A. COMMON PROVISIONS
00
G.R. No. L-24968 April 27, 1972
SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.
Mabanag, Eliger and Associates and Saura, Magno and Associates for plaintiff-
appellee.
Jesus A. Avancea and Hilario G. Orsolino for defendant-appellant.
MAKALINTAL, J.:p
In Civil Case No. 55908 of the Court of First Instance of Manila, judgment was
rendered on June 28, 1965 sentencing defendant Development Bank of the
Philippines (DBP) to pay actual and consequential damages to plaintiff Saura Import
and Export Co., Inc. in the amount of P383,343.68, plus interest at the legal rate from
the date the complaint was filed and attorney's fees in the amount of P5,000.00. The
present appeal is from that judgment.
In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to the
Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an
industrial loan of P500,000.00, to be used as follows: P250,000.00 for the
construction of a factory building (for the manufacture of jute sacks); P240,900.00 to
pay the balance of the purchase price of the jute mill machinery and equipment; and
P9,100.00 as additional working capital.
Parenthetically, it may be mentioned that the jute mill machinery had already been
purchased by Saura on the strength of a letter of credit extended by the Prudential
Bank and Trust Co., and arrived in Davao City in July 1953; and that to secure its
release without first paying the draft, Saura, Inc. executed a trust receipt in favor of
the said bank.
On January 7, 1954 RFC passed Resolution No. 145 approving the loan application
for P500,000.00, to be secured by a first mortgage on the factory building to be
constructed, the land site thereof, and the machinery and equipment to be installed.
Among the other terms spelled out in the resolution were the following:
1. That the proceeds of the loan shall be utilized exclusively for the
following purposes:
For construction of factory building P250,000.00
For payment of the balance of purchase
price of machinery and equipment 240,900.
For working capital 9,100.00
T O T A L P500,000.00
4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto Caolboy and
Gregoria Estabillo and China Engineers, Ltd. shall sign the promissory notes jointly
with the borrower-corporation;
5. That release shall be made at the discretion of the Rehabilitation Finance
Corporation, subject to availability of funds, and as the construction of the factory
buildings progresses, to be certified to by an appraiser of this Corporation;"
Saura, Inc. was officially notified of the resolution on January 9, 1954. The day
before, however, evidently having otherwise been informed of its approval, Saura,
Inc. wrote a letter to RFC, requesting a modification of the terms laid down by it,
namely: that in lieu of having China Engineers, Ltd. (which was willing to assume
liability only to the extent of its stock subscription with Saura, Inc.) sign as co-maker
on the corresponding promissory notes, Saura, Inc. would put up a bond for
P123,500.00, an amount equivalent to such subscription; and that Maria S. Roca
would be substituted for Inocencia Arellano as one of the other co-makers, having
acquired the latter's shares in Saura, Inc.
In view of such request RFC approved Resolution No. 736 on February 4, 1954,
designating of the members of its Board of Governors, for certain reasons stated in
the resolution, "to reexamine all the aspects of this approved loan ... with special
reference as to the advisability of financing this particular project based on present
conditions obtaining in the operations of jute mills, and to submit his findings thereon
at the next meeting of the Board."
On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had again
agreed to act as co-signer for the loan, and asked that the necessary documents be
prepared in accordance with the terms and conditions specified in Resolution No.
145. In connection with the reexamination of the project to be financed with the loan
applied for, as stated in Resolution No. 736, the parties named their respective
committees of engineers and technical men to meet with each other and undertake
the necessary studies, although in appointing its own committee Saura, Inc. made the
observation that the same "should not be taken as an acquiescence on (its) part to
novate, or accept new conditions to, the agreement already) entered into," referring to
its acceptance of the terms and conditions mentioned in Resolution No. 145.
On April 13, 1954 the loan documents were executed: the promissory note, with F.R.
Halling, representing China Engineers, Ltd., as one of the co-signers; and the
corresponding deed of mortgage, which was duly registered on the following April 17.
It appears, however, that despite the formal execution of the loan agreement the
reexamination contemplated in Resolution No. 736 proceeded. In a meeting of the
RFC Board of Governors on June 10, 1954, at which Ramon Saura, President of
Saura, Inc., was present, it was decided to reduce the loan from P500,000.00 to
P300,000.00. Resolution No. 3989 was approved as follows:
RESOLUTION No. 3989. Reducing the Loan Granted Saura Import & Export Co., Inc.
under Resolution No. 145, C.S., from P500,000.00 to P300,000.00. Pursuant to Bd.
Res. No. 736, c.s., authorizing the re-examination of all the various aspects of the
loan granted the Saura Import & Export Co. under Resolution No. 145, c.s., for the
purpose of financing the manufacture of jute sacks in Davao, with special reference
as to the advisability of financing this particular project based on present conditions
obtaining in the operation of jute mills, and after having heard Ramon E. Saura and
after extensive discussion on the subject the Board, upon recommendation of the
Chairman, RESOLVED that the loan granted the Saura Import & Export Co. be
REDUCED from P500,000 to P300,000 and that releases up to P100,000 may be
authorized as may be necessary from time to time to place the factory in actual
operation: PROVIDED that all terms and conditions of Resolution No. 145, c.s., not
inconsistent herewith, shall remain in full force and effect."
On June 19, 1954 another hitch developed. F.R. Halling, who had signed the
promissory note for China Engineers Ltd. jointly and severally with the other RFC that
his company no longer to of the loan and therefore considered the same as cancelled
as far as it was concerned. A follow-up letter dated July 2 requested RFC that the
registration of the mortgage be withdrawn.
In the meantime Saura, Inc. had written RFC requesting that the loan of P500,000.00
be granted. The request was denied by RFC, which added in its letter-reply that it was
"constrained to consider as cancelled the loan of P300,000.00 ... in view of a
notification ... from the China Engineers Ltd., expressing their desire to consider the
loan insofar as they are concerned."
On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan and
informed RFC that China Engineers, Ltd. "will at any time reinstate their signature as
co-signer of the note if RFC releases to us the P500,000.00 originally approved by
you.".
On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan to the
original amount of P500,000.00, "it appearing that China Engineers, Ltd. is now willing
to sign the promissory notes jointly with the borrower-corporation," but with the
following proviso:
That in view of observations made of the shortage and high cost of
imported raw materials, the Department of Agriculture and Natural
Resources shall certify to the following:
1. That the raw materials needed by the borrower-corporation to
carry out its operation are available in the immediate vicinity; and
2. That there is prospect of increased production thereof to provide
adequately for the requirements of the factory."
The action thus taken was communicated to Saura, Inc. in a letter of RFC dated
December 22, 1954, wherein it was explained that the certification by the Department
of Agriculture and Natural Resources was required "as the intention of the original
approval (of the loan) is to develop the manufacture of sacks on the basis of locally
available raw materials." This point is important, and sheds light on the subsequent
actuations of the parties. Saura, Inc. does not deny that the factory he was building in
Davao was for the manufacture of bags from local raw materials. The cover page of
its brochure (Exh. M) describes the project as a "Joint venture by and between the
Mindanao Industry Corporation and the Saura Import and Export Co., Inc. to finance,
manage and operate a Kenaf mill plant, to manufacture copra and corn bags,
runners, floor mattings, carpets, draperies; out of 100% local raw materials,
principal kenaf." The explanatory note on page 1 of the same brochure states that,
the venture "is the first serious attempt in this country to use 100% locally grown raw
materials notably kenaf which is presently grown commercially in theIsland of
Mindanao where the proposed jutemill is located ..."
This fact, according to defendant DBP, is what moved RFC to approve the loan
application in the first place, and to require, in its Resolution No. 9083, a certification
from the Department of Agriculture and Natural Resources as to the availability of
local raw materials to provide adequately for the requirements of the factory. Saura,
Inc. itself confirmed the defendant's stand impliedly in its letter of January 21, 1955:
(1) stating that according to a special study made by the Bureau of Forestry
"kenaf will not be available in sufficient quantity this year or probably even next year;"
(2) requesting "assurances (from RFC) that my company and associates will be able
to bring in sufficient jute materials as may be necessary for the full operation of the
jute mill;" and (3) asking that releases of the loan be made as follows:
a) For the payment of the receipt for jute mill
machineries with the Prudential Bank &
Trust Company P250,000.00
(For immediate release)
b) For the purchase of materials and equip-
ment per attached list to enable the jute
mill to operate 182,413.91
c) For raw materials and labor 67,586.09
1) P25,000.00 to be released on the open-
ing of the letter of credit for raw jute
for $25,000.00.
2) P25,000.00 to be released upon arrival
of raw jute.
3) P17,586.09 to be released as soon as the
mill is ready to operate.
On January 25, 1955 RFC sent to Saura, Inc. the following reply:
Dear Sirs:
This is with reference to your letter of January 21, 1955, regarding the
release of your loan under consideration of P500,000. As stated in our letter
of December 22, 1954, the releases of the loan, if revived, are proposed to
be made from time to time, subject to availability of funds towards the end
that the sack factory shall be placed in actual operating status. We shall be
able to act on your request for revised purpose and manner of releases upon
re-appraisal of the securities offered for the loan.
With respect to our requirement that the Department of Agriculture and
Natural Resources certify that the raw materials needed are available in the
immediate vicinity and that there is prospect of increased production thereof
to provide adequately the requirements of the factory, we wish to reiterate
that the basis of the original approval is to develop the manufacture of sacks
on the basis of the locally available raw materials. Your statement that you
will have to rely on the importation of jute and your request that we give you
assurance that your company will be able to bring in sufficient jute materials
as may be necessary for the operation of your factory, would not be in line
with our principle in approving the loan.
With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not
pursue the matter further. Instead, it requested RFC to cancel the mortgage, and so,
on June 17, 1955 RFC executed the corresponding deed of cancellation and
delivered it to Ramon F. Saura himself as president of Saura, Inc.
It appears that the cancellation was requested to make way for the registration of a
mortgage contract, executed on August 6, 1954, over the same property in favor of
the Prudential Bank and Trust Co., under which contract Saura, Inc. had up to
December 31 of the same year within which to pay its obligation on the trust receipt
heretofore mentioned. It appears further that for failure to pay the said obligation the
Prudential Bank and Trust Co. sued Saura, Inc. on May 15, 1955.
On January 9, 1964, ahnost 9 years after the mortgage in favor of RFC was cancelled
at the request of Saura, Inc., the latter commenced the present suit for damages,
alleging failure of RFC (as predecessor of the defendant DBP) to comply with its
obligation to release the proceeds of the loan applied for and approved, thereby
preventing the plaintiff from completing or paying contractual commitments it had
entered into, in connection with its jute mill project.
The trial court rendered judgment for the plaintiff, ruling that there was a perfected
contract between the parties and that the defendant was guilty of breach thereof. The
defendant pleaded below, and reiterates in this appeal: (1) that the plaintiff's cause of
action had prescribed, or that its claim had been waived or abandoned; (2) that there
was no perfected contract; and (3) that assuming there was, the plaintiff itself did not
comply with the terms thereof.
We hold that there was indeed a perfected consensual contract, as recognized in
Article 1934 of the Civil Code, which provides:
ART. 1954. An accepted promise to deliver something, by way of
commodatum or simple loan is binding upon the parties, but the
commodatum or simple loan itself shall not be perferted until the
delivery of the object of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura,
Inc. for a loan of P500,000.00 was approved by resolution of the defendant, and the
corresponding mortgage was executed and registered. But this fact alone falls short
of resolving the basic claim that the defendant failed to fulfill its obligation and the
plaintiff is therefore entitled to recover damages.
It should be noted that RFC entertained the loan application of Saura, Inc. on the
assumption that the factory to be constructed would utilize locally grown raw
materials, principally kenaf. There is no serious dispute about this. It was in line with
such assumption that when RFC, by Resolution No. 9083 approved on December 17,
1954, restored the loan to the original amount of P500,000.00. it imposed two
conditions, to wit: "(1) that the raw materials needed by the borrower-corporation to
carry out its operation are available in the immediate vicinity; and (2) that there is
prospect of increased production thereof to provide adequately for the requirements
of the factory." The imposition of those conditions was by no means a deviation from
the terms of the agreement, but rather a step in its implementation. There was
nothing in said conditions that contradicted the terms laid down in RFC Resolution
No. 145, passed on January 7, 1954, namely "that the proceeds of the loan shall
be utilized exclusively for the following purposes: for construction of factory building
P250,000.00; for payment of the balance of purchase price of machinery and
equipment P240,900.00; for working capital P9,100.00." Evidently Saura, Inc.
realized that it could not meet the conditions required by RFC, and so wrote its letter
of January 21, 1955, stating that local jute "will not be able in sufficient quantity this
year or probably next year," and asking that out of the loan agreed upon the sum of
P67,586.09 be released "for raw materials and labor." This was a deviation from the
terms laid down in Resolution No. 145 and embodied in the mortgage contract,
implying as it did a diversion of part of the proceeds of the loan to purposes other
than those agreed upon.
When RFC turned down the request in its letter of January 25, 1955 the negotiations
which had been going on for the implementation of the agreement reached an
impasse. Saura, Inc. obviously was in no position to comply with RFC's conditions. So
instead of doing so and insisting that the loan be released as agreed upon, Saura,
Inc. asked that the mortgage be cancelled, which was done on June 15, 1955. The
action thus taken by both parties was in the nature cf mutual desistance what
Manresa terms "mutuo disenso"1 which is a mode of extinguishing obligations. It is
a concept that derives from the principle that since mutual agreement can create a
contract, mutual disagreement by the parties can cause its extinguishment.2
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest
against any alleged breach of contract by RFC, or even point out that the latter's
stand was legally unjustified. Its request for cancellation of the mortgage carried no
reservation of whatever rights it believed it might have against RFC for the latter's
non-compliance. In 1962 it even applied with DBP for another loan to finance a rice
and corn project, which application was disapproved. It was only in 1964, nine years
after the loan agreement had been cancelled at its own request, that Saura, Inc.
brought this action for damages.All these circumstances demonstrate beyond doubt
that the said agreement had been extinguished by mutual desistance and that on
the initiative of the plaintiff-appellee itself.
With this view we take of the case, we find it unnecessary to consider and resolve the
other issues raised in the respective briefs of the parties.
WHEREFORE, the judgment appealed from is reversed and the complaint dismissed,
with costs against the plaintiff-appellee.
Reyes, J.B.L., Actg. C.J., Zaldivar, Castro, Fernando, Teehankee, Barredo and
Antonio, JJ., concur.
[G.R. No. 133632. February 15, 2002]
BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF APPEALS
and ALS MANAGEMENT & DEVELOPMENT
CORPORATION, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari assails the decision dated February 28, 1997, of the
Court of Appeals and its resolution dated April 21, 1998, in CA-G.R. CV No. 38887. The
appellate court affirmed the judgment of the Regional Trial Court of Pasig City, Branch
151, in (a) Civil Case No. 11831, for foreclosure of mortgage by petitioner BPI
Investment Corporation (BPIIC for brevity) against private respondents ALS
Management and Development Corporation and Antonio K. Litonjua, [1] consolidated
with (b) Civil Case No. 52093, for damages with prayer for the issuance of a writ of
preliminary injunction by the private respondents against said petitioner.
