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PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK), petitioner, vs. HON.

COURT OF APPEALS AND FRANKLIN VIVES, respondents. FACTS Franklin Vives was asked by his friend Angeles Sanchez to help Arturo Doronilla, in incorporating his business, the Sterela Marketing and Services by depositing in producers bank of the Philippines amount of money in the bank account of Sterela for purposes of its incorporation. Relying on the assurances and representations of Sanchez and Doronilla, private respondent vives 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. In opening the account, the authorized signatories were Inocencia Vives and/or Angeles Sanchez. 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 Rufo Atienza, the assistant manager, who informed them that part of the money in Savings Account they opened had been withdrawn by Doronilla, and that only P90,000.00 remained therein.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, Doronilla opened another Current Account for Sterela and authorized the Bank to debit Savings Account for the amounts necessary to cover overdrawings in Current Account. In opening said current account, Sterela, through Doronilla, obtained a loan of P175,000.00 from the Bank. Atienza, the bank manager, also said that Doronilla could assign or withdraw the money in Savings Account because he was the sole proprietor of Sterela.[5] Private respondent tried to get in touch with Doronilla and subsequently he received a letter from Doronilla, assuring him that his money was intact and would be returned to himDoronilla 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. 2 more checks/demand was made, still of no avail. [6] 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. RTC ruled that defendants Arturo J. Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin Vives jointly and severally. Petitioner bank, Appealed before the us ISSUE: WON the transaction between the Vives and Doronilla is a simple loan (or one of an accommodation) as to dismiss the case against Producer Bank being not a privy thereto. SC RULED: It one of an accommodation. Banks Defenses: The contract between them was a simple loan or mutuum because the subject was money, there was an interest amounting to 12,000 and I was not privy thereto! since all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla was money, a consumable thing; and second, the transaction was onerous as Doronilla was

obliged to pay interest, as evidenced by the check issued by Doronilla in the amount of P212,000.00, or P12,000 more than what private respondent deposited in Sterelas bank account.[15] Moreover, the fact that private respondent sued his good friend Sanchez for his failure to recover his money from Doronilla shows that the transaction was not merely gratuitous but had a business angle to it. Hence, petitioner argues that it cannot be held liable for the return of private respondents P200,000.00 because it is not privy to the transaction between the latter and Doronilla.[16] As regards the subject - 1933 may seem to imply that if subject of contract is a consumable thing, e.g. money, the contract would be a mutuum. However, there are exceptions to this rule where the loan is commodatum and not mutuum. if consumable goods are loaned only for purposes of exhibition OR when the intention of parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon Intention of parties shall be accorded primordial consideration in determining the actual character of a contract. In case of doubt, the contemporaneous and subsequent acts of the parties shall be considered. No error was committed by the Court of Appeals when it ruled that the transaction between private respondent and Doronilla was a commodatum and not a mutuum. A circumspect examination of the records reveals that the transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of loans in this wise: By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. Commodatum is essentially gratuitous. Simple loan may be gratuitous or with a stipulation to pay interest. In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower. The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as money, the contract would be a mutuum. However, there are some instances where a commodatum may have for its object a consumable thing. Article 1936 of the Civil Code provides: Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and not a mutuum. The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract.[27] In case of doubt, the contemporaneous and subsequent acts of the parties shall be considered in such determination.[28] As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private respondent agreed to deposit his money in the savings account of Sterela specifically

for the purpose of making it appear that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within thirty (30) days. [29] Private respondent merely accommodated Doronilla by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not be removed from Sterelas savings account and would be returned to private respondent after thirty (30) days. Doronillas attempts to return to private respondent the amount of P200,000.00 which the latter deposited in Sterelas account together with an additional P12,000.00, allegedly representing interest on the mutuum, did not convert the transaction from a commodatum into a mutuum because such was not the intent of the parties and because the additionalP12,000.00 corresponds to the fruits of the lending of the P200,000.00. Article 1935 of the Civil Code expressly states that [t]he bailee in commodatum acquires the use of the thing loaned but not its fruits. Hence, it was only proper for Doronilla to remit to private respondent the interest accruing to the latters money deposited with petitioner. Neither does the Court agree with petitioners contention that it is not solidarily liable for the return of private respondents money because it was not privy to the transaction between Doronilla and private respondent. The nature of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of petitioners liability for the return of private respondents money because the factual circumstances of the case clearly show that petitioner, through its employee Mr. Atienza, was partly responsible for the loss of private respondents money and is liable for its restitution. Petitioners rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of Sterela for Savings Account No. 10-1567 expressly states that 2. Deposits and withdrawals must be made by the depositor personally or upon his written authority duly authenticated, and neither a deposit nor a withdrawal will be permitted except upon the production of the depositor savings bank book in which will be entered by the Bank the amount deposited or withdrawn.[30] Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant Branch Manager for the Buendia Branch of petitioner, to withdraw therefrom even without presenting the passbook (which Atienza very well knew was in the possession of Mrs. Vives), not just once, but several times. Both the Court of Appeals and the trial court found that Atienza allowed said withdrawals because he was party to Doronillas scheme of defrauding private respondent. As regards the interest - Attempt to return P200,000 with additional P12,000 does not convert the transaction from commodatum to muttum absent any showing of such intention. - In fact, the 12k corresponds to the fruits of the thing. - 1935: bailee acquires only the USE but NOT the FRUITS. - It was only proper for Doronilla to remit to Vives the interest accruing to the money deposited in the bank. As regards the privity - Whether the transaction was mutuum or commodatum has no bearing on your liability. Your liability is founded upon your employees fault under 2180 (vicarious). - Atienza was in conspiracy with Doronillas scheme. The passbook in custody of Vives says that one cannot withdraw without that passbook. How come Doronilla was able to get the money? - Atienza also knew very well that Vives was the owner of the money as he was expressly told by the wife.