This action might not be possible to undo. Are you sure you want to continue?
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 attorney’s fees; and D) pay the cost of suit. SO ORDERED.
The Case Before us is a petition for review of the 21 June 2000 Decision 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 decision of the Regional Trial Court of Quezon City, Branch 81,affirming the 15 December 1995 decision of the Metropolitan Trial Court of Quezon City, Branch 31.
Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon City, Branch 81 (“RTC”). On 11 November 1996, the RTC affirmed the MTC decision. The dispositive portion of the RTC decision reads: WHEREFORE, premises considered, the Court finds no reversible error in the decision appealed from, being in accord with the law and evidence presented, and the same is hereby affirmed en toto. SO ORDERED. 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 Resolution 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 Resolution granting the motion for extension conditioned on the timeliness of the filing of the motion. On 27 February 1997, the Court of Appeals ordered Pajuyo to comment on Guevara’s petition for review. On 11 April 1997, Pajuyo filed his Comment. On 21 June 2000, the Court of Appeals issued its decision reversing the RTC decision. The dispositive portion of the decision reads: WHEREFORE, premises considered, the assailed Decision of the court a quo in Civil Case No. Q-96-26943 is REVERSED and SET ASIDE; and it is hereby declared that the ejectment case filed against defendant-appellant is without factual and legal basis. SO ORDERED. Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that the Court of Appeals should have dismissed outright Guevarra’s petition for review because it was filed out of time. Moreover, it was Guevarra’s counsel and not Guevarra who signed the certification against forumshopping.
The Antecedents In June 1979, petitioner Colito T. Pajuyo (“Pajuyo”) paid P400 to a certain Pedro Perez for the rights over a 250square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a house made of light materials on the lot. Pajuyo and his family lived in the house from 1979 to 7 December 1985. On 8 December 1985, Pajuyo and private respondent Eddie Guevarra (“Guevarra”) executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyo’s demand. In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate the house. Guevarra refused. Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon City, Branch 31 (“MTC”). In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because the lot is within the 150 hectares set aside by Proclamation No. 137 for socialized housing. Guevarra pointed out that from December 1985 to September 1994, Pajuyo did not show up or communicate with him. Guevarra insisted that neither he nor Pajuyo has valid title to the lot. On 15 December 1995, the MTC rendered its decision in favor of Pajuyo. The dispositive portion of the MTC decision reads: WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and against defendant, ordering the latter to: A) vacate the house and lot occupied by the defendant or any other person or persons claiming any right under him; B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00) monthly as reasonable
On 14 December 2000, the Court of Appeals issued a resolution denying Pajuyo’s motion for reconsideration. The dispositive portion of the resolution reads: WHEREFORE, for lack of merit, the motion for reconsideration is hereby DENIED. No costs. SO ORDERED.
Article VI of the Code of Policies Beneficiary Selection and Disposition of Homelots and Structures in the National Housing Project (“the Code”), the actual occupant or caretaker of the lot shall have first priority as beneficiary of the project. The Court of Appeals concluded that Guevarra is first in the hierarchy of priority. In denying Pajuyo’s motion for reconsideration, the appellate court debunked Pajuyo’s claim that Guevarra filed his motion for extension beyond the period to appeal.
The Ruling of the MTC The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Thus, Guevarra’s refusal to vacate the house on Pajuyo’s demand made Guevarra’s continued possession of the house illegal.
The Ruling of the RTC The RTC upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and Guevarra. The terms of theKasunduan bound Guevarra to return possession of the house on demand. The RTC rejected Guevarra’s claim of a better right under Proclamation No. 137, the Revised National Government Center Housing Project Code of Policies and other pertinent laws. In an ejectment suit, the RTC has no power to decide Guevarra’s rights under these laws. The RTC declared that in an ejectment case, the only issue for resolution is material or physical possession, not ownership.
The Court of Appeals pointed out that Guevarra’s motion for extension filed before the Supreme Court was stamped “13 December 1996 at 4:09 PM” by the Supreme Court’s Receiving Clerk. The Court of Appeals concluded that the motion for extension bore a date, contrary to Pajuyo’s claim that the motion for extension was undated. Guevarra filed the motion for extension on time on 13 December 1996 since he filed the motion one day before the expiration of the reglementary period on 14 December 1996. Thus, the motion for extension properly complied with the condition imposed by the Court of Appeals in its 28 January 1997 Resolution. The Court of Appeals explained that the thirty-day extension to file the petition for review was deemed granted because of such compliance. The Court of Appeals rejected Pajuyo’s argument that the appellate court should have dismissed the petition for review because it was Guevarra’s counsel and not Guevarra who signed the certification against forum-shopping. The Court of Appeals pointed out that Pajuyo did not raise this issue in his Comment. The Court of Appeals held that Pajuyo could not now seek the dismissal of the case after he had extensively argued on the merits of the case. This technicality, the appellate court opined, was clearly an afterthought.
The Issues Pajuyo raises the following issues for resolution:
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 commodatumbecause 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
WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND DISCRETION TANTAMOUNT TO LACK OF JURISDICTION: 1) in GRANTING, instead of denying, Private Respondent’s Motion for an Extension of thirty days to file petition for review at the time when there was no more period to extend as the decision of the Regional Trial Court had already become final and executory. 2) in giving due course, instead of dismissing, private respondent’s Petition for Review even though the certification against forumshopping was signed only by counsel instead of by petitioner himself. 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.
In his petition for review before this Court, Guevarra no longer disputed the facts. Guevarra’s petition for review raised these questions: (1) Do ejectment cases pertain only to possession of a structure, and not the lot on which the structure stands? (2) Does a suit by a squatter against a fellow squatter constitute a valid case for ejectment? (3) Should a Presidential Proclamation governing the lot on which a squatter’s structure stands be considered in an ejectment suit filed by the owner of the structure? These questions call for the evaluation of the rights of the parties under the law on ejectment and the Presidential Proclamation. At first glance, the questions Guevarra raised appeared purely legal. However, some factual questions still have to be resolved because they have a bearing on the legal questions raised in the petition for review. These factual matters refer to the metes and bounds of the disputed property and the application of Guevarra as beneficiary of Proclamation No. 137. The Court of Appeals has the power to grant an extension of time to file a petition for review. In Lacsamana v. Second Special Cases Division of the Intermediate Appellate Court, we declared that the Court of Appeals could grant extension of time in appeals by petition for review. In Liboro v. Court of Appeals, 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. The drafting of the petition for review entails more time and effort than filing a notice of appeal. 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, we held that Liboro’s clarification of Lacsamanais consistent with the Revised Internal Rules of the Court of Appeals and Supreme Court Circular No. 191. 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. The RTC decision could not have gained finality because the Court of Appeals granted the 30-day extension to Guevarra. The Court of Appeals did not commit grave abuse of discretion when it approved Guevarra’s motion for extension. The Court of Appeals gave due course to the motion for extension because it complied with the condition set by the appellate court in its resolution dated 28 January 1997. The resolution stated that the Court of Appeals would only give due course to the motion for 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. 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.
The Ruling of the Court The procedural issues Pajuyo is raising are baseless. However, we find merit in the substantive issues Pajuyo is submitting for resolution.
Procedural Issues Pajuyo insists that the Court of Appeals should have dismissed outright Guevarra’s petition for review because the RTC decision had already become final and executory when the appellate court acted on Guevarra’s motion for extension to file the petition. Pajuyo points out that Guevarra had only one day before the expiry of his period to appeal the RTC decision. Instead of filing the petition for review with the Court of Appeals, Guevarra filed with this Court an undated motion for extension of 30 days to file a petition for review. This Court merely referred the motion to the Court of Appeals. Pajuyo believes that the filing of the motion for extension with this Court did not toll the running of the period to perfect the appeal. Hence, when the Court of Appeals received the motion, the period to appeal had already expired. We are not persuaded. 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. Decisions of the regional trial courts involving pure questions of law are appealable directly to this Court by petition for review. 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 Guevarra’s petition for review gives the impression that the issues he raised were pure questions of law. There is a question of law when the doubt or difference is on what the law is on a certain state of facts. There is a question of fact when the doubt or difference is on the truth or falsity of the facts alleged.
Pajuyo raised this procedural issue too late in the proceedings. 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. Guevarra filed the motion for extension exactly one day before the lapse of the reglementary period to appeal. 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. lawyer or any person who personally knows the truth of the facts alleged in the pleading may sign the verification. Pajuyo harped on Guevarra’s counsel signing the verification. In his Comment before the Court of Appeals. The plaintiff. In this case. the party in peaceable quiet possession shall not be thrown out by a strong hand. 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. 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. to the possession de facto and not to the possession de jure. by priority of his application and of his entry. and that the pleading is filed in good faith. 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. We do not agree with the Court of Appeals. Both the plaintiff and defendant entered the public land without the owner’s permission. claiming that the counsel’s verification is insufficient since it is based only on “mere information. The same is true when the defendant asserts the absence of title over the property. 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. Estoppel sets in not because the judgment of the court is a valid and conclusive adjudication. Ownership or the right to possess arising from ownership is not at issue in an action for recovery of possession. The government was not a party in the case of forcible entry. We disagreed with the defendant. 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. a party who can prove prior possession can recover such possession even against the owner himself. 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. Clearly. Pajuyo did not ask the appellate court to deny the motion for extension and dismiss the petition for review at the earliest opportunity. after voluntarily submitting a dispute for resolution. The only question that the courts must resolve in ejectment proceedings is . A party who. Pajuyo vigorously discussed the merits of the case.” A party’s failure to sign the certification against forum shopping is different from the party’s failure to sign personally the verification. The defendant questioned the jurisdiction of the courts to settle the issue of possession because while the application of the plaintiff was still pending. The government did not authorize either the plaintiff or the defendant in the case of forcible entry case to occupy the land. the requirement on verification of a pleading is a formal and not a jurisdictional requisite. In Pitargue v. Thus. he has the security that entitles him to remain on the property until a person with a better right lawfully ejects him. .who is entitled to the physical possession of the premises. if he has in his favor prior possession in time. violence or terror. acquired prior physical possession over the public land applied for as against other private claimants. the court may pass on such issue to determine only the question of possession. strictly speaking. the date stamped by this Court’s Receiving Clerk on the motion for extension. While the Court did not brand the plaintiff and the defendant in Pitargue as squatters. This doctrine is a necessary consequence of the nature of the two summary actions of ejectment. their entry into the disputed land was illegal. Even if the pleadings raise the issue of ownership. Pajuyo also failed to discuss Guevarra’s failure to sign the certification against forum shopping. To repeat. the government owned the land in dispute. is estopped from attacking the jurisdiction of the court. It was only when the Court of Appeals ruled in Guevarra’s favor that Pajuyo raised the procedural issues against Guevarra’s petition for review. 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 plaintiff had prior possession and had already introduced improvements on the public land. We ruled that courts have jurisdiction to entertain ejectment suits even before the resolution of the application. Sorilla. The certification of counsel renders the petition defective. Courts will always uphold respect for prior possession. and the Bureau of Public Lands had jurisdiction over the case. Title to the land remained with the government because it had not awarded to anyone ownership of the contested Absence of Title over the Disputed Property will not Divest the Courts of Jurisdiction to Resolve the Issue of Possession Settled is the rule that the defendant’s claim of ownership of the disputed property will not divest the inferior court of its jurisdiction over the ejectment case. receives an adverse decision on the merits. A party’s representative.Regardless of the actual condition of the title to the property. Instead. Neither is the unlawful withholding of property allowed. where the only issue for adjudication is the physical or material possession over the real property. title remained with the government. It does not even matter if a party’s title to the property is questionable. Whatever may be the character of his possession. We agree with the Court of Appeals that the issue on the certificate against forum shopping was merely an afterthought. On the other hand. the only issue that the court has to settle in an ejectment suit is the right to physical possession. and not by counsel. The party need not sign the verification. forcible entry and unlawful detainer. Instead. The certificate of non-forum shopping must be signed by the party. Pajuyo did not call the Court of Appeals’ attention to this defect at the early stage of the proceedings. especially if the ownership is inseparably linked with the possession. Assuming that the Court of Appeals should have dismissed Guevarra’s appeal on technical grounds. but because the practice of attacking the court’s jurisdiction after voluntarily submitting to it is against public policy. Guevarra filed his motion for extension before this Court on 13 December 1996.Guevarra had until 14 December 1996 to file an appeal from the RTC decision. that is.
the protection of actual possessors and occupants with a view to the prevention of breaches of the peace. 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. 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. Both the plaintiff and the defendant were in effect squatting on government property. 6 Phil. especially in newly opened regions. we have a possessory action. A judgment of the court ordering restitution of the possession of a parcel of land to the actual occupant. 59 Phil. 37 Phil. the courts will not interfere with the administration of matters concerning the same. of physical possession.. 190). can never be “prejudicial interference” with the disposition or alienation of public lands. Villanueva. 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. 314. and before title is given any of the conflicting claimants? It is one of utmost importance. 926) the action of forcible entry was already available in the courts of the country. occupants or squatters. the authority on the part of the courts to take jurisdiction over possessory actions arising therefrom not involving. 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. The Lands Department does not have the means to police public lands. or contain breaches of the peace among settlers. It also involves a matter of policy. Did the Legislature intend. where force or might. (Supia and Batioco vs. Yet. as a matter of fact.) The title or right to possession is never in issue in an action of forcible entry. and alienate public lands. not a legal possession. We made the following pronouncements in Pitargue: The question that is before this Court is: Are courts without jurisdiction to take cognizance of possessory actions involving these public lands before final award is made by the Lands Department. (Second 4. Under the Spanish Civil Code we had the accion interdictal. 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. 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.) So before the enactment of the first Public Land Act (Act No. 291). so that any troubles arising therefrom. if courts were deprived of jurisdiction of cases involving conflicts of possession. when it vested the power and authority to alienate and dispose of the public lands in the Lands Department. be removed from the jurisdiction of the judicial Branch of the Government. that threat of judicial action against breaches of the peace committed on public lands would be eliminated. Quintero and Ayala. and that until the disposition of the land has passed from the control of the Federal Government. both in England and the United States and in our jurisdiction. We further explained in Pitargue the greater interest that is at stake in actions for recovery of possession. i. Rules of Court. Quintero and Ayala.) With this nature of the action in mind. by violence or terror. To limit ourselves to the . or all public lands for that matter. resort to force to gain possession rather than to some appropriate action in the court to assert their claims. would rule. 190 of the Philippine Commission) we implanted the common law action of forcible entry (section 80 of Act No. or to pass promptly upon conflicts of possession. or any breaches of the peace or disorders caused by rival claimants. The party deprived of possession must not take the law into his own hands. either in the old. 286. disposition. 10931094. As to this. J. Mangaron.e. (Mediran vs. the corresponding branches of the Government must continue to exercise power and jurisdiction within the limits of their respective functions. 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. Rule 72. could be inquired into only by the Lands Department to the exclusion of the courts? The answer to this question seems to us evident. a summary proceeding which could be brought within one year from dispossession (Roman Catholic Bishop of Cebu vs. must not be understood as depriving the other branches of the Government of the exercise of the respective functions or powers thereon. and while it may decide conflicts of possession in order to make proper award.) We have no quarrel with this principle. neither does it have the means to prevent disorders arising therefrom. irrespective of the question as to who has the title thereto. 752. upon the enactment of the Code of Civil Procedure (Act No. dispose. 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. Our problem is made simple by the fact that under the Civil Code. This action. 312. 1901. The vesting of the Lands Department with authority to administer. therefore. On the other hand. the settlement of conflicts of possession which is recognized in the court herein has another ultimate purpose. 314. directly or indirectly. evidence thereof is expressly banned. 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. 312.) The basis of the remedy is mere possession as a fact. as it requires the determination of the respective authorities and functions of two coordinate branches of the Government in connection with public land conflicts. who has been deprived thereof by another through the use of force or in any other illegal manner. and control of public lands. therefore. which was in force in this country before the American occupation. as there are public lands everywhere and there are thousands of settlers. believing themselves entitled to the possession of property.” (Supia and Batioco vs. 59 Phil. and a state of lawlessness would probably be produced between applicants. alienation and disposition. the aim and purpose of which is the recovery of the physical possession of real property. its ultimate object being to prevent breach of the peace and criminal disorder. and as early as October 1. and the reasonable hope such withdrawal would create that some advantage must accrue to those persons who. except to prove the nature of the possession. 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. 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. not right or justice. So the question to be resolved is.public land. Then its power is clearly limited to disposition and alienation. such as the authority to stop disorders and quell breaches of the peace by the police. (50 C. 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. or in the new.
Guevarra merely alleged that in the survey the project administrator conducted. it would facilitate adjudication. the principle of pari delictoas applied by the Court of Appeals would give squatters free rein to dispossess fellow squatters or violently retake possession of properties usurped from them. First. He failed to do so. Proclamation No. The Court of Appeals should not have given credence to Guevarra’s unsubstantiated claim that he is the beneficiary of Proclamation No. the jurisdiction of the courts would be limited to the issue of physical possession only. However. he and not Pajuyo appeared as the actual occupant of the lot. Guevarra did not take any step to comply with the requirements of Proclamation No. emboldened by the knowledge that the courts would leave them where they are. Guevarra had the burden to prove that the disputed lot is within the coverage of Proclamation No. 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. Nothing would then stand in the way of the ousted squatter from re-claiming his prior possession at all cost. A squatter would oust another squatter from possession of the lot that the latter had illegally occupied. (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. Guevarra never applied as beneficiary of Proclamation No.Even the owner who has title over the disputed property cannot take the law into his own hands to regain possession of his property. said question need no longer waste the time of the land officers making the adjudication or award. the party in peaceable quiet possession shall not be turned out by strong hand. Petty warfare over possession of properties is precisely what ejectment cases or actions for recovery of possession seek to prevent. 137. Even when Guevarra already knew that Pajuyo was reclaiming possession of the property. The application of the pari delicto principle is not absolute. 137 laid down the metes and bounds of the land that it declared open for disposition to bona fide residents. Nevertheless. 137. 137 because Article VI of the Code declares that the actual occupant or caretaker is the one qualified to apply for socialized housing. and the reasonable hope such withdrawal would create that some advantage must accrue to those persons who.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. Even assuming that the disputed lot is within the coverage of Proclamation No. It leaves the parties where it finds them. We explained the principle of pari delicto in these words: The rule of pari delicto is expressed in the maxims ‘ex dolo malo non eritur actio’ and ‘in pari delicto potior est conditio defedentis. The owner must go to court. One of these exceptions is where the application of the pari delicto rule would violate well-established public policy. Third. for the question of priority of possession having been decided in a final manner by the courts. 137. To do so would make squatters receive better treatment under the law. 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. violence or terror. Pajuyo made his earliest demand for Guevarra to vacate the property in September 1994. The Court of Appeals refused to rule on the issue of physical possession. Articles 1411 and 1412 of the Civil Code  embody the principle of pari delicto. Guevarra did not present evidence to show that the contested lot is part of a relocation site under Proclamation No. 137. In Drilon v. 137 into law on 11 March 1986. The law restrains property owners from taking the law into their own hands. Second. Guevarra enjoys preferential right under Proclamation No. Clearly. 137. 137. 137 and Guevarra has a pending application over the lot. The determination of priority and superiority of possession is a serious and urgent matter that cannot be left to the squatters to decide. regardless of the actual condition of the title to the property. We held that: It must be stated that the purpose of an action of forcible entry and detainer is that. 137 allegedly segregated the disputed lot.” According to the Court of Appeals. as there are exceptions to its application. resort to force to gain possession rather than to some appropriate action in the courts to assert their claims. The ruling of the Court of Appeals has no factual and legal basis. the application of the principle of pari delicto to a case of ejectment between squatters is fraught with danger. believing themselves entitled to the possession of property. 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. Courts should not leave squatters to their own devices in cases involving recovery of possession. Pajuyo allowed Guevarra to occupy the disputed property in 1985. courts should still assume jurisdiction and resolve the issue of possession. To shut out relief to squatters on the ground of pari delicto would openly invite mayhem and lawlessness. President Aquino signed Proclamation No. Gaurana. Courts must resolve the issue of possession even if the parties to the ejectment suit are squatters.’ The law will not aid either party to an illegal agreement. There is no proof that Guevarra actually availed of the benefits of Proclamation No. The records do not show that the contested lot is within the land specified by Proclamation No. However. 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. 137. we reiterated the basic policy behind the summary actions of forcible entry and unlawful detainer. . During the time that Guevarra temporarily held the property up to the time that Proclamation No.
In Pitargue, 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. The administrative disposition and alienation of public lands should be threshed out in the proper government agency. The Court of Appeals’ determination of Pajuyo and Guevarra’s rights under Proclamation No. 137 was premature. Pajuyo and Guevarra were at most merely potential beneficiaries of the law. Courts should not preempt the decision of the administrative agency mandated by law to determine the qualifications of applicants for the acquisition of public lands. Instead, courts should expeditiously resolve the issue of physical possession in ejectment cases to prevent disorder and breaches of peace.
property on demand. Guevarra’s refusal to comply with Pajuyo’s demand to vacate made Guevarra’s continued possession of the property unlawful. We do not subscribe to the Court of Appeals’ theory that the Kasunduan is one of commodatum. In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. An essential feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain period. Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium. Under the Civil Code, precarium is a kind of commodatum. The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes theKasunduan a contract different from a commodatum. The effects of the Kasunduan are also different from that of a commodatum. Case law on ejectment has treated relationship based on tolerance as one that is akin to a landlordtenant relationship where the withdrawal of permission would result in the termination of the lease. The tenant’s withholding of the property would then be unlawful. This is settled jurisprudence. Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and commodatum. These contracts certainly involve the obligation to deliver or return the thing received. Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter. Squatters, Guevarra pointed out, cannot enter into a contract involving the land they illegally occupy. Guevarra insists that the contract is void. Guevarra should know that there must be honor even between squatters. Guevarra freely entered into the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it. The Kasunduan binds Guevarra. The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to physical possession of the contested property. The Kasunduan is the undeniable evidence of Guevarra’s recognition of Pajuyo’s better right of physical possession. Guevarra is clearly a possessor in bad faith. The absence of a contract would not yield a different result, as there would still be an implied promise to vacate. Guevarra contends that there is “a pernicious evil that is sought to be avoided, and that is allowing an absentee squatter who (sic) makes (sic) a profit out of his illegal act.” 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 is Entitled to Physical Possession of the Disputed Property Guevarra does not dispute Pajuyo’s prior possession of the lot and ownership of the house built on it. Guevarra expressly admitted the existence and due execution of the Kasunduan. The Kasunduan reads: Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay nagbibigay pahintulot kay G. Eddie Guevarra, na pansamantalang manirahan sa nasabing bahay at lote ng “walang bayad.” Kaugnay nito, kailangang panatilihin nila ang kalinisan at kaayusan ng bahay at lote. Sa sandaling kailangan na namin ang bahay at lote, sila’y kusang aalis ng walang reklamo. Based on the Kasunduan, Pajuyo permitted Guevarra to reside in the house and lot free of rent, but Guevarra was under obligation to maintain the premises in good condition. Guevarra promised to vacate the premises on Pajuyo’s demand but Guevarra broke his promise and refused to heed Pajuyo’s demand to vacate. These facts make out a case for unlawful detainer. Unlawful detainer involves the withholding by a person from another of the possession of real property to which the latter is entitled after the expiration or termination of the former’s right to hold possession under a contract, express or implied. Where the plaintiff allows the defendant to use his property by tolerance without any contract, the defendant is necessarily bound by an implied promise that he will vacate on demand, failing which, an action for unlawful detainer will lie. The defendant’s refusal to comply with the demand makes his continued possession of the property unlawful. The status of the defendant in such a case is similar to that of a lessee or tenant whose term of lease has expired but whose occupancy continues by tolerance of the owner. This principle should apply with greater force in cases where a contract embodies the permission or tolerance to use the property. TheKasunduan expressly articulated Pajuyo’s forbearance. Pajuyo did not require Guevarra to pay any rent but only to maintain the house and lot in good condition. Guevarra expressly vowed in the Kasunduan that he would vacate the
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. This is one of the distinctions between forcible entry and unlawful detainer. 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. 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. Pajuyo’s withdrawal of his permission to Guevarra terminated the Kasunduan. Guevarra’s transient right to possess the property ended as well. Moreover, it was Pajuyo who was in actual possession of the property because Guevarra had to seek Pajuyo’s permission to temporarily hold the property and Guevarra had to follow the conditions set by Pajuyo in the Kasunduan. Control over the property still rested with Pajuyo and this is evidence of actual possession. Pajuyo’s absence did not affect his actual possession of the disputed property. Possession in the eyes of the law does not mean that a man has to have his feet on every square meter of the ground before he is deemed in possession. One may acquire possession not only by physical occupation, but also by the fact that a thing is subject to the action of one’s will. Actual or physical occupation is not always necessary.
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. 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. The owner can still go to court to recover lawfully the property from the person who holds the property without legal title. Our ruling here does not diminish the power of government agencies, including local governments, to condemn, abate, remove or demolish illegal or unauthorized structures in accordance with existing laws.
Attorney’s Fees and Rentals The MTC and RTC failed to justify the award of P3,000 attorney’s fees to Pajuyo. Attorney’s fees as part of damages are awarded only in the instances enumerated in Article 2208 of the Civil Code. Thus, the award of attorney’s fees is the exception rather than the rule.Attorney’s fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. We therefore delete the attorney’s fees awarded to Pajuyo. We sustain the P300 monthly rentals the MTC and RTC assessed against Guevarra. Guevarra did not dispute this factual finding of the 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 attorney’s fees is deleted. No costs. SO ORDERED.
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.” 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 ofpari 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.
[G.R. No. 115324. February 19, 2003] PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK), petitioner, vs. HON. COURT OF APPEALS AND FRANKLIN VIVES, respondents. DECISION CALLEJO, SR., J.: This is a petition for review on certiorari of the Decision of the Court of Appeals dated June 25, 1991 in CA-G.R. CV No. 11791 and of its Resolution 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. 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. 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. 101567 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.
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. 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. Private respondent instituted an action for recovery of sum of money in the Regional Trial Court (RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was docketed as Civil Case No. 44485. He also filed criminal actions against Doronilla, Sanchez and Dumagpi in the RTC. However, Sanchez passed away on March 16, 1985 while the case was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157, promulgated its Decision in Civil Case No. 44485, the dispositive portion of which reads: IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J. Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin Vives jointly and severally – (a) the amount of 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) (d) the amount of P40,000.00 for attorney’s fees; and the costs of the suit.
SO ORDERED. 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. It likewise denied with finality petitioner’s motion for reconsideration in its Resolution dated May 5, 1994. 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,
2001. 1997. A circumspect examination of the records reveals that the transaction between them was a commodatum.00 FOR ATTORNEY’S FEES AND THE COSTS OF SUIT. 1994. it is not liable for the actual damages suffered by private respondent. Private respondent. P40. and second.since he did not actually part with the ownership of his P200. argues that the transaction between him and Doronilla is not a mutuum but an accommodation. Moreover.000. petitioner’s assistant manager. 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. on the other hand. On January 17.00 FOR EXEMPLARY DAMAGES. Hence.00 FOR MORAL DAMAGES. UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS APPLICABLE. THE PETITIONER SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE. He likewise asserts that the trial court did not err in finding that petitioner. factual findings of courts. However. and who alone had legal title to the savings account. 2001 while private respondent submitted his memorandum on March 22. did not contain any authorization for these two to withdraw from said account. 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.000. 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. 1979 letter addressed to the bank. petitioner claims that since there is no wrongful act or omission on its part. III. 1995.000 more than what private respondent deposited in Sterela’s bank account.00 because it is not privy to the transaction between the latter and Doronilla. Petitioner points out that no evidence other than the testimonies of private respondent and Mrs.000. AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE BASED ON A MISAPPREHENSION OF FACTS.000. The Court then required private respondent to submit a rejoinder to the reply. 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. as evidenced by the check issued by Doronilla in the amount of P212. THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT APPEALED FROM. Rufo Atienza. Vives and Sanchez to open a savings account for Sterela. P50. Vives and Sanchez opened a savings account with petitioner for said company.000. as well as the approval of the authority to debit Sterela’s savings account to cove r any overdrawings in its current account. when adopted and confirmed by the Court of Appeals. petitioner should not be held liable for allowing Doronilla to withdraw from Sterela’s savings account. There is no merit in the petition. and that it committed no wrong in allowing Doronilla to withdraw from Sterela’s savings account. Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum) since all the elements of amutuum are present: first. At the outset. Should be PRIVATE RESPONDENT) AND AS A CONSEQUENCE. Private respondent filed his Comment on September 23. due to petitioner’s delay in furnishing private respondent with copy of the reply and several substitutions of counsel on the part of private respondent. MARTINEZ. 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. Atienza’s employer. Petitioner filed its memorandum on April 16. it must be emphasized that only questions of law may be raised in a petition for review filed with this Court. IV. P50. 29 SCRA 745. 2001.000. Petitioner filed its Reply thereto on September 25. authorizing Mrs. is liable for the return of his money. Hence.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. Mr. Hence. the authority to withdraw therefrom remained exclusively with Doronilla. THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN SALUDARES VS. who was the sole proprietor of Sterela. V. No error was committed by the Court of Appeals when it ruled that the transaction between private respondent and Doronilla was acommodatum and not a mutuum. He insists that Atienza. said rejoinder was filed only on April 21. what was delivered by private respondent to Doronilla was money.00 REPRESENTING THE SAVINGS ACCOUNT DEPOSIT. a consumable thing. It argues further that petitioner’s Assistant Manager.00 in Sterela’s account for purposes of its incorporation.00.000. Petitioner asserts that Doronilla’s May 8. 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. and neither may it be held liable for moral and exemplary damages as well as attorney’s fees.000. Finally. connived with Doronilla in defrauding private respondent since it was Atienza who facilitated the opening of Sterela’s current account three days after Mrs.CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. are final and conclusive on this Court unless these findings are not supported by the evidence on record. Article 1933 of the Civil Code distinguishes between the two kinds of loans in this wise: . petitioner argues that it cannot be held liable for the return of private respondent’s P200. Moreover. 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. the transaction was onerous as Doronilla was obliged to pay interest. Vives was presented during trial to prove that private respondent deposited his P200. or P12. The Court’s jurisdiction is in principle limited to reviewing errors of law that might have been committed by the Court of Appeals. the Court resolved to give due course to the petition and required the parties to submit their respective memoranda. 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.
the contract would be amutuum. 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: X X X But the scheme could not have been executed successfully without the knowledge. However.000. Sanchez and company to open a savings account for Sterela in the amount of P200. Petitioner’s rules for savings deposits written on the passbook it issued Mrs. 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. while in simple loan. through its employee Mr. Vives on behalf of Sterela for Savings Account No. whether it is a mutuum or acommodatum. 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. but Doronilla and Dumagpi insisted that it must be in defendant’s branch in Makati for “it will be easier for them to get a certification”. the contemporaneous and subsequent acts of the parties shall be considered in such determination. 10-1567 expressly states that— “2. or money or other consumable thing.00. This is a clear manifestation that the other defendants had been in consultation with Atienza from the inception of the scheme.00 corresponds to the fruits of the lending of theP200. Vives). upon the condition that the same amount of the same kind and quality shall be paid. In commodatum. but several times. the Assistant Branch Manager for the Buendia Branch of petitioner. the deposit was made in defendant’s Buendia branch precisely because Atienza was a key officer therein. The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract. The nature of said transaction. help and cooperation of Rufo Atienza. either something not consumable so that the latter may use the same for a certain time and return it. Simple loan may be gratuitous or with a stipulation to pay interest. 1). 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. The foregoing provision seems to imply that if the subject of the contract is a consumable thing. As correctly pointed out by both the Court of Appeals and the trial court. as when it is merely for exhibition.By the contract of loan. Rufo Atienza. 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. that is. Vives. the loan is a commodatum and not a mutuum. 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. as a favor to his good friend Sanchez. Deposits and withdrawals must be made by the depositor personally or upon his written authority duly authenticated. was partly responsible for the loss of private respondent’s money and is liable for its restitution. the Manila Banking Corporation. Atienza. In case of doubt. not just once. Indeed.00. the bailor retains the ownership of the thing loaned.000. it was only proper for Doronilla to remit to private respondent the interest accruing to the latter’s money deposited with petitioner. ownership passes to the borrower.00. there are some instances where a commodatum may have for its object a consumable thing.000.” Hence. Assistant Manager of the Bank x x x” (Exh. to withdraw therefrom even without presenting the passbook (which Atienza very well knew was in the possession of Mrs. if consumable goods are loaned only for purposes of exhibition. In fact before he was introduced to plaintiff. To begin with. . 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.00 be deposited in his bank. Doronilla had already prepared a letter addressed to the Buendia branch manager authorizing Angeles B. assistant manager and cashier of the Makati (Buendia) branch of the defendant bank. 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. in which case the contract is called a commodatum. Thus.” Said rule notwithstanding. did not convert the transaction from a commodatum into a mutuumbecause such was not the intent of the parties and because the additional P12. such as money.00 which the latter deposited in Sterela’s account together with an additional P12.000. with the promise that the amount shall be returned within thirty (30) days. one of the parties delivers to another. 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. a friend and business associate of Doronilla. through Atienza. in which case the contract is simply called a loan or mutuum. 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. 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.000.” Private respondent merely “accommodated” Doronilla by lending his money without consideration. The records show that plaintiff had suggested that the P200. Doronilla’s attempts to return to private respondent the amount of P200. allegedly representing interest on the mutuum.000. as “per coordination with Mr. there were testimonies and admission that Atienza is the brother-in-law of a certain Romeo Mirasol. Significantly. Doronilla was permitted by petitioner. Commodatum is essentially gratuitous. Aside from such foreknowledge. Then there is the matter of the ownership of the fund. 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.