The trial court had held that private respondents were not in default in the payment
of their monthly amortization, hence, the extrajudicial foreclosure conducted by BPIIC
was premature and made in bad faith. It awarded private respondents the amount
of P300,000 for moral damages, P50,000 for exemplary damages, and P50,000 for
attorneys fees and expenses for litigation. It likewise dismissed the foreclosure suit for
being premature.
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), the predecessor of petitioner BPIIC,
for the construction of a house on his lot in New Alabang Village, Muntinlupa. Said
house and lot were mortgaged to AIDC to secure the loan. Sometime in 1980, Roa sold
the house and lot to private respondents ALS and Antonio Litonjua for P850,000. They
paid P350,000 in cash and assumed the P500,000 balance of Roas indebtedness with
AIDC. The latter, however, was not willing to extend the old interest rate to private
respondents and proposed to grant them a new loan of P500,000 to be applied to Roas
debt and secured by the same property, 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 P9,996.58 and penalty interest at the rate of
21% per annum per day from the date the amortization became due and payable.
Consequently, in March 1981, private respondents executed a mortgage deed
containing the above stipulations with the provision that payment of the monthly
amortization shall commence on May 1, 1981.
On August 13, 1982, ALS and Litonjua updated Roas arrearages by paying BPIIC
the sum of P190,601.35. This reduced Roas principal balance to P457,204.90 which,
in turn, was liquidated when BPIIC applied thereto the proceeds ofprivate respondents
loan of P500,000.
On September 13, 1982, BPIIC released to private respondents P7,146.87,
purporting to be what was left of their loan after full payment of Roas loan.
In June 1984, BPIIC instituted foreclosure proceedings against private
respondents on the ground that they failed to pay the mortgage indebtedness which
from May 1, 1981 to June 30, 1984, amounted to Four Hundred Seventy Five
Thousand Five Hundred Eighty Five and 31/100 Pesos (P475,585.31). A notice of
sheriffs sale was published on August 13, 1984.
On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against BPIIC.
They alleged, among others, that they were not in arrears in their payment, but in fact
made an overpayment as of June 30, 1984. They maintained that they should not be
made to pay amortization before the actual release of the P500,000 loan in August and
September 1982. Further, out of the P500,000 loan, only the total amount
of P464,351.77 was released to private respondents. Hence, applying the effects of
legal compensation, the balance of P35,648.23 should be applied to the initial monthly
amortization for the loan.
On August 31, 1988, the trial court rendered its judgment in Civil Case Nos. 11831
and 52093, thus:
WHEREFORE, judgment is hereby rendered in favor of ALS Management and
Development Corporation and Antonio K. 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 P464,351.77, with interest at 20% plus service charge of
1% per annum, payable on equal monthly and successive amortizations at P9,283.83
for ten (10) years or one hundred twenty (120) months. The amortization schedule
attached as Annex A to the Deed of Mortgage is correspondingly reformed as
aforestated.
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, and therefore orders BPI to pay ALS and Litonjua the following sums:
a) P300,000.00 for and as moral damages;
b) P50,000.00 as and for exemplary damages;
c) P50,000.00 as and for attorneys fees and expenses of litigation.
The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for being
premature.
Costs against BPI.
SO ORDERED.[2]
Both parties appealed to the Court of Appeals. However, private respondents
appeal was dismissed for non-payment of docket fees.
On February 28, 1997, the Court of Appeals promulgated its decision, the
dispositive portion reads:
WHEREFORE, finding no error in the appealed decision the same is hereby
AFFIRMED in toto.
SO ORDERED.[3]
In its decision, the Court of Appeals reasoned that a simple loan is perfected only
upon the delivery of the object of the contract. The contract of loan between BPIIC and
ALS & Litonjua was perfected only on September 13, 1982, the date when BPIIC
released the purported balance of the P500,000 loan after deducting therefrom the
value of Roas indebtedness. Thus, payment of the monthly amortization should
commence only a month after the said date, as can be inferred from the stipulations in
the contract. This, despite the express agreement of the parties that payment shall
commence on May 1, 1981. From October 1982 to June 1984, the total amortization
due was only P194,960.43. Evidence showed that private respondents had an
overpayment, because as of June 1984, they already paid a total amount
of P201,791.96. Therefore, 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. This fact constituted sufficient ground for
moral damages in favor of private respondents.
The motion for reconsideration filed by petitioner BPIIC was likewise denied,
hence this petition, where BPIIC submits for resolution the following issues:
I. WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL
CONTRACT IN THE LIGHT OF THE RULE LAID DOWN IN BONNEVIE
VS. COURT OF APPEALS, 125 SCRA 122.
II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND
EXEMPLARY DAMAGES AND ATTORNEYS FEES IN THE FACE OF
IRREGULAR PAYMENTS MADE BY ALS AND OPPOSED TO THE
RULE LAID DOWN IN SOCIAL SECURITY SYSTEM VS. COURT OF
APPEALS, 120 SCRA 707.
On the first issue, 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, the
loan contract in this case was perfected only on September 13, 1982.Petitioner claims
that a contract of loan is a consensual contract, and a loan contract is perfected at the
time the contract of mortgage is executed conformably with our ruling in Bonnevie v.
Court of Appeals, 125 SCRA 122. In the present case, the loan contract was perfected
on March 31, 1981, the date when the mortgage deed was executed, hence, the
amortization and interests on the loan should be computed from said date.
Petitioner also argues that while the documents showed that the loan was
released only on August 1982, the loan was actually released on March 31, 1981, when
BPIIC issued a cancellation of mortgage of Frank Roas loan. This finds support in the
registration on March 31, 1981 of the Deed of Absolute Sale executed by Roa in favor
of ALS, transferring the title of the property to ALS, and ALS executing the Mortgage
Deed in favor of BPIIC. Moreover, petitioner claims, the delay in the release of the loan
should be attributed to private respondents. As BPIIC only agreed to extend
a P500,000 loan, private respondents were required to reduce Frank Roas loan below
said amount. According to petitioner, private respondents were only able to do so in
August 1982.
In their comment, private respondents assert that based on Article 1934 of the
Civil Code,[4] a simple loan is perfected upon the delivery of the object of the contract,
hence a real contract. In this case, even though the loan contract was signed on March
31, 1981, it was perfected only on September 13, 1982, when the full loan was released
to private respondents. They submit that petitioner misread Bonnevie. To give meaning
to Article 1934, according to private respondents, Bonnevie must be construed to mean
that the contract to extend the loan was perfected on March 31, 1981 but the contract
of loan itself was only perfected upon the delivery of the full loan to private respondents
on September 13, 1982.
Private respondents further maintain that even granting, arguendo, that the loan
contract was perfected on March 31, 1981, and their payment did not start a month
thereafter, still no default took place. According to private respondents, a perfected loan
agreement imposes reciprocal obligations, where the obligation or promise of each
party is the consideration of the other party. In this case, the consideration for BPIIC in
entering into the loan contract is the promise of private respondents to pay the monthly
amortization. For the latter, it is the promise of BPIIC to deliver the money. In reciprocal
obligations, 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. Therefore, private
respondents conclude, they did not incur in delay when they did not commence paying
the monthly amortization on May 1, 1981, as it was only on September 13, 1982 when
petitioner fully complied with its obligation under the loan contract.
We agree with private respondents. A loan contract is not a consensual contract
but a real contract. It is perfected only upon the delivery of the object of the
contract.[5] Petitioner misapplied Bonnevie. The contract in Bonnevie declared by this
Court as a perfected consensual contract falls under the first clause of Article 1934,
Civil Code. It is an accepted promise to deliver something by way of simple loan.
In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines, 44
SCRA 445, petitioner applied for a loan of P500,000 with respondent bank. The latter
approved the application through a board resolution. Thereafter, the corresponding
mortgage was executed and registered. However, because of acts attributable to
petitioner, the loan was not released. Later, petitioner instituted an action for damages.
We recognized in this case, a perfected consensual contract which under normal
circumstances could have made the bank liable for not releasing the loan. However,
since the fault was attributable to petitioner therein, the court did not award it damages.
A perfected consensual contract, as shown above, can give rise to an action for
damages. However, 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.[6]
In the present case, the loan contract between BPI, on the one hand, and ALS
and Litonjua, on the other, was perfected only on September 13, 1982, the date of the
second release of the loan. Following the intentions of the parties on the
commencement of the monthly amortization, as found by the Court of Appeals, private
respondents obligation to pay commenced only on October 13, 1982, a month after the
perfection of the contract.[7]
We also agree with private respondents that a contract of loan involves a
reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other.[8] As averred by private respondents, 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, 1981, one month after the
supposed release of the loan. It is a basic principle in reciprocal obligations that 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.[9] 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, default sets in. Consequently, petitioner could only demand for the
payment of the monthly amortization after September 13, 1982 for it was only then
when it complied with its obligation under the loan contract. Therefore, in computing
the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the
mortgage, the starting date is October 13, 1982 and not May 1, 1981.
Other points raised by petitioner in connection with the first issue, 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, are factual. 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, [10] factual matters
need not tarry us now. On these points we are bound by the findings of the appellate
and trial courts.
On the second issue, 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. It merely exercised its right under the mortgage contract because private
respondents were irregular in their monthly amortization. It invoked our ruling in Social
Security System vs. Court of Appeals, 120 SCRA 707, where we said:
Nor can the SSS be held liable for moral and temperate damages. As concluded by
the Court of Appeals the negligence of the appellant is not so gross as to warrant
moral and temperate damages, except that, said Court reduced those damages by
only P5,000.00 instead of eliminating them. 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. 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 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.
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. Further, it did not make the corresponding deduction in the
monthly amortization to conform to the actual amount of loan released, and it
immediately initiated foreclosure proceedings when private respondents failed to make
timely payment.
But as admitted by private respondents themselves, they were irregular in their
payment of monthly amortization. Conformably with our ruling in SSS, we can not
properly declare BPIIC in bad faith. Consequently, we should rule out the award of
moral and exemplary damages.[11]
However, in our view, BPIIC was negligent in relying merely on the entries found
in the deed of mortgage, without checking and correspondingly adjusting its records on
the amount actually released to private respondents and the date when it was
released. Such negligence resulted in damage to private respondents, for which an
award of nominal damages should be given in recognition of their rights which were
violated by BPIIC.[12] For this purpose, the amount of P25,000 is sufficient.
Lastly, as in SSS where we awarded attorneys fees because private respondents
were compelled to litigate, we sustain the award of P50,000 in favor of private
respondents as attorneys fees.
WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals
and its resolution dated April 21, 1998, are AFFIRMED WITH MODIFICATION as to
the award of damages. The award of moral and exemplary damages in favor of private
respondents is DELETED, but the award to them of attorneys fees in the amount
of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay private
respondents P25,000 as nominal damages. Costs against petitioner.
SO ORDERED.
CAROLYN M. GARCIA, G.R. No. 154878
Petitioner,
Present:
 PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
RICA MARIE S. THIO,
Respondent. Promulgated:
March 16, 2007
DECISION
CORONA, J.:
Assailed in this petition for review on certiorari [1] are the June 19,
2002 decision[2] and August 20, 2002 resolution[3] of the Court of Appeals (CA) in CA-
G.R. CV No. 56577 which set aside the February 28, 1997 decision of the Regional
Trial Court (RTC) of Makati City, Branch 58.
Sometime in February 1995, respondent Rica Marie S. Thio received from
petitioner Carolyn M. Garcia a crossed check [4] dated February 24, 1995 in the amount
of US$100,000 payable to the order of a certain Marilou Santiago. [5] Thereafter,
petitioner received from respondent every month (specifically, on March 24, April 26,
June 26 and July 26, all in 1995) the amount of US$3,000 [6] and P76,500[7] on July
26,[8] August 26, September 26 and October 26, 1995.
In June 1995, respondent received from petitioner another crossed
check[9] dated June 29, 1995 in the amount of P500,000, also payable to the order of
Marilou Santiago.[10] Consequently, petitioner received from respondent the amount
of P20,000 every month on August 5, September 5, October 5 and November 5,
1995.[11]
According to petitioner, respondent failed to pay the principal amounts of the
loans (US$100,000 and P500,000) when they fell due. Thus, on February 22, 1996,
petitioner filed a complaint for sum of money and damages in the RTC of Makati City,
Branch 58 against respondent, seeking to collect the sums of US$100,000, with interest
thereon at 3% a month from October 26, 1995 and P500,000, with interest thereon at
4% a month from November 5, 1995, plus attorneys fees and actual damages. [12]
Petitioner alleged that on February 24, 1995, respondent borrowed from her
the amount of US$100,000 with interest thereon at the rate of 3% per month, which
loan would mature on October 26, 1995.[13] The amount of this loan was covered by the
first check. On June 29, 1995, respondent again borrowed the amount of P500,000 at
an agreed monthly interest of 4%, the maturity date of which was on November 5,
1995.[14] The amount of this loan was covered by the second check. For both loans, no
promissory note was executed since petitioner and respondent were close friends at
the time.[15] Respondent paid the stipulated monthly interest for both loans but on their
maturity dates, she failed to pay the principal amounts despite repeated demands. [16]
Respondent denied that she contracted the two loans with petitioner and
countered that it was Marilou Santiago to whom petitioner lent the money. She claimed
she was merely asked by petitioner to give the crossed checks to Santiago.[17] She
issued the checks for P76,000 and P20,000 not as payment of interest but to
accommodate petitioners request that respondent use her own checks instead of
Santiagos.[18]
In a decision dated February 28, 1997, the RTC ruled in favor of
petitioner.[19] It found that respondent borrowed from petitioner the amounts of
US$100,000 with monthly interest of 3% and P500,000 at a monthly interest of 4%:[20]
WHEREFORE, finding preponderance of evidence to
sustain the instant complaint, judgment is hereby rendered in favor
of [petitioner], sentencing [respondent] to pay the former the amount
of:
1. [US$100,000.00] or its peso
equivalent with interest thereon at 3% per month from October 26,
1995 until fully paid;
2. P500,000.00 with interest
thereon at 4% per month from November 5, 1995 until fully paid.
 3. P100,000.00 as and for
attorneys fees; and
4. P50,000.00 as and for actual
damages.
For lack of merit, [respondents] counterclaim is perforce
dismissed.
With costs against [respondent].
IT IS SO ORDERED.[21]
On appeal, the CA reversed the decision of the RTC and ruled that there was
no contract of loan between the parties:
A perusal of the record of the case shows that [petitioner]
failed to substantiate her claim that [respondent] indeed borrowed
money from her. There is nothing in the record that shows that
[respondent] received money from [petitioner].What is evident is
the fact that [respondent] received a MetroBank [crossed] check
dated February 24, 1995 in the sum of US$100,000.00, payable to
the order of Marilou Santiago and a CityTrust [crossed] check dated
June 29, 1995 in the amount of P500,000.00, again payable to the
order of Marilou Santiago, both of which were issued by
[petitioner]. The checks received by [respondent], being
crossed, may not be encashed but only deposited in the bank
by the payee thereof, that is, by Marilou Santiago herself.
It must be noted that crossing a check has the following
effects: (a) the check may not be encashed but only deposited in the
bank; (b) the check may be negotiated only onceto one who has an
account with the bank; (c) and the act of crossing the check serves
as warning to the holder that the check has been issued for a definite
purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a holder in due course.
