virtual 1aw library
Consumable goods may be the subject of commodatum if the purpose of the contract is not the
consumption of the object, as when it is merely for exhibition.

Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of
the parties is to lend consumable goods and to have the very same goods returned at the end
of the period agreed upon, the loan is a commodatum and not a mutuum.

The rule is that the intention of the parties thereto shall be accorded primordial consideration
in determining the actual character of a contract. 27 In case of doubt, the contemporaneous
and subsequent acts of the parties shall be considered in such determination. 28

As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows
that private respondent agreed to deposit his money in the savings account of Sterela
specifically for the purpose of making it appear "that said firm had sufficient capitalization for
incorporation, with the promise that the amount shall be returned within thirty (30) days. 29
Private respondent merely "accommodated" Doronilla by lending his money without
consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the
transaction that the money would not be removed from Sterela’s savings account and would be
returned to private respondent after thirty (30) days.

Doronilla’s attempts to return to private respondent the amount of P200,000.00 which the
latter deposited in Sterela’s account together with an additional P12,000.00, allegedly
representing interest on the mutuum, did not convert the transaction from a commodatum into
a mutuum because such was not the intent of the parties and because the additional
P12,000.00 corresponds to the fruits of the lending of the P200,000.00. Article 1935 of the Civil
Code expressly states that" [t]he bailee in commodatum acquires the use of the thing loaned
but not its fruits." Hence, it was only proper for Doronilla to remit to private respondent the
interest accruing to the latter’s money deposited with petitioner.

Neither does the Court agree with petitioner’s contention that it is not solidarily liable for the
return of private respondent’s money because it was not privy to the transaction between
Doronilla and private Respondent. The nature of said transaction, that is, whether it is a
mutuum or a commodatum, has no bearing on the question of petitioner’s liability for the
return of private respondent’s money because the factual circumstances of the case clearly
show that petitioner, through its employee Mr. Atienza, was partly responsible for the loss of
private respondent’s money and is liable for its restitution.

Petitioner’s rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of
Sterela for Savings Account No. 10-1567 expressly states that —

"2. Deposits and withdrawals must be made by the depositor personally or upon his written
authority duly authenticated, and neither a deposit nor a withdrawal will be permitted except
upon the production of the depositor savings bank book in which will be entered by the Bank
the amount deposited or withdrawn." 30
Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant
Branch Manager for the Buendia Branch of petitioner, to withdraw therefrom even without
presenting the passbook (which Atienza very well knew was in the possession of Mrs. Vives),
not just once, but several times. Both the Court of Appeals and the trial court found that
Atienza allowed said withdrawals because he was party to Doronilla’s "scheme" of defrauding
private respondent:chanrob1es virtual 1aw library

x x x

But the scheme could not have been executed successfully without the knowledge, help and
cooperation of Rufo Atienza, assistant manager and cashier of the Makati (Buendia) branch of
the defendant bank. Indeed, the evidence indicates that Atienza had not only facilitated the
commission of the fraud but he likewise helped in devising the means by which it can be done
in such manner as to make it appear that the transaction was in accordance with banking
procedure.

To begin with, the deposit was made in defendant’s Buendia branch precisely because Atienza
was a key officer therein. The records show that plaintiff had suggested that the P200,000.00 be
deposited in his bank, the Manila Banking Corporation, but Doronilla and Dumagpi insisted that
it must be in defendant’s branch Makati for "it will be easier for them to get a certification." In
fact before he was introduced to plaintiff, Doronilla had already prepared a letter addressed to
the Buendia branch manager authorizing Angeles B. Sanchez and company to open a savings
account for Sterela in the amount of P200,000.00, as "per coordination with Mr. Rufo Atienza,
Assistant Manager of the Bank . . ." (Exh. 1). This is a clear manifestation that the other
defendants had been in consultation with Atienza from the inception of the scheme.
Significantly, there were testimonies and admission that Atienza is the brother-in-law of a
certain Romeo Mirasol, a friend and business associate of Doronilla.

Then there is the matter of the ownership of the fund. Because of the "coordination" between
Doronilla and Atienza, the latter knew before hand that the money deposited did not belong to
Doronilla nor to Sterela. Aside from such foreknowledge, he was explicitly told by Inocencia
Vives that the money belonged to her and her husband and the deposit was merely to
accommodate Doronilla. Atienza even declared that the money came from Mrs. Vives.

Although the savings account was in the name of Sterela, the bank records disclose that the
only ones empowered to withdraw the same were Inocencia Vives and Angeles B. Sanchez. In
the signature card pertaining to this account (Exh. J), the authorized signatories were Inocencia
Vives &/or Angeles B. Sanchez. Atienza stated that it is the usual banking procedure that
withdrawals of savings deposits could only be made by persons whose authorized signatures
are in the signature cards on file with the bank. He, however, said that this procedure was not
followed here because Sterela was owned by Doronilla. He explained that Doronilla had the full
authority to withdraw by virtue of such ownership. The Court is not inclined to agree with
Atienza. In the first place, he was all the time aware that the money came from Vives and did
not belong to Sterela.. He was also told by Mrs. Vives that they were only accommodating
Doronilla so that a certification can be issued to the effect that Sterela had a deposit of so much
amount to be sued in the incorporation of the firm. In the second place, the signature of
Doronilla was not authorized in so far as that account is concerned inasmuch as he had not
signed the signature card provided by the bank whenever a deposit is opened. In the third
place, neither Mrs. Vives nor Sanchez had given Doronilla the authority to withdraw.

Moreover, the transfer of fund was done without the passbook having been presented. It is an
accepted practice that whenever a withdrawal is made in a savings deposit, the bank requires
the presentation of the passbook. In this case, such recognized practice was dispensed with.
The transfer from the savings account to the current account was without the submission of the
passbook which Atienza had given to Mrs. Vives. Instead, it was made to appear in a
certification signed by Estrella Dumagpi that a duplicate passbook was issued to Sterela
because the original passbook had been surrendered to the Makati Branch in view of a loan
accommodation assigning the savings account (Exh. C). Atienza, who undoubtedly had a hand in
the execution of this certification, was aware that the contents of the same are not true. He
knew that the passbook was in the hands of Mrs. Vives for he was the one who gave it to her.
Besides, as assistant manager of the branch and the bank official servicing the savings and
current accounts in question, he also was aware that the original passbook was never
surrendered. He was also cognizant that Estrella Dumagpi was not among those authorized to
withdraw so her certification had no effect whatsoever.

The circumstance surrounding the opening of the current account also demonstrate that
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 P200,000.00
was deposited. In spite of his disclaimer, the Court believes that Atienza was mindful and
posted regarding the opening of the current account considering that Doronilla was all the
while in "coordination" with him. That it was he who facilitated the approval of the authority to
debit the savings account to cover any overdrawings in the current account (Exh. 2) is not hard
to comprehend.

Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. . .
. 31

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for
damages caused by their employees acting within the scope of their assigned tasks. To hold the
employer liable under this provision, it must be shown that an employer-employee relationship
exists, and that the employee was acting within the scope of his assigned task when the act
complained of was committed 32 Case law in the United States of America has it that a
corporation that entrusts a general duty to its employee is responsible to the injured party for
damages flowing from the employee’s wrongful act done in the course of his general authority,
even though in doing such act, the employee may have failed in its duty to the employer and
disobeyed the latter’s instructions. 33
There is no dispute that Atienza was an employee of petitioner. Furthermore, petitioner did not
deny that Atienza was acting within the scope of his authority as Assistant Branch Manager
when he assisted Doronilla in withdrawing funds from Sterela’s Savings Account No. 10-1567, in
which account private respondent’s money was deposited, and in transferring the money
withdrawn to Sterela’s Current Account with petitioner. Atienza’s acts of helping Doronilla, a
customer of the petitioner, were obviously done in furtherance of petitioner’s interests 34 even
though in the process, Atienza violated some of petitioner’s rules such as those stipulated in its
savings account passbook. 35 It was established that the transfer of funds from Sterela’s
savings account to its current account could not have been accomplished by Doronilla without
the invaluable assistance of Atienza, and that it was their connivance which was the cause of
private respondent’s loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil
Code, petitioner is liable for private respondent’s loss and is solidarily liable with Doronilla and
Dumagpi for the return of the P200,000.00 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.chanrob1es virtua1 1aw
1ibrary

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court
of Appeals are AFFIRMED.