Sanchez. The transfer from the savings account to the current account was without the submission of the passbook which Atienza had given to Mrs. 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 employee may have failed in its duty to the employer and disobeyed the latter’s instructions.000. as assistant manager of the branch and the bank official servicing the savings and current accounts in question. and that it was not negligent in the selection and supervision of Atienza. Accordingly. were obviously done in furtherance of petitioner’s interests even though in the process. SO ORDERED. the bank records disclose that the only ones empowered to withdraw the same were Inocencia Vives and Angeles B. The Court is not inclined to agree with Atienza.00 was deposited. . moral and exemplary damages.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. Atienza’s acts of helping Doronilla. he was all the time aware that the money came from Vives and did not belong to Sterela. Moreover. such recognized practice was dispensed with. a customer of the petitioner. Besides. 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. Vives nor Sanchez had given Doronilla the authority to withdraw. 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. 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. petitioner is liable for private respondent’s loss and is solidarily liable with Doronilla and Dumagpi for the return of the P200. In the signature card pertaining to this account (Exh. In the first place. In this case. neither Mrs. and that it was their connivance which was the cause of private respondent’s loss. In the second place. 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. J). the bank requires the presentation of the passbook. Instead. and in transferring the money withdrawn to Sterela’s Current Account with petitioner. the transfer of fund was done without the passbook having been presented. The records indicate that this account was opened three days later after the P200. C). 2) is not hard to comprehend. He was also told by Mrs. 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. To hold the employer liable under this provision. 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. Vives for he was the one who gave it to her. It is an accepted practice that whenever a withdrawal is made in a savings deposit.000. was aware that the contents of the same are not true. Furthermore. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED. he also was aware that the original passbook was never surrendered. however. Sanchez. The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil Code. it must be shown that an employer-employee relationship exists. 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. 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. 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. WHEREFORE. even though in doing such act. In the third place. 10-1567. Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. no error was committed by the appellate court in the award of actual. who undoubtedly had a hand in the execution of this certification. He was also cognizant that Estrella Dumagpi was not among those authorized to withdraw so her certification had no effect whatsoever.Although the savings account was in the name of Sterela. Atienza violated some of petitioner’s rules such as those stipulated in its savings account passbook. There is no dispute that Atienza was an employee of petitioner. 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. attorney’s fees and costs of suit to private respondent. and that the employee was acting within the scope of his assigned task when the act complained of was committed. Atienza. Vives. the authorized signatories were Inocencia Vives &/or Angeles B. He. the petition is hereby DENIED. He knew that the passbook was in the hands of Mrs. in which account private respondent’s money was deposited. In spite of his disclaimer. 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. x x x.
the other half belonging. .. with the consent of his brother Francisco. was sold to Cu Joco. for. the court orders the sale at public auction of the said warehouse and of the lot on which it is built. etc. and the court decided it by holding that this land belonged to the owner of the warehouse which had been built thereon thirty years before. and the plaintiffs the ownership. et al.: Francisco Fontanilla and Andres Fontanilla were brothers. Andres Fontanilla. No. defendants-appellees." The plaintiffs — that is Alejandra Mina. of the said lot. with the present boundaries of the land and condition of the building. the capital of the Province of Ilocos Norte. the children of Ruperta Pascual were recognized likes without discussion. as it appears. through motion. the herein plaintiffs. to only six-sevenths of one-half of it. the other defendant in this case. embracing 14 meters of its frontage by 11 meters of its depth. This was the state of affairs. — opposed the petition of Ruperta Pascual for the reason that the latter had included therein the lot occupied by the warehouse. Ruperta Pascual. notwithstanding the finding made by the Supreme Court that the plaintiffs were the owners. while finding the plaintiffs to be the owners of the lot. when. vs. ARELLANO. these former and the defendants agree that there existed. petitioned the Curt of First Instance of Ilocos Norte for authorization to sell "the six-sevenths of the one-half of the warehouse. being dead. we recognized in principle the existence of a commodatum under which the defendants held the lot. Francisco Fontanilla acquired during his lifetime. So. The plaintiffs did more than oppose Pascual's petition. . as the guardian of her minor children. . The plaintiffs appealed and this court reversed the judgment of the lower court and held that the appellants were the owners of the lot in question. and they themselves only the use. ET AL. as Ruperta Pascual herself stated. which they claimed was their exclusive property. the property having been awarded to him through its purchase at a public auction held by the alcalde mayor of that province. the warehouse. a writ of execution issued and the plaintiffs were given possession of the lot.. as well as of the remainder thereof. 1 When the judgment became final and executory. also.. while the plaintiffs are undoubtedly. for the price mentioned. of the property. to all appearance. who had not been a party to the suit in which that writ was served. although there existed and still exists a commodatum by virtue of which the guardianship (meaning the defendants) had and has the use. The lot has a frontage of 120 meters and a depth of 15. Francisco Fontanilla. et al. or rather. to decide the question of the ownership of the lot before it pass upon the petition for the sale of the warehouse. An agreement was had ad to the facts. at a price of not less than P2. to the plaintiffs themselves. But such an agreement would not affect the truth of the contents of the decision of this court. What is essentially pertinent to the case is the fact that the defendant agree that the plaintiffs have the ownership. It was then that the plaintiffs commenced the present action for the purpose of having the sale of the said lot declared null and void and of no force and effect. with no finding concerning the decree of the lower court that ordered the sale. RUPERTA PASCUAL. were recognized without discussion as his heirs. together with the lot on which it stands. All this action was taken in a special proceeding in re guardianship. plaintiffs-appellants. Alejandro Mina. the former owner of the warehouse. erected a warehouse on a part of the said lot. and the remaining one-seventh of the first one-half to the children of one of the plaintiffs. That the herein plaintiffs excepted to the judgment and appealed therefrom to the Supreme Court which found for them by holding that they are the owners of the lot in question. C. the Supreme Court had to decide the ownership of the lot consistently with its titles and not in accordance with the judicial acts or proceedings had prior to the setting up of the issue in respect to the ownership of the property that was the subject of the judicial decree. the herein defendants. Andres Fontanilla.J. saying: While the trial continues with respect to the ownership of the lot. Nor did the decree of the lower court that ordered the sale have the least influence in our previous decision to require our making any finding in regard thereto. the meaning of that clause is that. ordered the sale of this building. and still exists. a lot in the center of the town of Laoag. with or without that decree. and the opinions held by the litigants in regard to this point could have no bearing whatever on the present decision. Nothing could be more inexact.G. and consequently are entitled to the said building. 1913 ALEJANDRA MINA. they requested the court. . the former owner of the lot. but soon thereafter the trial court annulled this possession for the reason that it affected Cu Joco. also having died. Possibly. on March 12. appears to be that it is a part of the decision of the Supreme Court and that. together with its lot. ET AL. the owners of the part of the lot occupied by that building. on May 6. The fact is that the plaintiffs and the defendants are virtually. 1909. 1874. a commodatum.R." etc.890 Philippine currency . The plaintiffs insisted upon a decision of the question of the ownership of the lot. the ninth paragraph of which is as follows: 9. the owners of the warehouse. L-8321 October 14. though it is not said how.. But the court before determining the matter of the ownership of the lot occupied by the warehouse. The obvious purport of the cause "although there existed and still exists a commodatum. Elena de Villanueva. of 14 by 11 meters.
I have and may have in the said property. sold at public auction all the land and all the rights title. perhaps. without express finding as to costs. it is in all respects impossible to hold that the plaintiffs must abide by it and tolerate. 1909. as the guardian of the said minors. Therefore. The plaintiffs cannot be obliged to acquiesce in or allow the sale made and be compelled to accept the price set on the lot by expert appraisers. The sale of a thing effected by one who is not its owner is null and void. the sentencing of the defendants to deliver the lot to the plaintiffs does not follow as a necessary corollary of the judicial declaration of ownership made in the previous suit. or even merely upon that of the first of them. The defendants do not hold lawful possession of the lot in question.1awphil. and ownership in the said property to Cu Joco. some thirty years ago. The trial court. all the interest. That it is a fact admitted by the litigating parties. the guardian of the minors. The sole purpose of the action in the beginning was to obtain an annulment of the sale of the lot. and nothing more. Civil Code). as regards the sale of the lot. yet that denomination given by them to the use of the lot granted by . which point this court does not decide as it is not a question submitted to us for decision. as the purchaser Cu Joco was not a party to that suit. Ruperta Pascual and the Chinaman Cu Joco. that neither Andres Fontanilla nor his successors paid any consideration or price whatever for the use of the lot occupied by the said building. on the ground of coownership. The purchaser could not acquire anything more than the interest that might be held by a person to whom realty in possession of the vendor might be sold. in the judgment rendered.On this premise. the defendants' predecessor in interest. and this conclusion is based on the fact that they did not give their consent (art. but was allowed by the court. On cannot convey to another what he has never had himself. This. whence it is. with the explicit consent of his brother Francisco Fontanilla. Cu Joco. once the sale has been annulled. The plaintiff's petition was opposed by the defendant's attorney. and only the contracting parties who have given it are obliged to comply (art. to have the defendants sentenced immediately to deliver the same to the plaintiffs. proceeded with the sale at public auction of the six-sevenths part of the one-half of the warehouse constructed of rubble stone. the plaintiff's predecessor in interest. the plaintiffs. etc. of the warehouse. The defendants. He who has only the use of a thing cannot validly sell the thing itself. 3.. but. What the minor children of Ruperta Pascual had in their possession was the ownership of the sixsevenths part of one-half of the warehouse and the use of the lot occupied by his building. 2. whether judicially or extrajudicially. etc. the sale made to him of this one-seventh of one-half and the entire other half of the building was null and void. neither the other half. 1091. 1261. It would be much indeed that. it. held that there were no grounds for the requested annulment of the sale. that Andres Fontanilla. Upon the premise of these facts. Ruperta Pascual. The sale of it by them is necessarily null and void. the guardian of the minors. Ruperta Pascual. . etc. nor were they ever considered to be such. they should have to abide by and tolerate the sale of the said building. I cede and deliver forever to the said purchaser. were absolved from the complaint. erected the warehouse on the lot.. but. The defendants never were the owners of the lot sold. That it also appears to be an admitted fact that the plaintiffs and the defendants are the coowners of the warehouse. idem). Whereas I. by the Court of First Instance of Ilocos Norte. both in this and in the previous suit. whatsoever be the manner in which the sale was effected. etc. nor of that of the nullity of the sale of the lot. to deliver the lot to its lawful owners. and that the plaintiffs were entitled to the P600 deposited with the clerk of the court as the value of the lot in question. The effect of the sale being a transfer of the ownership of the thing. but subsequently the plaintiffs. nor the remaining one-seventh of the said first half. wherein it was held that the ownership of the lot lay in the plaintiffs. That it is a fact explicitly admitted in the agreement. the present action is strictly one for recover against Cu Joco to compel him. although both litigating parties may have agreed in their idea of the commodatum. as indeed it is not. the nullity of the sale of the lot is in all respects quite evident. this Supreme Court finds: 1. his heirs and assigns. asked for an amendment by their complaint in the sense that the action should be deemed to be one for the recovery of possession of a lot and for the annulment of its sale. As respects this action for recovery. . The returns of the auction contain the following statements: I. could the Chinaman Cu Joco acquire at that sale: not the ownership of the lot. therefore the complaint seeks. on account of its not being. There is nothing that can justify the acquisition by the purchaser of the warehouse of the ownership of the lot that this building occupies. a question of fact but of law. and for this reason steps were taken to give possession thereof to the defendants.net But. made in the present case. etc. The purchaser could and should have known what it was that was offered for sale and what it was that he purchased. for at a judicial auction nothing else is disposed of. by virtue of the authorization conferred upon me on the 31st of July. and likewise with still more reason the sale of the lot the building occupies. . after the judicial annulment of the sale of the lot. it is evident that he who has only the mere use of the thing cannot transfer its ownership. through motion. who was the highest bidder. not even though the plaintiffs be considered as coowner of the warehouse. that both parties have denominated that use a commodatum. since the minors represented by Ruperta Pascual never were the owners of the said lot. Consequently. interest. ownership and inheritance rights and others that. Such a finding appears to be in harmony with the decision rendered by the Supreme Court in previous suit.
is not acceptable. it never entered Francisco's mind to limit the period during which his brother Andres was to have the use of the lot. Civil Code). . of the third Partida. in representation of her minor children. No special finding is made as to the costs of both instances. an essential feature of the commodatum that the use of the thing belonging to another shall for a certain period. . one of the parties delivers to the other. since. if what the plaintiffs themselves aver on page 7 of their brief is to be believed. Such. The present contention of the plaintiffs that Cu Joco. after payment of the indemnity prescribed in articles 453 and 454. which did not come to pass for the reason that Fructuoso died before his uncle Andres. and Andres had the gratuitous use of the lot. thirty years ago. in which case it is calledcommodatum . Andres Fontanilla. pursuant to article 361. 1740. and so it is that for the past thirty years of the lot has been used by both Andres and his successors in interest. the owner of the land on which a building is erected in good faith has a right to appropriate such edifice to himself. then. but must be construed. title 28. With that expectation in view. as the facts aforestated only show that a building was erected on another's ground. to Cu Joco. Contracts are not to be interpreted in conformity with the name that the parties thereto agree to give them. and to maintain the latter in the use of the lot until the plaintiffs shall choose one or the other of the two rights granted them by article 361 of the Civil Code. either anything not perishable. according to the second paragraph of the aforecited article 1740. as they are defined and denominated by law. nearly identical with the provisions of articles 361 and 362 of the Civil Code.1awphil. (art. now in possession of the lot. or to oblige the builder to pay him the value of the land. because he expected that the warehouse would eventually fall into the hands of his son. in order that the latter may use it during the certain period and return it to the former.Francisco Fontanilla to his brother. it is only necessary to annul the sale of the said lot which was made by Ruperta Pascual. It is. and no other. it appears more likely that Francisco intended to allow his brother Andres a surface right. duly considering their constitutive elements. is the right to which the plaintiff are entitled. called the adopted son of Andres. therefore. the question should be decided in accordance with the statutes that. For the foregoing reasons. governed accessions to real estate. "commodatum is essentially gratuitous. . should pay rent for it at the rate of P5 a month.net The judgment appealed from is reversed and the sale of the lot in question is held to be null and void and of no force or effect. but this right supposes the payment of an annual rent. By the contract of loan. So. would destroy the theory of the commodatum sustained by them. Francisco Fontanilla did not fix any definite period or time during which Andres Fontanilla could have the use of the lot whereon the latter was to erect a stone warehouse of considerable value. and which were Laws 41 and 42. Hence. Fructuoso Fontanilla." and.
Attorney Jose Felix Martinez notified the defendant and her counsel. By the laws in force the transfer of large cattle was and is still made by means of official documents issued by the local authorities. or their present value. the court below entered judgment sentencing Agustina Jarra. and to pay the costs. that the plaintiff presented his claim to the commissioners of the estate of Jimenea. or the value thereof at the rate of P120 each. nor were the declarations of the witnesses presented by the defendant affirming it satisfactory. that Magdaleno Jimenea died on the 28th of October. not only should the purchaser be provided with a new certificate or credential. and on the 25th of September. or at any rate the six surviving ones. which were afterwards transferred by sale by the plaintiff to the said Jimenea. notwithstanding the fact that the plaintiff claimed their return after the work at the mill was finished. and it is for this reason that the judgment appealed from only deals with six surviving carabaos. as shown by two letters addressed by the said Jimenea to Felix de los Santos. J. by a writing dated January 19. evidence was adduced by both parties. defendant-appellant. but in her answer the said defendant alleged that the late Jimenea only obtained three second-class carabaos.G. Felix de los Santos. that Magdaleno Jimenea. Matias Hilado. in answer to the complaint. The record discloses that it has been fully proven from the testimony of a sufficient number of witnesses that the plaintiff. it is the duty of the administratrix of the estate to return them or indemnify the owner for their value. as the said six carabaos were not the property of the deceased nor of any of his descendants. Four died of rinderpest. and that he afterwards kept them definitely by virtue of the purchase. TORRES. and. nor has the loss of the same been shown in the case. and in due course submitted the corresponding bill of exceptions. and either exhibits were made of record. Counsel for the defendant excepted to the foregoing judgment. 1907. the remaining six second and third class carabaos. that he had made an agreement with the plaintiff to the effect that the latter would not compromise the controversy without his consent. for all of which she asked the court to absolve her of the complaint with the cost against the plaintiff. 1904. which was approved and submitted to this court. The defendant has admitted that Magdaleno Jimenea asked the plaintiff for the loan of ten carabaos which are now claimed by the latter. who saw the animals arrive at the hacienda where it was proposed to employ them. vs. she demurred in writing to the complaint on the ground that it was vague. that she denied the allegations contained in paragraph 3 of the complaint. The case came up for trial. or they should have been delivered to the new purchaser.: On the 1st of September. one being a brother of said Jimenea. By a writing dated the 11th of December. have not been returned to the owner thereof. these documents constitute the title of ownership of the carabao or horse so acquired. No. or a total of P720 with the costs. The alleged purchase of three carabaos by Jimenea from his sonin-law Santos is not evidenced by any trustworthy documents such as those of transfer. did not return the carabaos. and the defendant herein was appointed by the Court of First Instance of Occidental Negros administratrix of his estate and she took over the administration of the same and is still performing her duties as such administratrix. establishes prescriptions in relation to the lastmentioned contract by the following articles: . from which generic denomination the specific one of commodatum is derived. in the two letters produced at the trial by the plaintiff. Santos. the defendant duly excepted. to return to the plaintiff. Felix de los Santos brought suit against Agustina Jarra. Furthermore. therefore. L-4150 February 10. alleging that in the latter part of 1901 Jimenea borrowed and obtained from the plaintiff ten first-class carabaos. however. to be used at the animal-power mill of his hacienda during the season of 1901-2. but on the 2d of October of the same year. The motion was overruled. as administratrix of the estate of Magdaleno Jimenea. deceased.R. Magdaleno Jimenea. The Civil Code. therefore. in dealing with loans in general. 1906. plaintiff-appelle. 1906. which were subsequently sold to him by the owner. for the return of the said ten carabaos. for said reason it can not be considered that Jimenea only received three carabaos on loan from his son-in-law. and that they were sold by the latter to him. a document which has not been produced in evidence by the defendant. and in the case at bar neither did the defendant present the old credential on which should be stated the name of the previous owner of each of the three carabaos said to have been sold by the plaintiff. under the sole condition that they should be returned to the owner as soon as the work at the mill was terminated. within the legal term. sent in charge of various persons the ten carabaos requested by his father-in-law. but the old documents ought to be on file in the municipality. AGUSTINA JARRA. Santos. that they. but that he only obtained three second-class animals. administratrix of the estate of Magdaleno Jimenea. The defendant was duly summoned. the administratrix of the estate of Magdaleno Jimenea. without recompense or remuneration whatever for the use thereof. From the foregoing it may be logically inferred that the carabaos loaned or given on commodatum to the now deceased Magdaleno Jimenea were ten in number. but the said commissioners rejected his claim as appears in their report. Felix de los Santos. she said that it was true that the late Magdaleno Jimenea asked the plaintiff to loan him ten carabaos. ordering her to return the ten firstclass carabaos loaned to the late Jimenea. On the 10th of January. and that it is not true that the latter sold to the former three carabaos that the purchaser was already using. 1910 FELIX DE LOS SANTOS. the plaintiff prayed that judgment be entered against the defendant as administratrix of the estate of the deceased. moved for anew trial on the ground that the findings of fact were openly and manifestly contrary to the weight of the evidence. in order to decide this litigation it is indispensable that proof be forthcoming that Jimenea only received three carabaos from his son-in-law Santos. and that Jimenea received them in the presence of some of said persons. and that as fees for his professional services he was to receive one half of the amount allowed in the judgment if the same were entered in favor of the plaintiff. therefore. 1906.
shall be subjected to indemnify for the losses and damages caused thereby. the refusal of the commissioners before whom the plaintiff unnecessarily appeared can not affect nor reduce the unquestionable right of ownership of the latter. Commodatum is essentially gratuitous.ART. and rendered in view of the result of the evidence adduced by the administrator of the estate and of the claimant. or from his capital. 1741. based on the fact that the plaintiff Santos had not appealed from the decision of the commissioners rejecting his claim for the recovery of his carabaos. one of the parties delivers to the other. 1742. either anything not perishable. to be paid by the person requiring the use. The obligations and rights which arise from the commodatum pass to the heirs of both contracting parties. and at the expiration of the period. By the contract of loan. The bailee acquires the use thereof. in which case his heirs shall not have the right to continue using the thing loaned. or payment for losses and damages (sec. if any compensation is involved. is sustained by the supreme tribunal of Sapin. . by which the errors assigned to the judgment appealed from have been refuted. thereby properly applies law 9 of title 11 ofpartida 5. it is the imperative duty of the bailee to return the thing itself to its owner. of six carabaos which did not belong to him. or delay. The demand for the exclusion of the said carabaos belonging to a third party and which did not form part of the property of the deceased. 1740. or money or any other perishable thing. the collection of a debt from the estate. So ordered. it is our opinion that it should be affirmed and we do hereby affirm it with the costs against the appellant. in which case it is called commodatum. the trial court. but with the exclusion from the inventory of the property of the late Jimenea. negligence. For the reasons above set forth. With regard to the third assignment of error. inasmuch as there is no law nor principle of justice authorizing the successors of the late Jimenea to enrich themselves at the cost and to the prejudice of Felix de los Santos. The carabaos delivered to be used not being returned by the defendant upon demand. or after the use for which it was loaned has been accomplished. Code of Civil Procedure). since it is so provided by the second part of section 699 and by section 703 of the Code of Civil Procedure. it is clear that where public securities are involved. or made under a stipulation to pay interest. ART. unless the loan has been in consideration for the person of the bailee. 1895. A simple loan may be gratuitous. in deferring to the claim of the bailor that the amount loaned be returned him by the bailee in bonds of the same class as those which constituted the contract. but not its fruits. Article 1101 of said code reads: Those who in fulfilling their obligations are guilty of fraud. or to pay him damages if through the fault of the bailee the thing should have been lost or injured. ART. and those who in any manner whatsoever act in contravention of the stipulations of the same. it sets out with precision the legal doctrine touching commodatum as follows: Although it is true that in a contract of commodatum the bailor retains the ownership of the thing loaned. and which formed no part of the inheritance. under the condition to return an equal amount of the same kind and quality. The bailee acquires retains the ownership of the thing loaned. in which case it is merely called a loan. there is no doubt that she is under obligation to indemnify the owner thereof by paying him their value. and considering that the same is in accordance with the law and the merits of the case. the agreement ceases to be a commodatum. wherein the right of the third party to the property which he seeks to have excluded from the inheritance and the right of the deceased has been discussed. In its decision of March 21. The obligation of the bailee or of his successors to return either the thing loaned or its value. must be the subject of a direct decision of the court in an ordinary action. it is sufficient to estate that we are not dealing with a claim for the payment of a certain sum. in order that the latter may use it during a certain period and return it to the former. 119.
and that other just and equitable relief be granted in (civil No. still the appellant is liable.17 with interest on both sums of (at) the legal rate from the filing of this complaint and costs. answered that because of the bad peace and order situation in Cagayan Valley. and costs. plaintiff-appellee. Cagayan. 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. as the appellee retained ownership or title to the bull it should suffer its loss due to force majeure. On 5 July 1951 Jose V. the Sahiniwal. Bagtas. Bagtas. On 6 February 1959 she filed a reply thereto.176. 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. sentencing the latter (defendant) to pay the sum of P3. After hearing. Baggao. is liable for loss of the things. BAGTAS. Upon the expiration on 7 May 1949 of the contract. defendant. . . However. A contract ofcommodatum is essentially gratuitous. No. And even if the contract be commodatum.62. . 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. It is true that on 26 June 1952 Jose M. Superintendent of the NVB Station. Bagtas. The contention is without merit. J. 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. the surviving spouse of the defendant Jose Bagtas who died on 23 October 1951 and as administratrix of his estate. 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. L-17474 October 25. So.241. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith. The loan by the appellee to the late defendant Jose V. 12818).320. . as evidenced by a memorandum receipt signed by the latter (Exhibit 2). Bayombong. unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event. on 30 July 1956 the trial court render judgment — 11 November 1958. returned the Sindhi and Bhagnari bulls to Roman Remorin. son of the appellant by the late defendant. 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. But the appellant kept and used the . 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. of P1. The loan of one bull was renewed for another period of one year to end on 8 May 1950.09 the total value of the three bulls plus the breeding fees in the amount of P626. Bagtas. on 6 December 1958. later on renewed for another year as regards one bull.. even if it should be through a fortuitous event: (2) If he keeps it longer than the period stipulated . then the contract would be a lease of the bull.46." She cannot be held liable for the two bulls which already had been returned to and received by the appellee.1 If the breeding fee be considered a compensation. was notified. Bagtas. FELICIDAD M. the Court denied her motion. Bureau of Animal Industry. of P744. Felicidad M.53 be issued against the estate of defendant deceased Jose V.45 and the unpaid breeding fee in the sum of P199. PADILLA. The appellant contends that the contract was commodatum and that. On 25 March 1950 Jose V. Bagtas failed to pay the book value of the three bulls or to return them. 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. because article 1942 of the Civil Code provides that a bailee in a contract of commodatum — . Jr. The original period of the loan was from 8 May 1948 to 7 May 1949. On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted on 18 October and issued on (3) If the thing loaned has been delivered with appraisal of its value. . On 31 January 1959 the plaintiff objected to her motion. for that reason. 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.: The Court of Appeals certified this case to this Court because only questions of law are raised. 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. Of this order appointing a special sheriff. Nueva Vizcaya. and praying that the writ of execution be quashed and that a writ of preliminary injunction be issued. the borrower asked for a renewal for another period of one year. Bagtas of the three bulls for breeding purposes for a period of one year from 8 May 1948 to 7 May 1949. JOSE V. both with interests.G. 6 February. where the animal was kept. Jose V. .R. 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.46. he could not return the animals nor pay their value and prayed for the dismissal of the complaint. because she had continued possession of the bull after the expiry of the contract. 1962 REPUBLIC OF THE PHILIPPINES. particularly in the barrio of Baggao. Rosete and Manalo.625. died from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal. 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. On the same day. a Bhagnari. was subject to the payment by the borrower of breeding fee of 10% of the book value of the bulls. this appeal certified by the Court of Appeals to this Court as stated at the beginning of this opinion. On 8 May 1948 Jose V. vs. Hence. through counsel Navarro. Bagtas wrote to the Director of Animal Industry that he would pay the value of the three bulls. BAGTAS. Administratrix of the Intestate Estate left by the late Jose V.56 and a Sahiniwal. . petitioner-appellant. to which depreciation the Auditor General did not object.