Consequently, the receipt of the [crossed] check by
[respondent] is not the issuance and delivery to the payee in
contemplation of law since the latter is not the person who could take
the checks as a holder, i.e., as a payee or indorsee thereof, with
intent to transfer title thereto. Neither could she be deemed as an
agent of Marilou Santiago with respect to the checks because she
was merely facilitating the transactions between the former and
[petitioner].
With the foregoing circumstances, it may be fairly inferred
that there were really no contracts of loan that existed between the
parties. x x x (emphasis supplied)[22]
Hence this petition.[23]
As a rule, only questions of law may be raised in a petition for review on
certiorari under Rule 45 of the Rules of Court. However, this case falls under one of the
exceptions, i.e., when the factual findings of the CA (which held that there
were no contracts of loan between petitioner and respondent) and the RTC (which held
that there were contracts of loan) are contradictory.[24]
The petition is impressed with merit.
A loan is a real contract, not consensual, and as such is perfected only upon
the delivery of the object of the contract.[25] This is evident in Art. 1934 of the Civil Code
which provides:
An accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but the
commodatum or simple loan itself shall not be perfected until the
delivery of the object of the contract. (Emphasis supplied)
Upon delivery of the object of the contract of loan (in this case the money received by
the debtor when the checks were encashed) the debtor acquires ownership of such
money or loan proceeds and is bound to pay the creditor an equal amount. [26]
It is undisputed that the checks were delivered to respondent. However, these
checks were crossed and payable not to the order of respondent but to the order of a
certain Marilou Santiago. Thus the main question to be answered is: who borrowed
money from petitioner respondent or Santiago?

Petitioner insists that it was upon respondents instruction that both checks
were made payable to Santiago.[27] She maintains that it was also upon respondents
instruction that both checks were delivered to her (respondent) so that she could, in
turn, deliver the same to Santiago.[28] Furthermore, she argues that once respondent
received the checks, the latter had possession and control of them such that she had
the choice to either forward them to Santiago (who was already her debtor), to retain
them or to return them to petitioner.[29]
We agree with petitioner. Delivery is the act by which the res or substance
thereof is placed within the actual or constructive possession or control of
another.[30] Although respondent did not physically receive the proceeds of the checks,
these instruments were placed in her control and possession under an arrangement
whereby she actually re-lent the amounts to Santiago.
Several factors support this conclusion.
First, respondent admitted that petitioner did not personally
know Santiago.[31] It was highly improbable that petitioner would grant two loans to a
complete stranger without requiring as much as promissory notes or any written
acknowledgment of the debt considering that the amounts involved were quite big.
Respondent, on the other hand, already had transactions with Santiago at that time.[32]
Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose
name appeared in both parties list of witnesses) testified that respondents plan was for
petitioner to lend her money at a monthly interest rate of 3%, after which respondent
would lend the same amount to Santiago at a higher rate of 5% and realize a profit of
2%.[33] This explained why respondent instructed petitioner to make the checks payable
to Santiago. Respondent has not shown any reason why Ruiz testimony should not be
believed.
Third, for the US$100,000 loan, respondent admitted issuing her own checks
in the amount of P76,000 each (peso equivalent of US$3,000) for eight months to cover
the monthly interest. For the P500,000 loan, she also issued her own checks in the
amount of P20,000 each for four months.[34] According to respondent, she merely
accommodated petitioners request for her to issue her own checks to cover the interest
payments since petitioner was not personally acquainted with Santiago. [35] She
claimed, however, that Santiago would replace the checks with cash. [36] Her
explanation is simply incredible. It is difficult to believe that respondent would put
herself in a position where she would be compelled to pay interest, from her own funds,
for loans she allegedly did not contract. We declared in one case that:
In the assessment of the testimonies of witnesses, this Court is
guided by the rule that for evidence to be believed, it must not only
proceed from the mouth of a credible witness, but must be credible
in itself such as the common experience of mankind can approve as
probable under the circumstances. We have no test of the truth of
human testimony except its conformity to our knowledge,
observation, and experience. Whatever is repugnant to these
belongs to the miraculous, and is outside of juridical cognizance. [37]
Fourth, in the petition for insolvency sworn to and filed by Santiago, it was
respondent, not petitioner, who was listed as one of her (Santiagos) creditors.[38]
Last, respondent inexplicably never presented Santiago as a witness to
corroborate her story.[39] The presumption is that evidence willfully suppressed would
be adverse if produced.[40] Respondent was not able to overturn this presumption.
We hold that the CA committed reversible error when it ruled that respondent
did not borrow the amounts of US$100,000 and P500,000 from petitioner. We instead
agree with the ruling of the RTC making respondent liable for the principal amounts of
the loans.
We do not, however, agree that respondent is liable for the 3% and 4%
monthly interest for the US$100,000 and P500,000 loans respectively. There was no
written proof of the interest payable except for the verbalagreement that the loans
would earn 3% and 4% interest per month. Article 1956 of the Civil Code provides that
[n]o interest shall be due unless it has been expressly stipulated in writing.
Be that as it may, while there can be no stipulated interest, there can be legal
interest pursuant to Article 2209 of the Civil Code. It is well-settled that:
When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of money,
the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code.[41]
Hence, respondent is liable for the payment of legal interest per annum to be
computed from November 21, 1995, the date when she received petitioners demand
letter.[42] From the finality of the decision until it is fully paid, the amount due shall earn
interest at 12% per annum, the interim period being deemed equivalent to a
forbearance of credit.[43]
The award of actual damages in the amount of P50,000 and P100,000
attorneys fees is deleted since the RTC decision did not explain the factual bases for
these damages.
WHEREFORE, the petition is hereby GRANTED and the June 19, 2002
decision and August 20, 2002 resolution of the Court of Appeals in CA-G.R. CV No.
56577 are REVERSED and SET ASIDE. The February 28, 1997 decision of the
Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with
the MODIFICATION that respondent is directed to pay petitioner the amounts of
US$100,000 and P500,000 at 12% per annum interest from November 21, 1995 until
the finality of the decision. The total amount due as of the date of finality will earn
interest of 12% per annum until fully paid. The award of actual damages and attorneys
fees is deleted.
SO ORDERED.
G.R. No. 174269 May 8, 2009
POLO S. PANTALEON, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC., Respondent.
DECISION
TINGA, J.:
The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and
son Adrian Roberto, joined an escorted tour of Western Europe organized by
Trafalgar Tours of Europe, Ltd., in October of 1991. The tour group arrived in
Amsterdam in the afternoon of 25 October 1991, the second to the last day of the
tour. As the group had arrived late in the city, they failed to engage in any sight-
seeing. Instead, it was agreed upon that they would start early the next day to see the
entire city before ending the tour.
The following day, the last day of the tour, the group arrived at the Coster Diamond
House in Amsterdam around 10 minutes before 9:00 a.m. The group had agreed that
the visit to Coster should end by 9:30 a.m. to allow enough time to take in a guided
city tour of Amsterdam. The group was ushered into Coster shortly before 9:00 a.m.,
and listened to a lecture on the art of diamond polishing that lasted for around ten
minutes.1 Afterwards, the group was led to the stores showroom to allow them to
select items for purchase. Mrs. Pantaleon had already planned to purchase even
before the tour began a 2.5 karat diamond brilliant cut, and she found a diamond
close enough in approximation that she decided to buy.2 Mrs. Pantaleon also selected
for purchase a pendant and a chain,3 all of which totaled U.S. $13,826.00.
To pay for these purchases, Pantaleon presented his American Express credit card
together with his passport to the Coster sales clerk. This occurred at around 9:15
a.m., or 15 minutes before the tour group was slated to depart from the store. The
sales clerk took the cards imprint, and asked Pantaleon to sign the charge slip. The
charge purchase was then referred electronically to respondents Amsterdam office at
9:20 a.m.
Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet
been approved. His son, who had already boarded the tour bus, soon returned to
Coster and informed the other members of the Pantaleon family that the entire tour
group was waiting for them. As it was already 9:40 a.m., and he was already worried
about further inconveniencing the tour group, Pantaleon asked the store clerk to
cancel the sale. The store manager though asked plaintiff to wait a few more minutes.
After 15 minutes, the store manager informed Pantaleon that respondent had
demanded bank references. Pantaleon supplied the names of his depositary banks,
then instructed his daughter to return to the bus and apologize to the tour group for
the delay.
At around 10:00 a.m, or around 45 minutes after Pantaleon had presented his
AmexCard, and 30 minutes after the tour group was supposed to have left the store,
Coster decided to release the items even without respondents approval of the
purchase. The spouses Pantaleon returned to the bus. It is alleged that their offers of
apology were met by their tourmates with stony silence. 4 The tour groups visible
irritation was aggravated when the tour guide announced that the city tour of
Amsterdam was to be canceled due to lack of remaining time, as they had to catch a
3:00 p.m. ferry at Calais, Belgium to London.5 Mrs. Pantaleon ended up weeping,
while her husband had to take a tranquilizer to calm his nerves.
It later emerged that Pantaleons purchase was first transmitted for approval to
respondents Amsterdam office at 9:20 a.m., Amsterdam time, then referred to
respondents Manila office at 9:33 a.m, then finally approved at 10:19 a.m.,
Amsterdam time.6 The Approval Code was transmitted to respondents Amsterdam
office at 10:38 a.m., several minutes after petitioner had already left Coster, and 78
minutes from the time the purchases were electronically transmitted by the jewelry
store to respondents Amsterdam office.
After the star-crossed tour had ended, the Pantaleon family proceeded to the United
States before returning to Manila on 12 November 1992. While in the United States,
Pantaleon continued to use his AmEx card, several times without hassle or delay, but
with two other incidents similar to the Amsterdam brouhaha. On 30 October 1991,
Pantaleon purchased golf equipment amounting to US $1,475.00 using his AmEx
card, but he cancelled his credit card purchase and borrowed money instead from a
friend, after more than 30 minutes had transpired without the purchase having been
approved. On 3 November 1991, Pantaleon used the card to purchase childrens
shoes worth $87.00 at a store in Boston, and it took 20 minutes before this
transaction was approved by respondent.
On 4 March 1992, after coming back to Manila, Pantaleon sent a letter 7 through
counsel to the respondent, demanding an apology for the "inconvenience, humiliation
and embarrassment he and his family thereby suffered" for respondents refusal to
provide credit authorization for the aforementioned purchases. 8 In response,
respondent sent a letter dated 24 March 1992,9 stating among others that the delay in
authorizing the purchase from Coster was attributable to the circumstance that the
charged purchase of US $13,826.00 "was out of the usual charge purchase pattern
established."10 Since respondent refused to accede to Pantaleons demand for an
apology, the aggrieved cardholder instituted an action for damages with the Regional
Trial Court (RTC) of Makati City, Branch 145.11 Pantaleon prayed that he be awarded
2,000,000.00, as moral damages; 500,000.00, as exemplary damages;
100,000.00, as attorneys fees; and 50,000.00 as litigation expenses. 12
On 5 August 1996, the Makati City RTC rendered a decision 13 in favor of Pantaleon,
awarding him 500,000.00 as moral damages, 300,000.00 as exemplary damages,
100,000.00 as attorneys fees, and 85,233.01 as expenses of litigation.
Respondent filed a Notice of Appeal, while Pantaleon moved for partial
reconsideration, praying that the trial court award the increased amount of moral and
exemplary damages he had prayed for.14 The RTC denied Pantaleons motion for
partial reconsideration, and thereafter gave due course to respondents Notice of
Appeal.15
On 18 August 2006, the Court of Appeals rendered a decision 16 reversing the award
of damages in favor of Pantaleon, holding that respondent had not breached its
obligations to petitioner. Hence, this petition.
The key question is whether respondent, in connection with the aforementioned
transactions, had committed a breach of its obligations to Pantaleon. In addition,
Pantaleon submits that even assuming that respondent had not been in breach of its
obligations, it still remained liable for damages under Article 21 of the Civil Code.
The RTC had concluded, based on the testimonial representations of Pantaleon and
respondents credit authorizer, Edgardo Jaurigue, that the normal approval time for
purchases was "a matter of seconds." Based on that standard, respondent had been
in clear delay with respect to the three subject transactions. As it appears, the Court
of Appeals conceded that there had been delay on the part of respondent in
approving the purchases. However, it made two critical conclusions in favor of
respondent. First, the appellate court ruled that the delay was not attended by bad
faith, malice, or gross negligence. Second, it ruled that respondent "had exercised
diligent efforts to effect the approval" of the purchases, which were "not in accordance
with the charge pattern" petitioner had established for himself, as exemplified by the
fact that at Coster, he was "making his very first single charge purchase of
US$13,826," and "the record of [petitioner]s past spending with [respondent] at the
time does not favorably support his ability to pay for such purchase."17
On the premise that there was an obligation on the part of respondent "to approve or
disapprove with dispatch the charge purchase," petitioner argues that the failure to
timely approve or disapprove the purchase constituted mora solvendi on the part of
respondent in the performance of its obligation. For its part, respondent characterizes
the depiction by petitioner of its obligation to him as "to approve purchases
instantaneously or in a matter of seconds."
Petitioner correctly cites that under mora solvendi, the three requisites for a finding of
default are that the obligation is demandable and liquidated; the debtor delays
performance; and the creditor judicially or extrajudicially requires the debtors
performance.18 Petitioner asserts that the Court of Appeals had wrongly applied the
principle of mora accipiendi, which relates to delay on the part of the obligee in
accepting the performance of the obligation by the obligor. The requisites of mora
accipiendi are: an offer of performance by the debtor who has the required capacity;
the offer must be to comply with the prestation as it should be performed; and the
creditor refuses the performance without just cause.19 The error of the appellate court,
argues petitioner, is in relying on the invocation by respondent of "just cause" for the
delay, since while just cause is determinative of mora accipiendi, it is not so with the
case of mora solvendi.
We can see the possible source of confusion as to which type of mora to appreciate.
Generally, the relationship between a credit card provider and its card holders is that
of creditor-debtor,20 with the card company as the creditor extending loans and credit
to the card holder, who as debtor is obliged to repay the creditor. This relationship
already takes exception to the general rule that as between a bank and its depositors,
the bank is deemed as the debtor while the depositor is considered as the
creditor.21 Petitioner is asking us, not baselessly, to again shift perspectives and
again see the credit card company as the debtor/obligor, insofar as it has the
obligation to the customer as creditor/obligee to act promptly on its purchases on
credit.
Ultimately, petitioners perspective appears more sensible than if we were to still
regard respondent as the creditor in the context of this cause of action. If there was
delay on the part of respondent in its normal role as creditor to the cardholder, such
delay would not have been in the acceptance of the performance of the debtors
obligation (i.e., the repayment of the debt), but it would be delay in the extension of
the credit in the first place. Such delay would not fall under mora accipiendi, which
contemplates that the obligation of the debtor, such as the actual purchases on credit,
has already been constituted. Herein, the establishment of the debt itself (purchases
on credit of the jewelry) had not yet been perfected, as it remained pending the
approval or consent of the respondent credit card company.
Still, in order for us to appreciate that respondent was in mora solvendi, we will have
to first recognize that there was indeed an obligation on the part of respondent to act
on petitioners purchases with "timely dispatch," or for the purposes of this case,
within a period significantly less than the one hour it apparently took before the
purchase at Coster was finally approved.