SO ORDERED.

Bellosillo, Mendoza, Quisumbing and Austria-Martinez, JJ., concur.

Pajuyo v. CA, G.R. No. 146364. March 19, 2002

Before us is a Petition for Review 1 of the 21 June 2000 Decision2 and 14 December 2000
Resolution of the Court of Appeals in CA-G.R. SP No. 43129. The Court of Appeals set aside the
11 November 1996 decision3 of the Regional Trial Court of Quezon City, Branch 81,4 affirming
the 15 December 1995 decision5 of the Metropolitan Trial Court of Quezon City, Branch 31.6

The Antecedents

In June 1979, petitioner Colito T. Pajuyo (Pajuyo) paid P400 to a certain Pedro Perez for the
rights over a 250-square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a
house made of light materials on the lot. Pajuyo and his family lived in the house from 1979 to
7 December 1985.
On 8 December 1985, Pajuyo and private respondent Eddie Guevarra (Guevarra) executed a
Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house
for free provided Guevarra would maintain the cleanliness and orderliness of the house.
Guevarra promised that he would voluntarily vacate the premises on Pajuyos demand.

In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that
Guevarra vacate the house.Guevarra refused.

Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon
City, Branch 31 (MTC).

In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot
where the house stands because the lot is within the 150 hectares set aside by Proclamation
No. 137 for socialized housing. Guevarra pointed out that from December 1985 to September
1994, Pajuyo did not show up or communicate with him. Guevarra insisted that neither he nor
Pajuyo has valid title to the lot.

On 15 December 1995, the MTC rendered its decision in favor of Pajuyo. The dispositive portion
of the MTC decision reads:

WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and against
defendant, ordering the latter to:

A) vacate the house and lot occupied by the defendant or any other person or persons claiming
any right under him;

B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00) monthly as reasonable
compensation for the use of the premises starting from the last demand;

C) pay plaintiff the sum of P3,000.00 as and by way of attorneys fees; andcralawlibrary

D) pay the cost of suit.

SO ORDERED.7 ςrνll

Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon City, Branch 81 (RTC).

On 11 November 1996, the RTC affirmed the MTC decision. The dispositive portion of the RTC
decision reads:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHEREFORE, premises considered, the Court finds no reversible error in the decision appealed
from, being in accord with the law and evidence presented, and the same is hereby affirmed en
toto.
SO ORDERED.8 ςrνll

Guevarra received the RTC decision on 29 November 1996. Guevarra had only until 14
December 1996 to file his appeal with the Court of Appeals. Instead of filing his appeal with the
Court of Appeals, Guevarra filed with the Supreme Court a Motion for Extension of Time to File
Appeal by Certiorari Based on Rule 42 (motion for extension). Guevarra theorized that his
appeal raised pure questions of law. The Receiving Clerk of the Supreme Court received the
motion for extension on 13 December 1996 or one day before the right to appeal expired.

On 3 January 1997, Guevarra filed his Petition for Review with the Supreme Court.

On 8 January 1997, the First Division of the Supreme Court issued a Resolution9 referring the
motion for extension to the Court of Appeals which has concurrent jurisdiction over the case.
The case presented no special and important matter for the Supreme Court to take cognizance
of at the first instance.

On 28 January 1997, the Thirteenth Division of the Court of Appeals issued a Resolution10
granting the motion for extension conditioned on the timeliness of the filing of the motion.

On 27 February 1997, the Court of Appeals ordered Pajuyo to comment on Guevaras Petition
for Review . On 11 April 1997, Pajuyo filed his Comment.

On 21 June 2000, the Court of Appeals issued its decision reversing the RTC decision. The
dispositive portion of the decision reads:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHEREFORE, premises considered, the assailed Decision of the court a quo in Civil Case No. Q-
96-26943 is REVERSED and SET ASIDE; and it is hereby declared that the ejectment case filed
against defendant-appellant is without factual and legal basis.

SO ORDERED.11 ςrνll

Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that the Court of
Appeals should have dismissed outright Guevarras Petition for Review because it was filed out
of time. Moreover, it was Guevarras counsel and not Guevarra who signed the certification
against forum-shopping.

On 14 December 2000, the Court of Appeals issued a resolution denying Pajuyos motion for
reconsideration. The dispositive portion of the resolution reads:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHEREFORE, for lack of merit, the motion for reconsideration is hereby DENIED. No costs.

SO ORDERED.12

TheRuling of the MTC

The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house
and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house
only by tolerance. Thus, Guevarras refusal to vacate the house on Pajuyos demand made
Guevarras continued possession of the house illegal.

The Ruling of the RTC

The RTC upheld the Kasunduan, which established the landlord and tenant relationship
between Pajuyo and Guevarra. The terms of the Kasunduan bound Guevarra to return
possession of the house on demand.

The RTC rejected Guevarras claim of a better right under Proclamation No. 137, the Revised
National Government Center Housing Project Code of Policies and other pertinent laws. In an
ejectment suit, the RTC has no power to decide Guevarras rights under these laws.The RTC
declared that in an ejectment case, the only issue for resolution is material or physical
possession, not ownership.

The Ruling of the Court of Appeals

The Court of Appeals declared that Pajuyo and Guevarra are squatters. Pajuyo and Guevarra
illegally occupied the contested lot which the government owned.

Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no right
or title over the lot because it is public land. The assignment of rights between Perez and
Pajuyo, and the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo
and Guevarra are in pari delicto or in equal fault. The court will leave them where they are.

The Court of Appeals reversed the MTC and RTC rulings, which held that the Kasunduan
between Pajuyo and Guevarra created a legal tie akin to that of a landlord and tenant
relationship. The Court of Appeals ruled that the Kasunduan is not a lease contract but a
commodatum because the agreement is not for a price certain.

Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate
court held that Guevarra has a better right over the property under Proclamation No. 137.
President Corazon C. Aquino (President Aquino) issued Proclamation No. 137 on 7 September
1987. At that time, Guevarra was in physical possession of the property. Under Article VI of the
Code of Policies Beneficiary Selection and Disposition of Homelots and Structures in the
National Housing Project (the Code), the actual occupant or caretaker of the lot shall have first
priority as beneficiary of the project. The Court of Appeals concluded that Guevarra is first in
the hierarchy of priority.

In denying Pajuyos motion for reconsideration, the appellate court debunked Pajuyos claim that
Guevarra filed his motion for extension beyond the period to appeal.
The Court of Appeals pointed out that Guevarras motion for extension filed before the Supreme
Court was stamped 13 December 1996 at 4:09 PM by the Supreme Courts Receiving Clerk. The
Court of Appeals concluded that the motion for extension bore a date, contrary to Pajuyos
claim that the motion for extension was undated. Guevarra filed the motion for extension on
time on 13 December 1996 since he filed the motion one day before the expiration of the
reglementary period on 14 December 1996. Thus, the motion for extension properly complied
with the condition imposed by the Court of Appeals in its 28 January 1997 Resolution. The
Court of Appeals explained that the thirty-day extension to file the Petition for Review was
deemed granted because of such compliance.

The Court of Appeals rejected Pajuyos argument that the appellate court should have dismissed
the Petition for Review because it was Guevarras counsel and not Guevarra who signed the
certification against forum-shopping. The Court of Appeals pointed out that Pajuyo did not raise
this issue in his Comment. The Court of Appeals held that Pajuyo could not now seek the
dismissal of the case after he had extensively argued on the merits of the case.This technicality,
the appellate court opined, was clearly an afterthought.

The Issues

Pajuyo raises the following issues for resolution:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND DISCRETION
TANTAMOUNT TO LACK OF JURISDICTION:

1) in GRANTING, instead of denying, Private Respondents Motion for an Extension of thirty days
to file Petition for Review at the time when there was no more period to extend as the decision
of the Regional Trial Court had already become final and executory.

2) in giving due course, instead of dismissing, private respondents Petition for Review even
though the certification against forum-shopping was signed only by counsel instead of by
petitioner himself.

3) in ruling that the Kasunduan voluntarily entered into by the parties was in fact a
commodatum, instead of a Contract of Lease as found by the Metropolitan Trial Court and in
holding that the ejectment case filed against defendant-appellant is without legal and factual
basis.