Bagtas.56 and the Sahiniwal at P744. and there was no reason for such failure to notify. 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. . or contingent. it shall be the duty of his attorney to inform the court promptly of such death . Bagtas having been instituted in the Court of First Instance of Rizal (Q-200). . 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. or other legal representative of the deceased . the appointed administratrix of the estate of the said deceased. 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. . . the Bhagnari at P1. 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. and judgment for monopoly against him. at P1. or within such time as may be granted." 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. Special proceedings for the administration and settlement of the estate of the deceased Jose V. because section 17 of Rule 3 of the Rules of Court provides that — After a party dies and the claim is not thereby extinguished. . Highway 54.46. Quezon City. the legal representative of the deceased to appear and to be substituted for the deceased. without pronouncement as to costs. The notice by the probate court and its publication in the Voz de Manila that Felicidad M. is untenable. As the appellant already had returned the two bulls to the appellee. when lent and delivered to the deceased husband of the appellant the bulls had each an appraised book value. . not due.. to with: the Sindhi. and to give the name and residence of the executory administrator. However. for funeral expenses and expenses of the last sickness of the said decedent.bull until November 1953 when during a Huk raid it was killed by stray bullets. within a period of thirty (30) days.320. the court shall order. the writ of execution appealed from is set aside. whether the same be due. 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 . the estate of the late defendant is only liable for the sum of P859. 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. the claim that his civil personality having ceased to exist the trial court lost jurisdiction over the case against him. arising from contract express or implied. ACCORDINGLY. the administratrix appointed by the court. 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.46.63. to file said claims with the Clerk of this Court at the City Hall Bldg. Bagtas.176. . . 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.. guardian. 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. within six (6) months from the date of the first publication of this order. serving a copy thereof upon the aforementioned Felicidad M. is not altogether without merit. Furthermore. . upon proper notice..
3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 38830R. both for Recovery of Possession. dated May 9. CV-05418 and 05419) was denied. The facts and background of these cases as narrated by the trail court are as follows — . Benguet.. Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419)] and CA-G. social hall. 3655 (429). the plaintiffs' claim or damages is hereby denied. et al. petitioner. respectively. Rollo) Respondent Court of Appeals. 1977. school gymnasium. docketed as LRC N-91. Judgment is hereby rendered ordering the defendant. 3607) appealed the decision of the land registration court to the then Court of Appeals. in the two cases affirmed by the Supreme Court. which affirmed the Decision of the Honorable Nicodemo T. that the principle of res judicata on these findings by the Court of Appeals will bar a reopening of these questions of facts. hence there is no possibility of acquisitive prescription which requires 10 years possession with just title and 30 years of possession without. when petitioner repudiated the trust and when it applied for registration in 1962. Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two aforementioned cases (CA G.R. dated May 4. sustained the trial court's conclusions that the Decision of the Court of Appeals. dated November 17. said Lots being the sites of the Catholic Church building. 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. COURT OF APPEALS. 1962 an application for registration of title over Lots 1. Heirs of Juan Valdez. asserting ownership and title thereto. No. No. with the dispositive portion as follows: WHEREFORE. that petitioner had just been in possession as owner for eleven years. The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. The Court of Appeals rendered its decision. 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. that petitioner had been in possession of the same lots as bailee in commodatum up to 1951. 3655 (429)]. 80294-95 September 21. J. 2. in affirming the trial court's decision. Petitioner questions as allegedly erroneous the Decision dated August 31.R. 05149 [Civil Case No. 1988 CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE. Ferrer. vs. reversing the decision of the land registration court and dismissing the VICAR's application as to Lots 2 and 3. Said defendant is ordered to pay costs. respondents. school dormitories. 2 and 3.G. 1987 of the Ninth Division of Respondent Court of Appeals 1 in CA-G. Catholic Vicar Apostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. confirming the registrable title of VICAR to Lots 1.).R. La Trinidad. 1965. (p. and Lot 3 of the same Plan to the other set of plaintiffs. After trial on the merits.R. No. No. 38830-R. 2. and 4. docketed as CA-G.R. stonewalls. the Heirs of Egmidio Octaviano (Leonardo Valdez.. etc. touched on the ownership of lots 2 and 3 in question.: 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. No. For lack or insufficiency of evidence. the land registration court promulgated its Decision. and 4 in Psu-194357. GANCAYCO. the first lot being presently occupied by the convent and the second by the women's dormitory and the sister's convent. 3. and that those facts may no longer be altered. 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. 05148 [Civil Case No. high school building. 36. 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). No. 3. situated at Poblacion Central.R. HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ. convents.1977 in CA-G. . 3607 (419) and Civil Case No. On March 22.
1979.R." and likewise denied that of the Heirs of Egmidio Octaviano. 1978. on December 7. Heirs of Juan Valdez and Pacita Valdez vs. pp. Jr. 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. the Heirs of Octaviano filed with the Court of Appeals a petitioner for certiorari and mandamus.. docketed as CAG. the Court of Appeals dismissed the petition. L-46832 and G. 1978. The Court. 08890-R. No. docketed as G.). Branch II. Salvador J. presided over by Hon. on September 8. likewise for recovery of possession of Lot 2 (Decision. 3607 (419) on July 24. 1977. 199-201. L46872. Valdez. his written demand (Exh. The plaintiffs Heirs of Egmidio Octaviano presented one (1) witness. 1977.R. In Civil Case No. No. No. It was at that stage that the instant cases were filed. entitled. Fructuoso Valdez.William Brasseur when the plaintiffs admitted that the witness if called to the witness stand. 1979. and on May 17. Rec. denied the motion on the ground that the Court of Appeals decision in CA-G. No. defendant Vicar presented the Register of Deeds for the Province of Benguet.R.. Valdez. 1977. the Heirs of Octaviano filed with the then Court of First Instance of Baguio. 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 . docketed as G. On January 13. Nicanor Sison. No. On February 7.. entitled Heirs of Egmidio Octaviano vs. would testify that defendant Vicar has been in possession of Lot . and the reasonable rentals for the use of the land at P10. for recovery of possession of Lot 3. 1979. 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. 3655 (429) on September 24. Heirs of Egmidio Octaviano and Annable O. 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.1977.R. C ). and the Heirs of Juan Valdez filed Civil Case No. L46872. On the other hand. and Vicar. 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. Valdez.' From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan Valdez and Pacita Valdez. Atty. filed with the Supreme Court a petition for review. 3607 (419) trial was held. Vicar. No. The defendant dispensed with the testimony of Mons. Upon the finality of both Supreme Court resolutions in G. entitled 'Catholic Vicar Apostolic of the Mountain Province vs. B—B-4 ) to defendant Vicar for the return of the land to them. Court of Appeals and Heirs of Egmidio Octaviano. On August 12.00 per month. Court of Appeals. 8).R.On May 9. Hon. The Heirs of Egmidio Octaviano filed Civil Case No. 1979. Thereupon.R. who testified on the alleged ownership of the land in question (Lot 3) by their predecessorin-interest. Egmidio Octaviano (Exh. Orig. Salvador J. 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.000. 38870 did not grant the Heirs of Octaviano any affirmative relief. a Motion For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3. In its decision dated May 16. L-46832.
No. it had been in possession in concept of owner only for eleven years. 038830. 2. 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. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED. 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.R. 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. ERROR IN FINDING THAT THE DECISION IN CA G. 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.R. 3655. They can no longer be altered by presentation of evidence because those issues were resolved with finality a long time ago. AND NOT PETITIONER. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS. on the question of ownership of Lots 2 and 3. declared that the said Court of Appeals Decision CA-G. Decision. 1977. Nos. 38830-R. which in effect declared the plaintiffs the owners of the land constitute res judicata. 3. Petitioner questions the ruling of respondent Court of Appeals in CA-G. First Division 5 in CA-G. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA. 10. 9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM. Ordinary acquisitive prescription requires possession for ten years. the parties admitting that the material facts are not in dispute. In these two cases . The Court of Appeals found that petitioner did not meet the requirement of 30 years possession for acquisitive prescription over Lots 2 and 3.R. 38830-R. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906. neither was it declared that they were not owners of the land. on its evaluation of evidence and conclusion of facts. when it repudiated the trust by declaring the properties in its name for taxation purposes. Petitioner was in possession as borrower in commodatum up to 1951. C. Extraordinary acquisitive prescription requires 30 years. but always with just title. 8. is the controlling pronouncement of the Court of Appeals.R. CA-G. 2 The alleged errors committed by respondent Court of Appeals according to petitioner are as follows: 1. with claim of ownership in good faith from 1906 to 1951. In Civil Case No. but it held that the predecessors of private respondents were possessors of Lots 2 and 3.R. NO. No. No. NO. No.R. The appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan . To ignore the principle of res judicata would be to open the door to endless litigations by continuous determination of issues without end. 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. for seventy-five (75) years continuously and peacefully and has constructed permanent structures thereon.R.R.R. Plaintiffs contend that the question of possession and ownership have already been determined by the Court of Appeals (Exh. 38830-R. 7. 038830 WAS AFFIRMED BY THE SUPREME COURT. Defendant Vicar contends that only the dispositive portion of the decision. 1. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G. 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. 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. A GRATUITOUS LOAN FOR USE. 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. 038830-R merely dismissed their application for registration and titling of 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. On his part. shows that it reversed the trial court's Decision 6 finding petitioner to be entitled to register the lands in question under its ownership. 38830-R) did not positively declare private respondents as owners of the land. and not its body. affirmed by this Court. 05148 and 05149. No. 038830R under the principle of res judicata. No. 5. 4 On the above findings of facts supported by evidence and evaluated by the Court of Appeals in CA-G. 6.R. NO. 038830-R) and affirmed by the Supreme Court (Exh. 4. Minute Resolution of the Supreme Court).R. An examination of the Court of Appeals Decision dated May 4. We see no error in respondent appellate court's ruling that said findings are res judicata between the parties.1977 in CA-G. 3 The petition is bereft of merit. When petitioner applied for registration of Lots 2 and 3 in 1962. No.3. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906.
R. The improvements oil Lots 1. SO ORDERED. Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed.R.R. the church was constructed only in 1951 and the new convent only 2 years before the trial in 1963. the Decision dated Aug. thereby in effect. 3.R. No. much less grave abuse of discretion. Lots 2 and 3 were surveyed by request of petitioner Vicar only in 1962. that petitioner Vicar was only a bailee in commodatum. but not Lots 2 and 3. The predecessors of private respondents. No. The facts as supported by evidence established in that decision may no longer be altered. because the buildings standing thereon were only constructed after liberation in 1945. Both Valdez and Octaviano had Free Patent Application for those lots since 1906. No. The bailee held in trust the property subject matter of commodatum. This Court declined to review said decision. The Court of Appeals found that the predecessors-in-interest and private respondents were possessors under claim of ownership in good faith from 1906. this petition is DENIED for lack of merit. they became bailors in commodatum and the petitioner the bailee. Nos. 38830-R.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. 31. 38830-R is governing. They never asked for the return of the house. Its findings of fact have become incontestible. By the very admission of petitioner Vicar. 4 were paid for by the Bishop but said Bishop was appointed only in 1947. with costs against petitioner.R. We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G. under the principle of res judicata. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. . There is evidence that petitioner Vicar occupied Lots 1 and 4. 05148 and CA-G. were in possession of the questioned lots since 1906. 2. the parish priest offered to buy the lot from Fructuoso Valdez. but when they allowed its free use. when it held that the Decision of the Court of Appeals in CA-G. WHEREFORE AND BY REASON OF THE FOREGOING. When petitioner Vicar was notified of the oppositor's claims. Lots 2 and 3 were owned by Valdez and Octaviano. 05148 and 05149. in the present cases CA-G. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. It has become final and executory a long time ago. No. 1987 in CA-G. hence the rule. affirming it. not petitioner Vicar. 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. which are not in question. Respondent appellate court did not commit any reversible error. 05149. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. by respondent Court of Appeals is AFFIRMED. and that the adverse claim and repudiation of trust came only in 1951.
Should the defendant fail to deliver some of the furniture. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff. in holding that they should get all the furniture from the Sheriff at their expenses. and 1741 of the Civil Code). subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. reserving for herself the ownership thereof. because the defendant wanted to retain the three gas heaters and the four electric lamps. articles 1740. The defendant was the one who breached the contract ofcommodatum. retaining for his benefit the three gas heaters and the four eletric lamps. before vacating the house. 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. 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. 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. No. by this contract the defendant bound himself to return the furniture to the plaintiff. therefore. it is only necessary to decide whether the defendant complied with his obligation to return the furniture upon the plaintiff's demand. in not ordering the defendant to pay them the value of the furniture in case they are not delivered. it is just and equitable that he pay the legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed. J. all the furniture described in paragraph 3 of the stipulation of facts Exhibit A. the value thereof should be latter determined by the trial Court through evidence which the parties may desire to present. As to the value of the furniture. without pronouncement as to the costs. the defendant has neither agreed to nor admitted the correctness of the said value. because under it the plaintiff gratuitously granted the use of the furniture to the defendant. The trial court. Rizal Avenue. L-46240 November 3. that she call for the other furniture from the said sheriff of Manila at her own expense. . paragraph 1. BECK. and whether she is entitled to the costs of litigation. when the defendant placed them at their disposal. 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. The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand. was not entitled to place the furniture on deposit. the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the defendant's behest. The contract entered into between the parties is one of commadatum. 1939 MARGARITA QUINTOS and ANGEL A. On January 14. On the 7th of the same month. upon the latters demand (clause 7 of the contract. 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. H. in ruling that both parties should pay their respective legal expenses or the costs. The plaintiff sold the property to Maria Lopez and Rosario Lopez and on September 14. IMPERIAL. 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. No. in the residence or house of the latter. 1936. means that he should return all of them to the plaintiff at the latter's residence or house. and without any reason he refused to return and deliver all the furniture upon the plaintiff's demand. the defendant. del Pilar street. To dispose of the case. and that the fees which the Sheriff may charge for the deposit of the furniture be paid pro rata by both parties. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff. The plaintiff refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. and in denying pay their respective legal expenses or the costs.R.G. whether the latter is bound to bear the deposit fees thereof. vs. and in denying the motions for reconsideration and new trial. 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 was a tenant of the plaintiff and as such occupied the latter's house on M. plaintiffsappellants. giving him sixty days to vacate the premises under one of the clauses of the contract of lease. in the residence to return and deliver to the plaintiff. 1175. wrote to the plaintiff reiterating that she may call for the furniture in the ground floor of the house. ANSALDO. upon the latter's demand. defendant-appellee. On November 5. as bailee. 1936. in ordering them to pay-half of the expenses claimed by the Sheriff for the deposit of the furniture. upon the novation of the contract of lease between the plaintiff and the defendant. 1521.: The plaintiff brought this action to compel the defendant to return her certain furniture which she lent him for his use. these three notified the defendant of the conveyance. 1936. 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). On November 15th. So ordered. 1936. the defendant shall pay the costs in both instances. the former gratuitously granted to the latter the use of the furniture described in the third paragraph of the stipulation of facts. nor was the plaintiff under a duty to accept the offer to return the furniture. There after the plaintiff required the defendant to return all the furniture transferred to him for them in the house where they were found. Exhibit A. in the custody of the said sheriff. The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff. In these circumstances. through another person. The provisions of article 1169 of the Civil Code cited by counsel for the parties are not squarely applicable. The latter.
1982.000 for moral damages. Branch 151. HON.585. 52093. and therefore orders BPI to pay ALS and Litonjua the following sums: a) P300. The amortization schedule attached as Annex “A” to the “Deed of Mortgage” is correspondingly reformed as aforestated.: This petition for certiorari assails the decision dated February 28.000 loan in August and September 1982. of the Court of Appeals and its resolution dated April 21. in (a) Civil Case No. the extrajudicial foreclosure conducted by BPIIC was premature and made in bad faith.[G. Roa sold the house and lot to private respondents ALS and Antonio Litonjua forP850. in March 1981.000. vs. applying the effects of legal compensation. No. among others. private respondents’ appeal was dismissed for non-payment of docket fees. but in fact made an overpayment as of June 30. the trial court rendered its judgment in Civil Case Nos. The contract of loan between BPIIC and ALS & Litonjua was perfected only on September 13. This reduced Roa’s principal balance to P457.00 as and for exemplary damages.77 was released to private respondents. was not willing to extend the old interest rate to private respondents and proposed to grant them a new loan of P500.00 as and for attorney’s fees and expenses of litigation. It awarded private respondents the amount of P300.000 for attorney’s fees and expenses for litigation. petitioner.351.35. 11831) is hereby DISMISSED for being premature.000 loan. P50. purporting to be what was left of their loan after full payment of Roa’s loan. On September 13. the Court of Appeals promulgated its decision. amounted to Four Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos (P475. out of the P500. 1982. only the total amount ofP464. the Court of Appeals reasoned that a simple loan is perfected only upon the delivery of the object of the contract. Thus. at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance payable within ten years in equal monthly amortization of P9. ALS and Litonjua filed Civil Case No. In its decision. b) P50. 1985. 11831.000 in cash and assumed the P500. 133632. Litonjua and against BPI Investment Corporation. holding that the amount of loan granted by BPI to ALS and Litonjua was only in the principal sum of P464. for the construction of a house on his lot in New Alabang Village. judgment is hereby rendered in favor of ALS Management and Development Corporation and Antonio K. February 15. in turn. Costs against BPI.000 for exemplary damages. CV No. In June 1984. A notice of sheriff’s sale was published on August 13. SO ORDERED. 1988. On February 28. SO ORDERED. 1984.000. BPIIC released to private respondents P7. The appellate court affirmed the judgment of the Regional Trial Court of Pasig City. They alleged. The facts are as follows: Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and Development Corporation (AIDC). They paid P350. 1981. The foreclosure suit (Civil Case No. 2002] BPI INVESTMENT CORPORATION. On February 28. that they were not in arrears in their payment. Said house and lot were mortgaged to AIDC to secure the loan. and P50. Hence.000 loan after deducting therefrom the value of Roa’s indebtedness. 1984.00 for and as moral damages. Sometime in 1980. however. finding no error in the appealed decision the same is hereby AFFIRMED in toto. 1997. the balance of P35. hence. DECISION QUISUMBING. for foreclosure of mortgage by petitioner BPI Investment Corporation (BPIIC for brevity) against private respondents ALS Management and Development Corporation and Antonio K.77. was liquidated when BPIIC applied thereto the proceeds of private respondents’ loan of P500. Further.283. 1997. the date when BPIIC released the purported balance of the P500. The trial court had held that private respondents were not in default in the payment of their monthly amortization.146.31). The Court further finds that ALS and Litonjua suffered compensable damages when BPI caused their publication in a newspaper of general circulation as defaulting debtors. thus: WHEREFORE. Consequently. J. Litonjua.23 should be applied to the initial monthly amortization for the loan.648. consolidated with (b) Civil Case No. 1998.204. 1982. 1984. the dispositive portion reads: WHEREFORE.000.601.90 which.000 balance of Roa’s indebtedness with AIDC. respondents. COURT OF APPEALS and ALS MANAGEMENT & DEVELOPMENT CORPORATION.58 and penalty interest at the rate of 21% per annum per day from the date the amortization became due and payable.000. for damages with prayer for the issuance of a writ of preliminary injunction by the private respondents against said petitioner.87. in CA-G. private respondents executed a mortgage deed containing the above stipulations with the provision that payment of the monthly amortization shall commence on May 1.83 for ten (10) years or one hundred twenty (120) months. 52093 against BPIIC. They maintained that they should not be made to pay amortization before the actual release of the P500. with interest at 20% plus service charge of 1% per annum. On August 31. Muntinlupa. 1981 to June 30.996. ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum of P190.000 to be applied to Roa’s debt and secured by the same property. payable on equal monthly and successive amortizations at P9. The latter.351. c) P50.000. 38887. It likewise dismissed the foreclosure suit for being premature. On August 13.R. BPIIC instituted foreclosure proceedings against private respondents on the ground that they failed to pay the mortgage indebtedness which from May 1. However. Both parties appealed to the Court of Appeals. 11831 and 52093. . the predecessor of petitioner BPIIC.R.
the total amortization due was only P194. 1981. a perfected consensual contract which under normal circumstances could have made the bank liable for not releasing the loan. A loan contract is not a consensual contract but a real contract. 120 SCRA 707. according to private respondents. the loan was not released. arguendo. 1981 but the contract of loan itself was only perfected upon the delivery of the full loan to private respondents onSeptember 13. petitioner could only demand for the payment of the monthly amortization after September 13. the court did not award it damages. 1981. the amortization and interests on the loan should be computed from said date. From October 1982 to June 1984. 1981. Petitioner misapplied Bonnevie. The contract in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause of Article 1934.43. still no default took place. the promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1. the loan contract was perfected on March 31. it was perfected only on September 13. They submit that petitioner misread Bonnevie. It is a basic principle in reciprocal obligations that neither party incurs in delay. We also agree with private respondents that a contract of loan involves a reciprocal obligation. despite the express agreement of the parties that payment shall commence on May 1. Petitioner claims that a contract of loan is a consensual contract. a perfected loan agreement imposes reciprocal obligations. In the present case. petitioner claims. For the latter. can give rise to an action for damages. 1982. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES IN THE FACE OF IRREGULAR PAYMENTS MADE BY ALS AND OPPOSED TO THE RULE LAID DOWN IN SOCIAL SECURITY SYSTEM VS. transferring the title of the property to ALS. 1982 when petitioner fully complied with its obligation under the loan contract. This. where BPIIC submits for resolution the following issues: I. It is an accepted promise to deliver something by way of simple loan. as it was only on September 13. Moreover. in . private respondents conclude. However. This finds support in the registration on March 31. We recognized in this case. On the first issue. private respondents were required to reduce Frank Roa’s loan below said amount. a simple loan is perfected upon the delivery of the object of the contract. 1982. COURT OF APPEALS. However. 1982 for it was only then when it complied with its obligation under the loan contract. Inc. if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Consequently. It is perfected only upon the delivery of the object of the contract. In this case. As averred by private respondents. when the full loan was released to private respondents. According to petitioner. Following the intentions of the parties on the commencement of the monthly amortization. II. Later. default sets in. Civil Code. 125 SCRA 122. as shown above. petitioner instituted an action for damages. when BPIIC issued a cancellation of mortgage of Frank Roa’s loan. 1982. This fact constituted sufficient ground for moral damages in favor of private respondents. they already paid a total amount of P201. there was no basis for BPIIC to extrajudicially foreclose the mortgage and cause the publication in newspapers concerning private respondents’ delinquency in the payment of their loan. was perfected only on September 13. 1981. and ALS and Litonjua. the loan was actually released onMarch 31. To give meaning to Article 1934. private respondents assert that based on Article 1934 of the Civil Code. because of acts attributable to petitioner. because as of June 1984. The motion for reconsideration filed by petitioner BPIIC was likewise denied. 1981.000 with respondent bank. In this case. However. vs. even though the loan contract was signed on March 31. the loan contract in this case was perfected only on September 13. the corresponding mortgage was executed and registered. Therefore. petitioner contends that the Court of Appeals erred in ruling that because a simple loan is perfected upon the delivery of the object of the contract. on the other. hence this petition.payment of the monthly amortization should commence only a month after the said date. COURT OF APPEALS. In their comment. We agree with private respondents. wherein the obligation or promise of each party is the consideration for that of the other. 125 SCRA 122. since the fault was attributable to petitioner therein. WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL CONTRACT IN THE LIGHT OF THE RULE LAID DOWN IN BONNEVIE VS. the consideration for BPIIC in entering into the loan contract is the promise of private respondents to pay the monthly amortization. In reciprocal obligations. Evidence showed that private respondents had an overpayment. petitioner applied for a loan of P500. In the present case. they did not incur in delay when they did not commence paying the monthly amortization on May 1. the date when the mortgage deed was executed. one month after the supposed release of the loan. hence. 44 SCRA 445. that the loan contract was perfected on March 31. The latter approved the application through a board resolution. 1981. on the one hand. the date of the second release of the loan. Therefore. Court of Appeals. and a loan contract is perfected at the time the contract of mortgage is executed conformably with our ruling in Bonnevie v. private respondents were only able to do so in August 1982. Thereafter. As BPIIC only agreed to extend a P500. and ALS executing the Mortgage Deed in favor of BPIIC. Therefore. In Saura Import and Export Co. and their payment did not start a month thereafter.96. Private respondents further maintain that even granting. 1981 of the Deed of Absolute Sale executed by Roa in favor of ALS. 1982. Petitioner also argues that while the documents showed that the loan was released only on August 1982.000 loan. A perfected consensual contract. Bonnevie must be construed to mean that the contract to extend the loan was perfected on March 31. a month after the perfection of the contract.791. the delay in the release of the loan should be attributed to private respondents. 1982. hence a real contract. private respondents’ obligation to pay commenced only on October 13. the loan contract between BPI.960. where the obligation or promise of each party is the consideration of the other party. 1981. as can be inferred from the stipulations in the contract. said contract does not constitute the real contract of loan which requires the delivery of the object of the contract for its perfection and which gives rise to obligations only on the part of the borrower. as found by the Court of Appeals. neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. it is the promise of BPIIC to deliver the money. Only when a party has performed his part of the contract can he demand that the other party also fulfills his own obligation and if the latter fails. Development Bank of the Philippines. According to private respondents.
” except that.000 as nominal damages. For this purpose. but the award to them of attorney’s fees in the amount of P50. Court of Appeals. where we said: Nor can the SSS be held liable for moral and temperate damages. BPIIC was negligent in relying merely on the entries found in the deed of mortgage.000 in favor of private respondents as attorn ey’s fees. The SSS was of the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of irregular payments made by private respondents and placed reliance on the automatic acceleration clause in the contract. the amount of P25. As concluded by the Court of Appeals “the negligence of the appellant is not so gross as to warrant moral and temperate damages. Lastly. Neither can we agree with the findings of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. it did not make the corresponding deduction in the monthly amortization to conform to the actual amount of loan released. The award of moral and exemplary damages in favor of private respondents is DELETED.000. we should rule out the award of moral and exemplary damages. Other points raised by petitioner in connection with the first issue. WHEREFORE. Additionally. the starting date is October 13. 1982 and not May 1.000 is UPHELD. SO ORDERED. such as the date of actual release of the loan and whether private respondents were the cause of the delay in the release of the loan. in our view. are factual. are AFFIRMED WITH MODIFICATION as to the award of damages. they were irregular in their payment of monthly amortization.computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage. as in SSS where we awarded attorney’s fees because private respondents were compelled to litigate. the decision dated February 28. 120 SCRA 707. On these points we are bound by the findings of the appellate and trial courts. Conformably with our ruling in SSS. . However. But as admitted by private respondents themselves. without checking and correspondingly adjusting its records on the amount actually released to private respondents and the date when it was released. for which an award of nominal damages should be given in recognition of their rights which were violated by BPIIC. Costs against petitioner. 1997. It merely exercised its right under the mortgage contract because private respondents were irregular in their monthly amortization. of the Court of Appeals and its resolution dated April 21. said Court reduced those damages by only P5. On the second issue. Private respondents counter that BPIIC was guilty of bad faith and should be liable for said damages because it insisted on the payment of amortization on the loan even before it was released. we sustain the award ofP50.000 is sufficient. Consequently. The filing alone of the foreclosure application should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages. we can not properly declare BPIIC in bad faith. petitioner is ORDERED to pay private respondentsP25.00 instead of eliminating them. factual matters need not tarry us now. and it immediately initiated foreclosure proceedings when private respondents failed to make timely payment. Since petitioner has not shown that the instant case is one of the exceptions to the basic rule that only questions of law can be raised in a petition for review under Rule 45 of the Rules of Court. It invoked our ruling in Social Security System vs. Such negligence resulted in damage to private respondents. 1981. petitioner claims that it should not be held liable for moral and exemplary damages for it did not act maliciously when it initiated the foreclosure proceedings. 1998. Further.