The findings of the trial court, to our mind, amply established that the tardiness on the
part of respondent in acting on petitioners purchase at Coster did constitute culpable
delay on its part in complying with its obligation to act promptly on its customers
purchase request, whether such action be favorable or unfavorable. We quote the
trial court, thus:
As to the first issue, both parties have testified that normal approval time for
purchases was a matter of seconds.
Plaintiff testified that his personal experience with the use of the card was that except
for the three charge purchases subject of this case, approvals of his charge
purchases were always obtained in a matter of seconds.
Defendants credit authorizer Edgardo Jaurique likewise testified:
Q. You also testified that on normal occasions, the normal approval time
for charges would be 3 to 4 seconds?
A. Yes, Maam.
Both parties likewise presented evidence that the processing and approval of
plaintiffs charge purchase at the Coster Diamond House was way beyond the normal
approval time of a "matter of seconds".
Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15
a.m. and by the time he had to leave the store at 10:05 a.m., no approval had yet
been received. In fact, the Credit Authorization System (CAS) record of defendant at
Phoenix Amex shows that defendants Amsterdam office received the request to
approve plaintiffs charge purchase at 9:20 a.m., Amsterdam time or 01:20, Phoenix
time, and that the defendant relayed its approval to Coster at 10:38 a.m., Amsterdam
time, or 2:38, Phoenix time, or a total time lapse of one hour and [18] minutes. And
even then, the approval was conditional as it directed in computerese [sic] "Positive
Identification of Card holder necessary further charges require bank information due
to high exposure. By Jack Manila."
The delay in the processing is apparent to be undue as shown from the frantic
successive queries of Amexco Amsterdam which reads: "US$13,826. Cardmember
buying jewels. ID seen. Advise how long will this take?" They were sent at 01:33,
01:37, 01:40, 01:45, 01:52 and 02:08, all times Phoenix. Manila Amexco could be
unaware of the need for speed in resolving the charge purchase referred to it, yet it
sat on its hand, unconcerned.
xxx
To repeat, the Credit Authorization System (CAS) record on the Amsterdam
transaction shows how Amexco Netherlands viewed the delay as unusually
frustrating. In sequence expressed in Phoenix time from 01:20 when the charge
purchased was referred for authorization, defendants own record shows:
01:22 the authorization is referred to Manila Amexco
01:32 Netherlands gives information that the identification of the
cardmember has been presented and he is buying jewelries worth US
$13,826.
01:33 Netherlands asks "How long will this take?"
02:08 Netherlands is still asking "How long will this take?"
The Court is convinced that defendants delay constitute[s] breach of its contractual
obligation to act on his use of the card abroad "with special handling."22 (Citations
omitted)
xxx
Notwithstanding the popular notion that credit card purchases are approved "within
seconds," there really is no strict, legally determinative point of demarcation on how
long must it take for a credit card company to approve or disapprove a customers
purchase, much less one specifically contracted upon by the parties. Yet this is one of
those instances when "youd know it when youd see it," and one hour appears to be
an awfully long, patently unreasonable length of time to approve or disapprove a
credit card purchase. It is long enough time for the customer to walk to a bank a
kilometer away, withdraw money over the counter, and return to the store.
Notably, petitioner frames the obligation of respondent as "to approve or disapprove"
the purchase "in timely dispatch," and not "to approve the purchase instantaneously
or within seconds." Certainly, had respondent disapproved petitioners purchase
"within seconds" or within a timely manner, this particular action would have never
seen the light of day. Petitioner and his family would have returned to the bus without
delay internally humiliated perhaps over the rejection of his card yet spared the
shame of being held accountable by newly-made friends for making them miss the
chance to tour the city of Amsterdam.
We do not wish do dispute that respondent has the right, if not the obligation, to verify
whether the credit it is extending upon on a particular purchase was indeed
contracted by the cardholder, and that the cardholder is within his means to make
such transaction. The culpable failure of respondent herein is not the failure to timely
approve petitioners purchase, but the more elemental failure to timely act on the
same, whether favorably or unfavorably. Even assuming that respondents credit
authorizers did not have sufficient basis on hand to make a judgment, we see no
reason why respondent could not have promptly informed petitioner the reason for the
delay, and duly advised him that resolving the same could take some time. In that
way, petitioner would have had informed basis on whether or not to pursue the
transaction at Coster, given the attending circumstances. Instead, petitioner was left
uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced to
confront the wrath of foreign folk.
Moral damages avail in cases of breach of contract where the defendant acted
fraudulently or in bad faith, and the court should find that under the circumstances,
such damages are due. The findings of the trial court are ample in establishing the
bad faith and unjustified neglect of respondent, attributable in particular to the "dilly-
dallying" of respondents Manila credit authorizer, Edgardo Jaurique.23 Wrote the trial
court:
While it is true that the Cardmembership Agreement, which defendant prepared, is
silent as to the amount of time it should take defendant to grant authorization for a
charge purchase, defendant acknowledged that the normal time for approval should
only be three to four seconds. Specially so with cards used abroad which requires
"special handling", meaning with priority. Otherwise, the object of credit or charge
cards would be lost; it would be so inconvenient to use that buyers and consumers
would be better off carrying bundles of currency or travellers checks, which can be
delivered and accepted quickly. Such right was not accorded to plaintiff in the
instances complained off for reasons known only to defendant at that time. This, to
the Courts mind, amounts to a wanton and deliberate refusal to comply with its
contractual obligations, or at least abuse of its rights, under the contract.24
xxx
The delay committed by defendant was clearly attended by unjustified neglect and
bad faith, since it alleges to have consumed more than one hour to simply go over
plaintiffs past credit history with defendant, his payment record and his credit and
bank references, when all such data are already stored and readily available from its
computer. This Court also takes note of the fact that there is nothing in plaintiffs
billing history that would warrant the imprudent suspension of action by defendant in
processing the purchase. Defendants witness Jaurique admits:
Q. But did you discover that he did not have any outstanding account?
A. Nothing in arrears at that time.
Q. You were well aware of this fact on this very date?
A. Yes, sir.
Mr. Jaurique further testified that there were no "delinquencies" in plaintiffs account. 25
It should be emphasized that the reason why petitioner is entitled to damages is not
simply because respondent incurred delay, but because the delay, for which
culpability lies under Article 1170, led to the particular injuries under Article 2217 of
the Civil Code for which moral damages are remunerative. 26 Moral damages do not
avail to soothe the plaints of the simply impatient, so this decision should not be
cause for relief for those who time the length of their credit card transactions with a
stopwatch. The somewhat unusual attending circumstances to the purchase at Coster
that there was a deadline for the completion of that purchase by petitioner before
any delay would redound to the injury of his several traveling companions gave rise
to the moral shock, mental anguish, serious anxiety, wounded feelings and social
humiliation sustained by the petitioner, as concluded by the RTC.27 Those
circumstances are fairly unusual, and should not give rise to a general entitlement for
damages under a more mundane set of facts.
We sustain the amount of moral damages awarded to petitioner by the RTC. There is
no hard-and-fast rule in determining what would be a fair and reasonable amount of
moral damages, since each case must be governed by its own peculiar facts,
however, it must be commensurate to the loss or injury suffered. 28 Petitioners original
prayer for 5,000,000.00 for moral damages is excessive under the circumstances,
and the amount awarded by the trial court of 500,000.00 in moral damages more
seemly.1avvphi1
Likewise, we deem exemplary damages available under the circumstances, and the
amount of 300,000.00 appropriate. There is similarly no cause though to disturb the
determined award of 100,000.00 as attorneys fees, and 85,233.01 as expenses of
litigation.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of
Appeals is REVERSED and SET ASIDE. The Decision of the Regional Trial Court of
Makati, Branch 145 in Civil Case No. 92-1665 is hereby REINSTATED. Costs against
respondent.
SO ORDERED.
B. COMMODATUM
G.R. No. L-46240 November 3, 1939
MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants,
vs.
BECK, defendant-appellee.
Mauricio Carlos for appellants.
Felipe Buencamino, Jr. for appellee.
IMPERIAL, J.:
The plaintiff brought this action to compel the defendant to return her certain furniture
which she lent him for his use. She appealed from the judgment of the Court of First
Instance of Manila which ordered that the defendant return to her the three has
heaters and the four electric lamps found in the possession of the Sheriff of said city,
that she call for the other furniture from the said sheriff of Manila at her own expense,
and that the fees which the Sheriff may charge for the deposit of the furniture be
paid pro rata by both parties, without pronouncement as to the costs.
The defendant was a tenant of the plaintiff and as such occupied the latter's house on
M. H. del Pilar street, No. 1175. On January 14, 1936, upon the novation of the
contract of lease between the plaintiff and the defendant, the former gratuitously
granted to the latter the use of the furniture described in the third paragraph of the
stipulation of facts, subject to the condition that the defendant would return them to
the plaintiff upon the latter's demand. The plaintiff sold the property to Maria Lopez
and Rosario Lopez and on September 14, 1936, these three notified the defendant of
the conveyance, giving him sixty days to vacate the premises under one of the
clauses of the contract of lease. There after the plaintiff required the defendant to
return all the furniture transferred to him for them in the house where they were found.
On November 5, 1936, the defendant, through another person, wrote to the
plaintiff reiterating that she may call for the furniture in the ground floor of the house.
On the 7th of the same month, the defendant wrote another letter to the plaintiff
informing her that he could not give up the three gas heaters and the four electric
lamps because he would use them until the 15th of the same month when the lease
in due to expire. The plaintiff refused to get the furniture in view of the fact that the
defendant had declined to make delivery of all of them. On November 15th,
before vacating the house, the defendant deposited with the Sheriff all the furniture
belonging to the plaintiff and they are now on deposit in the warehouse situated at
No. 1521, Rizal Avenue, in the custody of the said sheriff.
In their seven assigned errors the plaintiffs contend that the trial court incorrectly
applied the law: in holding that they violated the contract by not calling for all the
furniture on November 5, 1936, when the defendant placed them at their disposal; in
not ordering the defendant to pay them the value of the furniture in case they are not
delivered; in holding that they should get all the furniture from the Sheriff at their
expenses; in ordering them to pay-half of the expenses claimed by the Sheriff for the
deposit of the furniture; in ruling that both parties should pay their respective legal
expenses or the costs; and in denying pay their respective legal expenses or the
costs; and in denying the motions for reconsideration and new trial. To dispose of the
case, it is only necessary to decide whether the defendant complied with his
obligation to return the furniture upon the plaintiff's demand; whether the latter is
bound to bear the deposit fees thereof, and whether she is entitled to the costs of
litigation.lawphi1.net
The contract entered into between the parties is one of commadatum, because under
it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving
for herself the ownership thereof; by this contract the defendant bound himself to
return the furniture to the plaintiff, upon the latters demand (clause 7 of the contract,
Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code). The obligation
voluntarily assumed by the defendant to return the furniture upon the plaintiff's
demand, means that he should return all of them to the plaintiff at the latter's
residence or house. The defendant did not comply with this obligation when he
merely placed them at the disposal of the plaintiff, retaining for his benefit the three
gas heaters and the four eletric lamps. The provisions of article 1169 of the Civil Code
cited by counsel for the parties are not squarely applicable. The trial court, therefore,
erred when it came to the legal conclusion that the plaintiff failed to comply with her
obligation to get the furniture when they were offered to her.
As the defendant had voluntarily undertaken to return all the furniture to the plaintiff,
upon the latter's demand, the Court could not legally compel her to bear the expenses
occasioned by the deposit of the furniture at the defendant's behest. The latter, as
bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a
duty to accept the offer to return the furniture, because the defendant wanted to retain
the three gas heaters and the four electric lamps.
As to the value of the furniture, we do not believe that the plaintiff is entitled to the
payment thereof by the defendant in case of his inability to return some of the
furniture because under paragraph 6 of the stipulation of facts, the defendant has
neither agreed to nor admitted the correctness of the said value. Should the
defendant fail to deliver some of the furniture, the value thereof should be latter
determined by the trial Court through evidence which the parties may desire to
present.
The costs in both instances should be borne by the defendant because the plaintiff is
the prevailing party (section 487 of the Code of Civil Procedure). The defendant was
the one who breached the contract of commodatum, and without any reason he
refused to return and deliver all the furniture upon the plaintiff's demand. In these
circumstances, it is just and equitable that he pay the legal expenses and other
judicial costs which the plaintiff would not have otherwise defrayed.
The appealed judgment is modified and the defendant is ordered to return and deliver
to the plaintiff, in the residence to return and deliver to the plaintiff, in the residence or
house of the latter, all the furniture described in paragraph 3 of the stipulation of facts
Exhibit A. The expenses which may be occasioned by the delivery to and deposit of
the furniture with the Sheriff shall be for the account of the defendant. the defendant
shall pay the costs in both instances. So ordered.
G.R. No. L-17474 October 25, 1962
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
JOSE V. BAGTAS, defendant,
FELICIDAD M. BAGTAS, Administratrix of the Intestate Estate left by the late
Jose V. Bagtas, petitioner-appellant.
D. T. Reyes, Liaison and Associates for petitioner-appellant.
Office of the Solicitor General for plaintiff-appellee.
PADILLA, J.:
The Court of Appeals certified this case to this Court because only questions of law
are raised.
On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through
the Bureau of Animal Industry three bulls: a Red Sindhi with a book value of
P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of one
year from 8 May 1948 to 7 May 1949 for breeding purposes subject to a government
charge of breeding fee of 10% of the book value of the bulls. Upon the expiration on 7
May 1949 of the contract, the borrower asked for a renewal for another period of one
year. However, the Secretary of Agriculture and Natural Resources approved a
renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and
requested the return of the other two. On 25 March 1950 Jose V. Bagtas wrote to the
Director of Animal Industry that he would pay the value of the three bulls. On 17
October 1950 he reiterated his desire to buy them at a value with a deduction of
yearly depreciation to be approved by the Auditor General. On 19 October 1950 the
Director of Animal Industry advised him that the book value of the three bulls could
not be reduced and that they either be returned or their book value paid not later than
31 October 1950. Jose V. Bagtas failed to pay the book value of the three bulls or to
return them. So, on 20 December 1950 in the Court of First Instance of Manila the
Republic of the Philippines commenced an action against him praying that he be
ordered to return the three bulls loaned to him or to pay their book value in the total
sum of P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with
interests, and costs; and that other just and equitable relief be granted in (civil No.
12818).
On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo,
answered that because of the bad peace and order situation in Cagayan Valley,
particularly in the barrio of Baggao, and of the pending appeal he had taken to the
Secretary of Agriculture and Natural Resources and the President of the Philippines
from the refusal by the Director of Animal Industry to deduct from the book value of
the bulls corresponding yearly depreciation of 8% from the date of acquisition, to
which depreciation the Auditor General did not object, he could not return the animals
nor pay their value and prayed for the dismissal of the complaint.
After hearing, on 30 July 1956 the trial court render judgment
. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total
value of the three bulls plus the breeding fees in the amount of P626.17 with
interest on both sums of (at) the legal rate from the filing of this complaint
and costs.