4) in reversing and setting aside the Decision of the Regional Trial Court in Civil Case No. Q-96-
26943 and in holding that the parties are in pari delicto being both squatters, therefore, illegal
occupants of the contested parcel of land.

5) in deciding the unlawful detainer case based on the so-called Code of Policies of the National
Government Center Housing Project instead of deciding the same under the Kasunduan
voluntarily executed by the parties, the terms and conditions of which are the laws between
themselves.13

The Ruling of the Court

The procedural issues Pajuyo is raising are baseless. However, we find merit in the substantive
issues Pajuyo is submitting for resolution.

Procedural Issues

Pajuyo insists that the Court of Appeals should have dismissed outright Guevarras Petition for
Review because the RTC decision had already become final and executory when the appellate
court acted on Guevarras motion for extension to file the petition. Pajuyo points out that
Guevarra had only one day before the expiry of his period to appeal the RTC decision. Instead
of filing the Petition for Review with the Court of Appeals, Guevarra filed with this Court an
undated motion for extension of 30 days to file a Petition for Review . This Court merely
referred the motion to the Court of Appeals. Pajuyo believes that the filing of the motion for
extension with this Court did not toll the running of the period to perfect the appeal. Hence,
when the Court of Appeals received the motion, the period to appeal had already expired.

We are not persuaded.

Decisions of the regional trial courts in the exercise of their appellate jurisdiction are appealable
to the Court of Appeals by Petition for Review in cases involving questions of fact or mixed
questions of fact and law.14 Decisions of the regional trial courts involving pure questions of
law are appealable directly to this Court by Petition for Review .15 These modes of appeal are
now embodied in Section 2, Rule 41 of the 1997 Rules of Civil Procedure.

Guevarra believed that his appeal of the RTC decision involved only questions of law. Guevarra
thus filed his motion for extension to file Petition for Review before this Court on 14 December
1996. On 3 January 1997, Guevarra then filed his Petition for Review with this Court. A perusal
of Guevarras Petition for Review gives the impression that the issues he raised were pure
questions of law. There is a question of law when the doubt or difference is on what the law is
on a certain state of facts.16 There is a question of fact when the doubt or difference is on the
truth or falsity of the facts alleged.17 ςrνll

In his Petition for Review before this Court, Guevarra no longer disputed the facts. Guevarras
Petition for Review raised these questions: (1) Do ejectment cases pertain only to possession of
a structure, and not the lot on which the structure stands? (2) Does a suit by a squatter against
a fellow squatter constitute a valid case for ejectment?(3) Should a Presidential Proclamation
governing the lot on which a squatters structure stands be considered in an ejectment suit filed
by the owner of the structure?chanroblesvirtualawlibrary
These questions call for the evaluation of the rights of the parties under the law on ejectment
and the Presidential Proclamation. At first glance, the questions Guevarra raised appeared
purely legal. However, some factual questions still have to be resolved because they have a
bearing on the legal questions raised in the Petition for Review .These factual matters refer to
the metes and bounds of the disputed property and the application of Guevarra as beneficiary
of Proclamation No. 137.

The Court of Appeals has the power to grant an extension of time to file a Petition for Review .
In Lacsamana v. Second Special Cases Division of the Intermediate Appellate Court,18 we
declared that the Court of Appeals could grant extension of time in appeals by Petition for
Review . In Liboro v. Court of Appeals,19 we clarified that the prohibition against granting an
extension of time applies only in a case where ordinary appeal is perfected by a mere notice of
appeal. The prohibition does not apply in a Petition for Review where the pleading needs
verification. A Petition for Review , unlike an ordinary appeal, requires preparation and research
to present a persuasive position.20 The drafting of the Petition for Review entails more time
and effort than filing a notice of appeal.21 Hence, the Court of Appeals may allow an extension
of time to file a Petition for Review .

In the more recent case of Commissioner of Internal Revenue v. Court of Appeals,22 we held
that Liboros clarification of Lacsamana is consistent with the Revised Internal Rules of the Court
of Appeals and Supreme Court Circular No. 1-91. They all allow an extension of time for filing
petitions for review with the Court of Appeals. The extension, however, should be limited to
only fifteen days save in exceptionally meritorious cases where the Court of Appeals may grant
a longer period.

A judgment becomes final and executory by operation of law. Finality of judgment becomes a
fact on the lapse of the reglementary period to appeal if no appeal is perfected.23 The RTC
decision could not have gained finality because the Court of Appeals granted the 30-day
extension to Guevarra.

The Court of Appeals did not commit grave abuse of discretion when it approved Guevarras
motion for extension. The Court of Appeals gave due course to the motion for extension
because it complied with the condition set by the appellate court in its resolution dated 28
January 1997. The resolution stated that the Court of Appeals would only give due course to the
motion for extension if filed on time. The motion for extension met this condition.

The material dates to consider in determining the timeliness of the filing of the motion for
extension are (1) the date of receipt of the judgment or final order or resolution subject of the
petition, and (2) the date of filing of the motion for extension.24 It is the date of the filing of the
motion or pleading, and not the date of execution, that determines the timeliness of the filing
of that motion or pleading. Thus, even if the motion for extension bears no date, the date of
filing stamped on it is the reckoning point for determining the timeliness of its filing.
Guevarra had until 14 December 1996 to file an appeal from the RTC decision. Guevarra filed
his motion for extension before this Court on 13 December 1996, the date stamped by this
Courts Receiving Clerk on the motion for extension. Clearly, Guevarra filed the motion for
extension exactly one day before the lapse of the reglementary period to appeal.

Assuming that the Court of Appeals should have dismissed Guevarras appeal on technical
grounds, Pajuyo did not ask the appellate court to deny the motion for extension and dismiss
the Petition for Review at the earliest opportunity. Instead, Pajuyo vigorously discussed the
merits of the case. It was only when the Court of Appeals ruled in Guevarras favor that Pajuyo
raised the procedural issues against Guevarras Petition for Review .

A party who, after voluntarily submitting a dispute for resolution, receives an adverse decision
on the merits, is estopped from attacking the jurisdiction of the court.25 Estoppel sets in not
because the judgment of the court is a valid and conclusive adjudication, but because the
practice of attacking the courts jurisdiction after voluntarily submitting to it is against public
policy.26 ςrνll

In his Comment before the Court of Appeals, Pajuyo also failed to discuss Guevarras failure to
sign the certification against forum shopping. Instead, Pajuyo harped on Guevarras counsel
signing the verification, claiming that the counsels verification is insufficient since it is based
only on mere information.

A partys failure to sign the certification against forum shopping is different from the partys
failure to sign personally the verification. The certificate of non-forum shopping must be signed
by the party, and not by counsel.27 The certification of counsel renders the petition
defective.28 ςrνll

On the other hand, the requirement on verification of a pleading is a formal and not a
jurisdictional requisite.29 It is intended simply to secure an assurance that what are alleged in
the pleading are true and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith.30 The party need not sign the
verification. A partys representative, lawyer or any person who personally knows the truth of
the facts alleged in the pleading may sign the verification.31 ςrνll

We agree with the Court of Appeals that the issue on the certificate against forum shopping
was merely an afterthought. Pajuyo did not call the Court of Appeals attention to this defect at
the early stage of the proceedings. Pajuyo raised this procedural issue too late in the
proceedings.

Absence of Title over the Disputed Property will not Divest the Courts of Jurisdiction to Resolve
the Issue of Possession

Settled is the rule that the defendants claim of ownership of the disputed property will not
divest the inferior court of its jurisdiction over the ejectment case.32 Even if the pleadings raise
the issue of ownership, the court may pass on such issue to determine only the question of
possession, especially if the ownership is inseparably linked with the possession.33 The
adjudication on the issue of ownership is only provisional and will not bar an action between
the same parties involving title to the land.34 This doctrine is a necessary consequence of the
nature of the two summary actions of ejectment, forcible entry and unlawful detainer, where
the only issue for adjudication is the physical or material possession over the real property.35
ςrνll

In this case, what Guevarra raised before the courts was that he and Pajuyo are not the owners
of the contested property and that they are mere squatters. Will the defense that the parties to
the ejectment case are not the owners of the disputed lot allow the courts to renounce their
jurisdiction over the case?The Court of Appeals believed so and held that it would just leave the
parties where they are since they are in pari delicto.

We do not agree with the Court of Appeals.