” Thus. However. the Province of Isabela issued several checks drawn against its accounts with petitioner Philippine National Bank (PNB) in favor of the seller. should be imposed. Thereafter.90 with interest thereon at the legal rate from the date of the filing of the complaint until the entire amount is fully paid. RESOLUTION FRANCISCO.a. All the three courts. 1974 before the Regional Trial Court (RTC) an “action for a sum of money and damages. where the demand is established with reasonable certainty. v. 1994 said court issued an order clarifying that the rate is 12%.” (Italics ours. among which is: “(1) P98. against theProvince of Isabela. Inc. Any other monetary judgment which does not involve or which has nothing to do with loans or forbearance of any money.691. the interest rate shall be 12% p. CA. Said amount being merely the uncollected balance of the purchase price covered by the 23 checks encashed and appropriated by Ibarrola’s agents. Accordingly. the monetary judgment in favor of private respondent does not involve a loan or forbearance of money. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. PNB’s direct appeal to this court from that order was referred to the CA which affirmed the RTC order. 1996] PHILIPPINE NATIONAL BANK." to wit: “When an obligation. this petition for review under Rule 45 where two legal issues are raised: (1) whether in an action for damages. respectively.[G. ERLINDA G.: As payments for the purchase of medicines. Hence. In its decision dated September 29. The actual base for the computation of legal interest shall. 1987. once the judgment becomes final and executory. this Court had provided a rule “of thumb for future guidance. For her failure to receive the full payment for the medicines.691. Lyndon Pharmaceuticals Laboratories. petitioner.” the applicable rate is “6% per annum as provided in Article 2209 of the NCC and not the rate of 12% per annum as provided in (CB) Cir. hence the proper imposable rate of interest is six (6%) per cent.691. 416 applies only to: “[L]oan or forbearance of money.) PNB’s appeal to the Court of Appeals (CA) and later to the Supreme Court were denied and dismissed. At the execution stage. the sheriff computed the interest mentioned in the judgment at the rate of 12% which PNB opposed insisting that the rate should only be 6%. The actual base for the computation of this 12% interest after the judgment in this damage suit became final shall be the amount adjudged (P98.) The case at bench does not involve a loan. In the case of Eastern Shipping Lines. Forbearance of money or judgment involving a loan or forbearance of money as it arose from a contract of sale whereby Ibarrola did not receive full payment for her merchandise. 2209 of the Civil Code. SO ORDERED. the appealed decision is REVERSED. therefore . 1993 until fully satisfied. The rate of interest shall be 6% p. 1169. and (2) whether such rate shall be computed from the filing of the complaint until fully paid? The issues are not new. in accordance with the pronouncement in Eastern Shipping the rate of 12% p. which the agents appropriated after negotiating them with PNB. its Treasurer. COURT OF APPEALS and DR. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. if the amount adjudged remains unpaid. however. to “jointly and solidarily” pay Ibarrola several amounts. When an obligation arises “from a contract of purchase and sale and not from a contract of loan or mutuum. No interest. not constituting a loan or forbearance of money. a business operated by private respondent Ibarrola. the legal rate of interest is 6% as provided by Article 2209 of the New Civil Code or 12% as provided by CB Circular 416 series of 1974.691.90. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. When an obligation not constituting a loan or forbearance of money is breached then an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum in accordance with Art. computed from the time of the filing of the complaint until its full payment before finality of judgment. 416. did not specify whether the legal rate of interest referred to in the judgment is 6% or 12%. 1993. an interest on the amount of damages awarded may be imposed at thediscretion of the court at the rate of 6% per annum. On August 4.respondents. is deemed to be equivalent to a forbearance of credit. be on the amount finally adjudged. No. Indeed. PNB’s liability is based only on the RTC’s judgment where it was held solidarily liable with the other defendants due to its negligence when it “failed to assure itself” if the Provincial Treasurer was “properly authorized” by Ibarrola to “make endorsements” of said checks. except the treasurer who died in the meantime. No.a. is breached. in any case. Ibarrola filed on November 6. J. the two agents and PNB. The checks were delivered to the seller’s agents who turned them over to Ibarrola.R.) Applying the aforequoted rule. the proper rate of interest referred to in the judgment under execution is only 6%. 123643. IBARROLA.a. however. the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). and to be computed from the time the judgment became final and executory until fully satisfied.90) can be established with reasonable certainty. This interest according to Eastern Shipping shall be computed from the time of the filing of the complaint considering that the amount adjudged (P98.” docketed as Civil Case 4226-P.” (Italics supplied. the "interim period from the finality of judgment awarding a monetary claim and until payment thereof.” (Italics ours. or to cases where money is transferred from one person to another and the obligation to return the same or a portion thereof is adjudged. vs. The judgment in Civil Case 4226-P became final and executory on November 26. ACCORDINGLY.90). . Ibarrola sought clarification from the same RTC which promulgated the decision. goods or credit does not fall within its coverage for such imposition is not within the ambit of the authority granted to the Central Bank. computed from the time the judgment became final and executory on November 26. October 30. The rate of 12% interest referred to in Cir. the trial court ordered all the defendants in said civil case. except 23 checks amounting to P98.” Indeed.
petitioner in bad faith.000. the Court of Appeals rendered a decision in CAG. the trial court ruled in favor of private respondent. exemplary and nominal damages to await the final judgment of the main case in CA-G. The defendant-appellant Pilipinas Bank.000. 1993 PILIPINAS BANK. On July 1.00 representing the total actual damages suffered by the plaintiff plus legal interest until fully paid. "F" and "G"). Petitioner. 97873 August 12.300. 1987. (b) The sum of One Hundred Thousand (P100.000. J.R.R. Branch 71.000." wherein Greatland conveyed to petitioner several parcels of land in consideration of the sum of P7.69. Antipolo. On June 17. the Supreme Court in G.300.00 out of the total consideration of the Dacion en Pago. in favor of private respondent.300.707. 05909. No. The matters sought to be clarified arose in the course of the execution of the decision of the Regional Trial Court. 78). upon the filing of the required bond. No. 2) P3. 1985 before the Court of Appeals in CA-G.00 exemplary and nominal damages to vindicate plaintiff's violated rights. The Resolution was rendered in response to private respondent's motion for clarification of the decision of the Court of Appeals in CA-G.707.965.G.70 payable to the Clerk of Court. Constantino Bautista. 1985. and LILIA R. by limiting the execution pending appeal against petitioner to P5.: This is a petition for certiorari under Rule 45 of the Revised Rules of Court to review the Resolution of the Court of Appeals in CAG. the conditions stipulated therein were never fulfilled.000. 1986. The trial court granted the motion for execution pending appeal in an Order dated April 3.R.R. 1991. 6) Costs of suit (Rollo.R. No. vs. 06017. 1987. date when demand was first made (Exh. 1985.217.R. the trial court granted the new motion for execution pending appeal filed by private respondent pursuant to the Resolution of the Supreme Court dated June 17. 1988. and (3) that notwithstanding her demand for payment.00) Pesos. while admitting the execution of the Dacion en Pago. 06017. THE HONORABLE COURT OF APPEALS. The complaint alleged: (1) that petitioner and Greatland Realty Corporation (Greatland) executed a "Dacion en Pago. 06017.335. Dismissing petitioner's defense as unmeritorious. petitioner appealed the decision of the trial court to the Court of Appeals. to pay private respondent as follows: 1) P2. (2) that Greatland assigned P2. petitioner.00 in moral damages to partially assuage the extreme moral sufferings of plaintiff inflicted upon her person considering the bad faith on the part of the defendants and their failure to act with justice.517. respondents.00 (one for P4. L-76506 affirmed the Order dated October 30. Antipolo. 06017 promulgated on March 14. Petitioner complied with the writ of execution pending appeal by issuing two manager's checks in the total amount of P5. Rizal in Civil Case No.00) Pesos in moral damages. The check payable to private respondent was encashed on July 15. for collection of a sum of money.R. On October 30. No. 239-A. No.707. and to give what is lawfully due her and observe honesty and good faith. representing the total amount assigned by Greatland to her. 1986 of the Court of Appeals.936.30 payable to private respondent and another for P551. ECHAUS. claimed: (1) that its former president had no authority to enter into such agreement. and (3) that assuming arguendo that the agreement was binding. Petitioner challenged the Order dated April 3.517. 239-A. jointly and severally. the Court of Appeals modified the Order dated April 3. On June 28. On the same day. as modified by the decision of the Court of Appeals in CA-G.R. . (2) that it never ratified the same.00 liability of defendant Pilipinas to Greatland plus legal interest from the dates of assignments until fully paid. p.000. 1985. private respondent filed a complaint against petitioner and its president. No.000. with interest at the legal rate starting July 24. In Civil Case No. The trial court ordered petitioner and its co-defendant. 3) P1. 06017.300.770. 5) Attorney's fees equivalent to 15% of the total award in favor of the plaintiff. private respondent filed a motion for Immediate Execution Pending Appeal. CV No. No. formerly known as Filipinas Manufacturers Bank is ordered to pay the plaintiff-appellee the following: (a) The sum of Two Million Three Hundred Thousand (2.00 and deferring the execution of the award for moral.R. 1990. refused and failed to pay the said amount assigned to her. 1981. which docketed the appeal as CAG. CV-06017. RTC. CV No.000. 4) P100.00 the total amount assigned by Greatland in her favor out of the P2. which modified the judgment of the trial court as follows: 1. Rizal). to assuage moral sufferings and embarrassment of plaintiffappellee as a consequence QUIASON. 1988.776. On March 22. SP No.
In its Resolution promulgated on March 14. on her part. "N" (Rollo. 1990. 1981 up to July 14.300.00. b) The imposition of such "legal rate" of interest on the accrued interest' from July 24.00 at 12% per annum as proposed by private respondent. the trial court.00 should be 12% per annum in accordance with Circular No. the legal interest on the principal amount of P2. which however could not be acted upon because on October 23.00 (P2.655.of appellant-bank's unwarranted acts. not allowed in the instant case. instead of 6% per annum as proposed by petitioner. p. 06017.300. 1974 of the Central Bank.000. 83-84).1990. Constantino Bautista is absolved of personal liability (Rollo.000.300. which likewise was withdrawn on August 13.000.00 from July 24. 416 dated July 29. According to private respondent. and f) Aside from this final award of 10% attorney's fees chargeable against defendantappellant. is denied. 35-36).707.300. 06017 became final and executory. depending on the computation of the interest. therefore. together "with interest on the amount of P2.000. "F" and "G"). On October 16.517. p.00 as exemplary damages and attorney's fees equivalent to 10% of the P2. 31-32). whether this should totally go to plaintiff-appellee's former counsel or to be shared on the basis of quantum meruit with the undersigned counsel. CV No.813.R. the decision of the Court of Appeals rendered in CA-G. In this appeal. 1990 of the trail court. date when demand was first made (Exh. 05909. filed a motion for reconsideration of the decision of the Court of Appeals in CA-G. c) The amount of the costs of suit will include premium on surety bond. No. and 2. P100.300. while ordering the refund to petitioner of the excess payment. Petitioner filed a motion for extension of time to file a Petition for Review on Certiorari with the Supreme Court.R. petitioner moved to reconsider the Order dated October 12.R.000. 06017.50 as cost.623. 06017) awarded to private respondent damages in the total amount of only P2. No. (which furnished the bond required in the advance execution of the decision of the trial court) to refund to her the excess payment of P1. No. the Court of Appeals clarified that: a) The legal rate of interest on the principal award of P2. fixed the interest rate due on the amount of P2. It must be recalled that while private respondent was able to collect P5. 1981 (as per decision) up to July 14. private respondent filed a Motion for Clarification with the Court of Appeals in CA-G.67 with interests at 6% (Rollo. 1981.R. whether or not former counsel of plaintiff-appellee can still collect from her the balance of 15% out of the 25% attorney's fees under Exh. (c) The sum of Twenty Five Thousand (P25. 1991. SP No. Private respondent. 1990. 1990. c) The payment of premium on the bond in the sum of P259. the final judgment in the main case (CA-G. pp.000. 1988 (date of actual payment made by defendant-appellant to plaintiff-appellee per execution pending appeal).000.300. Hence. SO ORDERED (Rollo.300.300. as exemplary damages to serve as an example or correction for the public good. petitioner filed a motion in the trial court praying that private respondent and Standard Insurance Co. 1990. d) The surety bond posted by plaintiffappellee may be released after satisfaction of the decision. regarding the following matters: a) The "legal rate" of interest on the principal award of P2.R. 1990.000. representing attorney's fees. On September 4.000. 416 and not 6% per annum as computed by petitioner.00) Pesos. On October 12. and e) Payment/distribution of attorney's fees may/shall be litigated in a separate proceeding if the parties cannot settle their differences amicably.000.898.00 at the legal rate starting July 24.32). P25. e) The award of attorney's fees equivalent to 10% of the principal award. d) The discharged of the surety bond whether total or partial.00 representing the amount assigned by Greatland to private respondent. b) The computation of compounding interest annually has no basis. (d) The sum equivalent to ten (10) percent of the principal claim awarded." Private respondent opposed the motion of petitioner with respect to the rate of interest to be charged on the amount of P2.00). petitioner claims that the Court of Appeals erred: .00 as moral damages.00 due her should be 12% per annum pursuant to CB Circular No. 1988.000. pp.00 from petitioner pursuant to the writ of advance execution allowed in CA-G. being without legal and factual basis.000. which however was withdrawn on July 23. No.
We also held that payment of unliquidated cash advances to an employee by his employer (Villarica v. fixing the rate of interest at 12% per annum. 208 SCRA 542 ). not the Central Bank Circular No. Tensuan.000.000. If the obligation consists in the payment of a sum of money. Angas. Hence.300. 416. Court of Appeals. 18). and to charge such rate or rates whenever warranted by prevailing economic and social conditions: Provided.00 adjudged to be paid by petitioner to private respondent is 12% per annum. As amended. 416 does not apply to judgments involving damages (Reformina v. which provides: By virtue of the authority granted to it under Section 1 of Act 2655.00 was assigned by Greatland in favor of private respondent. 1622 dated July 29. the Usury Law now provides: Sec. finance companies and other similar credit institutions although the rates prescribed for these institutions need not necessarily be uniform. . goods. (2) In not holding that the refund to which petitioner is entitled should earn interest at the rate of 12% per annum. 239-A filed by private respondent against petitioner "involves forbearance of money. p.335.300. No. otherwise known as the "Usury Law" the Monetary Board in its Resolution No. and (3) judgments. or credits and the rate allowed in judgments.000. Applying Central Bank Circular No. in the absence of express contract as to such rate of interest. (italics supplied) Note that Circular No. the Monetary Board of Central Bank issued Central Bank Circular No. the Court held that the judgments spoken of and referred to in Circular No. within the ambit of the authority granted to the Central Bank.D. Any other kind of monetary judgment which has nothing to do with nor involving loans or forbearance of any money. 2655) for that purpose. shall be twelve (12%) per cent per annum. Said Article 2209 provides: Art. the indemnity for damages." We held that Circular No. Tensuan.00? The said amount was a portion of the P7. Sec. What then is the nature of the judgment ordering petitioner to pay private respondent the amount of P2. which emphasized that the "judgments" contemplated in Circular No. Jr. Presidential Decree No. 1974. or forbearance of any money.300. has prescribed that the rate of interest for the loan. p. Acting on the authority vested on it by the Usury Law. (3) In not holding that the surety bond should only be released after actual refund (Rollo. 154 SCRA 438 ).. the legal interest. 1-a. .69 which petitioner was obligated to pay Greatland as consideration for the sale of several parcels of land by Greatland to petitioner. or credits and the rate allowed in judgments. supra) and compensation in expropriation proceedings (National Power Corporation v. as the unpaid creditor from the defendant bank. goods or credits and amended the Usury Law (Act No. 33). goods or credits. in effect. goods or credits does not fall within the coverage of the said law for it is not.. That such changes shall not be made oftener that once every twelve months. p. goods or credit. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest for the loan or renewal thereof or the forbearance of any money. 123 SCRA 259 ) and the return of money paid by a buyer of a leasehold right but which contract was voided due to the fault of the seller (Buisier v. The rate of interest for the loan or forbearance of any money. as amended by P. and in the absence of stipulation. Tomol. goods. what is applicable is the rate of 6% per annum as provided in Article 2209 of the Civil Code of the Philippines . Petitioner argues that the applicable law is Article 2209 of the Civil Code. and the debtor incurs in delay. as the principal award to plaintiff-appellee (private respondent) in the amount of P2. .3. a simple collection of the money due to plaintiff-appellee. shall be the payment of the interest agreed upon. 116.776. The case is. 416 are "judgments in litigation involving loans or forbearance of any money.300. 416. the Court of Appeals held that the applicable rate of interest is 12% per annum. The amount of P2. 416. In Reformina v. (2) forbearance of any money. there being no stipulation to the contrary. 116 authorized the Monetary Board to prescribe the maximum rate or rates of interest for the loan or renewal thereof or the forbearance of any money. Philippine Virginia Tobacco Administration v. 188 SCRA 628 . which is six per cent per annum. as amended.00 was the overdue debt of defendant-appellant to her since July 1981. goods or credits. Rollo. 2209. Jr. supra." Reformina was affirmed in Philippines Virginia Tobacco Administration v. shall be six per centum per annum or such rate as may be prescribed by the Monetary Board of the Central Bank of the Philippines for that purpose in accordance with the authority hereby granted.(1) In ruling that the legal rate of interest on the amount of P2. 139 SCRA 260 . This Circular shall take effect immediately. in the absence of express contract as to such rate of interest. In the exercise of the authority herein granted. 416. 417 "are judgments involving said loans or forbearance only and not in judgments in litigation that have nothing to do with loans . Court of Appeals. The Court of Appeals was of the theory that the action in Civil Case No. Tomol. the debtor" (Resolution. deals with (1) loans. the Monetary Board may prescribe higher maximum rates for consumer loans or renewals thereof as well as such loans made by pawnshops.000. The said obligation therefore arose from a contract of purchase and sale and not from a contract of loan or mutuum.
416.898.33. 416 applies to cases where money is transferred from one person to another and the obligation to return the same or a portion thereof is subsequently adjudged. Costs against private respondent. SO ORDERED. The Resolution of the Court of Appeals appealed from is MODIFIED in that (1) the amount of P2.707. the petition is GRANTED.and not the rate of 12% per annum as provided in Circular No. the trial court.623. we sustain petitioner's contention as correct. consistent with its thesis that Circular No. funds are advanced by the losing party to the prevailing party with the implied obligation of the latter to repay former.000. on motion. ." We believe that this ruling of the Court of Appeals is clear enough in ordering that the surety bond shall be released only after private respondent has fully refunded the overpayment to petitioner. as equity and justice may warrant under the circumstances. Under Section 5 of Rule 39 of the Revised Rules of Court where "the judgment executed is reversed totally or partially on appeal.619.67 to be refunded by private respondent to petitioner shall earn interest of 12% per annum. Finally. On appeal. Petitioner next contends that. after the case is remanded to it.623. Private respondent was paid in advance the amount of P5. In an execution pending appeal.00 by petitioner to the order for the execution pending appeal of the judgment of the trial court. 416 applies only to judgments involving the payment of loans or forbearance of money. may issue such orders of restitution. the Court of Appeals reduced the total damages to P3. goods and credit. WHEREFORE." It was to guarantee the restitution contemplated by Section 5 of Rule 39 of the Revised Rules of Court that private respondent was required by the trial court to post a bond before the writ of advance execution was issued.00 adjudged to be paid by petitioner to private respondent shall earn interest of 6% per annum and (2) the amount of P1. the excess amount ordered to refunded by private respondent falls within the ruling inViloria and Buiser that Circular No. petitioner questions as vague the ruling of the Court of Appeals that the surety bond given to secure the advance execution may be discharged "upon the finality and satisfaction of the decision.898.300.517. In the case before us. the Court of Appeals should have ordered private respondent to pay interest at the rate of 12% on the overpayment collected by her pursuant to the advance execution of the judgment.083. leaving a balance of P1. in case the appellate court cancels or reduces the monetary award.67 to be refunded by private respondent to petitioner. Again.
730. Respondent accepted the project on 9 July 1992.8 million loan matured and respondent demanded payment plus interest and penalty.165. Thus.516. Pan Pacific’s operational capital was becoming inadequate for the project.957.. Pan Pacific refused the offsetting but agreed to receive the reduced amount of P3.. Pan Pacific. DEL ROSARIO. On 24 November 1989.. On 5 April 1991.957.. and RICARDO F.945..730. In 1990. labor costs and prices of materials escalated. DEL CASTILLO.015.226. Pan Pacific. To show goodwill.. However.R. Pan Pacific refused to pay the loan. 63966 AS WELL AS THE RESOLUTION DATED 5 OCTOBER 2005 DENYING THE MOTION FOR RECONSIDERATION. No.8 million was released directly to laborers and suppliers and not a single centavo was given to Pan Pacific.. (Pan Pacific) is engaged in contracting mechanical works on airconditioning system. BRANCH 59 (RTC) BY ORDERING EQUITABLE PCI BANK (RESPONDENT) TO PAY PETITIONERS P1. TheP1. 2010 X ...942 as advance payments.730. among others. PRICE INDEX OF THE NATIONAL STATISTICS OFFICE.. Promulgated: March 18. EQUITABLE PCI BANK (formerly THE PHILIPPINE COMMERCIAL INTERNATIONAL BANK).688.. CV NO... Due to the extraordinary increases in the costs of labor and materials.. Meanwhile..622.. Pan Pacific maintained that the P1.8 million as a requirement for the loan. IN THE ASSAILED DECISION.. DEL ROSARIO (PETITIONERS) FILED THIS PETITION FOR REVIEW ASSAILING THE COURT OF APPEALS’ (CA) DECISION DATED 30 JUNE 2005 IN CA-G.. in accordance with the escalation clause. there was really no consideration for the promissory note. Labor Indices of the Department of Labor and Employment.2 of the “General Conditions for the Construction of PCIB Tower II Extension” (the escalation clause). On 28 April 1992. 15 MARCH 1991. was constrained to execute a promissory note in the amount of P1. respondent offered Pan Pacific a loan of P1. hence. PD 1594 AND ITS IMPLEMENTING RULES AND REGULATIONS AS AMENDED. Pan Pacific commenced the mechanical works in the project site.8 million and P414.. Ricardo F. ABAD. AND RICARDO F.52.... SHIPPING DOCUMENTS SUBMITTED BY PPSCI. and PEREZ.8 million. Pan Pacific reduced the price adjustment to P4.548.. 2. Pan Pacific also posted a surety bond..07 in accordance with the escalation clause.PAN PACIFIC SERVICE CONTRACTORS.: The Case Pan Pacific contended that with this recommendation.07 as recommended by the TCGI Engineers for the purpose of extrajudicial settlement. Pan Pacific alleged that the promissory note did not express the true agreement of the parties. n. Del Rosario (Del Rosario)..1 and 70..01.8 million was to be considered as an advance payment on the price adjustment... representing the loan.30.. Inc.... TCGI Engineers..410.. through Del Rosario..858. Chairperso BRION. TCGI Engineers recommended to respondent that the price adjustment should be pegged at P3. Instead. that Pan Pacific shall be entitled to a price adjustment in case of increase in labor costs and prices of materials under paragraphs 70.. less P1.311. building in Makati City. versu s- G. The Facts Pan Pacific Service Contractors. entered into a contract of mechanical works (Contract) with respondent for P20. Against its will and on the strength of respondent’s promise that the price adjustment would be released soon. Pan Pacific and respondent also agreed on nine change orders forP2. Respondent’s appointed project engineer. it is null and void from the beginning.186.610.. INC... the total consideration for the whole project was P23. the P1. JJ. Pan Pacific claimed a price adjustment of P5. Pan Pacific insisted that it would not have incurred the loan if respondent released the price adjustment on time. Pursuant to the contract.. respondent was already estopped from disclaiming liability of at least P3. SUB-CLAUSE 70.1 OF THE GENERAL CONDITIONS OF THE CONTRACT DOCUMENTS. Respondent stood firm that it would not release any amount of the price adjustment to Pan Pacific but it would offset the price adjustment with Pan Pacific’s outstanding balance of P3. through its President. the PCIB Tower II extension . PAN PACIFIC SERVICE CONTRACTORS. INC. THE CA MODIFIED THE 12 APRIL 1999 DECISION OF THE REGIONAL TRIAL COURT OF MAKATI CITY. respondent withheld the payment of the price adjustment under the escalation clause despite Pan Pacific’s repeated demands.30. interests.07 WITH INTEREST AT THE LEGAL RATE OF 12% PER ANNUM STARTING 6 MAY 1994 UNTIL THE AMOUNT IS FULLY PAID. Respondent. TCGI Engineers based their evaluation of the price adjustment on the following factors: 1. Petitioners. penalties and collection charges.R..957.67. 169975 Present: CARPIO. J. The Contract stipulated. The project was completed in June 1992....07. Pan Pacific made several demands for payment on the price adjustment but respondent merely kept on promising to release the same.. Therefore..800.. J.-X DECISION CARPIO. asked for a reduction in the price adjustment.
JUDGMENT IS HEREBY RENDERED IN FAVOR OF THE PLAINTIFFS AND AGAINST THE DEFENDANT AS FOLLOWS: 1. SO ORDERED. DISMISSING DEFENDANT’S COUNTERCLAIM. petitioners filed a complaint for declaration of nullity/annulment of the promissory note. To unilaterally increase the interest rate of the adjusted price would be violative of the principle of mutuality of contracts. the CA ordered respondent to pay P1.97 because it represented the final payment on the basic contract price. 2. with respect to the principal amount due to petitioners. ORDERING THE DEFENDANT TO PAY THE PLAINTIFFS THE FOLLOWING AMOUNTS: A. fees in favor of petitioners and in dismissing its counterclaim. With respect to respondent.516. the Court maintains the legal rate of twelve percent per annum starting from the date of On 23 May 1999. WHETHER THE RTC ERRED IN DEDUCTING THE AMOUNT OFP126. WITH RESPECT TO THE PETITIONERS. petitioners partially appealed the RTC Decision to the CA. PREMISES CONSIDERED. thedispositive portion of which reads: WHEREFORE. Unlike their request for price adjustment on the basic contract price.07. The CA removed the deduction of P126. The CA denied petitioners’ claim for the application of the bank lending rate of 18% compounded annually reasoning. and the promissory note charged an interest of 18%. On 26 July 2005. Ruling of the Court We grant the petition.903. This Court notes that respondent did not appeal the decision of the CA. 2. petitioners filed a Motion for Partial Reconsideration seeking a reconsideration of the CA’s Decision imposing the legal rate of 12%. P100. Petitioners claimed that the interest rate applicable should be the 18% bank lending rate.000.07 to petitioners. sum of money. Respondent likewise filed a Motion for Reconsideration of the CA’s decision.015.516. UNTIL THE AMOUNT IS FULLY PAID.000. plaintiffs never informed nor sought the approval of defendant for the imposition of 18% interest on the adjusted price. respondent appealed the entire RTC Decision for being contrary to law and evidence. INSTEAD OF THE BANK LOAN RATE OF 18% COMPOUNDED ANNUALLY BEGINNING SEPTEMBER 1992. the RTC rendered its decision. to wit: Anent the 18% interest rate compounded annually. THE DATE WHEN THE COMPLAINT WAS FILED. In sum. in awarding the unpaid balance of the price adjustment. Hence.903. P1. On 12 April 1999. AND WITH COSTS AGAINST THE DEFENDANT.00 REPRESENTING EXEMPLARY DAMAGES.000.10 RE PRESENTING UNPAID BALANCE OF THE ADJUSTMENT PRICE. Branch 59. In its decision dated 30 June 2005. 1994. ELEVATED THE CASE BEFORE THIS COURT.97 FROM THE BALANCE OF THE ADJUSTED PRICE AND IN AWARDING ONLY 12% ANNUAL INTEREST ON THE AMOUNT DUE.389. the appeals of the parties with the CA are as follows: 1. The Issue PETITIONERS Petitioners submit this sole issue for our consideration: Whether the CA. the CA denied both motions. and damages against the respondent with the RTC of Makati City.015. erred in fixing the interest rate at 12% instead of the 18% bank lending rate.00 AS AND FOR ATTORNEY’S FEES.111. The only remaining issue is the interest rate applicable for respondent’s delay in the payment of the balance of the price adjustment. In a Resolution dated 5 October 2005. WITH INTEREST THEREON AT THE LEGAL RATE OF TWELVE (12%) PERCENT PER ANNUM STARTING MAY 6. with interest at the legal rate of 12% per annum starting 6 May 1994. DECLARING THE PROMISSORY NOTE (EXHIBIT “B”) NULL AND VOID. Hence. which the CA correctly computed at P1.On 6 May 1994. Thus. FOR LACK OF MERIT. there is no longer any issue as to the principal amount of the unpaid balance on the price adjustment. P50. AND P50. the CA modified the RTC decision. On 26 May 1999.00 REPRESENTING MORAL DAMAGES. whether the RTC erred in declaring the promissory note void and in awarding moral and exemplary damages and attorney’s . the said proviso does not authorize plaintiffs to unilaterally raise the interest rate without the other party’s consent. AGGRIEVED BY THE CA’S DECISION. while it is true that the contract provides for an interest at the current bank lending rate in case of delay in payment by the Owner.
between the parties and their successors in interest. it naturally follows that respondent was never consulted or informed of the imposition of 18% interest rate compounded annually on the adjusted price. THE OWNER SHALL PAY TO THE CONTRACTOR INTEREST AT THE RATE BASED ON BANKING LOAN RATES PREVAILING AT THE TIME OF THE SIGNING OF THE CONTRACT UPON ALL SUMS UNPAID FROM THE DATE BY WHICH THE SAME SHOULD HAVE BEEN PAID. petitioners invoke Section 2.015. and held respondent liable for the balance of P1. IN THE CASE OF THE FINAL CERTIFICATE REFERRED TO IN SUB-CLAUSE 60. Although the contract provides for the period when the recommendation of the TCGI Engineers as to the price adjustment would be binding on the parties. however. it necessarily follows that the bank lending interest rate of 18% shall be applied. the CA already settled that petitioners consulted respondent on the imposition of the price adjustment. WITHIN 56 DAYS. Decree or other Law or any regulation or bye-law (sic) of any local or other duly constituted authority. Ordinance. respondent insists that under the provisions of 70. Thus.1 Increase or Decrease of Cost There shall be added to or deducted from the Contract Price such sums in respect of rise or fall in the cost of labor and/or materials or any other matters affecting the cost of the execution of the Works as may be determined. Respondent did not appeal from the decision of the CA. Ordinance. GENERAL CONDITIONS 60. It is settled that the agreement or the contract between the parties is the formal expression of the parties’ rights. both of which provide for interest at the bank lending rate on any unpaid amount due under the contract.07. and the consent for the imposition of the bank lending rate. A review of Section 2. This is erroneous. It is the best evidence of the intention of the parties. petitioners allege that the contract between the parties consists of two parts.10 of the General Conditions as follows: Agreement 2.2 of the General Conditions. A perusal of the assailed decision shows that the CA made a distinction between the consent given by the owner of the project for the liability for the price adjustments. We disagree. it was established. hence. respondent isestopped from contesting such fact. SHALL. herein respondent. there being no prior consultation with the respondent regarding the additional cost to the basic contract price. In this appeal. after the date 28 days prior to the latest date of submission of tenders for the Contract there occur in the country in which the Works are being or are to be executed changes to any National or State Statute.judicial demand.10 of the General Conditions shows that the consent of the respondent is not . nonetheless. with a copy to the Owner. Petitioners further claim that there is nothing in the contract which requires the consent of the respondent to be given in order that petitioners can charge the bank lending rate. in the execution of the Contract. However. the CA went beyond the intent of the parties by requiring respondent to give its consent to the imposition of interest before petitioners can hold respondent liable for interest at the current bank lending rate. (EMPHASIS SUPPLIED) Petitioners thus submit that it is automatically entitled to the bank lending rate of interest from the time an amount is determined to be due thereto. Specifically.516. such additional or reduced cost shall. In this case. be determined by the Engineer and shall be added to or deducted from the Contract Price and the Engineer shall notify the Contractor accordingly. no evidence of such terms other than the contents of the written agreement. while the CA held that petitioners consulted respondent for price adjustment on the basic contract price. it is stipulated that any additional cost shall be determined by the Engineer and shall be added to the contract price after due consultation with the Owner. or the introduction of any such State Statute.2 Subsequent Legislation If. BE PAID BY THE OWNER TO THE CONTRACTOR WITHIN 28 DAYS AFTER SUCH INTERIM CERTIFICATE HAS BEEN DELIVERED TO THE OWNER. AFTER SUCH FINAL CERTIFICATE HAS BEEN DELIVERED TO THE OWNER.5 IF ANY PAYMENT IS DELAYED. after due consultation with the Owner and Contractor. WITHOUT PREJUDICE TO OWNER’S RECOURSE TO ANY OTHER REMEDY AVAILABLE UNDER EXISTING LAW. Decree. Thus. Therefore. IN THE EVENT OF THE FAILURE OF THE OWNER TO MAKE PAYMENT WITHIN THE TIMES STATED. 70. petitioners. duties. regulation or bye-law (sic) which causes additional or reduced cost to the contractor. THE PROVISIONS OF THIS SUB-CLAUSE ARE WITHOUT PREJUDICE TO THE CONTRACTOR’S ENTITLEMENT UNDER CLAUSE 69. other than under Sub-Clause 70. which respondent should have paid. are not entitled to the imposition of 18% interest on the adjusted price. when the terms of an agreement have been reduced to writing. On the other hand.6 of the Agreement and Section 60. the Agreement and the General Conditions. Law. as petitioners never informed or sought the approval of respondent for such imposition.1 and 70. THE CONTRACTOR MAY CHARGE INTEREST THEREON AT THE CURRENT BANK LENDING RATES. as petitioners have already proven their entitlement to the price adjustment. The escalation clause of the contract provides: CHANGES IN COST AND LEGISLATION 70. and obligations.5 of the Agreement and Section 60. OR TO ANY TERM OF THE CONTRACT. SUBJECT TO CLAUSE 47. that part of the adjusted price demanded by plaintiffs was already disbursed as early as 28 February 1992 by defendant bank to their suppliers and laborers for their account.8.1. OR. Hence.10 TIME FOR PAYMENT THE AMOUNT DUE TO THE CONTRACTOR UNDER ANY INTERIM CERTIFICATE ISSUED BY THE ENGINEER PURSUANT TO THIS CLAUSE. it is considered as containing all the terms agreed upon and there can be.