On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court
granted on 18 October and issued on 11 November 1958. On 2 December 1958
granted an ex-parte motion filed by the plaintiff on November 1958 for the
appointment of a special sheriff to serve the writ outside Manila. Of this order
appointing a special sheriff, on 6 December 1958, Felicidad M. Bagtas, the surviving
spouse of the defendant Jose Bagtas who died on 23 October 1951 and as
administratrix of his estate, was notified. On 7 January 1959 she file a motion alleging
that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the Bureau
Animal of Industry and that sometime in November 1958 the third bull, the Sahiniwal,
died from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal, and
praying that the writ of execution be quashed and that a writ of preliminary injunction
be issued. On 31 January 1959 the plaintiff objected to her motion. On 6 February
1959 she filed a reply thereto. On the same day, 6 February, the Court denied her
motion. Hence, this appeal certified by the Court of Appeals to this Court as stated at
the beginning of this opinion.
It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late
defendant, returned the Sindhi and Bhagnari bulls to Roman Remorin,
Superintendent of the NVB Station, Bureau of Animal Industry, Bayombong, Nueva
Vizcaya, as evidenced by a memorandum receipt signed by the latter (Exhibit 2). That
is why in its objection of 31 January 1959 to the appellant's motion to quash the writ
of execution the appellee prays "that another writ of execution in the sum of P859.53
be issued against the estate of defendant deceased Jose V. Bagtas." She cannot be
held liable for the two bulls which already had been returned to and received by the
appellee.
The appellant contends that the Sahiniwal bull was accidentally killed during a raid by
the Huk in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal,
Baggao, Cagayan, where the animal was kept, and that as such death was due
to force majeure she is relieved from the duty of returning the bull or paying its value
to the appellee. The contention is without merit. The loan by the appellee to the late
defendant Jose V. Bagtas of the three bulls for breeding purposes for a period of one
year from 8 May 1948 to 7 May 1949, later on renewed for another year as regards
one bull, was subject to the payment by the borrower of breeding fee of 10% of the
book value of the bulls. The appellant contends that the contract
was commodatum and that, for that reason, as the appellee retained ownership or
title to the bull it should suffer its loss due to force majeure. A contract
of commodatum is essentially gratuitous.1 If the breeding fee be considered a
compensation, then the contract would be a lease of the bull. Under article 1671 of
the Civil Code the lessee would be subject to the responsibilities of a possessor in
bad faith, because she had continued possession of the bull after the expiry of the
contract. And even if the contract be commodatum, still the appellant is liable,
because article 1942 of the Civil Code provides that a bailee in a contract
of commodatum
. . . is liable for loss of the things, even if it should be through a fortuitous
event:
(2) If he keeps it longer than the period stipulated . . .
(3) If the thing loaned has been delivered with appraisal of its value, unless
there is a stipulation exempting the bailee from responsibility in case of a
fortuitous event;
The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one
bull was renewed for another period of one year to end on 8 May 1950. But the
appellant kept and used the bull until November 1953 when during a Huk raid it was
killed by stray bullets. Furthermore, when lent and delivered to the deceased husband
of the appellant the bulls had each an appraised book value, to with: the Sindhi, at
P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not
stipulated that in case of loss of the bull due to fortuitous event the late husband of
the appellant would be exempt from liability.
The appellant's contention that the demand or prayer by the appellee for the return of
the bull or the payment of its value being a money claim should be presented or filed
in the intestate proceedings of the defendant who died on 23 October 1951, is not
altogether without merit. However, the claim that his civil personality having ceased to
exist the trial court lost jurisdiction over the case against him, is untenable, because
section 17 of Rule 3 of the Rules of Court provides that
After a party dies and the claim is not thereby extinguished, the court shall
order, upon proper notice, the legal representative of the deceased to
 appear and to be substituted for the deceased, within a period of thirty (30)
days, or within such time as may be granted. . . .
and after the defendant's death on 23 October 1951 his counsel failed to comply with
section 16 of Rule 3 which provides that
Whenever a party to a pending case dies . . . it shall be the duty of his
attorney to inform the court promptly of such death . . . and to give the name
and residence of the executory administrator, guardian, or other legal
representative of the deceased . . . .
The notice by the probate court and its publication in the Voz de Manila that Felicidad
M. Bagtas had been issue letters of administration of the estate of the late Jose
Bagtas and that "all persons having claims for monopoly against the deceased Jose
V. Bagtas, arising from contract express or implied, whether the same be due, not
due, or contingent, for funeral expenses and expenses of the last sickness of the said
decedent, and judgment for monopoly against him, to file said claims with the Clerk of
this Court at the City Hall Bldg., Highway 54, Quezon City, within six (6) months from
the date of the first publication of this order, serving a copy thereof upon the
aforementioned Felicidad M. Bagtas, the appointed administratrix of the estate of the
said deceased," is not a notice to the court and the appellee who were to be notified
of the defendant's death in accordance with the above-quoted rule, and there was no
reason for such failure to notify, because the attorney who appeared for the
defendant was the same who represented the administratrix in the special
proceedings instituted for the administration and settlement of his estate. The
appellee or its attorney or representative could not be expected to know of the death
of the defendant or of the administration proceedings of his estate instituted in
another court that if the attorney for the deceased defendant did not notify the plaintiff
or its attorney of such death as required by the rule.
As the appellant already had returned the two bulls to the appellee, the estate of the
late defendant is only liable for the sum of P859.63, the value of the bull which has
not been returned to the appellee, because it was killed while in the custody of the
administratrix of his estate. This is the amount prayed for by the appellee in its
objection on 31 January 1959 to the motion filed on 7 January 1959 by the appellant
for the quashing of the writ of execution.
Special proceedings for the administration and settlement of the estate of the
deceased Jose V. Bagtas having been instituted in the Court of First Instance of Rizal
(Q-200), the money judgment rendered in favor of the appellee cannot be enforced by
means of a writ of execution but must be presented to the probate court for payment
by the appellant, the administratrix appointed by the court.
ACCORDINGLY, the writ of execution appealed from is set aside, without
pronouncement as to costs.
G.R. No. L-46145 November 26, 1986
REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner,
vs.
THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY, represented
by RICARDO BALOY, ET AL., respondents.
Pelaez, Jalondoni, Adriano and Associates for respondents.
PARAS, J.:p
This case originally emanated from a decision of the then Court of First Instance of
Zambales in LRC Case No. 11-0, LRC Record No. N-29355, denying respondents'
application for registration. From said order of denial the applicants, heirs of Domingo
Baloy, represented by Ricardo P. Baloy, (herein private respondents) interposed on
appeal to the Court of Appeals which was docketed as CA-G.R. No. 52039-R. The
appellate court, thru its Fifth Division with the Hon. Justice Magno Gatmaitan as
ponente, rendered a decision dated February 3, 1977 reversing the decision
appealed from and thus approving the application for registration. Oppositors
(petitioners herein) filed their Motion for Reconsideration alleging among other things
that applicants' possessory information title can no longer be invoked and that they
were not able to prove a registerable title over the land. Said Motion for
Reconsideration was denied, hence this petition for review on certiorari.
Applicants' claim is anchored on their possessory information title (Exhibit F which
had been translated in Exhibit F-1) coupled with their continuous, adverse and public
possession over the land in question. An examination of the possessory information
title shows that the description and the area of the land stated therein substantially
coincides with the land applied for and that said possessory information title had been
regularly issued having been acquired by applicants' predecessor, Domingo Baloy,
under the provisions of the Spanish Mortgage Law. Applicants presented their tax
declaration on said lands on April 8, 1965.
The Director of Lands opposed the registration alleging that this land had become
public land thru the operation of Act 627 of the Philippine Commission. On November
26, 1902 pursuant to the executive order of the President of the U.S., the area was
declared within the U.S. Naval Reservation. Under Act 627 as amended by Act 1138,
a period was fixed within which persons affected thereby could file their application,
(that is within 6 months from July 8, 1905) otherwise "the said lands or interest therein
will be conclusively adjudged to be public lands and all claims on the part of private
individuals for such lands or interests therein not to presented will be forever barred."
Petitioner argues that since Domingo Baloy failed to file his claim within the
prescribed period, the land had become irrevocably public and could not be the
subject of a valid registration for private ownership.
Considering the foregoing facts respondents Court of Appeals ruled as follows:
... perhaps, the consequence was that upon failure of Domingo
Baloy to have filed his application within that period the land had
 become irrevocably public; but perhaps also, for the reason that
warning was from the Clerk of the Court of Land Registration,
named J.R. Wilson and there has not been presented a formal
order or decision of the said Court of Land Registration so declaring
the land public because of that failure, it can with plausibility be said
that after all, there was no judicial declaration to that effect, it is true
that the U.S. Navy did occupy it apparently for some time, as a
recreation area, as this Court understands from the communication
of the Department of Foreign Affairs to the U.S. Embassy exhibited
in the record, but the very tenor of the communication apparently
seeks to justify the title of herein applicants, in other words, what
this Court has taken from the occupation by the U.S. Navy is that
during the interim, the title of applicants was in a state of
suspended animation so to speak but it had not died either; and the
fact being that this land was really originally private from and after
the issuance and inscription of the possessory information Exh. F
during the Spanish times, it would be most difficult to sustain
position of Director of Lands that it was land of no private owner;
open to public disposition, and over which he has control; and since
immediately after U.S. Navy had abandoned the area, applicant
came in and asserted title once again, only to be troubled by first
Crispiniano Blanco who however in due time, quitclaimed in favor of
applicants, and then by private oppositors now, apparently
originally tenants of Blanco, but that entry of private oppositors
sought to be given color of ownership when they sought to and did
file tax declaration in 1965, should not prejudice the original rights
of applicants thru their possessory information secured regularly so
long ago, the conclusion must have to be that after all, applicants
had succeeded in bringing themselves within the provisions of Sec.
19 of Act 496, the land should be registered in their favor;
IN VIEW WHEREOF, this Court is constrained to reverse, as it now
reverses, judgment appealed from the application is approved, and
once this decision shall have become final, if ever it would be, let
decree issue in favor of applicants with the personal circumstances
outlined in the application, costs against private oppositors.
Petitioner now comes to Us with the following:
ASSIGNMENT OF ERRORS:
1. Respondent court erred in holding that to bar private
respondents from asserting any right under their possessory
information title there is need for a court order to that effect.
2. Respondent court erred in not holding that private respondents'
rights by virtue of their possessory information title was lost by
prescription.
3. Respondent court erred in concluding that applicants have
registerable title.
A cursory reading of Sec. 3, Act 627 reveals that several steps are to be followed
before any affected land can "be conclusively adjudged to be public land." Sec. 3, Act
627 reads as follows:
SEC. 3. Immediately upon receipt of the notice from the civil
Governor in the preceeding section mentioned it shall be the duty of
the judge of the Court of Land Registration to issue a notice, stating
that the lands within the limits aforesaid have been reserved for
military purposes, and announced and declared to be military
reservations, and that claims for all private lands, buildings, and
interests therein, within the limits aforesaid, must be presented for
registration under the Land Registration Act within six calendar
months from the date of issuing the notice, and that all lands,
buildings, and interests therein within the limits aforesaid not so
presented within the time therein limited will be conclusively
adjudged to be public lands and all claims on the part of private
individuals for such lands, buildings, or an interest therein not so
presented will be forever barred. The clerk of the Court of Land
Registration shall immediately upon the issuing of such notice by
the judge cause the same to be published once a week for three
successive weeks in two newspapers, one of which newspapers
shall be in the English Language, and one in the Spanish language
in the city or province where the land lies, if there be no such
Spanish or English newspapers having a general circulation in the
city or province wherein the land lies, then it shall be a sufficient
compliance with this section if the notice be published as herein
provided, in a daily newspaper in the Spanish language and one in
the English language, in the City of Manila, having a general
circulation. The clerk shall also cause a duly attested copy of the
notice in the Spanish language to be posted in conspicuous place
at each angle formed by the lines of the limits of the land reserved.
The clerk shall also issue and cause to be personally served the
notice in the Spanish language upon every person living upon or in
visible possession of any part of the military reservation. If the
person in possession is the head of the family living upon the hand,
it shall be sufficient to serve the notice upon him, and if he is absent
it shall be sufficient to leave a copy at his usual place of residence.
The clerk shall certify the manner in which the notices have been
published, posted, and served, and his certificate shall be
conclusive proof of such publication, posting, and service, but the
court shall have the power to cause such further notice to be given
as in its opinion may be necessary.
Clearly under said provisions, private land could be deemed to have become public
land only by virtue of a judicial declaration after due notice and hearing. It runs
contrary therefore to the contention of petitioners that failure to present claims set
forth under Sec. 2 of Act 627 made the land ipso facto public without any deed of
judicial pronouncement. Petitioner in making such declaration relied on Sec. 4 of Act
627 alone. But in construing a statute the entire provisions of the law must be
considered in order to establish the correct interpretation as intended by the law-
making body. Act 627 by its terms is not self-executory and requires implementation
by the Court of Land Registration. Act 627, to the extent that it creates a forfeiture, is
a penal statute in derogation of private rights, so it must be strictly construed so as to
safeguard private respondents' rights. Significantly, petitioner does not even allege
the existence of any judgment of the Land Registration court with respect to the land
in question. Without a judgment or order declaring the land to be public, its private
character and the possessory information title over it must be respected. Since no
such order has been rendered by the Land Registration Court it necessarily follows
that it never became public land thru the operation of Act 627. To assume otherwise
is to deprive private respondents of their property without due process of law. In fact it
can be presumed that the notice required by law to be given by publication and by
personal service did not include the name of Domingo Baloy and the subject land,
and hence he and his lane were never brought within the operation of Act 627 as
amended. The procedure laid down in Sec. 3 is a requirement of due process. "Due
process requires that the statutes which under it is attempted to deprive a citizen of
private property without or against his consent must, as in expropriation cases, be
strictly complied with, because such statutes are in derogation of general rights."
(Arriete vs. Director of Public Works, 58 Phil. 507, 508, 511).
We also find with favor private respondents' views that court judgments are not to be
presumed. It would be absurd to speak of a judgment by presumption. If it could be
contended that such a judgment may be presumed, it could equally be contended that
applicants' predecessor Domingo Baloy presumably seasonably filed a claim, in
accordance with the legal presumption that a person takes ordinary care of his
concerns, and that a judgment in his favor was rendered.
The finding of respondent court that during the interim of 57 years from November 26,
1902 to December 17, 1959 (when the U.S. Navy possessed the area) the
possessory rights of Baloy or heirs were merely suspended and not lost by
prescription, is supported by Exhibit "U," a communication or letter No. 1108-63,
dated June 24, 1963, which contains an official statement of the position of the
Republic of the Philippines with regard to the status of the land in question. Said letter
recognizes the fact that Domingo Baloy and/or his heirs have been in continuous
possession of said land since 1894 as attested by an "Informacion Possessoria" Title,
which was granted by the Spanish Government. Hence, the disputed property is
private land and this possession was interrupted only by the occupation of the land by
the U.S. Navy in 1945 for recreational purposes. The U.S. Navy eventually
abandoned the premises. The heirs of the late Domingo P. Baloy, are now in actual
possession, and this has been so since the abandonment by the U.S. Navy. A new
recreation area is now being used by the U.S. Navy personnel and this place is
remote from the land in question.