Ownership or the right to possess arising from ownership is not at issue in an action for
recovery of possession.The parties cannot present evidence to prove ownership or right to legal
possession except to prove the nature of the possession when necessary to resolve the issue of
physical possession.36 The same is true when the defendant asserts the absence of title over
the property. The absence of title over the contested lot is not a ground for the courts to
withhold relief from the parties in an ejectment case.

The only question that the courts must resolve in ejectment proceedings is - who is entitled to
the physical possession of the premises, that is, to the possession de facto and not to the
possession de jure.37 It does not even matter if a partys title to the property is questionable,38
or when both parties intruded into public land and their applications to own the land have yet
to be approved by the proper government agency.39 Regardless of the actual condition of the
title to the property, the party in peaceable quiet possession shall not be thrown out by a
strong hand, violence or terror.40 Neither is the unlawful withholding of property allowed.
Courts will always uphold respect for prior possession.

Thus, a party who can prove prior possession can recover such possession even against the
owner himself.41 Whatever may be the character of his possession, if he has in his favor prior
possession in time, he has the security that entitles him to remain on the property until a
person with a better right lawfully ejects him.42 To repeat, the only issue that the court has to
settle in an ejectment suit is the right to physical possession.

In Pitargue v. Sorilla,43 the government owned the land in dispute. The government did not
authorize either the plaintiff or the defendant in the case of forcible entry case to occupy the
land. The plaintiff had prior possession and had already introduced improvements on the public
land.The plaintiff had a pending application for the land with the Bureau of Lands when the
defendant ousted him from possession. The plaintiff filed the action of forcible entry against
the defendant. The government was not a party in the case of forcible entry.
The defendant questioned the jurisdiction of the courts to settle the issue of possession
because while the application of the plaintiff was still pending, title remained with the
government, and the Bureau of Public Lands had jurisdiction over the case. We disagreed with
the defendant. We ruled that courts have jurisdiction to entertain ejectment suits even before
the resolution of the application. The plaintiff, by priority of his application and of his entry,
acquired prior physical possession over the public land applied for as against other private
claimants. That prior physical possession enjoys legal protection against other private claimants
because only a court can take away such physical possession in an ejectment case.

While the Court did not brand the plaintiff and the defendant in Pitargue44 as squatters, strictly
speaking, their entry into the disputed land was illegal. Both the plaintiff and defendant entered
the public land without the owners permission. Title to the land remained with the government
because it had not awarded to anyone ownership of the contested public land. Both the
plaintiff and the defendant were in effect squatting on government property. Yet, we upheld
the courts jurisdiction to resolve the issue of possession even if the plaintiff and the defendant
in the ejectment case did not have any title over the contested land.

Courts must not abdicate their jurisdiction to resolve the issue of physical possession because
of the public need to preserve the basic policy behind the summary actions of forcible entry
and unlawful detainer. The underlying philosophy behind ejectment suits is to prevent breach
of the peace and criminal disorder and to compel the party out of possession to respect and
resort to the law alone to obtain what he claims is his.45 The party deprived of possession must
not take the law into his own hands.46 Ejectment proceedings are summary in nature so the
authorities can settle speedily actions to recover possession because of the overriding need to
quell social disturbances.47 ςrνll

We further explained in Pitargue the greater interest that is at stake in actions for recovery of
possession. We made the following pronouncements in Pitargue:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

The question that is before this Court is: Are courts without jurisdiction to take cognizance of
possessory actions involving these public lands before final award is made by the Lands
Department, and before title is given any of the conflicting claimants? It is one of utmost
importance, as there are public lands everywhere and there are thousands of settlers,
especially in newly opened regions. It also involves a matter of policy, as it requires the
determination of the respective authorities and functions of two coordinate branches of the
Government in connection with public land conflicts.

Our problem is made simple by the fact that under the Civil Code, either in the old, which was
in force in this country before the American occupation, or in the new, we have a possessory
action, the aim and purpose of which is the recovery of the physical possession of real property,
irrespective of the question as to who has the title thereto. Under the Spanish Civil Code we
had the accion interdictal, a summary proceeding which could be brought within one year from
dispossession (Roman Catholic Bishop of Cebu v. Mangaron, 6 Phil. 286, 291); and as early as
October 1, 1901, upon the enactment of the Code of Civil Procedure (Act No. 190 of the
Philippine Commission) we implanted the common law action of forcible entry (section 80 of
Act No. 190), the object of which has been stated by this Court to be to prevent breaches of the
peace and criminal disorder which would ensue from the withdrawal of the remedy, and the
reasonable hope such withdrawal would create that some advantage must accrue to those
persons who, believing themselves entitled to the possession of property, resort to force to
gain possession rather than to some appropriate action in the court to assert their claims.
(Supia and Batioco v. Quintero and Ayala, 59 Phil. 312, 314.) So before the enactment of the
first Public Land Act (Act No. 926) the action of forcible entry was already available in the courts
of the country. So the question to be resolved is, Did the Legislature intend, when it vested the
power and authority to alienate and dispose of the public lands in the Lands Department, to
exclude the courts from entertaining the possessory action of forcible entry between rival
claimants or occupants of any land before award thereof to any of the parties? Did Congress
intend that the lands applied for, or all public lands for that matter, be removed from the
jurisdiction of the judicial Branch of the Government, so that any troubles arising therefrom, or
any breaches of the peace or disorders caused by rival claimants, could be inquired into only by
the Lands Department to the exclusion of the courts? The answer to this question seems to us
evident. The Lands Department does not have the means to police public lands; neither does it
have the means to prevent disorders arising therefrom, or contain breaches of the peace
among settlers; or to pass promptly upon conflicts of possession. Then its power is clearly
limited to disposition and alienation, and while it may decide conflicts of possession in order to
make proper award, the settlement of conflicts of possession which is recognized in the court
herein has another ultimate purpose, i.e., the protection of actual possessors and occupants
with a view to the prevention of breaches of the peace. The power to dispose and alienate
could not have been intended to include the power to prevent or settle disorders or breaches
of the peace among rival settlers or claimants prior to the final award. As to this, therefore, the
corresponding branches of the Government must continue to exercise power and jurisdiction
within the limits of their respective functions. The vesting of the Lands Department with
authority to administer, dispose, and alienate public lands, therefore, must not be understood
as depriving the other branches of the Government of the exercise of the respective functions
or powers thereon, such as the authority to stop disorders and quell breaches of the peace by
the police, the authority on the part of the courts to take jurisdiction over possessory actions
arising therefrom not involving, directly or indirectly, alienation and disposition.

Our attention has been called to a principle enunciated in American courts to the effect that
courts have no jurisdiction to determine the rights of claimants to public lands, and that until
the disposition of the land has passed from the control of the Federal Government, the courts
will not interfere with the administration of matters concerning the same. (50 C.J. 1093-1094.)
We have no quarrel with this principle. The determination of the respective rights of rival
claimants to public lands is different from the determination of who has the actual physical
possession or occupation with a view to protecting the same and preventing disorder and
breaches of the peace. A judgment of the court ordering restitution of the possession of a
parcel of land to the actual occupant, who has been deprived thereof by another through the
use of force or in any other illegal manner, can never be prejudicial interference with the
disposition or alienation of public lands. On the other hand, if courts were deprived of
jurisdiction of cases involving conflicts of possession, that threat of judicial action against
breaches of the peace committed on public lands would be eliminated, and a state of
lawlessness would probably be produced between applicants, occupants or squatters, where
force or might, not right or justice, would rule.

It must be borne in mind that the action that would be used to solve conflicts of possession
between rivals or conflicting applicants or claimants would be no other than that of forcible
entry. This action, both in England and the United States and in our jurisdiction, is a summary
and expeditious remedy whereby one in peaceful and quiet possession may recover the
possession of which he has been deprived by a stronger hand, by violence or terror; its ultimate
object being to prevent breach of the peace and criminal disorder. (Supia and Batioco v.
Quintero and Ayala, 59 Phil. 312, 314.) The basis of the remedy is mere possession as a fact, of
physical possession, not a legal possession. (Mediran v. Villanueva, 37 Phil. 752.) The title or
right to possession is never in issue in an action of forcible entry; as a matter of fact, evidence
thereof is expressly banned, except to prove the nature of the possession. (Second 4, Rule 72,
Rules of Court.) With this nature of the action in mind, by no stretch of the imagination can
conclusion be arrived at that the use of the remedy in the courts of justice would constitute an
interference with the alienation, disposition, and control of public lands. To limit ourselves to
the case at bar can it be pretended at all that its result would in any way interfere with the
manner of the alienation or disposition of the land contested? On the contrary, it would
facilitate adjudication, for the question of priority of possession having been decided in a final
manner by the courts, said question need no longer waste the time of the land officers making
the adjudication or award. (Emphasis ours)

The Principle of Pari Delicto is not Applicable to Ejectment Cases

The Court of Appeals erroneously applied the principle of pari delicto to this case.