CV No.10 of the General Conditions. Upon respondent’s failure to pay within the time provided (28 days). The written agreement entered into between petitioners and respondent provides for an interest at the current bank lending rate in case of delay in payment and the promissory note charged an interest of 18%.R. The Court’s duty is confined to the interpretation of the contract which the parties have made for themselves without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words which it does not contain.needed for the imposition of interest at the current bank lending rate. which occurs upon any delay in payment.07 with interest at the bank lending rate of 18% per annum starting 6 May 1994 until the amount is fully paid. is substantial proof that the bank lending rate at the time of default was 18% per annum. as one requiring a separate consent for the imposition of the stipulated interest. then it shall be liable to pay the stipulated interest. To provide a contrary interpretation. This promissory note. Under Section 60. 12% per annum.516. specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties. 63966. The concurrence of the two conditions is required for the payment of monetary interest. WHEREFORE. To prove petitioners’ entitlement to the 18% bank lending rate of interest. the agreement is in effect an amendment to the original contract. we GRANT the petition. SO ORDERED. We ORDER respondent to pay petitioners P1. . if no regular interest had been agreed upon by the contracting parties. undue influence or any vice of consent exercised by petitioners against the respondent. courts have no authority to alter a contract by construction or to make a new contract for the parties.10 of the General Conditions which pertain to the time of payment. the literal meaning of its stipulations governs. We agree with petitioners’ interpretation that in case of default. would render the intentions of the parties nugatory. Once the parties agree on the price adjustment after due consultation in compliance with the provisions of the escalation clause. the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. Applicable Interest Rate Under Article 2209 of the Civil Code. It is only when the parties to a contract have failed to fix the rate of interest or when such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or forbearance of money. payment of monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest.5 of the Agreement and Section 60. the respondent shall pay such liability to the petitioner within 28 days from issuance of the interim certificate. the interest rate agreed upon is binding on them. the consent of the respondent is not needed in order to impose interest at the current bank lending rate. This is the logical interpretation of the agreement of the parties on the imposition of interest. In these cases. and (2) the agreement for the payment of interest was reduced in writing. Therefore. then the damages payable will consist of payment of legal interest which is 6%.015. payment of additional interest at a rate equal to the regular monetary interest becomes due and payable. petitioners presented the promissory note prepared by respondent bank itself. The escalation clause must be read in conjunction with Section 2. In the absence of a stipulation of a particular rate of penalty interest. It is only when the contract is vague and ambiguous that courts are permitted to resort to construction of its terms and determine the intention of the parties. and gives rise to the liability of respondent to pay the adjusted costs. Article 1956 of the Civil Code. We SET ASIDE the Decision and Resolution of the Court of Appeals in CAG. Absent any evidence of fraud. although declared void by the lower courts because it did not express the real intention of the parties. which refers to monetary interest. or in the case of loans or forbearances of money. Finally.
against the petitioner after the latter failed to settle his said restructured loan obligation. Third. On October 20. respondent CCP filed in the RTC of Manila a complaint for collection of a sum of money. Second. 1993 and Resolution dated July 13. 1983. the petitioner filed a Manifestation wherein he proposed to settle his indebtedness to respondent CCP by proposing to make a down payment of One Hundred Forty Thousand Pesos (P140. 1984. On August 29. plus P50. judgment is hereby rendered in favor of plaintiff and against defendant. petitioner requested and proposed to respondent CCP a mode of paying the restructured loan. the amount of P7.e. arguendo.411. Petitioner claimed that he has not been able to locate Wilson Lucmen.000.314.996.respondents. there being none. (a) twenty percent (20%) of the principal amount of the loan upon the respondent giving its conformity to his proposal. respondent CCP did not agree to the petitioner’s proposals and so the trial of the case ensued.421. 84-26363. DECISION DE LEON. The petitioner appealed the decision of the trial court to the Court of Appeals insofar as it charged interest. In affirming the decision of the trial court imposing surcharges and interest.00). petitioner. the appellate court held that: We are unable to accept appellant’s (petitioner’s) claim for modification on the basis of alleged partial or irregular performance. 1984 amounted to Six Million Eighty-Eight Thousand Seven Hundred Thirty-Five Pesos and Three Centavos (P6.00 as exemplary damages .411.03). Defendant’s counterclaims are ordered dismissed. Instead.[G..000.000.421. While the case was pending in the trial court. October 19. petitioner may not avoid his liability to pay his obligation under the promissory note (Exh. respectively. In his appeal.32). Branch 27. and (b) the balance on the principal obligation payable in thirty-six (36) equal monthly installments until fully paid. However. 1979 in the amount of Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and ThirtyTwo Centavos (P3. until fully paid. respondent CCP. “A”) which he must comply with in good faith pursuant to Article 1159 of the New Civil Code. J. the dispositive portion of which reads: WHEREFORE. JR. the appellate court rendered a decision. assuming. not a single centavo appears to have been paid by the defendant. by ratiocinating as follows: Given the circumstances of the case.: Before us is a petition for review of the Decision dated August 31. the appellate court modified the decision of the trial court by deleting the award for exemplary damages and reducing the amount of awarded attorney’s fees to five percent (5%). the alleged accommodated party but he did not. 1978. He abandoned his alleged defense in the trial court that he merely accommodated his friend. with the foregoing modification. it gave little weight to the petitioner’s contention that the loan was merely for the accommodation of Wilson Lucmen for the reason that the defense propounded was not credible in itself. for three (3) times the petitioner offered to settle his loan obligation with respondent CCP.00) and to issue twelve (12) checks every beginning of the year to cover installment payments for one year. However. COURT OF APPEALS and the CULTURAL CENTER OF THE PHILIPPINES. 1978 and July 6. 2001] ANTONIO TAN. the trial court rendered a decision. and every year thereafter until the balance is fully paid.088. as exemplary damages. for brevity) evidenced by two (2) promissory notes with maturity dates on May 14. wrote a letter dated May 30. 1991.735. attorney’s fees and exemplary damages against the petitioner. The trial court gave five (5) reasons in ruling in favor of respondent CCP. the last installment falling due on December 31. Petitioner defaulted but after a few partial payments he had the loans restructured by respondent CCP. On May 8. ordering defendant to pay plaintiff. i. First. petitioner again sent a letter to respondent CCP requesting for a moratorium on his loan obligation until the following year allegedly due to a substantial deduction in the volume of his business and on account of the peso devaluation. and petitioner accordingly executed a promissory note (Exhibit “A”) on August 31. within ten (10) days from receipt of said letter. the petitioner asked for the reduction of the penalties and charges on his loan obligation. that the petitioner did not personally benefit from the said loan. docketed as Civil Case No. with the corresponding stipulated interest and charges thereof. 1984 to the petitioner demanding full payment. plus costs. the judgment appealed from is hereby AFFIRMED. 1991 of the Regional Trial Court (RTC) of Manila. 1980. 1986. 1994 of the Court of Appeals affirming the Decision dated May 8. No. through counsel.000.32) payable in five (5) installments. 116285. No favorable response was made to said letters. Petitioner Tan failed to pay any installment on the said restructured loan of Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and Thirty-Two Centavos (P3.000.00. or in the total principal amount of Four Million Pesos (P4.67. surcharges.00) from respondent Cultural Center of the Philippines (CCP. Fourth. We believe the award of 25% as attorney’s fees and P500. and instead admitted the validity of the same. petitioner Antonio Tan obtained two (2) loans each in the principal amount of Two Million Pesos (P2.000. for lack of merit. vs.R. The petitioner interposed the defense that he merely accommodated a friend. Fifth. 1993. plus the fact that plaintiff was represented by a government lawyer.. Wilson Lucmen. who allegedly asked for his help to obtain a loan from respondent CCP. the dispositive portion of which reads: WHEREFORE. in obtaining the loan. of the petitioner’s restructured loan which as of April 30. Wilson Lucmen. On August 31. 1979. plus attorney’s fees in an amount equivalent to 25% of said outstanding account. 1982.000. he should have filed a third party complaint against Wilson Lucmen. representing defendant’s outstanding account as of August 28. petitioner is estopped from denying his liability or loan obligation to the private respondent. The facts are as follows: On May 14. SO ORDERED. SO ORDERED. In a letter dated January 26. 1979 and July 6. Appellant’s offer or tender of payment cannot be deemed as a partial or irregular performance of the contract.
payable and computed monthly. In a Resolution dated July 13. the next issue to be resolved is whether interest may accrue on the penalty or . 1994. unconscionable and iniquitous. Significantly. the sum of THREE MILLION FOUR HUNDRED ELEVEN THOUSAND FOUR HUNDRED + PESOS (P3. and in the absence of stipulation.32) Philippine Currency. xxx xxx xxx With interest at the rate of FOURTEEN per cent (14%) per annum from the date hereof until paid. Penalty on delinquent loans may take different forms. this Court has ruled that the New Civil Code permits an agreement upon a penalty apart from the monetary interest. shall be the payment of the interest agreed upon. The petitioner takes exception to the computation of the private respondent whereby the interest. more particularly under Article 2209 of the New Civil Code which provides that: If the obligation consists in the payment of a sum of money. PLUS THREE PERCENT (3%) SERVICE CHARGE. Default of payment of this note or any portion thereof when due shall render all other installments and all existing promissory notes made by us in favor of the CULTURAL CENTER OF THE PHILIPPINES immediately due and demandable. the petitioner is asking for the non-imposition of interest on the surcharges inasmuch as the compounding of interest on surcharges is not provided in the promissory note marked Exhibit “A”. the penalty shall substitute the indemnity for damages and the payment of interests in case of non-compliance. And if penalty is to be awarded. Article 1226 of the New Civil Code provides that: In obligations with a penal clause. I/We jointly and severally agree to payadditional penalty charges at the rate of TWO per cent (2%) per month on the total amount due until paid. I/We jointly and severally promise to pay to the CULTURAL CENTER OF THE PHILIPPINES at its office in Manila. and as such the two are different and distinct from each other and may be demanded separately. Liwanag. The petitioner imputes error on the part of the appellate court in not totally eliminating the award of attorney’s fees and in not reducing the penalties considering that the petitioner. Court of Appeals. If the parties stipulate this kind of agreement. In the case at bar. The penalty charge of two percent (2%) per month in the case at bar began to accrue from the time of default by the petitioner. III THE HONORABLE COURT OF APPEALS ERRED IN NOT DELETING AWARD OF ATTORNEY’S FEES AND IN REDUCING PENALTIES. Petitioner also claims that there is no basis in law for the charging of interest on the surcharges for the reason that the New Civil Code is devoid of any provision allowing the imposition of interest on surcharges. xxx. the indemnity for damages. the stipulated two percent (2%) per month penalty is in the form of penalty charge which is separate and distinct from the monetary interest on the principal of the loan. contrary to the appellate court’s findings. Nevertheless. The pertinent portion of the promissory note (Exhibit “A”) imposing interest and penalties provides that: For value received. In case of non-payment of this note at maturity/on demand or upon default of payment of any portion of it when due. the appellate court denied the petitioner’s motion for reconsideration of the said decision. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.421. We find no merit in the petitioner’s contention. interest on the penalty and attorney’s fees. the GSIS case went on to state that such a stipulation about payment of an additional interest rate partakes of the nature of a penalty clause which is sanctioned by law. II THE HONORABLE COURT OF APPEALS ERRED IN NOT SUSPENDING IMPOSITION OF INTEREST FOR THE PERIOD OF TIME THAT PRIVATE RESPONDENT HAS FAILED TO ASSIST PETITIONER IN APPLYING FOR RELIEF OF LIABILITY THROUGH THE COMMISSION ON AUDIT AND THE OFFICE OF THE PRESIDENT.411. (Underscoring supplied) xxx xxx xxx The stipulated fourteen percent (14%) per annum interest charge until full payment of the loan constitutes the monetary interest on the note and is allowed under Article 1956 of the New Civil Code. The first question to be resolved in the case at bar is whether there are contractual and legal bases for the imposition of the penalty. The penalty charge is also called penalty or compensatory interest. In Government Service Insurance System v. the legal interest. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. has allegedly made partial payments on the loan.is out of proportion to the actual damage caused by the nonperformance of the contract and is excessive. the petitioner does not question his liability for his restructured loan under the promissory note marked Exhibit “A”. which is six per cent per annum. this petition anchored on the following assigned errors: I THE HONORABLE COURT OF APPEALS COMMITTED A MISTAKE IN GIVING ITS IMPRIMATUR TO THE DECISION OF THE TRIAL COURT WHICH COMPOUNDED INTEREST ON SURCHARGES. the penalty does not include the monetary interest. Having clarified the same. Hence. There is no doubt that the petitioner is liable for both the stipulated monetary interest and the stipulated penalty charge. surcharge and the principal were added together and that on the total sum interest was imposed. On the other hand. and the debtor incurs in delay. there being no stipulation to the contrary. Quoting Equitable Banking Corp. the promissory note (Exhibit “A”) expressly provides for the imposition of both interest and penalties in case of default on the part of the petitioner in the payment of the subject restructured loan. v. if there is no stipulation to the contrary.
1984. any penalty interest not paid. The petitioner now seeks the reduction of the penalty due to the said partial payments. As of August 28.32) when the loan was restructured on August 31. The petitioner seeks the elimination of the compounded interest imposed on the total amount based allegedly on the case of National Power Corporation v. We also took into consideration the offers of the petitioner to enter into a compromise for the settlement of his debt by presenting proposed payment schemes to respondent CCP. when due. He claims that since there is no law that allows imposition of interest on penalties. According to the petitioner. 1988 addressed to petitioner which partially reads: . However. Thus. interest likewise began to run on the penalty interest upon the filing of the complaint in court by respondent CCP on August 29. 1986: Principal Interest P2. But as we have already explained.581. we are not unmindful of the respondent’s long overdue deprivation of the use of its money collectible from the petitioner. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. petitioner contends that reduction of the penalty is justifiable pursuant to Article 1229 of the New Civil Code which provides that: “The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Inasmuch as petitioner has made partial payments which showed his good faith. wherein we ruled that the imposition of interest on the damages from the filing of the complaint is unjust where the litigation was prolonged for twenty-five (25) years through no fault of the defendant. the penalties should not earn interest. 1983 to September 30. The petitioner also imputes error on the part of the appellate court for not declaring the suspension of the running of the interest during that period when the respondent allegedly failed to assist the petitioner in applying for relief from liability. Second. penalty clauses can be in the form of penalty or compensatory interest.454. which as added principal. the contracting parties may by stipulation capitalize the interest due and unpaid.838. Considering petitioner’s several partial payments and the fact he is liable under the note for the two percent (2%) penalty charge per month on the total amount due.89 Surcharge P4. Even if there has been no performance. we find the continued monthly accrual of the two percent (2%) penalty charge on the total amount due to be unconscionable inasmuch as the same appeared to have been compounded monthly.411. the said written stipulation should be respected.838. equity cannot be considered inasmuch as there is a contractual stipulation in the promissory note whereby the petitioner expressly agreed to the compounding of interest in case of failure on his part to pay the loan at maturity.561.compensatory interest without violating the provisions of Article 1959 of the New Civil Code.” Therefore. However. the monetary interest and the penalty interest. 1986. however.314. the courts a quo did not err in ruling that the petitioner is bound to pay the interest on the total amount of the principal.” Petitioner insists that the penalty should be reduced to ten percent (10%) of the unpaid debt in accordance with Bachrach Motor Company v. National Merchandising Corporation.67 The said statement of account also shows that the above amounts stated therein are net of the partial payments amounting to a total of Four Hundred Fifty-Two Thousand Five Hundred SixtyOne Pesos and Forty-Three Centavos (P452. the date of the last Statement of Account (Exhibits “C” to “C-2”).167. which provides that: Without prejudice to the provisions of Article 2212.” In the case at bar.454. although the obligation may be silent upon this point. However. the whole amount to bear interest at the maximum rate allowed by law.996. The principal amount of the promissory note (Exhibit “A”) was Three Million Four Hundred Eleven Thousand Four Hundred Twenty-One Pesos and ThirtyTwo Centavos (P3. there is no legal basis for the imposition of interest on the penalty charge for the reason that the law only allows imposition of interest on monetary interest but not the charging of interest on penalty. the principal amount of the said restructured loan has been reduced to Two Million Eight Hundred Thirty-Eight Thousand Four Hundred Fifty-Four Pesos and Sixty-Eight Centavos (P2.421. The fifth paragraph of the said promissory note provides that: “Any interest which may be due if not paid shall be added to the total amount when due and shall become part thereof.68 P 576.10 P7. Inasmuch as the said stipulation on the compounding of interest has the force of law between the parties and does not appear to be inequitable or unjust. The said offers at compromise also showed his good faith despite difficulty in complying with his loan obligation due to his financial problems. Thus. Espiritu. shall earn new interest. for twenty-one (21) years since his default in 1980. until paid can indeed be justified under the said provision of Article 1229 of the New Civil Code. The private respondent’s Statement of Account (marked Exhibits “C” to “C-2”) shows the following breakdown of the petitioner’s indebtedness as of August 28. There appears to be a justification for a reduction of the penalty charge but not necessarily to ten percent (10%) of the unpaid balance of the loan as suggested by petitioner. In other words. interest due and unpaid shall not earn interest. shall earn the legal interest of twelve percent (12%) per annum.43) which were made during the period from May 13. the petitioner referred to the private respondent’s letterdated September 28. as in the case at bar. compounded monthly. compounded monthly. we find it fair and equitable to reduce the penalty charge to a straight twelve percent (12%) per annum on the total amount due starting August 28. 1979.” In the instant case. in the absence of express stipulation on the specific rate of interest. the compounding of the penalty or compensatory interest is sanctioned by and allowed pursuant to the above-quoted provision of Article 1959 of the New Civil Code considering that: First. there is an express stipulation in the promissory note (Exhibit “A”) permitting the compounding of interest. the ruling in the said National Power Corporation (NPC) case is not applicable to the case at bar inasmuch as our ruling on the issue of interest in that NPC case was based on equitable considerations and on the fact that the said case lasted for twenty-five (25) years “through no fault of the defendant. 1983. 1986. Article 2212 of the New Civil Code provides that “Interest due shall earn legal interest from the time it is judicially demanded.692. Hence. a reduction of the penalty charge from two percent (2%) per month on the total amount due.68). In this connection.
000. Second. the said letter does not contain any categorical agreement on the part of respondent CCP that the payment of the interest and surcharge on the loan is deemed suspended while his appeal for condonation of the interest and surcharge was being processed. 1445. the private respondent correctly asserted that it was the primary responsibility of petitioner to inform the Commission on Audit and the Office of the President of his application for condonation of interest and surcharge. the appellate court ruled correctly and justly in reducing the trial court’s award of twentyfive percent (25%) attorney’s fees to five percent (5%) of the total amount due. 1988 alleged to have been sent by the respondent CCP to the petitioner is not part of the formally offered documentary evidence of either party in the trial court. SO ORDERED. . With costs against the petitioner. 1986. the center will be accepting your proposed payment scheme with the downpayment of P160. On the issue of attorney’s fees. the assailed Decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION in that the penalty charge of two percent (2%) per month on the total amount due. WHEREFORE.000. While your application is being processed and awaiting approval. the letter dated September 28. It was incumbent upon the petitioner to bring his administrative appeal for condonation of interest and penalty charges to the attention of the said government offices. his liability to pay the interest and surcharge on the loan has not arisen. First. Since the condition has not happened allegedly due to the private respondent’s reneging on its promise.” Besides. is hereby reduced to a straight twelve percent (12%) per annum starting from August 28. It is our view. This is the petitioner’s contention. Section 34 of the Rules of Court which provides that: “The court shall consider no evidence which has not been formally offered xxx.Dear Mr. that is dependent on a future and uncertain event which consists of whether the petitioner’s request for condonation of interest and surcharge would be recommended by the Commission on Audit and the Office of the President to the House of Representatives for approval as required under Section 36 of Presidential Decree No.00 and monthly remittances of P60. Tan: xxx xxx xxx With reference to your appeal for condonation of interest and surcharge.00 xxx. xxx xxx xxx The petitioner alleges that his obligation to pay the interest and surcharge should have been suspended because the obligation to pay such interest and surcharge has become conditional. That letter cannot be considered evidence pursuant to Rule 132. we wish to inform you that the center will assist you in applying for relief of liability through the Commission on Audit and Office of the President xxx. that the running of the interest and surcharge was not suspended by the private respondent’s promise to assist the petitioners in applying for relief therefrom through the Commission on Audit and the Office of the President. compounded monthly. however.
00. 173227 January 20. petitioner denied that he offered a loan to respondent.00 worth of loan. This time he rejected her plea.G. there was no stipulation as to the payment of interest for the loan. Thus.00 inclusive of interests. Also. respondent requested him to restructure the payment of the loan because she could not give full payment on the due date. He demanded that respondent settle her obligation.200.12 Petitioner insisted that there was no overpayment because respondent admitted in the latter’s promissory note that her monetary obligation as of 12 September 1994 amounted to P1.000. respondent again asked him to give her a loan.000. Hence.00 as guarantee of compliance with her obligation. inclusive of interest. he agreed to grant her a loan. He maintained that to rule in favor of respondent is tantamount to concluding that the loan was given interest-free.00 plus legal interest from the time of demand. The loan agreement was not reduced in writing. the total amount she paid to petitioner for the loan and interest accumulated toP1. Branch 65 (MeTC).000. ALICIA VILLANUEVA. Upon his approval of respondent’s request for restructuring of the loan. respondent consulted a lawyer regarding the propriety of paying interest on the loan despite absence of agreement to that effect. and that the alleged interests due should not be included in the computation of respondent’s total monetary debt because there was no agreement between them regarding payment of interest.000. respondent executed a promissory note dated 12 September 1994 wherein she admitted having borrowed an amount of P1. At first.00 to petitioner as partial payment of the loan.9 In his answer10 to the complaint.000. Thus. It ratiocinated that respondent’s obligation was only to pay the loaned amount of P540. Petitioner. and (4) an amount equivalent to 25% of P660. The facts gathered from the records are as follows: On 30 March 1998.00.00 to petitioner as payment of the remaining balance of the loan. Subsequently.000. 22) against respondent. Thereafter. he presented the six checks for encashment but only one check was honored. because the latter had a spotty record as a supplier of the PNO. which affirmed in toto the Decision.3 dated 19 June 2006 of the Court of Appeals in CA-G.00. Respondent alleged that she was a businesswoman engaged in supplying office materials and equipments to the Philippine Navy Office (PNO) located at Fort Bonifacio.00 for theP540. According to her computation.00 as exemplary damages.000.000.00 as attorney’s fees.8 Respondent prayed that the RTC render judgment ordering petitioner to pay respondent (1) P660. she paid additional amounts in cash and checks as interests for the loan. docketed as Civil Case No. Branch 255. Respondent paid the loan in full. in Civil Case No. (3) P50.00 as moral damages. Respondent also issued to him six postdated checks amounting to P1. Respondent. inclusive of interest. she sent a demand letter to petitioner asking for the return of the excess amount of P660.000.00.240.000.R.00. the RTC rendered a Decision on 26 January 2001 holding that respondent made an overpayment of her loan obligation to petitioner and that the latter should refund the excess amount to the former. After trial.000. Petitioner.R. ignored her claim for reimbursement. respondent pleaded for another restructuring of the payment of the loan. He argued that respondent was already estopped from complaining that she should not have paid any interest. respondent issued a check worth P500. CV No. On 31 October 1993. DECISION CHICO-NAZARIO.000. of the Las Pinas City Regional Trial Court. respondent approached and asked him if he could grant her a loan. she conceded.000. The cases were assigned to the Metropolitan Trial Court of Makati City. He averred that in 1992.00 through mistake.4 dated 26 January 2001. and fearing that petitioner might block or unduly influence the payment of her vouchers in the PNO.000. from petitioner and that she would pay said amount in March 1995. LP-98-0068.00 worth of loan. Petitioner told her that since she paid a total amount of P700. the excess amount of P160. Not satisfied with the amount applied as interest.200. he agreed to grant her another loan.6 On 31 August 1993. Respondent claimed that sometime in 1992. petitioner approached her inside the PNO and offered to loan her the amount of P540. No.7 Thereafter.000. while petitioner was a military officer and comptroller of the PNO from 1991 to 1996. It concluded that since respondent made an excess payment to petitioner in the amount of P660. She asked petitioner for receipt for the payments but petitioner told her that it was not necessary as there was mutual trust and confidence between them. and upon being advised by her lawyer that she made overpayment to petitioner. (2) P300. However. As respondent had been able to pay the previous loan in full. she issued another check in the amount of P200. 2009 SEBASTIAN SIGA-AN.: Before Us is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision. Since she needed capital for her business transactions with the PNO. since respondent was an acquaintance of his officemate. J. 71814. and Resolution. He acceded to her request. Taguig City. Petitioner threatened to block or disapprove her transactions with the PNO if she would not comply with his demand.000. Branch 255. despite receipt of the demand letter. As all her transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO. petitioner pestered her to pay additional interest.00 would be applied as interest for the loan.00 for the P540.240.000. LP-98-0068. Her lawyer told her that petitioner could not validly collect interest on the loan because there was no agreement between her and petitioner regarding payment of interest. Since she paid petitioner a total amount of P1. vs. as she needed money to finance her business venture with the PNO. he was reluctant to deal with respondent. she accepted petitioner’s proposal. and that she would issue several postdated checks to guarantee the payment of her obligation. .000. but the latter failed to do so. he filed criminal cases for Violation of the Bouncing Checks Law (Batas Pambansa Blg. Later. because she was given several times to settle her obligation but failed to do so.000. he asked the RTC to dismiss respondent’s complaint. respondent Alicia Villanueva filed a complaint5 for sum of money against petitioner Sebastian Siga-an before the Las Pinas City Regional Trial Court (RTC).11 Subsequently.2 dated 16 December 2005.240. respondent proposed to execute a promissory note wherein she would acknowledge her obligation to him. Based on the foregoing averments.