Clearly, the occupancy of the U.S. Navy was not in the concept of owner. It partakes
of the character of a commodatum. It cannot therefore militate against the title of
Domingo Baloy and his successors-in-interest. One's ownership of a thing may be
lost by prescription by reason of another's possession if such possession be under
claim of ownership, not where the possession is only intended to be transient, as in
the case of the U.S. Navy's occupation of the land concerned, in which case the
owner is not divested of his title, although it cannot be exercised in the meantime.
WHEREFORE, premises considered, finding no merit in the petition the appealed
decision is hereby AFFIRMED.
SO ORDERED.
G.R. No. 80294-95 September 21, 1988
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN
VALDEZ, respondents.
Valdez, Ereso, Polido & Associates for petitioner.
Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner.
Jaime G. de Leon for the Heirs of Egmidio Octaviano.
Cotabato Law Office for the Heirs of Juan Valdez.
GANCAYCO, J.:
The principal issue in this case is whether or not a decision of the Court of Appeals
promulgated a long time ago can properly be considered res judicata by respondent
Court of Appeals in the present two cases between petitioner and two private
respondents.
Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of
the Ninth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil
Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for
Recovery of Possession, which affirmed the Decision of the Honorable Nicodemo T.
Ferrer, Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No.
3607 (419) and Civil Case No. 3655 (429), with the dispositive portion as follows:
WHEREFORE, Judgment is hereby rendered ordering the
defendant, Catholic Vicar Apostolic of the Mountain Province to
return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs.
Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set of
plaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.).
For lack or insufficiency of evidence, the plaintiffs' claim or
damages is hereby denied. Said defendant is ordered to pay costs.
(p. 36, Rollo)
Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial
court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in
CA-G.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on
the ownership of lots 2 and 3 in question; that the two lots were possessed by the
predecessors-in-interest of private respondents under claim of ownership in good
faith from 1906 to 1951; that petitioner had been in possession of the same lots as
bailee in commodatum up to 1951, when petitioner repudiated the trust and when it
applied for registration in 1962; that petitioner had just been in possession as owner
for eleven years, hence there is no possibility of acquisitive prescription which
requires 10 years possession with just title and 30 years of possession without; that
the principle of res judicata on these findings by the Court of Appeals will bar a
reopening of these questions of facts; and that those facts may no longer be altered.
Petitioner's motion for reconsideation of the respondent appellate court's Decision in
the two aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.
The facts and background of these cases as narrated by the trail court are as follows
No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano filed with the then Court
... The documents and records presented reveal that the whole controversy started
when the defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for
brevity) filed with the Court of First Instance of Baguio Benguet on September 5, 1962
an application for registration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated
at Poblacion Central, La Trinidad, Benguet, docketed as LRC N-91, said Lots being
the sites of the Catholic Church building, convents, high school building, school
gymnasium, school dormitories, social hall, stonewalls, etc. On March 22, 1963 the
Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their
Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title
thereto. After trial on the merits, the land registration court promulgated its Decision,
dated November 17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3,
and 4.
The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs
of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the
decision of the land registration court to the then Court of Appeals, docketed as CA-
G.R. No. 38830-R. The Court of Appeals rendered its decision, dated May 9, 1977,
reversing the decision of the land registration court and dismissing the VICAR's
application as to Lots 2 and 3, the lots claimed by the two sets of oppositors in the
land registration case (and two sets of plaintiffs in the two cases now at bar), the first
lot being presently occupied by the convent and the second by the women's dormitory
and the sister's convent.
On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the
Court of Appeals to order the registration of Lot 3 in the names of the Heirs of
Egmidio Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and Pacita
Valdez filed their motion for reconsideration praying that both Lots 2 and 3 be ordered
registered in the names of the Heirs of Juan Valdez and Pacita Valdez. On August
12,1977, the Court of Appeals denied the motion for reconsideration filed by the Heirs
of Juan Valdez on the ground that there was "no sufficient merit to justify
reconsideration one way or the other ...," and likewise denied that of the Heirs of
Egmidio Octaviano.
Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari
of the decision of the Court of Appeals dismissing his (its) application for registration
of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of
the Mountain Province vs. Court of Appeals and Heirs of Egmidio Octaviano.'
From the denial by the Court of Appeals of their motion for reconsideration the Heirs
of Juan Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme
Court a petition for review, docketed as G.R. No. L-46872, entitled, Heirs of Juan
Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano
and Annable O. Valdez.
On January 13, 1978, the Supreme Court denied in a minute resolution both petitions
(of VICAR on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the
other) for lack of merit. Upon the finality of both Supreme Court resolutions in G.R.
of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying
that the Heirs of Octaviano be placed in possession of Lot 3. The Court, presided
over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion on the
ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the
Heirs of Octaviano any affirmative relief.
On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a
petitioner for certiorari and mandamus, docketed as CA-G.R. No. 08890-R,
entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its
decision dated May 16, 1979, the Court of Appeals dismissed the petition.
It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano
filed Civil Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3;
and the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979,
likewise for recovery of possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).
In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano
presented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership
of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano
(Exh. C ); his written demand (Exh. BB-4 ) to defendant Vicar for the return of the
land to them; and the reasonable rentals for the use of the land at P10,000.00 per
month. On the other hand, defendant Vicar presented the Register of Deeds for the
Province of Benguet, Atty. Nicanor Sison, who testified that the land in question is not
covered by any title in the name of Egmidio Octaviano or any of the plaintiffs (Exh. 8).
The defendant dispensed with the testimony of Mons.William Brasseur when the
plaintiffs admitted that the witness if called to the witness stand, would testify that
defendant Vicar has been in possession of Lot 3, for seventy-five (75) years
continuously and peacefully and has constructed permanent structures thereon.
In Civil Case No. 3655, the parties admitting that the material facts are not in dispute,
submitted the case on the sole issue of whether or not the decisions of the Court of
Appeals and the Supreme Court touching on the ownership of Lot 2, which in effect
declared the plaintiffs the owners of the land constitute res judicata.
 In these two cases , the plaintiffs arque that the defendant Vicar is
barred from setting up the defense of ownership and/or long and
continuous possession of the two lots in question since this is
barred by prior judgment of the Court of Appeals in CA-G.R. No.
038830-R under the principle of res judicata. Plaintiffs contend that
the question of possession and ownership have already been
determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No.
038830-R) and affirmed by the Supreme Court (Exh. 1, Minute
Resolution of the Supreme Court). On his part, defendant Vicar
maintains that the principle of res judicata would not prevent them
from litigating the issues of long possession and ownership
because the dispositive portion of the prior judgment in CA-G.R.
No. 038830-R merely dismissed their application for registration
and titling of lots 2 and 3. Defendant Vicar contends that only the
dispositive portion of the decision, and not its body, is the
controlling pronouncement of the Court of Appeals. 2
The alleged errors committed by respondent Court of Appeals according to petitioner
are as follows:
1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;
2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3
WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE
PRESENTED;
3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND
3 FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE
FORMER OWNERS WERE VALDEZ AND OCTAVIANO;
4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE
RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST
FROM 1906, AND NOT PETITIONER;
5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT
APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS
ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906;
6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN
1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN
RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE
PRESCRIPTION OF 10 YEARS;
7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA
G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT;
8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED
ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND
THEIR PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A
CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS
2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS
LOAN FOR USE;
10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN
GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND
IS BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA
G.R. NO. 038830. 3
The petition is bereft of merit.
Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148
and 05149, when it clearly held that it was in agreement with the findings of the trial
court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No.
38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court
of Appeals Decision CA-G.R. No. 38830-R) did not positively declare private
respondents as owners of the land, neither was it declared that they were not owners
of the land, but it held that the predecessors of private respondents were possessors
of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951. Petitioner
was in possession as borrower in commodatum up to 1951, when it repudiated the
trust by declaring the properties in its name for taxation purposes. When petitioner
applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept
of owner only for eleven years. Ordinary acquisitive prescription requires possession
for ten years, but always with just title. Extraordinary acquisitive prescription requires
30 years. 4
On the above findings of facts supported by evidence and evaluated by the Court of
Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in
respondent appellate court's ruling that said findings are res judicatabetween the
parties. They can no longer be altered by presentation of evidence because those
issues were resolved with finality a long time ago. To ignore the principle of res
judicata would be to open the door to endless litigations by continuous determination
of issues without end.
An examination of the Court of Appeals Decision dated May 4, 1977, First
Division 5 in CA-G.R. No. 38830-R, shows that it reversed the trial court's
Decision 6 finding petitioner to be entitled to register the lands in question under its
ownership, on its evaluation of evidence and conclusion of facts.
The Court of Appeals found that petitioner did not meet the requirement of 30 years
possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the
requirement of 10 years possession for ordinary acquisitive prescription because of
the absence of just title. The appellate court did not believe the findings of the trial
court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired
also by purchase from Egmidio Octaviano by petitioner Vicar because there was
absolutely no documentary evidence to support the same and the alleged purchases
were never mentioned in the application for registration.
By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and
Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots
since 1906. The predecessors of private respondents, not petitioner Vicar, were in
possession of the questioned lots since 1906.
There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in
question, but not Lots 2 and 3, because the buildings standing thereon were only
constructed after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for
taxation purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the
Bishop but said Bishop was appointed only in 1947, the church was constructed only
in 1951 and the new convent only 2 years before the trial in 1963.
When petitioner Vicar was notified of the oppositor's claims, the parish priest offered
to buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of
petitioner Vicar only in 1962.
Private respondents were able to prove that their predecessors' house was borrowed
by petitioner Vicar after the church and the convent were destroyed. They never
asked for the return of the house, but when they allowed its free use, they became
bailors in commodatum and the petitioner the bailee. The bailees' failure to return the
subject matter of commodatum to the bailor did not mean adverse possession on the
part of the borrower. The bailee held in trust the property subject matter of
commodatum. The adverse claim of petitioner came only in 1951 when it declared the
lots for taxation purposes. The action of petitioner Vicar by such adverse claim could
not ripen into title by way of ordinary acquisitive prescription because of the absence
of just title.
The Court of Appeals found that the predecessors-in-interest and private respondents
were possessors under claim of ownership in good faith from 1906; that petitioner
Vicar was only a bailee in commodatum; and that the adverse claim and repudiation
of trust came only in 1951.
We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-
G.R. No. 38830-R. Its findings of fact have become incontestible. This Court declined
to review said decision, thereby in effect, affirming it. It has become final and
executory a long time ago.
Respondent appellate court did not commit any reversible error, much less grave
abuse of discretion, when it held that the Decision of the Court of Appeals in CA-G.R.
No. 38830-R is governing, under the principle of res judicata, hence the rule, in the
present cases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported
by evidence established in that decision may no longer be altered.
WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for
lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by
respondent Court of Appeals is AFFIRMED, with costs against petitioner.
SO ORDERED.
[G.R. No. 112485. August 9, 2001]
EMILIA MANZANO, petitioner, vs. MIGUEL PEREZ SR., LEONCIO PEREZ,
MACARIO PEREZ, FLORENCIO PEREZ, NESTOR PEREZ, MIGUEL
PEREZ JR. and GLORIA PEREZ, respondents.
DECISION
PANGANIBAN, J.:
Courts decide cases on the basis of the evidence presented by the parties. In the
assessment of the facts, reason and logic are used. In civil cases, the party that
presents a preponderance of convincing evidence wins.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the March 31, 1993 Decision[1] of the Court of Appeals (CA)[2] in CA-
GR CV No. 32594. The dispositive part of the Decision reads:
WHEREFORE, the judgment appealed from is hereby REVERSED and another one
is entered dismissing plaintiffs complaint.
On the other hand, the Judgment[3] reversed by the CA ruled in this wise:
WHEREFORE, premises considered, judgment is hereby rendered:
1) Declaring the two Kasulatan ng Bilihang Tuluyan (Exh. J & K) over the
properties in question void or simulated;
2) Declaring the two Kasulatan ng Bilihang Tuluyan (Exh. J & K) over the
properties in question rescinded;
3) Ordering the defendants Miguel Perez, Sr., Macario Perez, Leoncio
Perez, Florencio Perez, Miguel Perez, Jr., Nestor Perez and Gloria
Perez to execute an Extra Judicial Partition with transfer over the said
residential lot and house, now covered and described in Tax Declaration
Nos. 1993 and 1994, respectively in the name of Nieves Manzano (Exh.
Q & P), subject matter of this case, in favor of plaintiff Emilia Manzano;
4) Ordering the defendants to pay plaintiff:
a) P25,000.00 as moral damages;
b) P10,000.00 as exemplary damages;
c) P15,000.00 as and for [a]ttorneys fees; and
d) To pay the cost of suit.[4]
The Motion for Reconsideration filed by petitioner before the CA was denied in a
Resolution dated October 28, 1993.[5]
The Facts
The facts of the case are summarized by the Court of Appeals as follows:
[Petitioner] Emilia Manzano in her Complaint alleged that she is the owner of a
residential house and lot, more particularly described hereunder:
A parcel of residential lot (Lots 1725 and 1726 of the Cadastral Survey of Siniloan),
together with all the improvements thereon, situated at General Luna Street, Siniloan,
Laguna. Bounded on the North by Callejon; on the East, by [a] town river; on the
South by Constancia Adofina; and on the West by Gen. Luna Street. Containing an
area of 130 square meters more or less, covered by Tax Dec. No. 9583 and
assessed at P1,330.00.
A residential house of strong mixed materials and G.I. iron roofing, with a floor area of
40 square meters, more or less. Also covered by Tax No. 9583.
In 1979, Nieves Manzano, sister of the [petitioner] and predecessor-in-interest of the
herein [private respondents], allegedly borrowed the aforementioned property as
collateral for a projected loan. The [petitioner] acceded to the request of her sister
upon the latters promise that she [would] return the property immediately upon
payment of her loan.
Pursuant to their understanding, the [petitioner] executed two deeds of conveyance
for the sale of the residential lot on 22 January 1979 (Exhibit J) and the sale of the
house erected thereon on 2 February 1979 (Exhibit K), both for a consideration of
P1.00 plus other valuables allegedly received by her from Nieves Manzano.
On 2 April 1979, Nieves Manzano together with her husband, [respondent] Miguel
Perez, Sr., and her son, [respondent] Macario Perez, obtained a loan from the Rural
Bank of Infanta, Inc. in the sum of P30,000.00. To secure payment of their
indebtedness, they executed a Real Estate Mortgage (Exhibit A) over the subject
property in favor of the bank.
Nieves Manzano died on 18 December 1979 leaving her husband and children as
heirs. These heirs, [respondents] herein allegedly refused to return the subject
property to the [petitioner] even after the payment of their loan with the Rural Bank
(Exhibit B).
The [petitioner] alleged that sincere efforts to settle the dispute amicably failed and
that the unwarranted refusal of the [respondents] to return the property caused her
sleepless nights, mental shock and social humiliation. She was, likewise, allegedly
constrained to engage the services of a counsel to protect her proprietary rights.
The [petitioner] sought the annulment of the deeds of sale and execution of a deed of
transfer or reconveyance of the subject property in her favor, the award of moral
damages of not less than P50,000.00, exemplary damages of P10,000.00 attorneys
fees of P10,000.00 plus P500.00 per court appearance, and costs of suit.