Articles 1411 and 1412 of the Civil Code48 embody the principle of pari delicto. We explained
the principle of pari delicto in these words:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

The rule of pari delicto is expressed in the maxims ex dolo malo non eritur actio and in pari
delicto potior est conditio defedentis. The law will not aid either party to an illegal agreement.
It leaves the parties where it finds them.49 ςrνll

The application of the pari delicto principle is not absolute, as there are exceptions to its
application. One of these exceptions is where the application of the pari delicto rule would
violate well-established public policy.50 ςrνll

In Drilon v. Gaurana,51 we reiterated the basic policy behind the summary actions of forcible
entry and unlawful detainer. We held that:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
It must be stated that the purpose of an action of forcible entry and detainer is that, regardless
of the actual condition of the title to the property, the party in peaceable quiet possession shall
not be turned out by strong hand, violence or terror. In affording this remedy of restitution the
object of the statute is to prevent breaches of the peace and criminal disorder which would
ensue from the withdrawal of the remedy, and the reasonable hope such withdrawal would
create that some advantage must accrue to those persons who, believing themselves entitled
to the possession of property, resort to force to gain possession rather than to some
appropriate action in the courts to assert their claims. This is the philosophy at the foundation
of all these actions of forcible entry and detainer which are designed to compel the party out of
possession to respect and resort to the law alone to obtain what he claims is his.52 ςrνll

Clearly, the application of the principle of pari delicto to a case of ejectment between squatters
is fraught with danger. To shut out relief to squatters on the ground of pari delicto would
openly invite mayhem and lawlessness. A squatter would oust another squatter from
possession of the lot that the latter had illegally occupied, emboldened by the knowledge that
the courts would leave them where they are. Nothing would then stand in the way of the
ousted squatter from re-claiming his prior possession at all cost.

Petty warfare over possession of properties is precisely what ejectment cases or actions for
recovery of possession seek to prevent.53 Even the owner who has title over the disputed
property cannot take the law into his own hands to regain possession of his property. The
owner must go to court.

Courts must resolve the issue of possession even if the parties to the ejectment suit are
squatters. The determination of priority and superiority of possession is a serious and urgent
matter that cannot be left to the squatters to decide. To do so would make squatters receive
better treatment under the law. The law restrains property owners from taking the law into
their own hands. However, the principle of pari delicto as applied by the Court of Appeals
would give squatters free rein to dispossess fellow squatters or violently retake possession of
properties usurped from them. Courts should not leave squatters to their own devices in cases
involving recovery of possession.

Possession is the only Issue for Resolution in an Ejectment Case

The case for review before the Court of Appeals was a simple case of ejectment. The Court of
Appeals refused to rule on the issue of physical possession. Nevertheless, the appellate court
held that the pivotal issue in this case is who between Pajuyo and Guevarra has the priority
right as beneficiary of the contested land under Proclamation No. 137.54 According to the
Court of Appeals, Guevarra enjoys preferential right under Proclamation No. 137 because
Article VI of the Code declares that the actual occupant or caretaker is the one qualified to
apply for socialized housing.

The ruling of the Court of Appeals has no factual and legal basis.
First. Guevarra did not present evidence to show that the contested lot is part of a relocation
site under Proclamation No. 137. Proclamation No. 137 laid down the metes and bounds of the
land that it declared open for disposition to bona fide residents.

The records do not show that the contested lot is within the land specified by Proclamation No.
137. Guevarra had the burden to prove that the disputed lot is within the coverage of
Proclamation No. 137. He failed to do so.

Second. The Court of Appeals should not have given credence to Guevarras unsubstantiated
claim that he is the beneficiary of Proclamation No. 137. Guevarra merely alleged that in the
survey the project administrator conducted, he and not Pajuyo appeared as the actual occupant
of the lot.

There is no proof that Guevarra actually availed of the benefits of Proclamation No. 137. Pajuyo
allowed Guevarra to occupy the disputed property in 1985.President Aquino signed
Proclamation No. 137 into law on 11 March 1986. Pajuyo made his earliest demand for
Guevarra to vacate the property in September 1994.

During the time that Guevarra temporarily held the property up to the time that Proclamation
No. 137 allegedly segregated the disputed lot, Guevarra never applied as beneficiary of
Proclamation No. 137. Even when Guevarra already knew that Pajuyo was reclaiming
possession of the property, Guevarra did not take any step to comply with the requirements of
Proclamation No. 137.

Third. Even assuming that the disputed lot is within the coverage of Proclamation No. 137 and
Guevarra has a pending application over the lot, courts should still assume jurisdiction and
resolve the issue of possession. However, the jurisdiction of the courts would be limited to the
issue of physical possession only.

In Pitargue,55 we ruled that courts have jurisdiction over possessory actions involving public
land to determine the issue of physical possession. The determination of the respective rights
of rival claimants to public land is, however, distinct from the determination of who has the
actual physical possession or who has a better right of physical possession.56 The
administrative disposition and alienation of public lands should be threshed out in the proper
government agency.57 ςrνll

The Court of Appeals determination of Pajuyo and Guevarras rights under Proclamation No. 137
was premature.Pajuyo and Guevarra were at most merely potential beneficiaries of the law.
Courts should not preempt the decision of the administrative agency mandated by law to
determine the qualifications of applicants for the acquisition of public lands. Instead, courts
should expeditiously resolve the issue of physical possession in ejectment cases to prevent
disorder and breaches of peace.58

Pajuyo is Entitled to Physical Possession of the Disputed Property

Guevarra does not dispute Pajuyos prior possession of the lot and ownership of the house built
on it. Guevarra expressly admitted the existence and due execution of the Kasunduan. The
Kasunduan reads:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay nagbibigay
pahintulot kay G. Eddie Guevarra, na pansamantalang manirahan sa nasabing bahay at lote ng
walang bayad. Kaugnay nito, kailangang panatilihin nila ang kalinisan at kaayusan ng bahay at
lote.

Sa sandaling kailangan na namin ang bahay at lote, silay kusang aalis ng walang reklamo.

Based on the Kasunduan, Pajuyopermitted Guevarra to reside in the house and lot free of rent,
but Guevarra was under obligation to maintain the premises in good condition. Guevarra
promised to vacate the premises on Pajuyos demand but Guevarra broke his promise and
refused to heed Pajuyos demand to vacate.

These facts make out a case for unlawful detainer. Unlawful detainer involves the withholding
by a person from another of the possession of real property to which the latter is entitled after
the expiration or termination of the formers right to hold possession under a contract, express
or implied.59 ςrνll

Where the plaintiff allows the defendant to use his property by tolerance without any contract,
the defendant is necessarily bound by an implied promise that he will vacate on demand, failing
which, an action for unlawful detainer will lie.60 The defendants refusal to comply with the
demand makes his continued possession of the property unlawful.61 The status of the
defendant in such a case is similar to that of a lessee or tenant whose term of lease has expired
but whose occupancy continues by tolerance of the owner.62 ςrνll

This principle should apply with greater force in cases where a contract embodies the
permission or tolerance to use the property. The Kasunduan expressly articulated Pajuyos
forbearance. Pajuyo did not require Guevarra to pay any rent but only to maintain the house
and lot in good condition. Guevarra expressly vowed in the Kasunduan that he would vacate
the property on demand. Guevarras refusal to comply with Pajuyos demand to vacate made
Guevarras continued possession of the property unlawful.

We do not subscribe to the Court of Appeals theory that the Kasunduan is one of
commodatum.