the appellate court promulgated its Decision affirming in toto the RTC Decision. payment of monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest. and that such was the same promissory note presented by petitioner as alleged proof of their written agreement on interest. which refers to monetary interest. in view of the foregoing evidence and in the light of the provisions of law and jurisprudence on the matter. (2) Ordering defendant to pay plaintiff the amount of P300.26 While the Court of Appeals mentioned in its Decision that it concurred in the RTC’s ruling that petitioner and .00. nonetheless.000." Respondent. the foregoing considered.000. claims that both the RTC and the Court of Appeals found that he and respondent agreed on the payment of 7% rate of interest on the loan.00. however. and an exception to the application of such provision should be made when the borrower admits that a specific rate of interest was agreed upon as in the present case. explained that it was petitioner who made a promissory note and she was told to copy it in her own handwriting. she copied the promissory note in her own handwriting.15 Petitioner filed a motion for reconsideration of the appellate court’s decision but this was denied. and (2) the agreement for the payment of interest was reduced in writing.14 Petitioner appealed to the Court of Appeals.000. they. petitioner should pay exemplary damages by way of example or correction for the public good. The RTC clearly stated that although petitioner and respondent entered into a valid oral contract of loan amounting to P540.00 as exemplary damages. thus: WHEREFORE. the RTC and the Court of Appeals.16 Hence. and (5) Ordering defendant to pay the costs of suit. nonetheless. judgment is hereby rendered in favor of the plaintiff and against the defendant as follows: (1) Ordering defendant to pay plaintiff the amount of P660. never intended the payment of interest thereon. that being unaware of the law on interest and fearing that petitioner would make good of his threats if she would not obey his instruction to copy the promissory note. THE RTC AND THE COURT OF APPEALS ERRED IN APPLYING THE PRINCIPLE OF SOLUTIO INDEBITI.petitioner should return the said amount to respondent pursuant to the principle of solutio indebiti. Further. 22 cases he filed against respondent. that the application of Article 1956 of the Civil Code should not be absolute. we have held that collection of interest without any stipulation therefor in writing is prohibited by law. 22 cases that there was an agreed 7% rate of interest on the loan. Neither was there convincing proof of written agreement between the two regarding the payment of interest. (3) Ordering defendant to pay plaintiff the amount of P50.21 It appears that petitioner and respondent did not agree on the payment of interest for the loan. petitioner lodged the instant petition before us assigning the following errors: I.24 Petitioner did not rebut the foregoing testimony.20 specifically mandates that no interest shall be due unless it has been expressly stipulated in writing.13 The RTC also ruled that petitioner should pay moral damages for the sleepless nights and wounded feelings experienced by respondent.00 as moral damages.000.18 The right to interest arises only by virtue of a contract or by virtue of damages for delay or failure to pay the principal loan on which interest is demanded. Respondent testified that although she accepted petitioner’s offer of loan amounting to P540. (4) Ordering defendant to pay plaintiff the amount equivalent to 25% of P660. THE RTC AND THE COURT OF APPEALS ERRED IN RULING THAT NO INTEREST WAS DUE TO PETITIONER. Petitioner. On 16 December 2005. This is called compensatory interest. Hence.000. there was. that despite such judicial admission by respondent. It is evident that respondent did not really consent to the payment of interest for the loan and that she was merely tricked and coerced by petitioner to pay interest. citing Article 1956 of the Civil Code. the instant appeal is hereby DENIED and the assailed decision [is] AFFIRMED in toto.000. still held that no interest was due him since the agreement on interest was not reduced in writing. Interest may also be imposed by law or by courts as penalty or indemnity for damages. it cannot be gainfully said that such promissory note pertains to an express stipulation of interest or written agreement of interest on the loan between petitioner and respondent. Thus. that the agreed 7% rate of interest was duly admitted by respondent in her testimony in the Batas Pambansa Blg.00 as attorney’s fees. This is referred to as monetary interest.25 We have carefully examined the RTC Decision and found that the RTC did not make a ruling therein that petitioner and respondent agreed on the payment of interest at the rate of 7% for the loan.19 Article 1956 of the Civil Code. nevertheless. II. The concurrence of the two conditions is required for the payment of monetary interest. As can be gleaned from the foregoing provision. no verbal or written agreement for her to pay interest on the loan. that all her transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO. plus attorney’s fees and costs of suit. that petitioner threatened to disapprove her transactions with the PNO if she would not pay interest. and that it would be unfair to allow respondent to pay only the loan when the latter very well knew and even admitted in the Batas Pambansa Blg.17 Interest is a compensation fixed by the parties for the use or forbearance of money. The dispositive portion of the RTC Decision reads: WHEREFORE.22 Petitioner presented a handwritten promissory note dated 12 September 199423 wherein respondent purportedly admitted owing petitioner "capital and interest.00 plus legal interest of 12% per annum computed from 3 March 1998 until the amount is paid in full.
and the person who has no right to receive such payment becomes obligated to return the same. Likewise. and the debtor incurs delay. Section 26 Rule 130 of the Rules of Evidence provides that the declaration of a party as to a relevant fact may be given in evidence against him. Article 2209 of the Civil Code states that if the obligation consists in the payment of a sum of money.32 We have held that the principle of solutio indebiti applies in case of erroneous payment of undue interest.000. he cannot be compelled to return the alleged excess amount paid by respondent as interest.00 to petitioner as interest.000. Apropos the second assigned error. The rule is that factual findings of the trial court deserve great weight and respect especially when affirmed by the appellate court. respondent merely testified that after paying the total amount of loan. the two instances apply only to compensatory interest and not to monetary interest.33 It was duly established that respondent paid interest to petitioner.30 Under Article 1960 of the Civil Code.37 Although no receipts reflecting the same were presented because petitioner refused to issue such to respondent.000. and it was unduly delivered through mistake.39 Article 2217 of the Civil Code provides that moral damages may be recovered if the party underwent physical suffering. There are instances in which an interest may be imposed even in the absence of express stipulation. and the person who received the payment.27 We found no compelling reason to disturb the ruling of both courts. a legal interest of 12% per annum may be imposed as indemnity for damages if no stipulation on the payment of interest was agreed upon.000. were not among the five checks found to be dishonored or bounced in the five criminal cases.00 in favor of petitioner as payment of the loan.respondent agreed on a certain rate of interest as regards the loan. the obligation to return it arises. Further.000. Petitioner’s reliance on respondent’s alleged admission in the Batas Pambansa Blg.28 Respondent did not categorically declare in the same case that she and respondent made an express stipulation in writing as regards payment of interest at the rate of 7%.34 Respondent issued two checks with a total worth of P700.00 in the payment for the loan.000. Since we have previously found that petitioner is not entitled to payment of interest and that the principle of solutio indebiti applies to the instant case. petitioner should return to respondent the excess amount of P160. although the obligation may be silent on this point.31 The principle of solutio indebitiapplies where (1) a payment is made when there exists no binding relation between the payor. the award of moral damages is justified. It cannot be charged as a compensation for the use or forbearance of money. petitioner filed five (5) criminal cases for violation of Batas Pambansa Blg. verbal or written. he has an obligation to return it. and (2) the payment is made through mistake.00 paid as interest.00 and P175. 22 cases that respondent paid him a total amount of P175. Petitioner claims that the excess of P160. 22 against respondent. Nonetheless.29 The case at bar involves petitioner’s claim for monetary interest. the provisions of the Civil Code concerning solutio indebiti shall be applied. As earlier discussed. Records show that respondent received a loan amounting to P540.00. nonetheless. In such a case. totaling P700. who has no duty to pay. Aside from issuing the said two checks. monetary interest is due only if there was anexpress stipulation in writing for the payment of interest.000. regarding payment of interest. besmirched reputation. the MeTC found that respondent made an overpayment of the loan by reason of the interest which the latter paid to petitioner. no other proof of additional payment as interest was presented by respondent. both the RTC and the Court of Appeals ruled that petitioner is not entitled to the payment of interest on the loan. respondent’s conviction therein does not affect our ruling in the instant case. there was an excess of P160. fright. the interest under these two instances may be imposed only as a penalty or damages for breach of contractual obligations. as earlier elucidated. its corresponding amount .00 serves as interest on the loan to which he was entitled. Hence.00 which respondent claimed as payment of the P540. the MeTC found respondent guilty of violating Batas Pambansa Blg.35 These checks were subsequently encashed by petitioner. subject matter of this case.000. social humiliation and similar injury. The payment was clearly a mistake. as earlier found.000.00. Aside from the amounts of P160. the reimbursable amount to respondent fixed by the RTC and the Court of Appeals should be reduced fromP660. said compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan. Since petitioner received something when there was no right to demand it.000. The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. moral shock. All the same. Article 2212 of the Civil Code provides that interest due shall earn legal interest from the time it is judicially demanded. if the borrower of loan pays interest when there has been no stipulation therefor. petitioner argues that the principle of solutio indebiti does not apply to the instant case.000. Article 2154 of the Civil Code explains the principle of solutio indebiti. respondent also paid cash in the total amount of P175. admitted in his ReplyAffidavit38 in the Batas Pambansa Blg.00 or the total amount of P335. mental anguish.000.00 and P175.000. 22 for issuing five dishonored checks to petitioner. no interest was due on the loan because there was no written agreement as regards payment of interest. Respondent testified that she experienced sleepless nights and wounded feelings when petitioner refused to return the amount paid as interest despite her repeated demands. we consider this as merely an inadvertence because.00 worth of loan.00 from petitioner. wounded feelings. We shall now determine the propriety of the monetary award and damages imposed by the RTC and the Court of Appeals. petitioner ordered her to pay interest. serious anxiety. and not through liberality or some other cause. The two checks. Also. In the said case. 22 cases that they had agreed on the payment of interest at the rate of 7% deserves scant consideration. a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake.000. Thus. Respondent was under no duty to make such payment because there was no express stipulation in writing to that effect. Said provision provides that if something is received when there is no right to demand it. In other words. Further.00 cash in addition to the two checks.000. petitioner. However. Accordingly. In the said cases.36 Obviously. There was no binding relation between petitioner and respondent as regards the payment of interest.00 to P335. As earlier stated.
shall be 12% per annum from such finality until its satisfaction.R.43 Further. the award of exemplary damages is appropriate. SO ORDERED.42 In the case under consideration. (2) the amount ofP300. Finally.000. Court of Appeals.000. petitioner’s obligation arose from a quasi contract of solutio indebiti and not from a loan or forbearance of money. not constituting a loan or forbearance of money is breached. dated 16 December 2005. In addition.of P300.000. 71814.000. an interest on the amount of damages awarded may be imposed at the rate of 6% per annum. exemplary damages may be imposed if the defendant acted in an oppressive manner. to be computed from the time of the extra-judicial demand on 3 March 1998. the Decision of the Court of Appeals in CA-G.00. the RTC stated in its Decision that the award of attorney’s fees equivalent to 25% of the amount paid as interest by respondent to petitioner is reasonable and moderate considering the extent of work rendered by respondent’s lawyer in the instant case and the fact that it dragged on for several years. whether it is a loan/forbearance of money or not.00 imposed as exemplary damages by the RTC and the Court is fitting so as to deter petitioner and other lenders from committing similar and other serious wrongdoings. the amount of P150.00 as moral damages is fair. and proportionate to the injury suffered by respondent. legal or equitable justification for awarding the same.40 To our mind. reasonable. such as solutio indebiti.44 The award.46 up to the finality of this Decision. is exorbitant and should be equitably reduced. Thus. . We held in Eastern Shipping Lines. Thus. This is erroneous. Article 2232 of the Civil Code states that in a quasi-contract. is hereby AFFIRMED with the following MODIFICATIONS: (1) the amount of P660.00 imposed as moral damages is reduced to ONE HUNDRED FIFTY THOUSAND PESOS (P150.000.45 that when an obligation. this interim period being deemed equivalent to a forbearance of credit. CV No.00 as refundable amount of interest is reduced to THREE HUNDRED THIRTY FIVE THOUSAND PESOS (P335. This forced respondent to pay interest despite lack of agreement thereto. We further declared that when the judgment of the court awarding a sum of money becomes final and executory. of attorney’s fees and its amount equivalent to 25% of the amount paid as interest by respondent to petitioner is proper.000. WHEREFORE. v. Petitioner acted oppressively when he pestered respondent to pay interest and threatened to block her transactions with the PNO if she would not pay interest. on the damages awarded and on the attorney’s fees to be computed from the time of the extra-judicial demand on 3 March 1998 up to the finality of this Decision. as fixed by the RTC and the Court of Appeals. respondent testified that she agreed to compensate her lawyer handling the instant case such amount. (3) an interest of 6% per annum is imposed on the P335. the interest shall become 12% per annum from the finality of this Decision up to its satisfaction. therefore. Inc.00). the RTC and the Court of Appeals imposed a 12% rate of legal interest on the amount refundable to respondent computed from 3 March 1998 until its full payment. and (4) an interest of 12% per annum is also imposed from the finality of this Decision up to its satisfaction. an interest of 6% per annum should be imposed on the amount to be refunded as well as on the damages awarded and on the attorney’s fees. the rate of legal interest.000.00).000.00. The amount of P50. Article 2216 of the Civil Code instructs that assessment of damages is left to the discretion of the court according to the circumstances of each case. the trial court must state the factual. This discretion is limited by the principle that the amount awarded should not be palpably excessive as to indicate that it was the result of prejudice or corruption on the part of the trial court.41 Jurisprudence instructs that in awarding attorney’s fees. Costs against petitioner. In the present case.
T. Iloilo to Roxas City from 30 June to 4 July 1982. On 19 October 1988. Within the same period. On 15 June 1982. Revised Penal Code. Iloilo City. On 30 October 1987. the Court of Appeals dismissed the petition for having been filed out of time. The Solicitor PADILLA. No. vs.O. 2222 which covered his travels to different places in Luzon from 16 June to 21 July 1982.:p This petition seeks the review on certiorari of the following: 1. 1 and the affirming decision of the Regional Trial Court. 1991 YONG CHAN KIM. The records of the case were received by the Intermediate Appellate Court on 8 October 1987. J.O. Records disclose there is no aggravating circumstance proven by the prosecution. No. Costs against the accused. Hence. Petitioner was required to comment on the internal auditor's report regarding the alleged anomalous claim for per diems. guilty beyond reasonable doubt for the crime of Estafa penalized under paragraph l(b) of Article 315. 2 2. Petitioner appealed from the decision of the Municipal Circuit Trial Court in Criminal Case No.00 to SEAFDEC. the Court hereby sentences the accused to suffer an imprisonment ranging from four (4) months as the minimum to one (1) year and six (6) months as the maximum in accordance with the Indeterminate Sentence Law and to reimburse the amount of P1. petitioner received a cash advance of P495. Under this travel order. After trial in Criminal Case No. petitioner was issued another travel order. In his reply. the Municipal Circuit Trial Court rendered a decision. No. petitioner filed with the appellate court a petition for review. On 11 August 1987. As earlier stated. 05035. two (2) complaints for Estafa were filed against the petitioner before the Municipal Circuit Trial Court at Guimbal. GUSTILO. 20958 affirmed in toto the trial court's decision.438. When the Travel Expense Reports were audited. 2222. the total amount in the form of per diems and allowances charged and collected by petitioner under Travel Order No. As Head of the Economics Unit of the Research Division. Branch 28 Iloilo City and Court of Appeals (13th Division) respondents. and the appeal was docketed as CA-G.00 as cash advance to defray his travel expenses. The decision of the Court of Appeals. claiming that he made make-up trips to compensate for the trips he failed to undertake under T. Iloilo. when he did not actually and physically travel as represented by his liquidation papers. the Court resolved to require the respondents to comment on the petition for review. Consonantly. 628. In September 1983. On 30 July 1987. thru counsel. requiring him to travel from the Head Station at Tigbauan. EDGAR D. dated 19 August 1988. a period of five (5) days. On 14 January 1983. the court finds the accused. denying petitioner's motion for reconsideration. 4 The antecedent facts are as follows: Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture Department of the Southeast Asian Fisheries Development Center (SEAFDEC) with head station at Tigbauan. PEOPLE OF THE PHILIPPINES. For this travel order. The surety bond of the accused shall remain valid until final judgment in accordance herewith. it was discovered that there was an overlap of four (4) days (30 June to 3 July 1982) in the two (2) travel orders for which petitioner collected per diems twice. 6th Judicial Region. In sum. Revised Penal Code. he conducted prawn surveys which required him to travel to various selected provinces in the country where there are potentials for prawn culture. 6 The decision of the Regional Trial Court was received by petitioner on 10 August 1987. 12 August 1987. petitioner.G. 3. 2222 because he was recalled to the head office and given another assignment.00. 5 Criminal Case No. 628. submitting Travel Expense Reports to the Accounting Section. in Criminal Case No. Neither there is any mitigating circumstance proven by the accused. . petitioner denied the alleged anomaly. promulgated on 30 July 1987.R.230. a period of thirty five (35) days. 2268. 84719 January 25. Iloilo.230. was P1. the imposable penalty should be in the medium period ofarresto mayor in its maximum period to prision correccional in its minimum period in accordance with Article 315. Yong Chan Kim. 631 was subsequently dismissed for failure to prosecute. Branch XXVIII. 628. HON. on 29 April 1988. petitioner presented both travel orders for liquidation. filed a notice of appeal with the Regional Trial Court which ordered the elevation of the records of the case to the then Intermediate Appellate Court on the following day. Petitioner's motion for reconsideration was denied for lack of merit. petitioner. docketed as Criminal Case Nos.R. 628 and 631. dated 29 April 1988. the Regional Trial Court in Iloilo City in Criminal Case No. 20958. 3 dismissing petitioner's appeal/petition for review for having been filed out of time. he received P6. Presiding Judge. and the resolution. in Criminal Case No. the present recourse. Considering the amount subject of the present complaint. RTC. petitioner was issued Travel Order No. Province of Iloilo.00. the dispositive part of which reads as follows: IN VIEW OF THE FOREGOING CONSIDERATIONS. The decision dated 3 September 1986 of the 15th Municipal Circuit Trial Court (Guimbal-Igbaras-Tigbauan-Tubungan) in Guimbal.
according to the Solicitor General. .O. such as this. we resolved to set aside our resolution dismissing this case and gave due course to the petition. when we granted petitioner's second motion for reconsideration.. petitioner filed his memorandum on 25 October 1989. 315. as the ultimate bulwark of human rights and individual liberty. it had set aside technicalities in the Rules in order to give way to justice and equity. will not allow substantial justice to be sacrified at the altar of procedural rigor. Rule 123 of the 1985 Rules of Criminal Procedure. to be sure. EQUITY AND DUE PROCESS.00 out of the cash advance which he received under T. yet. In the present case.00. BRANCH 28 (ILOILO CITY) ARE SUPPORTED BY THE FACTS AND EVIDENCE OR CONTRARY TO LAW AND THAT THE TWO COURTS A QUO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION OR HAVE ACTED WITHOUT OR IN EXCESS OF JURISDICTION. [Alonzo v. . since the RTC judge was rendered in the exercise of its appellate jurisdiction over municipal trial courts. It is likewise admitted that within the period covered by T. 2268. after several grants of extensions of time to file the same. 10 In the same resolution. there is nothing sacred about the procedure of pleadings. Hence. closing the door to his every entreaty for a full opportunity to be heard. we shall consider the petition for review filed in the Court of Appeals as a Supplement to the Notice of Appeal. the Solicitor General filed on 13 March 1990 a Recommendation for Acquittal in lieu of the required memorandum. we note that the petitioner. it has to be lauded for correctly applying the rules of procedure in appeals to the Court of Appeals from decisions of the RTC rendered in the exercise of its appellate jurisdiction. when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy. This Court may go beyond the pleadings when the interest of justice so warrants. which reads as follows: Art. It is undisputed that petitioner received a cash advance from private respondent SEAFDEC to defray his travel expenses under T. in filing his Notice of Appeal the very next day after receiving the decision of the court a quo lost no time in showing his intention to appeal. 8 Petitioner filed a motion for reconsideration maintaining that his petition for review did not limit itself to the issue upon which the appellate court's decision of 29 April 1988 was based. we stated: In several cases decided by this Court. . under altered rules of procedure. as provided for under Section 22. Two (2) issues are raised by petitioner to wit: I. We find merit in the petition. Any person who shall defraud another by any of the means mentioned herein below shall be punished by: . In his Comment. II. the parties were required to file their respective memoranda.General filed his Comment on 20 January 1989. simply because he had chosen an appeal route. recognized by law but made inapplicable to his case. if strict compliance with the rules would mean sacrificing justice to technicality. par. Technicality. petitioner was recalled to the head station in Iloilo and given another assignment which was covered by T. In the said resolution. It has the prerogative to suspend its rules for the same purpose. On the other hand. WHETHER OR NOT THE DECISION OF THE HONORABLE COURT OF APPEALS IS CONTRARY TO LAW. et al. we resolved to deny the petition for failure of petitioner to sufficiently show that the Court of Appeals had committed any reversible error in its questioned judgment which had dismissed petitioner's petition for review for having been filed out of time. 2222. the petitioner should have filed a petition for review with the then Intermediate Appellate Court instead of a notice of appeal with the Regional Trial Court. Swindling (Estafa).O. . 9 On 10 August 1990. '. this Court. In our Resolution of 29 May 1989. but rather it delved into the substance and merits of the case. although the procedure taken was not correct. deserves scant consideration from courts. 2222. ILOILO) AND THE REGIONAL TRIAL COURT. 315] Conscience cannot rest in allowing a man to go straight to jail. The dispute arose when petitioner allegedly failed to return P1. should be considered in order that the principle barring a petitioner's right of review can be made flexible in the interest of justice and equity. We shall now proceed to the first issue. while private respondent SEAFDEC filed its required memorandum on 10 April 1990. Petitioner's counsel submitted a Reply (erroneously termed Comment) 7 wherein she contended that the peculiar circumstances of a case. Batas Pambansa 129.O. 1(b) of the Revised Penal Code. For the alleged failure of petitioner to return the amount of P1. The failure of petitioner to file the proper petition rendered the decision of the Regional Trial Court final and executory. The imminence of a person being deprived unjustly of his liberty due to procedural lapse of counsel is a strong and compelling reason to warrant suspension of the Rules.O. the Solicitor General prayed for the dismissal of the instant petition on the ground that. ESTABLISHED JURISPRUDENCE. in fact. As the Court declared in a recent decision. While the Court of Appeals can not be faulted and. 16 Phil. he was charged with the crime of Estafa under Article 315.230. Villamor. 2222. even as he has made a prima facie showing of a meritorious cause. . The Court can overlook the wrong pleading filed. and in compliance with said resolution. Section 22 of the Interim Rules and Guidelines. WHETHER OR NOT THE DECISION (sic) OF THE MUNICIPAL CIRCUIT TRIAL COURT (GUIMBAL.230. The second issue has been resolved in our Resolution dated 10 August 1990. in perfecting his appeal from the RTC to the Intermediate Appellate Court. and Section 3.
he has the right to demand reimbursement from his employer the amount he spent coming from his personal funds. Commodatum is essentially gratuitous. the money advanced by either party is actually a loan to the other. "if the amount of the cash advance he received is less than the amount he spent for actual travel . Simple loan may be gratuitous or with a stipulation to pay interest.. or for administration. Otherwise. even though such obligation be fatally or partially guaranteed by a bond. Cash Advance for Travel xxx xxx xxx 4. or other property. asper diems and allowances. goods. be is obliged to return the amount. 10. or under any other obligation involving the duty to make delivery of. it is a transfer of ownership subject to a suspensive condition that he liquidates the amount of cash advance upon return to station and completion of the travel? . With unfaithfulness or abuse of confidence. A The one drawing cash advance already owns the money but subject to liquidation. . dated 12 February 1980 provides as follows: B. All cash advances must be liquidated within 30 days after date of projected return of the person. to the prejudice of another. 12 In other words. and is bound to pay to the creditor an equal amount of the same kind and quality. good or personal property that he had received. i. Art. as stated in the assailed decision of the lower court. petitioner was under no legal obligation to return the same cash or money. The ruling of the trial judge that ownership of the cash advanced to the petitioner by private respondent was not transferred to the latter is erroneous. one of the parties delivers to another. upon the condition that the same amount of the same kind and quality shall be paid. Hence. it must be proven that he had the obligation to deliver or return the same money. Executive Order No. By the contract of loan. the same. You said the cash advance given to the accused is his own money. at the time you departed with the money it belongs already to the accused? A Yes. corresponding salary deduction shall be made immediately following the expiration day. Liquidation simply means the settling of an indebtedness. or money or other consumable thing. accused or SEAFDEC? How do you consider the funds in the possession of the accused at the time when there is an actual transfer of cash? . namely: (a) xxx xxx xxx (b) By misappropriating or converting. in which case the contract is simply called a loan or mutuum. who owns the funds. 1933. or by denying having received such money. testified thus: Q When you gave cash advance to the accused in this Travel Order No. In other words. either something not consumable so that the latter may use the same for a certain time and return it. ownership passes to the borrower. such as herein petitioner. An employee. . Q xxx xxx xxx So why do you treat the itinerary of travel temporary when in fact as of that time the accused owned already the cash advance. In order that a person can be convicted under the abovequoted provision. He will be only entitled for that credence if he liquidates.xxx xxx xxx 1. . Q If other words. which he received from the private respondent. . 13 Article 1933 and Article 1953 of the Civil Code define the nature of a simple loan. Virgilio Hierro. 2222 subject to liquidation. goods. Similarly.— A person who receives a loan of money or any other fungible thing acquires the ownership thereof. but subject for liquidation. In commodatum the bailor retains the ownership of the thing loaned. who liquidates a cash advance is in fact paying back his debt in the form of a loan of money advanced to him by his employer. in which case the contract is called a commodatum. 11 Was petitioner under obligation to return the same money (cash advance) which he had received? We belive not. If he will not liquidate. Even the prosecution witness. 1953.e. or to return. Ownership of the money was transferred to the petitioner. the bills or coins. while in simple loan. or any other personal property received by the offender in trust or on commission. money. Art.
(pp. Absent this fiduciary relationship between petitioner and private respondent. Iloilo City. 20958. 1 (b) of the Revised Penal Code and the affirming decision of the Regional Trial Court. promulgated on 30 July 1987 are both hereby SET ASIDE. 26-28. finding petitioner guilty of estafa under Article 315. which is an essential element of the crime of estafa by misappropriation or conversion. it has been the policy of private respondent that all cash advances not liquidated are to be deducted correspondingly from the salary of the employee concerned. The evidence shows that the corresponding salary deduction was made in the case of petitioner vis-a-vis the cash advance in question. the decision dated 3 September 1986 of the 15th Municipal Circuit Trial Court in Guimbal. . May 8. 1985). 15 Additionally. in Criminal Case No. sir. petitioner could not have committed estafa. no fiduciary relationship was created. Petitioner is ACQUITTED of criminal charge filed against him. Iloilo in Criminal Case No. Branch XXVIII. WHEREFORE.A Yes. tsn. 14 Since ownership of the money (cash advance) was transferred to petitioner. SO ORDERED. 628. par.
64 in the bank. denying having gone to Malita and having obtained a loan from respondent. Digos.000. petitioners-spouses repaired to his place of business at Malita.versus - By their Answer. hence.000. (b) defendantsappellees could not have borrowed money on that date because from January to March. 2001. 1992..00.. the lower Court gave four reasons for ruling out a loan. November 22. it should have been expressly stipulated upon in writing by the parties but it was not. and GARCIA..SPOUSES ANTONIO and LOLITA TAN.. Petitioners. respondent filed before the Digos. Davao del Sur.. since the alleged loan was one with a period — payable in six months. respondent issued a Philippine Bank of Communications (PBCom) crossed check in the amount ofP250.000. c. original) Plaintiff Carmelito Villapaz to SO ORDERED. for conference of vital importance.00 as exemplary damages.000. be it verbal or written. espondent... the essential requisite for the validity and enforceability of a loan is wanting. P50.00. the present Petition for Review on Certiorari was lodged. on the maturity date of the loan or on August 6. (Underscoring in the Respondent appealed to the Court of Appeals which. respecting the alleged loan. Branch 19 of the RTC.. SANDOVAL-GUTIERREZ. hence. drawing him to file the complaint thru his counsel to whom he agreed to pay 30% of the loan as attorney’s fees on a contingent basis and P1. inter alia. Davao del Sur which dismissed the complaint filed by herein respondent Carmelito Villapaz against herein petitioners-spouses Antonio “Tony” and Lolita Tan. they had “surely no reason nor logic” to borrow money from plaintiffappellant... 1994 at 9:00 o’clock in the morning “in connection with the request of [herein respondent] Carmelito Villapaz. they never received from respondent any demand for payment. alleging that. Davao City inviting him to appear before the Deputy Chief of Police Office on June 27. The Malita..000.211...00 as moral damages.” 1994. Lolita’s Rendezvous. Chairman. On November 7. on February 6. date the check was given to them. his issuance of the February 6... hence. No. 1994 but on the advice of his lawyer. P100.R. Davao and obtained a loan of P250. issued an invitation-request to petitioner Antonio Tan at his address at Malatibas Plaza. Davao del Sur Police.. Promulgated: . by Decision of July 24. among other things.. by Decision of January 25. and despite repeated demands.. (c) the alleged loan was not ... 160892 Present: PANGANIBAN.. 1992..00 as attorney’s fees. and CARMELITO VILLAPAZ.. petitioners prayed for the award of damages and litigation expenses and attorney’s fees..000. 3..00. namely: (a) the defense of defendants-appellees that they did not go to plaintiff-appellant’s place on February 6. 1992.: From the January 25.00 per appearance fee. 2005 xx . On February 6.400. 2... G.. 1996. by letter of June 22. 1994. payable to the order of petitioner Tony Tan. b. he did not show up at the Malita. disposing as follows: WHEREFORE. On the counterclaim ordering the plaintiff Carmelito Villapaz to pay to defendants spouses Antonio and Lolita Tan: a.. and on account of the willful refusal of petitioners to honor their obligation. dismissed the Complaint and granted the Counterclaim. credited his version and accordingly reversed the trial court’s decision in this wise: Briefly stated. judgment is hereby rendered as follows: 1. Crediting defendants-petitioners’ version. petitioner Antonio Tan failed to settle the same.. Davao del Sur Police Office. 1992 “in exchange for equivalent cash”.. J. The invitation-request was received by petitioner Antonio Tan on June 22. Bonifacio St.. J. 1992 PBCom crossed check which loan was to be settled interest-free in six (6) months. they hadP1.. 1992.. petitioners never did... they had an average daily deposit of P700. On even date.-xx DECISION CARPIO MORALES...000 and on February 6. premises considered. 1992.. PBCom Davao City branch at Monteverde Avenue. CARPIO MORALES. P30. 2001 decision of the Court of Appeals reversing that of the Regional Trial Court (RTC) of Digos. to the account of petitioner Antonio Tan also at said bank.00..000. Davao del Sur RTC a Complaint for sum of money against petitioners-spouses.. and the check is inadmissible to prove the existence of a loan forP250.. By way of Compulsory Counterclaim. Ordering the dismissal of the complaint.000.* CORONA. the check was deposited at the drawee bank. pay the costs. alleged that the check was issued by respondent in Davao City on February 6. he suffered moral damages in the amount of P50. 1992. petitioners. JJ.