In seeking the dismissal of the complaint, the [respondents] countered that they are
the owners of the property in question being the legal heirs of Nieves Manzano
Who purchased the same from the [petitioner] for value and in good faith, as shown
by the deeds of sale which contain the true agreements between the parties therein;
that except for the [petitioners] bare allegations, she failed to show any proof that the
transaction she entered into with her sister was a loan and not a sale.
By way of special and affirmative defense, the [respondents] argued that what the
parties to the [sale] agreed upon was to resell the property to the [petitioner] after the
payment of the loan with the Rural Bank. But since the [respondents] felt that the
property is the only memory left by their predecessor-in-interest, they politely
informed the [petitioner] of their refusal to sell the same. The [respondents] also
argued that the [petitioner] is now estopped from questioning their ownership after
seven (7) years from the consummation of the sale.
As a proximate result of the filing of this alleged baseless and malicious suit, the
[respondents] prayed as counterclaim the award of moral damages in the amount of
P10,000.00 each, exemplary damages in an amount as may be warranted by the
evidence on record, attorneys fees of P10,000.00 plus P500.00 per appearance in
court and costs of suit.
In ruling for the [petitioner], the court a quo considered the following:
First, the properties in question after [they have] been transferred to Nieves Manzano,
the same were mortgaged in favor of the Rural Bank of Infante, Inc. (Exh. A) to
secure payment of the loan extended to Macario Perez.
Second, the documents covering said properties which were given to the bank as
collateral of said loan, upon payment and [release] to the [private respondents], were
returned to [petitioner] by Florencio Perez, one of the [private respondents].
[These] uncontroverted facts [are] clear recognition [by private respondents] that
[petitioner] is the owner of the properties in question.
xxxxxxxxx
Third, [respondents] pretense of ownership of the properties in question is belied by
their failure to present payment of real estate taxes [for] said properties, and it is on
[record] that [petitioner] has been paying the real estate taxes [on] the same (Exh. T,
V, V-1, V-2 & V-3).
xxxxxxxxx
Fourth, [respondents] confirmed the fact that [petitioner] went to the house in question
and hacked the stairs. According to [petitioner] she did it for failure of the
[respondents] to return and vacate the premises. [Respondents] did not file any action
against her.
This is a clear indication also that they (respondents) recognized [petitioner] as owner
of said properties.
xxxxxxxxx
Fifth, the Cadastral Notice of said properties were in the name of [petitioner] and the
same was sent to her (Exh. F & G).
xxxxxxxxx
Sixth, upon request of the [petitioner] to return said properties to her, [respondents]
did promise and prepare an Extra Judicial Partition with Sale over said properties in
question, however the same did not materialize. The other heirs of Nieves Manzano
did not sign.
xxxxxxxxx
Seventh, uncontroverted is the fact that the consideration [for] the alleged sale of the
properties in question is P1.00 and other things of value. [Petitioner] denies she has
received any consideration for the transfer of said properties, and the [respondents]
have not presented evidence to belie her testimony. [6]
Ruling of the Court of Appeals
The Court of Appeals was not convinced by petitioners claim that there was a
supposed oral agreement of commodatum over the disputed house and lot. Neither
was it persuaded by her allegation that respondents predecessor-in-interest had given
no consideration for the sale of the property in the latters favor. It explained as follows:
To begin with, if the plaintiff-appellee remained as the rightful owner of the subject
property, she would not have agreed to reacquire one-half thereof for a consideration
of P10,000.00 (Exhibit U-1). This is especially true if we are to accept her assertion
that Nieves Manzano did not purchase the property for value. More importantly, if the
agreement was to merely use plaintiffs property as collateral in a mortgage loan, it
was not explained why physical possession of the house and lot had to be with the
supposed vendee and her family who even built a pigpen on the lot (p. 6, TSN, June
11, 1990). A mere execution of the document transferring title in the latters name
would suffice for the purpose.
The alleged failure of the defendants-appellants to present evidence of payment of
real estate taxes cannot prejudice their cause. Realty tax payment of property is not
conclusive evidence of ownership (Director of Lands vs. Intermediate Appellate Court,
195 SCRA 38). Tax receipts only become strong evidence of ownership when
accompanied by proof of actual possession of the property (Tabuena vs. Court of
Appeals, 196 SCRA 650).
In this case, plaintiff-appell[ee] was not in possession of the subject property. The
defendant-appellants were the ones in actual occupation of the house and lot which
as aforestated was unnecessary if the real agreement was merely to lend the
property to be used as collateral. Moreover, the plaintiff-appellee began paying her
taxes only in 1986 after the instant complaint ha[d] been instituted (Exhibits V, V-1, V-
3 and T), and are, therefore, self-serving.
Significantly, while plaintiff-appellee was still the owner of the subject property in 1979
(Exhibit I), the Certificate of Tax Declaration issued by the Office of the Municipal
Treasurer on 8 August 1990 upon the request of the plaintiff-appellee herself (Exhibit
W) named Nieves Manzano as the owner and possessor of the property in
question. Moreover, Tax Declaration No. 9589 in the name of Nieves Manzano
(Exhibits D and D-1) indicates that the transfer of the subject property was based on
the Absolute Sale executed before Notary Public Alfonso Sanvictores, duly recorded
in his notarial book as Document No. 3157, Page 157, Book No. II. Tax Declaration
No[s]. 9633 (Exhibit H), 1994 (Exhibit P), 1993 (Exhibit Q) are all in the name of
Nieves Manzano.
There is always the presumption that a written contract [is] for a valuable
consideration (Section 5 (r), Rule 131 of the Rules of Court; Gamaitan vs. Court of
Appeals, 200 SCRA 37). The execution of a deed purporting to convey ownership of
a realty is in itself prima facie evidence of the existence of a valuable consideration
and x x x the party alleging lack of consideration has the burden of proving such
allegation (Caballero, et al. vs. Caballero, et al., C.A. 45 O.G. 2536).
The consideration [for] the questioned [sale] is not the One (P1.00) Peso alone but
also the other valuable considerations. Assuming that such consideration is
suspiciously insufficient, this circumstance alone, is not sufficient to invalidate the
sale. The inadequacy of the monetary consideration does not render a conveyance
null and void, for the vendors liberality may be a sufficient cause for a valid contract
(Ong vs. Ong, 139 SCRA 133).[7]
Hence, this Petition.[8]
Issues
 Petitioner submits the following grounds in support of her cause: [9]
1. The Court of Appeals erred in failing to consider that:
A) The introduction of petitioners evidence is proper under the parol evidence rule.
B) The rules on admission by silence apply in the case at bar.
C) Petitioner is entitled to the reliefs prayed for.
2. The Court of Appeals erred in reversing the decision of the trial court whose factual
findings are entitled to great respect since it was able to observe and evaluate the
demeanor of the witnesses.[10]
In sum, the main issue is whether the agreement between the parties was
a commodatum or an absolute sale.
The Courts Ruling
The Petition has no merit.
Main Issue: Sale or Commodatum
Obviously, the issue in this case is enveloped by conflict in factual perception,
which is ordinarily not reviewable in a petition under Rule 45. But the Court is
constrained to resolve it, because the factual findings of the Court of Appeals are
contrary to those of the trial court.[11]
Preliminarily, petitioner contends that the CA erred in rejecting the introduction of
her parol evidence. A reading of the assailed Decision shows, however, that an
elaborate discussion of the parol evidence rule and its exceptions was merely given as
a preface by the appellate court. Nowhere therein did it consider petitioners evidence
as improper under the said rule. On the contrary, it considered and weighed each and
every piece thereof. Nonetheless, it was not persuaded, as explained in the multitude
of reasons explicitly stated in its Decision.
This Court finds no cogent reason to disturb the findings and conclusions of the
Court of Appeals. Upon close examination of the records, we find that petitioner has
failed to discharge her burden of proving her case by preponderance of evidence. This
concept refers to evidence that has greater weight or is more convincing than that which
is offered in opposition; at bottom, it means probability of truth. [12]
In the case at bar, petitioner has presented no convincing proof of her continued
ownership of the subject property. In addition to her own oral testimony, she submitted
proof of payment of real property taxes. But that payment, which was made only after
her Complaint had already been lodged before the trial court, cannot be considered in
her favor for being self-serving, as aptly explained by the CA. Neither can we give
weight to her allegation that respondents possession of the subject property was merely
by virtue of her tolerance. Bare allegations, unsubstantiated by evidence, are not
equivalent to proof under our Rules.[13]
On the other hand, respondents presented two Deeds of Sale, which petitioner
executed in favor of the formers predecessor-in-interest. Both Deeds for the residential
lot and for the house erected thereon were each in consideration of P1.00 plus other
valuable. Having been notarized, they are presumed to have been duly executed. Also,
issued in favor of respondents predecessor-in-interest the day after the sale was Tax
Declaration No. 9589, which covered the property.
The facts alleged by petitioner in her favor are the following:
(1) she inherited the subject house and lot from her parents, with her siblings
waiving in her favor their claim over the same; (2) the property was mortgaged to secure
a loan of P30,000 taken in the names of Nieves Manzano Perez and Respondent
Miguel Perez; (3) upon full payment of the loan, the documents pertaining to the house
and lot were returned by Respondent Florencio Perez to petitioner; (4) three of the
respondents were signatories to a document transferring one half of the property to
Emilia Manzano in consideration of the sum of ten thousand pesos, although the
transfer did not materialize because of the refusal of the other respondents to sign the
document; and (5) petitioner hacked the stairs of the subject house, yet no case was
filed against her.
These matters are not, however, convincing indicators of petitioners ownership of
the house and lot. On the contrary, they even support the claim of respondents. Indeed,
how could one of them obtained a mortgage over the property, without having dominion
over it? Why would they execute a reconveyance of one half of it in favor of
petitioner? Why would the latter have to pay P10,000 for that portion if, as she claims,
she owns the whole?
Pitted against respondents evidence, that of petitioner awfully pales. Oral
testimony cannot, as a rule, prevail over a written agreement of the parties. [14] In order
to contradict the facts contained in a notarial document, such as the two Kasulatan ng
Bilihang Tuluyan in this case, as well as the presumption of regularity in the execution
thereof, there must be clear and convincing evidence that is more than merely
preponderant.[15] Here petitioner has failed to come up with even a preponderance of
evidence to prove her claim.
Courts are not blessed with the ability to read what goes on in the minds of
people. That is why parties to a case are given all the opportunity to present evidence
to help the courts decide on who are telling the truth and who are lying, who are entitled
to their claim and who are not. The Supreme Court cannot depart from these guidelines
and decide on the basis of compassion alone because, aside from being contrary to
the rule of law and our judicial system, this course of action would ultimately lead to
anarchy.
We reiterate, the evidence offered by petitioner to prove her claim is sadly
lacking. Jurisprudence on the subject matter, when applied thereto, points to the
existence of a sale, not a commodatum over the subject house and lot.
 WHEREFORE, the Petition is hereby DENIED and the assailed Decision
AFFIRMED. Costs against petitioner.
[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[1] of the Court of Appeals
dated June 25, 1991 in CA-G.R. CV No. 11791 and of its Resolution[2] dated May 5,
1994, denying the motion for reconsideration of said decision filed by petitioner
Producers Bank of the Philippines.
Sometime in 1979, private respondent Franklin Vives was asked by his neighbor
and friend Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in
incorporating his business, the Sterela Marketing and Services (Sterela for
brevity). Specifically, Sanchez asked private respondent to deposit in a bank a certain
amount of money in the bank account of Sterela for purposes of its incorporation. She
assured private respondent that he could withdraw his money from said account within
a months time. Private respondent asked Sanchez to bring Doronilla to their house so
that they could discuss Sanchezs request.[3]
On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella
Dumagpi, Doronillas private secretary, met and discussed the matter. Thereafter,
relying on the assurances and representations of Sanchez and Doronilla, private
respondent issued a check in the amount of Two Hundred Thousand Pesos
(P200,000.00) in favor of Sterela. Private respondent instructed his wife, Mrs. Inocencia
Vives, to accompany Doronilla and Sanchez in opening a savings account in the name
of Sterela in the Buendia, Makati branch of Producers Bank of the
Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to
deposit the check. They had with them an authorization letter from Doronilla authorizing
Sanchez and her companions, in coordination with Mr. Rufo Atienza, to open an
account for Sterela Marketing Services in the amount of P200,000.00. In opening the
account, the authorized signatories were Inocencia Vives and/or Angeles Sanchez. A
passbook for Savings Account No. 10-1567 was thereafter issued to Mrs. Vives.[4]
Subsequently, private respondent learned that Sterela was no longer holding
office in the address previously given to him. Alarmed, he and his wife went to the Bank
to verify if their money was still intact. The bank manager referred them to Mr. Rufo
Atienza, the assistant manager, who informed them that part of the money in Savings
Account No. 10-1567 had been withdrawn by Doronilla, and that only P90,000.00
remained therein. He likewise told them that Mrs. Vives could not withdraw said
remaining amount because it had to answer for some postdated checks issued by
Doronilla. According to Atienza, after Mrs. Vives and Sanchez opened Savings Account
No. 10-1567, Doronilla opened Current Account No. 10-0320 for Sterela and authorized
the Bank to debit Savings Account No. 10-1567 for the amounts necessary to cover
overdrawings in Current Account No. 10-0320. In opening said current account,
Sterela, through Doronilla, obtained a loan of P175,000.00 from the Bank. To cover
payment thereof, Doronilla issued three postdated checks, all of which were
dishonored. Atienza also said that Doronilla could assign or withdraw the money in
Savings Account No. 10-1567 because he was the sole proprietor of Sterela.[5]
Private respondent tried to get in touch with Doronilla through Sanchez. On June
29, 1979, he received a letter from Doronilla, assuring him that his money was intact
and would be returned to him. On August 13, 1979, Doronilla issued a postdated check
for Two Hundred Twelve Thousand Pesos (P212,000.00) in favor of private
respondent. However, upon presentment thereof by private respondent to the drawee
bank, the check was dishonored. Doronilla requested private respondent to present the
same check on September 15, 1979 but when the latter presented the check, it was
again dishonored.[6]
Private respondent referred the matter to a lawyer, who made a written demand
upon Doronilla for the return of his clients money. Doronilla issued another check
for P212,000.00 in private respondents favor but the check was again dishonored for
insufficiency of funds.[7]
Private respondent instituted an action for recovery of sum of money in the
Regional Trial Court (RTC) in Pasig, Metro Manila against Doronilla, Sanchez,
Dumagpi and petitioner. The case was docketed as Civil Case No. 44485. He also filed
criminal actions against Doronilla, Sanchez and Dumagpi in the RTC. However,
Sanchez passed away on March 16, 1985 while the case was pending before the trial
court. On October 3, 1995, the RTC of Pasig, Branch 157, promulgated its Decision in
Civil Case No. 44485, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants
Arturo J. Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay
plaintiff Franklin Vives jointly and severally
(a) the amount of P200,000.00, representing the money deposited, with interest at the
legal rate from the filing of the complaint until the same is fully paid;
(b) the sum of P50,000.00 for moral damages and a similar amount for exemplary
damages;
(c) the amount of P40,000.00 for attorneys fees; and
(d) the costs of the suit.