In a contract of commodatum, one of the parties delivers to another something not

consumable so that the latter may use the same for a certain time and return it.63 An essential
feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use
of the thing belonging to another is for a certain period.64 Thus, the bailor cannot demand the
return of the thing loaned until after expiration of the period stipulated, or after
accomplishment of the use for which the commodatum isconstituted.65 If the bailor should
have urgent need of the thing, he may demand its return for temporary use.66 If the use of the
thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which
case the contractual relation is called a precarium.67 Under theCivil Code, precarium is a kind
of commodatum.68 ςrνll

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 effectsof the Kasunduan are also
different from that of a commodatum. Case law on ejectment has treated relationship based on
tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of
permission would result in the termination of the lease.69 The tenants withholding of the
property would then be unlawful. This is settled jurisprudence.

Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum,
Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo,
the bailor. The obligation to deliver or to return the thing received attaches to contracts for
safekeeping, or contracts of commission, administration and commodatum.70 These contracts
certainly involve the obligation to deliver or return the thing received.71 ςrνll

Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a
squatter. Squatters, Guevarra pointed out, cannot enter into a contract involving the land they
illegally occupy. Guevarra insists that the contract is void.

Guevarra should know that there must be honor even between squatters. Guevarra freely
entered into the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had
benefited from it. The Kasunduan binds Guevarra.

The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has
a right to physical possession of the contested property. The Kasunduan is the undeniable
evidence of Guevarras recognition of Pajuyos better right of physical possession. Guevarra is
clearly a possessor in bad faith. The absence of a contract would not yield a different result, as
there would still be an implied promise to vacate.

Guevarra contends that there is a pernicious evil that is sought to be avoided, and that is
allowing an absentee squatter who (sic) makes (sic) a profit out of his illegal act.72 Guevarra
bases his argument on the preferential right given to the actual occupant or caretaker under
Proclamation No. 137 on socialized housing.

We are not convinced.

Pajuyo did not profit from his arrangement with Guevarra because Guevarra stayed in the
property without paying any rent. There is also no proof that Pajuyo is a professional squatter
who rents out usurped properties to other squatters. Moreover, it is for the proper government
agency to decide who between Pajuyo and Guevarra qualifies for socialized housing. The only
issue that we are addressing is physical possession.

Prior possession is not always a condition sine qua non in ejectment.73 This is one of the
distinctions between forcible entry and unlawful detainer.74 In forcible entry, the plaintiff is
deprived of physical possession of his land or building by means of force, intimidation, threat,
strategy or stealth. Thus, he must allege and prove prior possession.75 But in unlawful detainer,
the defendant unlawfully withholds possession after the expiration or termination of his right to
possess under any contract, express or implied. In such a case, prior physical possession is not
required.76 ςrνll

Pajuyos withdrawal of his permission to Guevarra terminated the Kasunduan.Guevarras

transient right to possess the property ended as well. Moreover, it was Pajuyo who was in
actual possession of the property because Guevarra had to seek Pajuyos permission to
temporarily hold the property and Guevarra had to follow the conditions set by Pajuyo in the
Kasunduan. Control over the property still rested with Pajuyo and this is evidence of actual
possession.

Pajuyos absence did not affect his actual possession of the disputed property. Possession in the
eyes of the law does not mean that a man has to have his feet on every square meter of the
ground before he is deemed in possession.77 One may acquire possession not only by physical
occupation, but also by the fact that a thing is subject to the action of ones will.78 Actual or
physical occupation is not always necessary.79

Ruling on Possession Does not Bind Title to the Land in Dispute

We are aware of our pronouncement in cases where we declared that squatters and intruders
who clandestinely enter into titled government property cannot, by such act, acquire any legal
right to said property.80 We made this declaration because the person who had title or who
had the right to legal possession over the disputed property was a party in the ejectment suit
and that party instituted the case against squatters or usurpers.

In this case, the owner of the land, which is the government, is not a party to the ejectment
case. This case is between squatters. Had the government participated in this case, the courts
could have evicted the contending squatters, Pajuyo and Guevarra.

Since the party that has title or a better right over the property is not impleaded in this case, we
cannot evict on our own the parties. Such a ruling would discourage squatters from seeking the
aid of the courts in settling the issue of physical possession. Stripping both the plaintiff and the
defendant of possession just because they are squatters would have the same dangerous
implications as the application of the principle of pari delicto. Squatters would then rather
settle the issue of physical possession among themselves than seek relief from the courts if the
plaintiff and defendant in the ejectment case would both stand to lose possession of the
disputed property. This would subvert the policy underlying actions for recovery of possession.

Since Pajuyo has in his favor priority in time in holding the property, he is entitled to remain on
the property until a person who has title or a better right lawfully ejects him. Guevarra is
certainly not that person. The ruling in this case, however, does not preclude Pajuyo and
Guevarra from introducing evidence and presenting arguments before the proper
administrative agency to establish any right to which they may be entitled under the law.81
ςrνll

In no way should our ruling in this case be interpreted to condone squatting. The ruling on the
issue of physical possession does not affect title to the property nor constitute a binding and
conclusive adjudication on the merits on the issue of ownership.82 The owner can still go to
court to recover lawfully the property from the person who holds the property without legal
title. Our ruling here does not diminish the power of government agencies, including local
governments, to condemn, abate, remove or demolish illegal or unauthorized structures in
accordance with existing laws.

Attorneys Fees and Rentals

The MTC and RTC failed to justify the award of P3,000 attorneys fees to Pajuyo. Attorneys fees
as part of damages are awarded only in the instances enumerated in Article 2208 of the Civil
Code.83 Thus, the award of attorneys fees is the exception rather than the rule.84 Attorneys
fees are not awarded every time a party prevails in a suit because of the policy that no premium
should be placed on the right to litigate.85 We therefore delete the attorneys fees awarded to
Pajuyo.

We sustain the P300 monthly rentals the MTC and RTC assessed against Guevarra. Guevarra did
not dispute this factual finding of the two courts.We find the amount reasonable compensation
to Pajuyo. The P300 monthly rental is counted from the last demand to vacate, which was on
16 February 1995.

WHEREFORE, we GRANT the petition. The Decision dated 21 June 2000 and Resolution dated 14
December 2000 of the Court of Appeals in CA-G.R. SP No. 43129 are SET ASIDE. The Decision
dated 11 November 1996 of the Regional Trial Court of Quezon City, Branch 81 in Civil Case No.
Q-96-26943, affirming the Decision dated 15 December 1995 of the Metropolitan Trial Court of
Quezon City, Branch 31 in Civil Case No. 12432, is REINSTATED with MODIFICATION. The award
of attorneys fees is deleted. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
Quintos and Ansaldo v. Beck, 69 Phils 108, 1939

MPERIAL, J.:

The plaintiff brought this action to compel the defendant to return her certain furniture which
she lent him for his use. She appealed from the judgment of the Court of First Instance of
Manila which ordered that the defendant return to her the three has heaters and the four
electric lamps found in the possession of the Sheriff of said city, that she call for the other
furniture from the said sheriff of Manila at her own expense, and that the fees which the Sheriff
may charge for the deposit of the furniture be paid pro rata by both parties, without
pronouncement as to the costs.

The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del
Pilar street, No. 1175. On January 14, 1936, upon the novation of the contract of lease between
the plaintiff and the defendant, the former gratuitously granted to the latter the use of the
furniture described in the third paragraph of the stipulation of facts, subject to the condition
that the defendant would return them to the plaintiff upon the latter's demand. The plaintiff
sold the property to Maria Lopez and Rosario Lopez and on September 14, 1936, these three
notified the defendant of the conveyance, giving him sixty days to vacate the premises under
one of the clauses of the contract of lease. There after the plaintiff required the defendant to
return all the furniture transferred to him for them in the house where they were found. On
November 5, 1936, the defendant, through another person, wrote to the plaintiff reiterating
that she may call for the furniture in the ground floor of the house. On the 7th of the same
month, the defendant wrote another letter to the plaintiff informing her that he could not give
up the three gas heaters and the four electric lamps because he would use them until the 15th
of the same month when the lease in due to expire. The plaintiff refused to get the furniture in
view of the fact that the defendant had declined to make delivery of all of them. On
November 15th, before vacating the house, the defendant deposited with the Sheriff all the
furniture belonging to the plaintiff and they are now on deposit in the warehouse situated at
No. 1521, Rizal Avenue, in the custody of the said sheriff.