not for validity. Such requirement. Thus. whether oral or written. 21) Q: A: Apart from their self-serving testimonies. but because it is a big amount. (TSN of Villapaz dtd 7/25/95. a pertinent portion of his testimony on cross-examination discloses: ATTY. ATTY. You mean you are a fellow who adheres that every transaction should be recorded? Yes. it should be covered a (sic) proof. They are faulty and do not accord either with law or ordinary conduct of men. must appear in writing. it has been held. A loan (simple loan or mutuum) exists when a person receives a loan of money or any other fungible thing and acquires the ownership thereof. TAN (On Cross Examination): Q: Now. The existence of a contract of loan cannot be denied merely because it is not reduced in writing.00. The lower Court misplaced its reliance on Article 1358 of the Civil Code providing that to be enforceable. if ever we have a transaction which involves P1. Defendant-appellee Tan testified that he records his transactions if it involves a huge cash amount. usage and law. one of them being a godfather to the other’s son. Contracts are binding between the parties. maybe in keeping with good faith. Contracts are perfected by mere consent.000. Q: CARPENTERO (On Examination): Cross- x x x you have noticed Carmelito Villapaz to have trusted and have full confidence in you during your business relationship.000. aside from this check that you issued. deserve scant consideration. You said that the spouses Tan were in need of money on February 6.00 in exchange for the check. if the transaction involves a big amount. there is no evidence or proof that defendants-appellees actually delivered to plaintiff-appellant the cash amount of P250. p. plaintiffappellant had no account whatsoever with them. It bears emphasis that at the time plaintiff-appellant delivered the crossedcheck to defendants-appellees. it needs Q: A: Q: A: . according to their nature. contracts where the amount involved exceed five hundred pesos. He is bound to pay to the creditor the equal amount of the same kind and quality. the last two miss the applicable provisions of law. the first two given reasons partake more of alibi and speculation. hence. For another. There is no established enmity between them such that plaintiffappellant would be motivated to institute an unfounded action in court. and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which.000. 1992. he did not follow his usual practice. Defendants-appellees’ contention that they did not obtain any loan but merely exchanged the latter’s check for cash is not borne by any evidence. correct? The truth is. The law is explicit that contracts shall be obligatory in whatever form they may have been entered into. provided all the essential requisites for their validity are present. A: The four-fold reasoning cannot be sustained. But surprisingly in this case. For one thing. Why did you have to issue a cross-check? I issued a cross-check in order to be sure that he received the money from me so that he could not deny that he did not receive. is only for convenience. Surely. Plaintiffappellant’s sole purpose was to be paid back the loan he extended to defendantsappellees. correct? A: All people have trust and confidence but whenever there is a transaction. we need no document at all as proof.00 or P2. But in this case of Carmelito Villapaz you noticed personally that he has trust and confidence in your person.reduced in writing and (d) the check could not be a competent evidence of loan. there can be a verbal loan. plaintiff-appellant and defendant-appellee Antonio Tan are compadres. did you let the defendant sign a cash voucher? I did not require him any cash voucher or any written document because as I said we are close friends and I trusted him so I issued a check in his name Tony Tan. Notably.
m. by way of exception to the general rule. Certainly. the present appeal by petitioners anchored on the following grounds: I. . to obtain the alleged loan represented by the check because February 6. and the mere encashment of the check is not a contractual transaction such as a sale or a loan which ordinarily requires a receipt and that explains why they did not issue a receipt when they encashed the check of respondent. (Emphasis supplied. If plaintiffappellant was in dire need of money. prepared and counted the money at home from Obrero. PBCom Bank where plaintiff-appellant has his account is in the same vicinity of the store of Golden Harvest. In contrast. It is immaterial whether or not one is financially capable. 1992 was the opening for business in Davao City of Golden Harvest of which petitioner Antonio Tan is treasurer and in-charge of the bodega. Plaintiff-appellant has a checking account with PBCom Bank. 1992. Petitioners add that they could not have gone to Malita on February 6. This is located within walking distance (300 meters) from defendants-appellees’ store. a prince may incur a loan for expansion. the erroneous inferences in the factual finding of the trial Court cannot bind the appellate courts. respondent arrived at the Golden Harvest place of business at Davao City on February 6. as claimed by respondent. respondent’s allegation that no memorandum in writing of the transaction was executed because he and they are “kumpadres” does not inspire belief for respondent.00 with 12% interest per annum from judicial demand or filing of the complaint in Court until fully paid. returned to Golden Harvest shortly before 3:00 o’clock in the afternoon of the same day upon which he informed him (petitioner Antonio Tan) that he needed to bring cash to Malita in the amount of P250. since it was sufficiently funded. he could have personally withdrawn said money from his own account.” Thus. The Honorable Court of Appeals erred in concluding that the transaction in dispute was a contract of loan and not a mere matter of check encashment as found by the trial court. was with more reason expected to be more prudent. prudence dictates that a contract of loan must be in writing as in fact the New Civil Code provides that to be enforceable “contracts where the amount involved exceed[s] P500. produced. Davao City. the Court of Appeals disposed: WHEREFORE. The Honorable Court likewise erred in reasoning that the trial court placed much emphasis on the daily and time deposits of herein petitioners to determine their financial capability. 1992 crossed check. (Underscoring supplied) Petitioners maintain that they did not secure a loan from respondent. in the ordinary course of business. Davao City. 1992 at about 10:30 in the morning and left before noon of the same day. (TSN of Tan dtd 5/9/96. being a businessman himself. Petitioners furthermore maintain that they were financially stable on February 6.documents. as well as attorney’s fees and costs of suit. A pauper may borrow money for survival. there was no reason for them to go to a distant place like Malita to borrow money. respondent.” hence. . reckless manner of respondent in attempting to enforce an obligation that does not even exist. pp. then delivered it to plaintiff-appellant who was in the Golden Harvest Store at Sta Ana Avenue.00 but “time was running out and . Defendants-appellees are ordered to pay plaintiff-appellant the sum of P250. Hence. III. . The trial Court placed much emphasis on the daily and time deposit accounts of defendants-appellees. the appealed judgment is hereby REVERSED and SET ASIDE. however. 1992 as shown by the entries of their bank passbook. hence.00 must appear in writing even a private one. By petitioner Antonio Tan’s account. thus justifying the award for moral and exemplary damages. respondent’s “self-serving” claim does not suffice to prove the existence of a loan. The Honorable Court failed to consider the wanton. It is well-nigh unlikely that the wife who was supposed to have delivered the money on such a short notice.000. Defendantappellee Antonio Tan himself testified that plaintiff-appellant’s check was sufficiently funded. underscoring in the original) II. during which opening guests and well-wishers including respondent were entertained. The petition fails. he was so busy that was why he requested [him] to accommodate (sic) the said amount at 3:00 p. 12-13.000. insisting that they encashed in Davao City respondent’s February 6.
believed that the crossed check sufficed to prove their transaction. Costs against petitioners.Still by petitioner Antonio Tan’s account. he thereupon inquire by telephone from his wife who was at their house whether she had P250.00 cash.000.000.00 cash and as his wife replied she had. was also a client-depositor and the bank was still open for business? Petitioners’ version was thus correctly denied credit by the appellate court. 1992. at the time respondent needed to have his check encashed. that respondent’s account at same branch of the bank was funded and the check could be deposited and credited to his (petitioner Antonio Tan’s) account that same afternoon. 1358 of the Civil Code. That petitioner Antonio Tan had. out of trust and respect. . At all events. the same is misplaced for the requirement that contracts where the amount involved exceeds P500.000. and the drawee bank PBCom Davao City. could prove a loan transaction. It is pure naivete to believe that if a businessman has such an outstanding balance in his bank account. Even assuming that. needed cash of P250. In fine. the entries of which are no doubt in writing. a check. on February 6. SO ORDERED. an outstanding balance of more than P950. it being about 300 meters away.000. he turned over to him the P250. whereas respondent’s claim that the proceeds of the check.000. WHEREFORE. he asked her to bring the cash. his account had sufficient funds. and when later that same afternoon respondent returned to the Golden Harvest. as she did. After all. Monteverde branch where respondent maintained a current account could even be reached by foot from the Golden Harvest in just a few minutes (albeit by petitioner Antonio Tan’s own information respondent brought his truck with him).00 in his account at PBCom Monteverde branch where he was later to deposit respondent’s check did not rule out petitioners’ securing a loan. it was already close to 3:00 o’clock in the afternoon. as claimed by petitioner Antonio Tan.00 cash and gave the check to his wife who had it deposited on thesame afternoon to his account at PBCom Monteverde branch after he received clearance from the bank manager. In other words. in the meantime. he would have no need to borrow a lesser amount. That apart from the check no written proof of the grant of the loan was executed was credibly explained by respondent when he declared that petitioners’ son being his godson. For it is contrary to common experience. If indeed respondent.00 must appear in writing is only for convenience. he did not have to encash his check from petitioners. as petitioners’ side of the case is incredible as it is inconsistent with the principles by which men similarly situated are governed. which were admittedly received by petitioners. As for petitioners’ reliance on Art. arriving at petitioner Antonio Tan’s workplace at Golden Harvest at 10:30 in the morning. to the Golden Harvest where she gave the amount of P250. represented a loan extended to petitioner Antonio Tan is credible. why could not have PBCom Monteverde branch also accommodated him and allow him to encash his check that same time when he.000.00 to him (petitioner Antonio Tan). Petitioner Antonio Tan’s foregoing tale hardly inspires credence. respondent could just have gone there and drew cash from his current account via over the counter transaction. like petitioners. he (petitioner Antonio Tan) kept the P250. who came all the way from Malita to Davao City. as respondent had left for a while but not before leaving the check. the present petition is DENIED. the preponderance of evidence inclines on respondent. who knows him (petitioner Antonio Tan) very well. he .00.
Exhs. p. if determinable). it was discharged unto the custody of defendant Metro Port Service. Records. Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody. INC. respondents.: The issues. portion of the same was already in bad order (p." Exh. the arrastre operator and the customs broker.. adopting plaintiff's Records. Record). On December 4. K. vs. adopted by the Court of Appeals. 11. albeit not completely novel.. 17. 97412 July 12. it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it. From the evidence the court found the following: The issues are: 1. Whether or not defendant(s) should be held liable for the losses/damages (see plaintiff's pre-Trial Brief. 3. and (c) whether the applicable rate of interest. filed by the insurer-subrogee who paid the consignee the value of such losses/damages. Claims were presented against defendants who failed and refused to pay the same (Exhs. Allied's preTrial Brief. is twelve percent (12%) or six percent (6%). The latter excepted to one drum. Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. due to the fault and negligence of defendants. The shipment was insured under plaintiff's Marine Insurance Policy No. not having negligent or at fault for the shipment was already in damage and bad order condition when received by it.38. L). (pp. YMA-8 (Exh. The latter excepted to one drum which contained spillages. traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter. are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary. or joint and several. H. As a consequence of the losses sustained. Exh. Rollo. so that it became subrogated to all the rights of action of said consignee against defendants (per "Form of Subrogation". Record). B). p. liability of the common carrier.. other factual issues that confronted both courts. one drum opened and without seal (per "Request for Bad Order Survey. the appellate court said: Defendants filed their respective answers. Whether or not the shipment sustained losses/damages. J. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY. HON. N. 38). but nonetheless. 1981. Allied Brokerage alleged that plaintiff has no cause of action against it. and O). defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. said to be in bad order. 34.466. 81/01177 for P36. On January 8 and 14. plaintiff was compelled to pay the consignee P19. Here. 10649. two fiber drums of riboflavin were shipped from Yokohama. The findings of the court a quo. referred to above. No. (b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered. consignee suffered losses totaling P19. on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced: This is an action against defendants shipping company. Inc.) There were. which damage was unknown to plaintiff. 1994 EASTERN SHIPPING LINES.032. petitioner. 2. 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service. M. 85-86. the .G. INC.95 under the aforestated marine insurance policy. while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No. D).95. 1981. VITUG. Metroport averred that although subject shipment was discharged unto its custody. to be sure. Plaintiff contended that due to the losses/damage sustained by said drum. Inc. E). J. Upon arrival of the shipment in Manila on December 12.382.032. 1982. is no longer its liability (p. On January 7. I.R. arrastre operator and brokerforwarder for damages sustained by a shipment while in defendants' custody. "Release" and Philbanking check.
until fully paid (the liability of defendant Eastern Shipping. it follows that the losses/damages were sustained while in the respective and/or successive custody and possession of defendants carrier (Eastern). This becomes evident when the Marine Cargo Survey Report (Exh. Net unrecovered spillages was 15 kgs. that these losses/damages occurred before the shipment reached the consignee while under the successive custodies of defendants. But when on December 12. whichever is lesser. South Harbor.. Inc. with its "Additional Survey Notes".000. 1982. NCC). Correspondingly. and 3. Inc. Defendant Eastern Shipping's own exhibit. one drum was found opened without seal. Under Art. 1737 of the New Civil Code. cello bag partly torn but contents intact. shall not exceed US$500 per case or the CIF value of the loss.As to the first issue.95. 1738. covered by the vessel's Agent's Bad Order Tally Sheet No. pursuant to Section 6." The report further states that when defendant Allied Brokerage withdrew the shipment from defendant arrastre operator's custody on January 7.032. with the present legal interest of 12% per annum from October 1. PREMISES CONSIDERED. 86427. until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. there can be no doubt that the shipment sustained losses/damages. B. Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation. crate box or container in no case to exceed P5. In the latter notes. The amount of P19. . Costs. are considered. B and C). arrastre operator (Metro Port) and broker (Allied Brokerage). The report went on to state that when the drums reached the consignee. 2. 1981 the shipment was delivered to defendant Metro Port Service.00 as attorney's fees. The two drums were shipped in good order and condition. while the liability of defendant Metro Port Service. 1981. one drum was found with adulterated/faked contents. Inc. the "Turn-Over Survey of Bad Order Cargoes" (Exhs. it is stated that when the shipment was "landed on vessel" to dock of Pier # 15.01 of the Management Contract). as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. jointly and severally: 1. 1981 one drum was found "open". it excepted to one drum in bad order. therefore. G). it was observed that "one (1) fiber drum (was) in damaged condition. Manila on December 12. shall be to the extent of the actual invoice value of each package. 1982. 3Eastern) states that on December 12. the common carrier's duty to observe extraordinary diligence in the vigilance of goods remains in full force and effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the place of destination. as to the second issue. judgment is hereby rendered: A. and thus held: WHEREFORE. It is obvious.000. P3. Ordering defendants to pay plaintiff. the date of filing of this complaints.00 each.
we have begun by saying that the questions raised by petitioner carrier are not all that novel. et al. we do have a fairly good number of previous decisions this Court can merely tack to. (p. There are.20. The appeal is devoid of merit.447. (pp. In Fireman's Fund Insurance vs. v. 1735. this Court ruled: . Indeed. is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). 52 Phil.. was neither established in its totality nor definitely ascertained. II. involved a suit for recovery of money arising out of short deliveries and pilferage of goods . the liability imposed on Eastern Shipping Lines. of course. Ganzon vs. the sole petitioner in this case. in lieu of proof. and received by. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1. The petition is. Eastern Shipping Lines. granted. 1736-1738. Rollo. Inc. imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier. inter alia. In this petition. 863). 131 SCRA 365). Kui Bai vs.. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee. to be held liable in this particular case. defendant's recourse to US. Philippine National Railways vs. exceptional cases when such presumption of fault is not observed but these cases. Manila Port Service. the award of legal interest. 2 decided 3 on 15 May 1969. PRIVATE RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED. in holding the carrier and the arrastre operator liable in solidum. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants. We find that the conclusion drawn therefrom is correct. Dissatisfied. The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has. 207. in part. Prince Line. in any event.51 with legal interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof.947. Record). IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM. nor that attendant facts in a given case may not vary the rule. or viceversa.. The instant petition has been brought solely by Eastern Shipping Lines. the person entitled to receive them (Arts. Inc. Accordingly.SO ORDERED. Manila Railroad Co. The appellants then assailed. We do not. the common carrier. A factual finding of both the court a quo and the appellate court. In this case.. too.447. 253 ). IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION. Court of Appeals.. which. 87-89. After a careful scrutiny of the evidence on record. In this decision. and therefore they are liable to the appellee. Inc. Inc. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors. the carrier for transportation until delivered to. 161 SCRA 646. In sustaining the appellants. Metro Port Services (182 SCRA 455). Court of Appeals. appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3.thus: The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of. Civil Code. been passed upon by the Court. Metro Port Service vs. Dollar Steamship Lines. as subrogee for the amount it paid to the consignee. is. When the goods shipped either are lost or arrive in damaged condition. not one of which can be applied to this case.51 was agreed upon. 19 SCRA 5 . enumerated in Article 1734 1 of the Civil Code. is inevitable regardless of whether there are others solidarily liable with it. It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark. or until the lapse of a reasonable time for their acceptance by. and there need not be an express finding of negligence to hold it liable (Art. Civil Code. we have explained. This demand. such responsibility also devolves upon the CARRIER. of course. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee.. attributes error and grave abuse of discretion on the part of the appellate court when — I. vs.) The Court of Appeals thus affirmed in toto the judgment of the court a quo. 107 Phil. Let us first see a chronological recitation of the major rulings of this Court: The early case of Malayan Insurance Co. In the stipulation of facts later entered into by the parties. are exclusive. we take note. however. the amount of P1. 139 SCRA 87. being the carrier and not having been able to rebut the presumption of fault. Court of Appeals. a presumption arises against the carrier of its failure to observe that diligence.
Guzman." And as was held by this Court in Rivera vs. . . 1956. Inc. Lichauco v. 1969 up to the time they are actually paid or already the total sum of P370. "unliquidated and not known until definitely ascertained.00 as of June 4. the petitioners contended that Central Bank Circular No. the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the appellate court's decision became final. there being no stipulation to the contrary. the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan. (one of the petitioners) . — If the obligation consists in the payment of a sum of money. from the filing of the complaint until fully paid. in an action for the recovery of damages arising from the collapse of a building. Agustinos.) On appeal to the Court of Appeals. the lower court decreed: WHEREFORE. nor involving loans or forbearance of any money.335. instead. (Emphasis found in the text) — should have. Incorporated to pay jointly and severally the following persons: xxx xxx xxx (g) Plaintiffs Pacita F. 4 L-6998. providing thus — By virtue of the authority granted to it under Section 1 of Act 2655.000. or forbearance of any money. the date of the filing of the .000.00 which is the value of the insurance recovered and the amount of P10." then. 7 promulgated on 28 July 1986. 2209.68 with interest at the legal rate from November 29. Tomol.500. the sum of P989. judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows: Ordering defendants and third party plaintiffs Shell and Michael. This Circular shall take effect immediately." (Emphasis supplied) The case of Reformina vs. v. In their petition for review on certiorari.00 which is the value of the boat F B Pacita III together with its accessories. absent a stipulation. the "defendant United Construction Co. the law applicable to the said case is Article 2209 of the New Civil Code which reads — Art. judicial or extrajudicial. 5 rendered on 11 October 1985. goods or credits.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6. except when the demand can be established with reasonable certainty. shall be the payment of interest agreed upon. as amended. 416. xxx xxx xxx Coming to the case at bar.000. been applied. In Nakpil and Sons vs. Relying on the Reformina v. interest "cannot be recovered upon unliquidated claims or damages..P. 1974. Perez. Tomol case. assessed and determined by the courts after proof (Montilla c. was for "Recovery of Damages for Injury to Person and Loss of Property. 1622 dated July 29. and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code.Interest upon an obligation which calls for the payment of money." After trial. Court of Appeals. Cruz. to pay the plaintiff.00 with costs against defendants and third party plaintiffs. . goods. the case was remanded to the lower court for execution. i. This Court 6 ruled: The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money.. February 29.Corporacion de P. or credits and the rate allowed in judgments. inter alia. 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5. interest "should be from the date of the decision. Monetary Board in its Resolution No. in the absence of express contract as to such rate of interest. Any other kind of monetary judgment which has nothing to do with. goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank. . Reformina and Francisco Reformina the sum of P131. the legal interest which is six percent per annum. The trial court opted for judicial demand as the starting point.000. The above rule was reiterated in Philippine Rabbit Bus Lines. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72.e. this Court 8modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof. 9 the trial court. 25 Phil. . 302). and the debtor incurs in delay. has prescribed that the rate of interest for the loan.00 with legal interest thereon from the filing of the complaint until fully paid. goods or credits. Such interest normally is allowable from the date of demand. The case was for damages occasioned by an injury to person and loss of property.084. 1968. (Emphasis supplied. But then upon the provisions of Article 2213 of the Civil Code. and in the absence of stipulation. ordered. the indemnity for damages. if the suit were for damages. is the legal rate.. As correctly argued by the private respondents. Inc. fishing gear and equipment minus P80. 447. shall be twelve (12%) percent per annum. . much less forbearances of any money. 38 Phil.
000. dated 29 April 1985. Cruz. 1723. to P240. goods or credits. twelve (12%) per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. It is delay in the payment of such final judgment. In a decision of 09 November 1988. on 03 October 1986. Jr. Supra. Angas. After conducting a hearing on the complaints for eminent domain.) The subsequent case of American Express International. vs. . Civil Code. . 1972 is affirmed in all respects. in other words. .00 in concept of compensatory damages. it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate" from the time of the filing of the complaint. 416] does not apply to actions based on a breach of employment contract like the case at bar. as part of the judgment for damages. Ruiz 13 which arose from a breach of employment contract. (Emphasis supplied) Reformina came into fore again in the 21 February 1989 case of Florendo v. 143 SCRA 160-161 . The writ of execution issued by the trial court directed that only compensatory damages should earn interest at 6% per annum from the date of the filing of the complaint." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and. Solidary costs against the defendant and third-party defendants (Except Roman Ozaeta). 139 SCRA 260 ). providing any legal interest thereon. Upon failure to pay on such finality. plus costs of suit. goods or credit. Intermediate Appellate Court 11 was a petition for review on certiorari from the decision. Tomol. to be inconceivably large. i.00) Pesos as and for attorney's fees. there is neither a loan or a forbearance. (Emphasis supplied) The Court reiterated that the 6% interest per annum on the damages should be computed from the time the complaint was filed until the amount is fully paid. (Emphasis supplied) A motion for reconsideration was filed by United Construction. Said circular [Central Bank Circular No. of the then Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court. the latter held: WHEREFORE.00 as moral damages and P400.00) Pesos as moral damages. Clearly. This Court said: .00) Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100. are ordered to pay. Reformina v.. . including the sum of P1. (Philippine Rabbit Bus Lines Inc.000. while recognizing the right of the private respondent to recover damages. National Power Corporation vs. for moral damages by the trial court.00 and P100. involved the expropriation of certain parcels of land. restoring the amount of damages awarded by the trial court. . Quite recently. the Court of Appeals sustained the trial court's decision. When the decision was appealed to the Court of Appeals. it explained: There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. dated 27 February 1985. the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case. except as modified hereinabove the decision of the CFI of Negros Oriental dated October 31. It will be noted that in the cases already adverted to. except defendantappellant Merton Munn.000. . When taken to this Court for review. with interest at the legal rate from the date of the filing of the complaint until fully paid(Emphasis supplied.. jointly and severally. thus: WHEREFORE.400. and its resolution. The Court 12 thus set aside the decision of the appellate court and rendered a new one. Inc.000. "ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100." Save from the modification of the amount granted by the lower court. we deem it reasonable to render a decision imposing.) The petition for review to this Court was denied. the trial court ordered the petitioner to pay the private . and an entry of judgment was made.000. they are not applicable to the instant case. . as We do hereby impose.complaint until full payment . in its resolution of 15 April 1988. held the award. 416 . upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. the amounts stated in the dispositive portion of the decision.000. v.00.e. 14decided on 08 May 1992. contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in contravention of law. the case. however. (Emphasis supplied. the total sum being payable upon the finality of this decision. from the filing of the complaint until paid. that will cause the imposition of the interest. . the petitioner was awarded by the trial court moral and exemplary damages without. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5.00 as exemplary damages with interest thereon at 12% per annum from notice of judgment. p. with the modification that defendants-appellants. It is true that in the instant case.000. later sustained by the IAC. however. a petition for certiorari assailed the said order. but then no interest is actually imposed provided the sums referred to in the judgment are paid upon the finality of the judgment. the Court had another occasion to rule on the matter.000. . For having been illegally dismissed. with six (6%) percent interest thereon computed from the finality of this decision until paid. this Court. the rate of interest is imposed on the total sum. is applicable only in the following: (1) loans. . (2) forbearance of any money. was decided. The records were thereupon transmitted to the trial court.. P2.000. Ascribing grave abuse of discretion on the part of the trial judge. and (3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money. respectively.
and not by way of earnings from loans.e. contracts. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20 II. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision. as well as the accrual thereof. and the interest adjudged by the trial court is in the nature of indemnity for damages.explaining that "if the suit were for damages. Ruiz (1989) and National Power Corporation v. 26 Accordingly. Observe. A TWELVE PERCENT (12%) interest. goods or credits. dated 03 February 1988. by way of clarification and reconciliation. 17depending on whether or not the amount involved is a loan or forbearance. in applying the 6% legal interest per annum under the Civil Code.' then. Art. Philippine Rabbit Bus Lines v. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. . this interim period being deemed to be by then an equivalent to a forbearance of credit. the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). whether the case falls under paragraph 1 or paragraph 2. assessed and determined by the courts after proof. Nonetheless. in lieu of SIX PERCENT (6%). the rate of interest. Angas (1992). the payment of which is without stipulation regarding interest. to suggest the following rules of thumb for future guidance. WHEREFORE. Court of Appeals (1988). the petition is partly GRANTED. quasi-contracts. . the contravenor can be held liable for damages.respondents certain sums of money as just compensation for their lands so expropriated "with legal interest thereon . the "first group" which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money. is imposed. a loan or forbearance of money. be on the amount finally adjudged. When an obligation. on the other hand..e.e. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof.. not constituting a loan or forbearance of money. Florendo v. The ostensible discord is not difficult to explain. IAC. and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. law. too. did not alter the pronounced rule on the application of the 6% or 12% interest per annum. there have been seeming variances in the above holdings. however. on the award of interest. . shall be imposed on such amount upon finality of this decision until the payment thereof. an interest on the amount of damages awarded may be imposed at the discretion of the court 24 at the rate of 6% per annum. The "second group". the interest due shall itself earn legal interest from the time it is judicially demanded. i.Manila Port Service (1969). is breached. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. The actual base for the computation of legal interest shall." The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid. 1169. When the judgment of the court awarding a sum of money becomes final and executory. In the "second group" would be Malayan Insurance Company v. a common time frame in the computation of the 6% interest per annum has been applied. until fully paid. SO ORDERED. or one of indemnity for damage. regardless of its source. of the court a quo. where the demand is established with reasonable certainty..e. i. the "second group" varied on the commencement of the running of the legal interest. as well as to judgments involving such loan or forbearance of money. it may not be unwise. since the kind of interest involved in the joint judgment of the lower court sought to be enforced in this case is interest by way of damages. (T)he transaction involved is clearly not a loan or forbearance of money. i. When an obligation. 21 Furthermore. and American Express International v. Unlike. Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo. 2. With regard particularly to an award of interest in the concept of actual and compensatory damages. i. from the time the complaint is filed until the adjudged amount is fully paid. . the interest due should be that which may have been stipulated in writing. . on the one hand. the basic issue focuses on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. interest 'should be from the date of the decision. above. Therefore. shall be 12% per annum from such finality until its satisfaction. 3. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code. goods or credits but expropriation of certain parcels of land for a public purpose. depending on the equities of each case. I. Nakpil and Sons v. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. Cruz(1986). introduced a different time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the) decision until paid .Intermediate Appellate Court (1988). 25 No interest. etc. . 22 In the absence of stipulation. delicts or quasi-delicts 18 is breached.. that in these cases. the rate of legal interest. Tomol (1985). In the "first group". and it consists in the payment of a sum of money. goods or credits. the Court 15 declared: . as follows: 1. When the obligation is breached." Again.'" American Express International v. The factual circumstances may have called for different applications. Concededly. guided by the rule that the courts are vested with discretion. The "first group" would consist of the cases of Reformina v. 2209 of the Civil Code shall apply. the rate of interest shall be 12% per annum to be computed from default. in any case. The cases can perhaps be classified into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the court. however. 'unliquidated and not known until definitely ascertained.
arguing that the interest was not provided in the promissory note. On December 8.00 To secure the payment of the loan.. 1993. 1997 ………………… P30.000. 1997.R. or a total obligation of P1. P40.000. or a total of P240. 1994 …………………. The petitioners failed to completely pay the loan within the stipulated six (6)-month period.000. gathered from the records. . 1994 …………………. P40. but modified the interest rate from 4% per month to 12% per annum. but denied the stipulation on the 4% monthly interest. Acting Chairperson. 1994 …………………….000. 2000 finding that the respondent issued a check for P1. The assailed CA Decision affirmed the Decision of the Regional Trial Court (RTC).00 February 8. Pantaleon also denied that he made himself personally liable and that he made representations that the loan would be repaid within six (6) months.0 00.00 April 8.00 June 8. and six (6) postdated checks corresponding to the schedule of payments. 1994 ………………….. obtained a P1.772.00 As of January 4. 1994 …………………….000).00 in attorney’s fees. the respondent found that the petitioners still had an outstanding balance of P1. the petitioners paid the following amounts to the respondent: September 8. ABAD.000. 1997.00 loan from the respondent.240.151. THE RTC RULING The RTC rendered a Decision on October 27.000.000.PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S. P40. 1994 ………………. 2003 and the Resolution dated October 22. P40.00 for a 6-month period.00 to be paid within six (6) months.. Promulgated: March 9. representing a sixmonth loan payable according to the following schedule: January 8. P40.R. the petitioners had already paid a total of P1. computed from the filing of the complaint to full payment. the respondent filed a complaint for sum of money with the RTC to enforce the unpaid balance. 2003 of the Former Ninth Division of the Court of Appeals (CA) in CA-G. 1995……………. Menchavez. 1994 ………………P320. 1994 ………………. Branch 73. MENCHAVEZ .00 May 8.. P40.364. P40.526..040.000. 1995…………………. and as duly authorized by the Board of Directors of PRISMA.00 April 8. 1994 ……………………. Pantaleon issued a promissory note that states: I. 00 February 8. from Mr.00 0. Menchavez (respondent). J.000.00 Total P1. CV No. 974552 that held the petitioners liable for payment of P3. P1.00 to respondent Arthur F.00.000.00.00 The checks corresponding to the above amounts are hereby acknowledged. BRION. P30.000. No.00 June 8.228. 1998.: We resolve in this Decision the petition for review on certiorari filed by petitioners Prisma Construction & Development Corporation (PRISMA) and Rogelio S. plus 4% monthly interest.P158. P40. 1994 …………………….000.000.00 January 4. the President and Chairman of the Board of PRISMA. under the following schedule of payments: January 8. G. P40. Rogelio S. hereby acknowledge the receipt of ONE MILLION TWO HUNDRED FORTY THOUSAND PESOS (P1. 1994 ………………… P1. ARTHUR F... However. The assailed CA Resolution denied the petitioners’ Motion for Reconsideration.. 160545 Present: *NACHURA. but they were still indebted to the - versus - J.000.000.00 October 8. 1994 ………………… P1.240. PANTALEON. 1994 to January 4. P40. In their Answer dated October 6.108. Pantaleon.000. Pantaleon..00 May 8.00 per month.000.00 November 8. 2010 x-----------------------------------------------------------------------------------------. the petitioners admitted the loan of P1. 1994 ………………….240. 69627.00. Pantaleon signed the promissory note in his personal capacity. Arthur F.00 in favor of the petitioners for a loan that would earn an interest of 4% or P40. and PEREZ. Petitioners.240.000.P600. From September 8..772. Thus.. JJ.117.000. with a monthly interest of P40.00 March 8. petitioners) who seek to reverse and set aside the Decision dated May 5.00 0. FACTUAL BACKGROUND The facts of the case.00 payable for six months. DEL CASTILLO.0 0 March 8. Respondent... 1997. It noted that the petitioners made several payments amounting to P1. to which it applied a 4% monthly interest.000.000. on August 28..040.000 . Pantaleon (Pantaleon) (collectively. 1997.00 per court appearance and costs of suit.000. Philippine Currency.772. are briefly summarized below. Antipolo City in Civil Case No.x DECISION BRION.000..00 as of January 4.