In their seven assigned errors the plaintiffs contend that the trial court incorrectly applied the
law: in holding that they violated the contract by not calling for all the furniture on November
5, 1936, when the defendant placed them at their disposal; in not ordering the defendant to
pay them the value of the furniture in case they are not delivered; in holding that they should
get all the furniture from the Sheriff at their expenses; in ordering them to pay-half of the
expenses claimed by the Sheriff for the deposit of the furniture; in ruling that both parties
should pay their respective legal expenses or the costs; and in denying pay their respective legal
expenses or the costs; and in denying the motions for reconsideration and new trial. To dispose
of the case, it is only necessary to decide whether the defendant complied with his obligation to
return the furniture upon the plaintiff's demand; whether the latter is bound to bear the
deposit fees thereof, and whether she is entitled to the costs of litigation.lawphi1.net
The contract entered into between the parties is one of commadatum, because under it the
plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the
ownership thereof; by this contract the defendant bound himself to return the furniture to the
plaintiff, upon the latters demand (clause 7 of the contract, Exhibit A; articles 1740, paragraph
1, and 1741 of the Civil Code). The obligation voluntarily assumed by the defendant to return
the furniture upon the plaintiff's demand, means that he should return all of them to the
plaintiff at the latter's residence or house. The defendant did not comply with this obligation
when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three
gas heaters and the four eletric lamps. The provisions of article 1169 of the Civil Code cited by
counsel for the parties are not squarely applicable. The trial court, therefore, erred when it
came to the legal conclusion that the plaintiff failed to comply with her obligation to get the
furniture when they were offered to her.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the
latter's demand, the Court could not legally compel her to bear the expenses occasioned by the
deposit of the furniture at the defendant's behest. The latter, as bailee, was not entitled to
place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return
the furniture, because the defendant wanted to retain the three gas heaters and the four
electric lamps.

As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment
thereof by the defendant in case of his inability to return some of the furniture because under
paragraph 6 of the stipulation of facts, the defendant has neither agreed to nor admitted the
correctness of the said value. Should the defendant fail to deliver some of the furniture, the
value thereof should be latter determined by the trial Court through evidence which the parties
may desire to present.

The costs in both instances should be borne by the defendant because the plaintiff is the
prevailing party (section 487 of the Code of Civil Procedure). The defendant was the one who
breached the contract of commodatum, and without any reason he refused to return and
deliver all the furniture upon the plaintiff's demand. In these circumstances, it is just and
equitable that he pay the legal expenses and other judicial costs which the plaintiff would not
have otherwise defrayed.

The appealed judgment is modified and the defendant is ordered to return and deliver to the
plaintiff, in the residence to return and deliver to the plaintiff, in the residence or house of the
latter, all the furniture described in paragraph 3 of the stipulation of facts Exhibit A. The
expenses which may be occasioned by the delivery to and deposit of the furniture with the
Sheriff shall be for the account of the defendant. the defendant shall pay the costs in both
instances. So ordered.

Avanceña, C.J., Villa-Real, Laurel, Concepcion and Moran, JJ., concur.

Republic vs. Bagtas, G.R. L-9417

The Court of Appeals certified this case to this Court because only questions of law are raised.

On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari,
of P1,320.56 and a Sahiniwal, of P744.46, for a period of one year from 8 May 1948 to 7 May
1949 for breeding purposes subject to a government charge of breeding fee of 10% of the book
value of the bulls. Upon the expiration on 7 May 1949 of the contract, the borrower asked for a
renewal for another period of one year. However, the Secretary of Agriculture and Natural
Resources approved a renewal thereof of only one bull for another year from 8 May 1949 to 7
May 1950 and requested the return of the other two. On 25 March 1950 Jose V. Bagtas wrote
to the Director of Animal Industry that he would pay the value of the three bulls. On 17 October
1950 he reiterated his desire to buy them at a value with a deduction of yearly depreciation to
be approved by the Auditor General. On 19 October 1950 the Director of Animal Industry
advised him that the book value of the three bulls could not be reduced and that they either be
returned or their book value paid not later than 31 October 1950. Jose V. Bagtas failed to pay
the book value of the three bulls or to return them. So, on 20 December 1950 in the Court of
First Instance of Manila the Republic of the Philippines commenced an action against him
praying that he be ordered to return the three bulls loaned to him or to pay their book value in
the total sum of P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with
interests, and costs; and that other just and equitable relief be granted in (civil No. 12818).

On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines from the refusal by the Director of Animal
Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8%
from the date of acquisition, to which depreciation the Auditor General did not object, he could
not return the animals nor pay their value and prayed for the dismissal of the complaint.

After hearing, on 30 July 1956 the trial court render judgment —

. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total value of the three
bulls plus the breeding fees in the amount of P626.17 with interest on both sums of (at) the
legal rate from the filing of this complaint and costs.

On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted
on 18 October and issued on 11 November 1958. On 2 December 1958 granted an ex-parte
motion filed by the plaintiff on November 1958 for the appointment of a special sheriff to serve
the writ outside Manila. Of this order appointing a special sheriff, on 6 December 1958,
Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who died on 23 October
1951 and as administratrix of his estate, was notified. On 7 January 1959 she file a motion
alleging that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the Bureau
Animal of Industry and that sometime in November 1958 the third bull, the Sahiniwal, died
from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal, and praying that
the writ of execution be quashed and that a writ of preliminary injunction be issued. On 31
January 1959 the plaintiff objected to her motion. On 6 February 1959 she filed a reply thereto.
On the same day, 6 February, the Court denied her motion. Hence, this appeal certified by the
Court of Appeals to this Court as stated at the beginning of this opinion.

It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late defendant,
returned the Sindhi and Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station,
Bureau of Animal Industry, Bayombong, Nueva Vizcaya, as evidenced by a memorandum
receipt signed by the latter (Exhibit 2). That is why in its objection of 31 January 1959 to the
appellant's motion to quash the writ of execution the appellee prays "that another writ of
execution in the sum of P859.53 be issued against the estate of defendant deceased Jose V.
Bagtas." She cannot be held liable for the two bulls which already had been returned to and
received by the appellee.

The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk
in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan,
where the animal was kept, and that as such death was due to force majeure she is relieved
from the duty of returning the bull or paying its value to the appellee. The contention is without
merit. The loan by the appellee to the late defendant Jose V. Bagtas of the three bulls for
breeding purposes for a period of one year from 8 May 1948 to 7 May 1949, later on renewed
for another year as regards one bull, was subject to the payment by the borrower of breeding
fee of 10% of the book value of the bulls. The appellant contends that the contract was
commodatum and that, for that reason, as the appellee retained ownership or title to the bull it
should suffer its loss due to force majeure. A contract of commodatum is essentially
gratuitous.1 If the breeding fee be considered a compensation, then the contract would be a
lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the
responsibilities of a possessor in bad faith, because she had continued possession of the bull
after the expiry of the contract. And even if the contract be commodatum, still the appellant is
liable, because article 1942 of the Civil Code provides that a bailee in a contract of
commodatum —

. . . is liable for loss of the things, even if it should be through a fortuitous event:

(2) If he keeps it longer than the period stipulated . . .

(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of a fortuitous event;

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was
renewed for another period of one year to end on 8 May 1950. But the appellant kept and used
the bull until November 1953 when during a Huk raid it was killed by stray bullets. Furthermore,
when lent and delivered to the deceased husband of the appellant the bulls had each an
appraised book value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the
Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to fortuitous event
the late husband of the appellant would be exempt from liability.

The appellant's contention that the demand or prayer by the appellee for the return of the bull
or the payment of its value being a money claim should be presented or filed in the intestate
proceedings of the defendant who died on 23 October 1951, is not altogether without merit.
However, the claim that his civil personality having ceased to exist the trial court lost
jurisdiction over the case against him, is untenable, because section 17 of Rule 3 of the Rules of
Court provides that —

After a party dies and the claim is not thereby extinguished, the court shall order, upon proper
notice, the legal representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be granted. . . .

and after the defendant's death on 23 October 1951 his counsel failed to comply with section
16 of Rule 3 which provides that —

Whenever a party to a pending case dies . . . it shall be the duty of his attorney to inform the
court promptly of such death . . . and to give the name and residence of the executory
administrator, guardian, or other legal representative of the deceased . . . .

The notice by the probate court and its publication in the Voz de Manila that Felicidad M.
Bagtas had been issue letters of administration of the estate of the late Jose Bagtas and that "all
persons having claims for monopoly against the deceased Jose V. Bagtas, arising from contract
express or implied, whether the same be due, not due, or contingent, for funeral expenses and
expenses of the last sickness of the said decedent, and judgment for monopoly against him, to
file said claims with the Clerk of this Court at the City Hall Bldg., Highway 54, Quezon City,
within six (6) months from the date of the first publication of this order, serving a copy thereof
upon the aforementioned Felicidad M. Bagtas, the appointed administratrix of the estate of the
said deceased," is not a notice to the court and the appellee who were to be notified of the
defendant's death in accordance with the above-quoted rule, and there was no reason for such
failure to notify, because the attorney who appeared for the defendant was the same who
represented the administratrix in the special proceedings instituted for the administration and
settlement of his estate. The appellee or its attorney or representative could not be expected to
know of the death of the defendant or of the administration proceedings of his estate instituted
in another court that if the attorney for the deceased defendant did not notify the plaintiff or its
attorney of such death as required by the rule.

As the appellant already had returned the two bulls to the appellee, the estate of the late
defendant is only liable for the sum of P859.63, the value of the bull which has not been
returned to the appellee, because it was killed while in the custody of the administratrix of his
estate. This is the amount prayed for by the appellee in its objection on 31 January 1959 to the
motion filed on 7 January 1959 by the appellant for the quashing of the writ of execution.
Special proceedings for the administration and settlement of the estate of the deceased Jose V.
Bagtas having been instituted in the Court of First Instance of Rizal (Q-200), the money
judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution
but must be presented to the probate court for payment by the appellant, the administratrix
appointed by the court.

ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as to
costs.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala and
Makalintal, JJ., concur.
Barrera, J., concurs in the result.

G.R. No. 80294-95 September 21, 1988

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,

vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents.

The principal issue in this case is whether or not a decision of the Court of Appeals promulgated
a long time ago can properly be considered res judicata by respondent Court of Appeals in the
present two cases between petitioner and two private respondents.

Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth
Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and
CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of Possession, which affirmed
the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of Baguio
and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the dispositive
portion as follows:

WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of
the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs
of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio
Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or
damages is hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo)

Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's
conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-
R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in
question; that the two lots were possessed by the predecessors-in-interest of private
respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had
been in possession of the same lots as bailee in commodatum up to 1951, when petitioner
repudiated the trust and when it applied for registration in 1962; that petitioner had just been
in possession as owner for eleven years, hence there is no possibility of acquisitive prescription
which requires 10 years possession with just title and 30 years of possession without; that the
principle of res judicata on these findings by the Court of Appeals will bar a reopening of these
questions of facts; and that those facts may no longer be altered.

Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two
aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.

The facts and background of these cases as narrated by the trail court are as follows —

... The documents and records presented reveal that the whole controversy started when the
defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the
Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration
of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad,
Benguet, docketed as LRC N-91, said Lots being the sites of the Catholic Church building,
convents, high school building, school gymnasium, school dormitories, social hall, stonewalls,
etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their
Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto.
After trial on the merits, the land registration court promulgated its Decision, dated November
17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.

The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio
Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land
registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of
Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land
registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by
the two sets of oppositors in the land registration case (and two sets of plaintiffs in the two
cases now at bar), the first lot being presently occupied by the convent and the second by the
women's dormitory and the sister's convent.

On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of
Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and
on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for
reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs
of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion
for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient
merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs
of Egmidio Octaviano.

Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the
decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3,
docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs.
Court of Appeals and Heirs of Egmidio Octaviano.'

From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan
Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for
review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court
of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez.

On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR
on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit.
Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872,
the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion
For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3.
The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion
on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs
of Octaviano any affirmative relief.

On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for
certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio
Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the
Court of Appeals dismissed the petition.

It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil
Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan
Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of
possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).

In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented
one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in
question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written
demand (Exh. B—B-4 ) to defendant Vicar for the return of the land to them; and the
reasonable rentals for the use of the land at P10,000.00 per month. On the other hand,
defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty. Nicanor
Sison, who testified that the land in question is not covered by any title in the name of Egmidio
Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensed with the testimony of
Mons.William Brasseur when the plaintiffs admitted that the witness if called to the witness
stand, would testify that defendant Vicar has been in possession of Lot 3, for seventy-five (75)
years continuously and peacefully and has constructed permanent structures thereon.

In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted
the case on the sole issue of whether or not the decisions of the Court of Appeals and the
Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the
owners of the land constitute res judicata.
In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the
defense of ownership and/or long and continuous possession of the two lots in question since
this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the
principle of res judicata. Plaintiffs contend that the question of possession and ownership have
already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R) and
affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his part,
defendant Vicar maintains that the principle of res judicata would not prevent them from
litigating the issues of long possession and ownership because the dispositive portion of the
prior judgment in CA-G.R. No. 038830-R merely dismissed their application for registration and
titling of lots 2 and 3. Defendant Vicar contends that only the dispositive portion of the
decision, and not its body, is the controlling pronouncement of the Court of Appeals. 2

The alleged errors committed by respondent Court of Appeals according to petitioner are as
follows:

1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;

2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY
PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED;

3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM VALDEZ
AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS WERE VALDEZ
AND OCTAVIANO;

4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN

POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER;

5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND
THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS
SINCE 1906;

6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE
IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR
ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;

7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830
WAS AFFIRMED BY THE SUPREME COURT;

8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF
LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN
POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO
1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS
BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE;

10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH
WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND
CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3

The petition is bereft of merit.

Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and
05149, when it clearly held that it was in agreement with the findings of the trial court that the
Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of
ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No. 38830-
R) did not positively declare private respondents as owners of the land, neither was it declared
that they were not owners of the land, but it held that the predecessors of private respondents
were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951.
Petitioner was in possession as borrower in commodatum up to 1951, when it repudiated the
trust by declaring the properties in its name for taxation purposes. When petitioner applied for
registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for
eleven years. Ordinary acquisitive prescription requires possession for ten years, but always
with just title. Extraordinary acquisitive prescription requires 30 years. 4

On the above findings of facts supported by evidence and evaluated by the Court of Appeals in
CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's
ruling that said findings are res judicata between the parties. They can no longer be altered by
presentation of evidence because those issues were resolved with finality a long time ago. To
ignore the principle of res judicata would be to open the door to endless litigations by
continuous determination of issues without end.

An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in CA-G.R.
No. 38830-R, shows that it reversed the trial court's Decision 6 finding petitioner to be entitled
to register the lands in question under its ownership, on its evaluation of evidence and
conclusion of facts.

The Court of Appeals found that petitioner did not meet the requirement of 30 years
possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement
of 10 years possession for ordinary acquisitive prescription because of the absence of just title.
The appellate court did not believe the findings of the trial court that Lot 2 was acquired from
Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by
petitioner Vicar because there was absolutely no documentary evidence to support the same
and the alleged purchases were never mentioned in the application for registration.

By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano.
Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The
predecessors of private respondents, not petitioner Vicar, were in possession of the questioned
lots since 1906.

There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not
Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in
1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The
improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only
in 1947, the church was constructed only in 1951 and the new convent only 2 years before the
trial in 1963.

When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy
the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in
1962.

Private respondents were able to prove that their predecessors' house was borrowed by
petitioner Vicar after the church and the convent were destroyed. They never asked for the
return of the house, but when they allowed its free use, they became bailors in commodatum
and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum
to the bailor did not mean adverse possession on the part of the borrower. The bailee held in
trust the property subject matter of commodatum. The adverse claim of petitioner came only in
1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such
adverse claim could not ripen into title by way of ordinary acquisitive prescription because of
the absence of just title.

The Court of Appeals found that the predecessors-in-interest and private respondents were
possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a
bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951.

We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No.
38830-R. Its findings of fact have become incontestible. This Court declined to review said
decision, thereby in effect, affirming it. It has become final and executory a long time ago.

Respondent appellate court did not commit any reversible error, much less grave abuse of
discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is
governing, under the principle of res judicata, hence the rule, in the present cases CA-G.R. No.
05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision
may no longer be altered.

WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of merit, the
Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court of Appeals
is AFFIRMED, with costs against petitioner.

SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.