The petitioners also point out the glaring inconsistency in the CA Decision.. i. the CA modified the RTC Decision by imposing a 12% per annum interest. but no such rate of interest was stipulated in the promissory note.00. for a total obligation of P1. The RTC observed that PRISMA was a one-man corporation of Pantaleon and used this circumstance to justify the piercing of the veil of corporate fiction. which reduced the interest from 4% per month or 48% per annum to 12% per annum.526. as agreed upon by the parties in the promissory note. we held in Tan v. Court of Appeals: When the obligation is breached. The petitioners elevated the case to the CA via an ordinary appeal under Rule 41 of the Rules of Court. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. the literal meaning of its stipulations governs. the RTC ordered the petitioners to jointly and severally pay the respondent the amount of P3. and (2) the agreement for the payment of interest was reduced in writing.respondent forP3. v. 1994 to June 8. THE PETITION The petitioners submit that the CA mistakenly relied on their board resolution to conclude that the parties agreed to a 4% monthly interest because the board resolution was not an evidence of a loan or forbearance of money.240.117. 12% from finality until fully paid. in his personal capacity and as authorized by the Board. Thus. the interest on the loan should be at the legal interest rate of 12% per annum. Applying this provision. was unreasonable and should be reduced to 12% per annum. but failed to consider that the amount of P3.117. Thereafter. Inc. Thus.. We note that this agreed sum can be computed at 4% interest per month. 1994. or from January 8. 1999 after considering the 4% monthly interest. During this period.00 per month corresponds only to the six (6)-month period of the loan.e. insisting that there was no express stipulation on the 4% monthly interest. rather a fixed sum equivalent to this rate was agreed upon. 1994. we find that the interest of P40.00 plus 4% per month interest from February 11. the interest covers the six (6)-month period only and cannot be interpreted to apply beyond it. Even assuming that the loan is subject to 4% monthly interest.000. 2003. the P1.117. Furthermore. When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties.000.” Under this provision.” (Emphasis supplied) . and an integral part of. THE CASE FOR THE RESPONDENT The respondent counters that the CA correctly ruled that the loan is subject to a 4% monthly interest because the board resolution is attached to. computed from the filing of the complaint until finality of judgment. does the rate of interest apply to the 6-month payment period only or until full payment of the loan? OUR RULING We find the petition meritorious.000. Interest due should be stipulated in writing. The appellate court. as the court cannot supply material stipulations or read into the contract words the contract does not contain. 1999 until fully paid. In the absence of stipulation. If so. a court's duty is confined to the interpretation of the contract the parties made for themselves without regard to its wisdom or folly.00 loan shall be payable within six (6) months. i.00 that the RTC ordered them to pay includes the compounded 4% monthly interest. the petitioners filed the present petition for review oncertiorari under Rule 45 of the Rules of Court. Thus.000. courts have no authority to alter the contract by construction or to make a new contract for the parties. THE ISSUE The core issue boils down to whether the parties agreed to the 4% monthly interest on the loan. The CA found that the parties agreed to a 4% monthly interest principally based on the board resolution that authorized Pantaleon to transact a loan with an approved interest of not more than 4% per month. 12% per annum Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. and no such stipulation exists.00 as of February 11.000. It is only when the contract is vague and ambiguous that courts are permitted to resort to the interpretation of its terms to determine the parties’ intent. since they agreed to pay the 4% monthly interest on the principal amount under the promissory note and the board resolution. and it consists in the payment of a sum of money. The expressed mandate of Article 1956 of the Civil Code is that interest due should be stipulated in writing. the respondent issued a check for P1. After the CA's denial of their motion for reconsideration. The CA affirmed the RTC’s finding that PRISMA was a mere instrumentality of Pantaleon that justified the piercing of the veil of corporate fiction. a loan or forbearance of money. the promissory note based on which the petitioners obtained the loan. including the power to enter into a contract of loan. the rate of interest shall be 12% per annum to be computed from default. the loan shall earn an interest of P40. The respondent further contends that the petitioners are estopped from assailing the 4% monthly interest. the interest due should be that which may have been stipulated in writing. Pantaleon. consistent with our ruling in Eastern Shipping Lines. In such cases. In the present case. Nicdao that collection of interest without any stipulation in writing is prohibited by law.526. Article 1956 of the Civil Code specifically mandates that “no interest shall be due unless it has been expressly stipulated in writing. THE CA RULING The CA decided the appeal on May 5. or from January 8. otherwise. however.e. executed the promissory note quoted above.00 per month. the payment of interest in loans or forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest. 1994 up to June 8. and thereafter.526. noted that the interest of 4% per month. In turn. but merely an authorization for Pantaleon to perform certain acts. Valdehueza and Ching v. Thus. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. or 48% per annum.00 for the six-month period. the interest due shall itself earn legal interest from the time it is judicially demanded.000.000.
exorbitant and hence. or from December 8. The payment of the specific sum of money of P40. on the other hand. or defend a crime. The doctrine of piercing the corporate veil applies only in three (3) basic instances. since they agreed to pay this interest on the principal amount under the promissory note and the board resolution.5% to be excessive.240. We remand the case to the trial court for the actual computation of the total amount due. what the petitioners agreed to was the payment of a specific sum ofP40. v. Inc.000. RTC-Makati. thereby rendering the stipulation null and void.240.000. We note that in all these cases. not to a 4% rate of interest payable within a six (6)month period. the terms of the loans were open-ended. as agreed by the parties. such corporate officer cannot be made personally liable for corporate liabilities. 1993 to June 8. the only limitation being that these stipulations. in Imperial v. Yasuma. of 4% per month or 48% per annum interest on a P2.00 loan. We cannot apply the doctrine of estoppel in the present case since the facts and circumstances. or a specific provision of law making a corporate officer liable.. Additionally. Again.5% per month. v.00 loan were required to pay an interest of 5. In the present case. for a total principal and interest amount of P1. Thereafter. of 7% and 5% per month for loans totallingP964. or when the corporate entity is used to justify a wrong. agency.000.000. Doctrine of Estoppel not applicable The respondent submits that the petitioners are estopped from disputing the 4% monthly interest beyond the six-month stipulated period. Court of Appeals. terms and conditions are not contrary to law.228. clauses. should be deducted from the total amount due. in Ruiz v. We disagree with the respondent’s contention. Jr.00 as of February 12. Therefore. amounting toP1. public order or public policy. With this statement of personal liability and in the absence of any representation on the part of PRISMA that the obligation is all its own because of its separate corporate identity. The facts show that the parties agreed to the payment of a specific sum of money of P40. we invalidated and reduced the stipulated interest in Spouses Solangon v.000. until the loan is fully paid. terms and conditions they have agreed to.00 shall earn P40. Court of Appeals. Thus. This resolution merely embodies the extent of Pantaleon’s authority to contract and does not create any right or obligation except as between Pantaleon and the board.500. namely: a) when the separate and distinct corporate personality defeats public convenience. Lorenzo.000.00. Court of Appeals not applicable The CA misapplied Medel v. since it was not agreed upon. Thus. of 16% per month or 192% per annum interest on a P320.00 loan. and in Chua v.000. 1994.000. in Bulos. i. 61. we found the interest rate of 5. he made himself accountable in the promissory note “in his personal capacity and as authorized by the Board Resolution” of PRISMA.000. Medel v. Taken in conjunction with the stipulated service charge and penalty. or c) is used in alter ego cases.00 per month was ever put in issue by the petitioners. for the total amount of P1.000.00 loan. negate its application. computed as indicated above. in Arrofo v. the loan of P1.000. and a penalty charge of 1% per month. Court of Appeals. plus attorney’s fee equivalent to 25% of the amount due. in fact. b) in fraud cases. we see no occasion to consider piercing the corporate veil as material to the case. contrary to morals.000.00 per month for a period of six (6) months. 1999. unconscionable.  they only assailed the application of a 4% interest rate.00.772. Tiu. which is the law between them. no reason exists to place the petitioners in estoppel. Quiño. or where the corporation is so organized and controlled and its affairs so conducted as to make it merely an instrumentality. of 3% per month or 36% per annum interest on aP3. simply authorizes Pantaleon to contract for a loan with a monthly interest of not more than 4%. no issue on theexcessiveness of the stipulated amount of P40.000. Sps. morals. since it is a mere alter ego or business conduit of a person. There is nothing from the records and. and Sps. protect a fraud.000. Barrera v. compounded by the application of this interest beyond the promissory note’s six (6) month period.00 loan.000.00 per month was voluntarily agreed upon by the petitioners and the respondent. Salazar of 6% per month or 72% per annum interest on a P60.00 loan. conduit or adjunct of another corporation. there is no allegation showing that petitioners were victims of fraud when they entered into the agreement with the respondent. Court of Appeals. Eastern Assurance and Surety Corporation v. of 7% interest per month or 84% per annum interest on a P15.00 per month for six months. Jaucian. In the absence of malice. .000. It is a familiar doctrine in obligations and contracts that the parties are bound by the stipulations. The board resolution. Timan. Piercing the corporate veil unfounded We find it unfounded and unwarranted for the lower courts to pierce the corporate veil of PRISMA. we see no competent and convincing evidence of any wrongful. Yong v.We reiterated this ruling in Security Bank and Trust Co. Court of Appeals in finding that a 4% interest per month was unconscionable. no cause exists to place the petitioners in estoppel.000.00 per month on the principal of a loan payable within six months. While Pantaleon denied personal liability in his Answer. clauses.00. the debtors in a P500. v. fraudulent or unlawful act on the part of PRISMA to justify piercing its corporate veil. iniquitous.000. In Medel. they erred in finding that the parties agreed to a 4% interest. Applying Medel.e. barring them from raising their present defenses against a 4% per month interest after the six-month period of the agreement.000. a service charge of 2% per annum. Hao. Catungal v. Sps. Medel finds no application in the present case where no other stipulation exists for the payment of any extra amount except aspecific sum of P40. Crismina Garments.00 per month for six months – not a 4% rate of interest per month for six (6) months – on a loan whose principal isP1.00. Br. The amounts already paid by the petitioners during the pendency of the suit. as established by the record. bad faith. where a corporation is essentially a farce. as when the corporate fiction is used as a vehicle for the evasion of an existing obligation. Under the promissory note. interest at the rate of 12% per annum shall apply.000. the RTC and the CA misappreciated the facts of the case. the stipulated interest rates were applied for an indefinite period. Sulit v.
shall thereafter bear interest at 12% per annum.00 per month for six (6) months from December 8.00 shall bear interest of P40. 69627.000. The petitioners’ loan of P1. Antipolo City for the proper computation of the amount due as herein directed. in light of all the foregoing. unpaid as of the end of the six-month payment period.000. shall bear interest at 12% per annum from the finality of this Decision.R. Any portion of this loan. Costs against the respondent. including accrued interests. 2003 of the Court of Appeals in CA-G. CV No. with due regard to the payments the petitioners have already remitted. SO ORDERED. Let this case be REMANDED to the Regional Trial Court.000. The total amount due and unpaid.WHEREFORE. 1993 as indicated in the promissory note. we hereby REVERSE and SET ASIDE the Decision dated May 5. . Branch 73.
000 loan that respondents had from petitioner Dio. Affirming the dissolution of the writ of preliminary injunction previously issued by the trial court. respondents filed with the appellate court. 2002. Under the terms of the deed. petitioner made written demands upon the respondents to pay their debt.R. SP No. one Lucia G. 2. “A” to “A-13”/Exhs. whereby respondents mortgaged anew the two properties already mortgaged with QDB to secure the timely payment of a P350. On August 27. The Deed of Real Estate Mortgage. 2005] On December 6. 1992. 1994. 51521 and CA-G. on February 24. 2. Meanwhile. Adjacent to the Japor’s lot is another lot owned by respondent Marta Japor. 1995. a petition for certiorari. CV No. as shown by Transfer Certificate of Title (TCT) No. The appellate court denied said petition.5 square-meter residential lot including its improvements. premises considered. July 8. Judgment is rendered as follows: 1. DECISION QUISUMBING. would be charged on them. Orian. which consisted of 325. in view of the foregoing considerations. On June 15. Lucena City. of the Court of Appeals.[G. in CA-G. The Petition in CA-G. 1982. though dated January 1989. offered to mortgage their properties to petitioner Teresita Dio. praying that the Court of Appeals direct the trial court to admit their Amended Complaint. more particularly the plaintiffs Virgilio Japor. of the appellate court. before the bank could foreclose on the mortgage. situated in Barangay Ibabang Mayao. J. 1989 be declared null and void. 92-26. denying Teresita Dio’s Motion for Partial Reconsideration of March 19. SO ORDERED. The respondents failed to settle their obligation to petitioner on April 14. “3” to “3-D”) to be valid and binding as between the parties. 3. No pronouncement as to costs. SP No. No. docketed as CA-G. .R. the agreed deadline for settlement. as evidenced by a Deed of Real Estate Mortgage duly executed by and between the respondents and QDB. SP No. CV No. SPOUSES VIRGILIO and LUZ ROCES JAPOR and MARTA JAPOR. vs. 35315. the trial court handed down the following judgment: WHEREFORE. 1989 and notarized on February 17. Respondents prayed that “judgment be rendered fixing the contractual obligations of plaintiffs with the defendant Dio plus legal or allowable interests thereon. petitioner. The trial court denied the motion.R. The respondents failed to pay their aforesaid loans. Fixing the interest at 12% per annum and an additional 1% penalty charge per month such that plaintiffs-appellants’ contractual obligation under the deed of real estate mortgage would amount to P1. Despite repeated demands. Petitioner prepared a Deed of Real Estate Mortgage. thru their broker. respondents did not pay. 154129. 1991. T39514. Luz Japor and Marta Japor TERESITA DIO.: For review on certiorari is the Decision.00 to plaintiffs-appellants.252. was actually executed on February 13.247.5 square meters and titled under TCT No. Dismissing the complaint for failure of the plaintiffs to substantiate their affirmative allegations. 1989. On September 27. T-15018. On August 23. 1983. Declaring the Real Estate Mortgage to be valid. the decision of the trial court is AFFIRMED with MODIFICATION. 51521.000 from the Quezon Development Bank (QDB). On December 11.674. dated July 2.R. The auction of the unredeemed properties was set for February 26.326. Equally assailed in this petition is the Resolution. 2002. respondents filed an action for Fixing of Contractual Obligation with Prayer for Preliminary Mandatory Injunction/Restraining Order .respondents. The decretal portion read: WHEREFORE. Declaring the Real Estate Mortgage (Exhs. Directing defendant-appellee Dio to give the surplus of P2. In the event of default. T39514 and T-15018 to QDB. 1992. hence petitioner applied for extrajudicial foreclosure of the mortgage. 2002 and the Spouses Japor and Marta Japor’s Motion for Reconsideration dated March 20. judgment is rendered: 1. respondents and QDB amended the Deed of Real Estate Mortgage increasing respondents’ loan to P128. docketed as Civil Case No.00.R. 1989.R. The antecedent facts are as follows: Herein respondents Spouses Virgilio Japor and Luz Roces Japor were the owners of an 845.000. and 4. the respondents obtained a loan of P90. 40457.” The trial court issued an Order enjoining the auction sale of the aforementioned mortgaged properties. dated February 22. 40457 is DENIED for being moot and academic. the Japors filed a Motion to Admit Amended Complaint with an attached copy of their Amended Complaint praying that the Deed of Real Estate Mortgage dated February 13. respondents agreed to pay the petitioner interest at the rate of five percent (5%) a month. for every month of delay. an additional interest equivalent to five percent (5%) of the amount then due. and as security therefor. they mortgaged the lots covered by TCT Nos. 1989. in the consolidated cases CAG. 2002. respondents. within a period of two months or until April 14. 1992. but reiterating the plea that the trial court fix the contractual obligations of the Japors with Dio. However. with the Regional Trial Court (RTC) of Lucena City.
the parties are now estopped from claiming otherwise. usury has become legally non-existent in this jurisdiction. Court of Appeals and Medel v. On May 8. Simply stated. On April 26. in applying Sps.326 as a result of the “overpricing” in the auction? . INIQUITOUS. Petitioner avers she has not The evidence shows that it was indeed the respondents who proposed the 5% interest rate per month for two (2) months. series of 1982 and accordingly. and hence.000. As stated at the outset.500.00 TO IN THEIR UNJUST violated any law considering she is not engaged in the business of money-lending. 1996. as the case may be. The appellate court thus erred. hence legally impermissible. petitioner now insists. thus. said rate may be equitably reduced should the same be found to be iniquitous. 905. we are constrained to rule against the petitioner’s contentions.247. the appellate court consolidated CAG. they also filed a Petition for Temporary Restraining Order And/Or Mandatory Injunction in Aid of Appellate Jurisdiction with the Court of Appeals. contrary to morals (contra bonosmores). regardless of maturity. the appellate court affirmed the decision of the trial court with respect to the validity of the Deed of Real Estate Mortgage. and exorbitant. 1983. Respondents admit they owe petitioner P350. Conformably to these precedent cases. On January 17. and 4. however. unconscionable. III PAYMENT OF RESPONDENTS ENRICHMENT. What then should the interest and penalty rates be? IV RESPONDENTS’ APPEAL SHOULD HAVE BEEN DISMISSED DUE TO FORUM SHOPPING.000 and do not question any lawful interest on their loan but they maintain that the Deed of Real Estate Mortgage is null and void since it did not state the true intent of the parties. if not illegal? Corollarily. the Court of Appeals denied respondents’ application for a temporary restraining order. unconscionable. 1996. the Court of Appeals correctly reduced the interest rate to 12% per annum and the penalty rate to 1% per month. if not against the law. While a stipulated rate of interest may not technically and necessarily be usurious under Circular No. 905. petitioner assigns the following errors allegedly committed by the appellate court: I THE ALLEGED INIQUITY OF THE STIPULATED INTEREST AND PENALTY WAS NOT RAISED BEFORE THE TRIAL COURT NOR ASSIGNED AS AN ERROR IN RESPONDENTS’ APPEAL. However. she claims she has suffered inconveniences and incurred expenses for some 13 years now as a result of respondents’ failure to pay her. 40457. but modified the interest and penalty rates for being unconscionable and exorbitant. UNCONSCIONABLE. SO ORDERED. CV No. nonetheless. usury now being legally nonexistent in our jurisdiction. should be deemed iniquitous. THE “SURPLUS” WOULD RESULT OF P2. a combined interest and penalty rate at 10% per month or 120% per annum.247. we sustain the appellate court when it found the interest and penalty rates in the Deed of Real Estate Mortgage in the present case excessive. Respondents vehemently contend that they never consented to the said stipulations and hence. unconscionable. Dissolving the writ of preliminary injunction previously issued by this Court. Court of Appeals to reduce the interest rate to 12% per annum and the penalty to 1% per month. 1996. Reduction is legally called for now in rates of interest and penalty stated in the mortgage contract. 1996. On May 9. This Court has held that a stipulated interest rate of 5. which took effect on January 1. which limited the 5% interest rate to only two (2) months from the date of the loan and which did not provide for penalties and other charges in the event of default or delay. 51521 and CA-G. and inordinate. and exorbitant shall depend upon the factual circumstances of each case. Hence. Before us.5% per month or 66% per annum is void for being iniquitous or unconscionable. On the first issue. the Court of Appeals found that the 5% interest rate per month and 5% penalty rate per month for every month of default or delay is in reality interest rate at 120% per annum. Moreover. For the succeeding period after the two months. the issue is: Did the Court of Appeals err when it held that the stipulations on interest and penalty in the Deed of Real Estate Mortgage is contrary to morals. petitioner contends that The Usury Law has been rendered ineffective by Central Bank Circular No. interest rates may accordingly be pegged at such levels or rates as the lender and the borrower may agree upon. Petitioner further points out that the 5% interest rate was proposed by the respondents and have only themselves to blame if the interests and penalties ballooned to its present amount due to their willful delay and default in payment. nothing in said Circular grants lenders carte blanche authority to impose interest rates which would result in the enslavement of their borrowers or to the hemorrhaging of their assets. were respondents entitled to any “surplus” on the auction sale price? On the main issue. should not be bound by them. II THE STIPULATED INTEREST AND PENALTY ARE NOT “EXCESSIVE. What is iniquitous. in accordance with Article 2227 of the Civil Code. We have likewise ruled that an interest rate of 6% per month or 72% per annum is outrageous and inordinate. On October 9. petitioner Dio as the sole bidder in an auction purchased the properties for P3. Almeda v. SP No.R. To pay the cost of this suit.326. But were respondents entitled to the “surplus” of P2.R. Central Bank Circular No. 905. respondents filed their notice of appeal. 1996. In the instant case. effectively removed the ceiling on interest rates for both secured and unsecured loans. Having agreed to said rate. EXORBITANT AND CONTRARY TO MORAL[S]”.or the latter’s substituted heir or heirs. 3.
what the Court did was merely to reflect the true price of the land in the foreclosure sale. In the instant case. but where he sells on credit instead of cash. and twelve percent (12%) for the succeeding period. . the mortgagee is liable for such surplus as actually comes into his hands. however. he must still account for the proceeds as if the price were paid in cash. WHEREFORE. any surplus in the foreclosure sale price. respondents could not legally claim any overprice from the petitioner. or whoever is now the party mortgagee.326. SP No. 2002. is hereby fixed at five percent (5%) for the first two (2) months following the date of execution of the Deed of Real Estate Mortgage. much less the amount of P2.R.R.00. for such surplus stands in the place of the land itself with respect to liens thereon or vested rights therein particularly those of the mortgagor or his assigns. SO ORDERED.We note that the “surplus” was the result of the computation by the Court of Appeals of respondents’ outstanding liability based on a reduced interest rate of 12% per annum and the reduced penalty rate of 1% per month. the Spouses Virgilio Japor and Luz Roces Japor and Marta Japor. The amount of the petitioner’s bid merely represented the true amount of the mortgage debt. the Decision dated February 22. 51521 and CA-G. Petitioner Teresita Dio is declared free of any obligation to return to the respondents. The penalty rate thereafter shall be fixed at one percent (1%) per month. there is no “surplus” to speak of. CV No.247. There being no surplus. The interest rate for the subject loan owing to QDB. No surplus in the purchase price was thus created to which the respondents as the mortgagors have a vested right. The court a quo then proceeded to apply our ruling in Sulit v. In adjusting the interest and penalty rates to equitable and conscionable levels. of the Court of Appeals in the consolidated cases CA-G. 40457 is hereby AFFIRMED with MODIFICATION. Court of Appeals. after the court below had applied our ruling in Sulit. to the effect that in case of surplus in the purchase price.
respectively. equivalent to 84% and 60% per annum.12 nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. Branch 86. 905-82. Court of Appeals. such an issue cannot be raised for the first time on appeal. The petition is patently devoid of merit. then proceeded. and in ordering petitioners to refund to respondents all payments of interest in excess of 12% per annum? Petitioners aver that the stipulated interest of 5% monthly and higher cannot be considered unconscionable because these rates are not usurious by virtue of Central Bank (C. 2004. RODRIGO TIMAN. d) P107.000 with the Clerk of Court of the RTC of Quezon City. unconscionable and exorbitant. Q-00-41276. They further aver they honestly believed that the interest rates they imposed on respondents’ loans were not usurious. c) P150. iniquitous. respondents. effectively removed the ceiling on interest rates for both secured and unsecured loans. as well as the subsequent motion for reconsideration. They also contend that petitioners cannot raise the defense of in pari delicto for the first time on appeal.8 We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3%9 per month and higher10 are excessive. It ruled that the original stipulated interest rates of 7% and 5% per month were excessive. invoking Medel v. The stipulated interest rates of 7% and 5% per month imposed on respondents’ loans must be equitably reduced to 1% per month or 12% per annum. 905826 which had expressly removed the interest ceilings prescribed by the Usury Law. respectively) to a fair and reasonable rate of 1% per month or 12% per annum. DECISION QUISUMBING. unconscionable and exorbitant. CV No. which took effect on January 1. iniquitous. The Court of Appeals also ordered petitioners to refund to respondents all interest payments in excess of 12% per annum. 170452 August 13. they are entitled to the return of the excessive interest paid. Such stipulations are void for being contrary to morals. LYNN TIMAN and LYDIA TIMAN. Rodrigo and Ma. 2000.B. the RTC rendered a decision in favor of respondents. Petitioners sought reconsideration. On May 3. On appeal.000. Lynn issued five (5) postdated checks to secure the loans. They further contend that the defense of good faith is a factual issue which cannot be raised by petitioners in a petition for review under Rule 45 of the Rules of Civil Procedure. petitioners. respondents offered to pay the principal amount of the loans through a Philippine National Bank manager’s check worthP764. e)P200. are unconscionable.000 loan which was secured by a postdated check issued by Lydia. The Court of Appeals declared illegal the stipulated interest rates of 7% and 5% per month for being excessive. Accordingly. but petitioners refused to accept the same insisting that the principal amount of the loans totalled P864. as well as on the issue of damages. It further ordered petitioners to refund to respondents all interest payments in excess of the legal rate of 1% per month or 12% per annum. On May 14. vs. The Court of Appeals reduced the stipulated original interest rates of 7% and 5% per month to only 1% per month or 12% per annum and ordered petitioners to refund the excess interest payments by respondents. No. The pertinent facts are as follows: In February and March 1999.R. in Civil Case No. but it was denied.000. By virtue of an order of Partial Judgment4 dated October 16. Sometime in March 2000. which had affirmed the Decision3 dated May 14.000.) Circular No.000. thus.13 Petitioners cannot also raise the defenses of in pari delicto and good faith.11 While C. the main issue is: (1) Did the Court of Appeals err in ruling that the original stipulated interest rates of 7% and 5%. Circular No. petitioners Salvador and Violeta Chua granted respondents Rodrigo. the Court of Appeals reduced the stipulated interest rates of 7% and 5% per month (equivalent to 84% and 60% per annum. 2002. Lynn and Lydia Timan the following loans: a) P100.5 Essentially. Petitioners add that respondents were in pari delicto since they agreed on the stipulated interest rates of 7% and 5% per month.000. 2004 of the Regional Trial Court (RTC) of Quezon City.7 counter that the stipulated interest rates of 7% and 5% per month are iniquitous.R. However. J. The defense of in pari delictowas not raised in the RTC. Respondents paid the loans initially at 7% interest rate per month until September 1999 and then at 5% interest rate per month from October to December 1999. Respondents.000. unconscionable and exorbitant. the Court of Appeals affirmed the trial court’s decision. These loans were evidenced by promissory notes with interest of 7% per month. except for the P150. but the RTC denied the motion. Petitioners must have seasonably raised it in the . Ma.000 to petitioners.B. MA. if not against the law.G. Later. the Clerk of Court of the RTC of Quezon City released the amount of P864. 2005 and November 24. of the Court of Appeals in CA-G. the RTC denied petitioners’ claim for damages. 2005. 82865. hence. this petition raising the lone issue of: WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR – OR ACTED NOT IN ACCORD WITH THE LAW AND JURISPRUDENCE – WHEN IT AFFIRMED THE JUDGMENT OF THE REGIONAL TRIAL COURT ORDERING THE RETURN OF THE EXCESS INTEREST TO RESPONDENTS. regardless of maturity. 1983. which was later reduced to 5% per month.: Before us is a petition for review on certiorari assailing the Decision1 and Resolution2 dated March 9. respondents deposited P864. Hence. b) P200. and f) P107. Petitioners moved to dismiss the case. 2008 SALVADOR CHUA and VIOLETA CHUA.000. Trial on the validity of the stipulated interests on the subject loans. they filed a case for consignation and damages.000.
contrary to morals ("contra bonos mores"). the Court held that CB Circular No." Indeed. the Usury Law has been rendered ineffective. hence. adopted on December 22. Costs against petitioners. has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now "legally inexistent. Regional Trial Court of Makati. Court of Appeals. and.000. iniquitous.5% per month on the P500. because questions raised on appeal are confined only within the issues framed by the parties. if not against the law. SO ORDERED." In the recent case of Florendo vs." Nevertheless.5% per month. The assailed Decision and Resolution dated March 9. Interest can now be charged as lender and borrower may agree upon. CV No. 905 of the Central Bank. respectively. the Court reiterated the ruling that "by virtue of CB Circular 905. WHEREFORE. we can not consider the rate "usurious" because this Court has consistently held that Circular No. 2005 and November 24. or 66% per annum. 905 "did not repeal nor in any way amend the Usury Law but simply suspended the latter’s effectivity. stipulated upon by the parties in the promissory note iniquitous or unconscionable.16 As well set forth in Medel:17 We agree … that the stipulated rate of interest at 5. The stipulation is void.R.proceedings before the lower court. we have held that "a Central Bank Circular can not repeal a law.14 The defense of good faith must also fail because such an issue is a question of fact15 which may not be properly raised in a petition for review under Rule 45 of the Rules of Civil Procedure which allows only questions of law. 2005. 1982. . Only a law can repeal another law." In Security Bank and Trust Company vs. Branch 61. 82865 are hereby AFFIRMED. the petition is DENIED for lack of merit. However. of the Court of Appeals in CAG.00 loan is excessive. unconscionable and exorbitant. we find the interest at 5." "Usury has been legally non-existent in our jurisdiction.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.