SO ORDERED.[8]
Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision
dated June 25, 1991, the appellate court affirmed in toto the decision of the RTC.[9] It
likewise denied with finality petitioners motion for reconsideration in its Resolution
dated May 5, 1994.[10]
 On June 30, 1994, petitioner filed the present petition, arguing that
I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE
TRANSACTION BETWEEN THE DEFENDANT DORONILLA AND RESPONDENT
VIVES WAS ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT
PETITIONERS BANK MANAGER, MR. RUFO ATIENZA, CONNIVED WITH THE
OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be PRIVATE
RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER SHOULD BE
HELD LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;
III.
THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE
RECORDS OF THE REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT
APPEALED FROM, AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE
BASED ON A MISAPPREHENSION OF FACTS;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE
CITED DECISION IN SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING
THE LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS
APPLICABLE;
V.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION
OF THE LOWER COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND
SEVERALLY LIABLE WITH THE OTHER DEFENDANTS FOR THE AMOUNT OF
P200,000.00 REPRESENTING THE SAVINGS ACCOUNT DEPOSIT, P50,000.00
FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARY DAMAGES, P40,000.00
FOR ATTORNEYS FEES AND THE COSTS OF SUIT.[11]
Private respondent filed his Comment on September 23, 1994. Petitioner filed its
Reply thereto on September 25, 1995. The Court then required private respondent to
submit a rejoinder to the reply. However, said rejoinder was filed only on April 21, 1997,
due to petitioners delay in furnishing private respondent with copy of the reply [12] and
several substitutions of counsel on the part of private respondent. [13] On January 17,
2001, the Court resolved to give due course to the petition and required the parties to
submit their respective memoranda.[14] Petitioner filed its memorandum on April 16,
2001 while private respondent submitted his memorandum on March 22, 2001.
Petitioner contends that the transaction between private respondent and Doronilla
is a simple loan (mutuum) since all the elements of a mutuum are present: first, what
was delivered by private respondent to Doronilla was money, a consumable thing; and
second, the transaction was onerous as Doronilla was obliged to pay interest, as
evidenced by the check issued by Doronilla in the amount of P212,000.00, or P12,000
more than what private respondent deposited in Sterelas bank account. [15] Moreover,
the fact that private respondent sued his good friend Sanchez for his failure to recover
his money from Doronilla shows that the transaction was not merely gratuitous but had
a business angle to it. Hence, petitioner argues that it cannot be held liable for the
return of private respondents P200,000.00 because it is not privy to the transaction
between the latter and Doronilla.[16]
It argues further that petitioners Assistant Manager, Mr. Rufo Atienza, could not
be faulted for allowing Doronilla to withdraw from the savings account of Sterela since
the latter was the sole proprietor of said company. Petitioner asserts that Doronillas
May 8, 1979 letter addressed to the bank, authorizing Mrs. Vives and Sanchez to open
a savings account for Sterela, did not contain any authorization for these two to
withdraw from said account. Hence, the authority to withdraw therefrom remained
exclusively with Doronilla, who was the sole proprietor of Sterela, and who alone had
legal title to the savings account.[17] Petitioner points out that no evidence other than
the testimonies of private respondent and Mrs. Vives was presented during trial to
prove that private respondent deposited his P200,000.00 in Sterelas account for
purposes of its incorporation.[18] Hence, petitioner should not be held liable for allowing
Doronilla to withdraw from Sterelas savings account.
Petitioner also asserts that the Court of Appeals erred in affirming the trial courts
decision since the findings of fact therein were not accord with the evidence presented
by petitioner during trial to prove that the transaction between private respondent and
Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla to
withdraw from Sterelas savings account.[19]
Finally, petitioner claims that since there is no wrongful act or omission on its part,
it is not liable for the actual damages suffered by private respondent, and neither may
it be held liable for moral and exemplary damages as well as attorneys fees. [20]
Private respondent, on the other hand, argues that the transaction between him
and Doronilla is not a mutuum but an accommodation,[21] since he did not actually part
with the ownership of his P200,000.00 and in fact asked his wife to deposit said amount
in the account of Sterela so that a certification can be issued to the effect that Sterela
had sufficient funds for purposes of its incorporation but at the same time, he retained
some degree of control over his money through his wife who was made a signatory to
the savings account and in whose possession the savings account passbook was
given.[22]
He likewise asserts that the trial court did not err in finding that petitioner, Atienzas
employer, is liable for the return of his money. He insists that Atienza, petitioners
assistant manager, connived with Doronilla in defrauding private respondent since it
was Atienza who facilitated the opening of Sterelas current account three days after
Mrs. Vives and Sanchez opened a savings account with petitioner for said company,
as well as the approval of the authority to debit Sterelas savings account to cover any
overdrawings in its current account.[23]
There is no merit in the petition.
 At the outset, it must be emphasized that only questions of law may be raised in
a petition for review filed with this Court. The Court has repeatedly held that it is not its
function to analyze and weigh all over again the evidence presented by the parties
during trial.[24] The Courts jurisdiction is in principle limited to reviewing errors of law
that might have been committed by the Court of Appeals.[25] Moreover, factual findings
of courts, when adopted and confirmed by the Court of Appeals, are final and
conclusive on this Court unless these findings are not supported by the evidence on
record.[26] There is no showing of any misapprehension of facts on the part of the Court
of Appeals in the case at bar that would require this Court to review and overturn the
factual findings of that court, especially since the conclusions of fact of the Court of
Appeals and the trial court are not only consistent but are also amply supported by the
evidence on record.
No error was committed by the Court of Appeals when it ruled that the transaction
between private respondent and Doronilla was a commodatum and not a mutuum. A
circumspect examination of the records reveals that the transaction between them was
a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of
loans in this wise:
By the contract of loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and return it, in
which case the contract is called a commodatum; or money or other consumable
thing, upon the condition that the same amount of the same kind and quality shall be
paid, in which case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum, the bailor retains the ownership of the thing loaned, while in simple
loan, ownership passes to the borrower.
The foregoing provision seems to imply that if the subject of the contract is a
consumable thing, such as money, the contract would be a mutuum. However, there
are some instances where a commodatum may have for its object a consumable
thing. Article 1936 of the Civil Code provides:
Consumable goods may be the subject of commodatum if the purpose of the contract
is not the consumption of the object, as when it is merely for exhibition.
Thus, if consumable goods are loaned only for purposes of exhibition, or when
the intention of the parties is to lend consumable goods and to have the very same
goods returned at the end of the period agreed upon, the loan is a commodatum and
not a mutuum.
The rule is that the intention of the parties thereto shall be accorded primordial
consideration in determining the actual character of a contract. [27] In case of doubt, the
contemporaneous and subsequent acts of the parties shall be considered in such
determination.[28]
As correctly pointed out by both the Court of Appeals and the trial court, the
evidence shows that private respondent agreed to deposit his money in the savings
account of Sterela specifically for the purpose of making it appear that said firm had
sufficient capitalization for incorporation, with the promise that the amount shall be
returned within thirty (30) days.[29] Private respondent merely accommodated Doronilla
by lending his money without consideration, as a favor to his good friend Sanchez. It
was however clear to the parties to the transaction that the money would not be
removed from Sterelas savings account and would be returned to private respondent
after thirty (30) days.
Doronillas attempts to return to private respondent the amount of P200,000.00
which the latter deposited in Sterelas account together with an additional P12,000.00,
allegedly representing interest on the mutuum, did not convert the transaction from
a commodatum into a mutuum because such was not the intent of the parties and
because the additional P12,000.00 corresponds to the fruits of the lending of
the P200,000.00. Article 1935 of the Civil Code expressly states that [t]he bailee
in commodatum acquires the use of the thing loaned but not its fruits. Hence, it was
only proper for Doronilla to remit to private respondent the interest accruing to the
latters money deposited with petitioner.
Neither does the Court agree with petitioners contention that it is not solidarily
liable for the return of private respondents money because it was not privy to the
transaction between Doronilla and private respondent. The nature of said transaction,
that is, whether it is a mutuum or a commodatum, has no bearing on the question of
petitioners liability for the return of private respondents money because the factual
circumstances of the case clearly show that petitioner, through its employee Mr.
Atienza, was partly responsible for the loss of private respondents money and is liable
for its restitution.
Petitioners rules for savings deposits written on the passbook it issued Mrs. Vives
on behalf of Sterela for Savings Account No. 10-1567 expressly states that
2. Deposits and withdrawals must be made by the depositor personally or upon his
written authority duly authenticated, and neither a deposit nor a withdrawal will be
permitted except upon the production of the depositor savings bank book in
which will be entered by the Bank the amount deposited or withdrawn. [30]
Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza,
the Assistant Branch Manager for the Buendia Branch of petitioner, to withdraw
therefrom even without presenting the passbook (which Atienza very well knew was in
the possession of Mrs. Vives), not just once, but several times. Both the Court of
Appeals and the trial court found that Atienza allowed said withdrawals because he
was party to Doronillas scheme of defrauding private respondent:
XXX
But the scheme could not have been executed successfully without the knowledge,
help and cooperation of Rufo Atienza, assistant manager and cashier of the Makati
(Buendia) branch of the defendant bank. Indeed, the evidence indicates that Atienza
had not only facilitated the commission of the fraud but he likewise helped in devising
the means by which it can be done in such manner as to make it appear that the
transaction was in accordance with banking procedure.
To begin with, the deposit was made in defendants Buendia branch precisely
because Atienza was a key officer therein. The records show that plaintiff had
suggested that the P200,000.00 be deposited in his bank, the Manila Banking
Corporation, but Doronilla and Dumagpi insisted that it must be in defendants branch
in Makati for it will be easier for them to get a certification. In fact before he was
introduced to plaintiff, Doronilla had already prepared a letter addressed to the
Buendia branch manager authorizing Angeles B. Sanchez and company to open a
savings account for Sterela in the amount of P200,000.00, as per coordination with
Mr. Rufo Atienza, Assistant Manager of the Bank x x x (Exh. 1). This is a clear
manifestation that the other defendants had been in consultation with Atienza from
the inception of the scheme. Significantly, there were testimonies and admission that
Atienza is the brother-in-law of a certain Romeo Mirasol, a friend and business
associate of Doronilla.
Then there is the matter of the ownership of the fund. Because of the coordination
between Doronilla and Atienza, the latter knew before hand that the money deposited
did not belong to Doronilla nor to Sterela. Aside from such foreknowledge, he was
explicitly told by Inocencia Vives that the money belonged to her and her husband
and the deposit was merely to accommodate Doronilla. Atienza even declared that
the money came from Mrs. Vives.
Although the savings account was in the name of Sterela, the bank records disclose
that the only ones empowered to withdraw the same were Inocencia Vives and
Angeles B. Sanchez. In the signature card pertaining to this account (Exh. J), the
authorized signatories were Inocencia Vives &/or Angeles B. Sanchez. Atienza stated
that it is the usual banking procedure that withdrawals of savings deposits could only
be made by persons whose authorized signatures are in the signature cards on file
with the bank. He, however, said that this procedure was not followed here because
Sterela was owned by Doronilla. He explained that Doronilla had the full authority to
withdraw by virtue of such ownership. The Court is not inclined to agree with
Atienza. In the first place, he was all the time aware that the money came from Vives
and did not belong to Sterela. He was also told by Mrs. Vives that they were only
accommodating Doronilla so that a certification can be issued to the effect that
Sterela had a deposit of so much amount to be sued in the incorporation of the
firm. In the second place, the signature of Doronilla was not authorized in so far as
that account is concerned inasmuch as he had not signed the signature card provided
by the bank whenever a deposit is opened. In the third place, neither Mrs. Vives nor
Sanchez had given Doronilla the authority to withdraw.
Moreover, the transfer of fund was done without the passbook having been
presented. It is an accepted practice that whenever a withdrawal is made in a savings
deposit, the bank requires the presentation of the passbook. In this case, such
recognized practice was dispensed with. The transfer from the savings account to the
current account was without the submission of the passbook which Atienza had given
to Mrs. Vives. Instead, it was made to appear in a certification signed by Estrella
Dumagpi that a duplicate passbook was issued to Sterela because the original
passbook had been surrendered to the Makati branch in view of a loan
accommodation assigning the savings account (Exh. C). Atienza, who undoubtedly
had a hand in the execution of this certification, was aware that the contents of the
same are not true. He knew that the passbook was in the hands of Mrs. Vives for he
was the one who gave it to her. Besides, as assistant manager of the branch and the
bank official servicing the savings and current accounts in question, he also was
aware that the original passbook was never surrendered. He was also cognizant that
Estrella Dumagpi was not among those authorized to withdraw so her certification
had no effect whatsoever.
The circumstance surrounding the opening of the current account also demonstrate
that Atienzas active participation in the perpetration of the fraud and deception that
caused the loss. The records indicate that this account was opened three days later
after the P200,000.00 was deposited. In spite of his disclaimer, the Court believes
that Atienza was mindful and posted regarding the opening of the current account
considering that Doronilla was all the while in coordination with him. That it was he
who facilitated the approval of the authority to debit the savings account to cover any
overdrawings in the current account (Exh. 2) is not hard to comprehend.
Clearly Atienza had committed wrongful acts that had resulted to the loss subject of
this case. x x x.[31]
Under Article 2180 of the Civil Code, employers shall be held primarily and
solidarily liable for damages caused by their employees acting within the scope of their
assigned tasks. To hold the employer liable under this provision, it must be shown that
an employer-employee relationship exists, and that the employee was acting within the
scope of his assigned task when the act complained of was committed.[32] Case law in
the United States of America has it that a corporation that entrusts a general duty to its
employee is responsible to the injured party for damages flowing from the employees
wrongful act done in the course of his general authority, even though in doing such act,
the employee may have failed in its duty to the employer and disobeyed the latters
instructions.[33]
There is no dispute that Atienza was an employee of petitioner. Furthermore,
petitioner did not deny that Atienza was acting within the scope of his authority as
Assistant Branch Manager when he assisted Doronilla in withdrawing funds from
Sterelas Savings Account No. 10-1567, in which account private respondents money
was deposited, and in transferring the money withdrawn to Sterelas Current Account
with petitioner. Atienzas acts of helping Doronilla, a customer of the petitioner, were
obviously done in furtherance of petitioners interests[34] even though in the process,
Atienza violated some of petitioners rules such as those stipulated in its savings
account passbook.[35] It was established that the transfer of funds from Sterelas savings
account to its current account could not have been accomplished by Doronilla without
the invaluable assistance of Atienza, and that it was their connivance which was the
cause of private respondents loss.
The foregoing shows that the Court of Appeals correctly held that under Article
2180 of the Civil Code, petitioner is liable for private respondents loss and is solidarily
liable with Doronilla and Dumagpi for the return of the P200,000.00 since it is clear that
petitioner failed to prove that it exercised due diligence to prevent the unauthorized
withdrawals from Sterelas savings account, and that it was not negligent in the selection
and supervision of Atienza. Accordingly, no error was committed by the appellate court
in the award of actual, moral and exemplary damages, attorneys fees and costs of suit
to private respondent.
WHEREFORE, the petition is hereby DENIED. The assailed Decision and
Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
[G.R. No. 146364. June 3, 2004]
COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE
GUEVARRA, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review[1] of the 21 June 2000 Decision[2] 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 [3] of the Regional Trial Court
of Quezon City, Branch 81,[4] affirming the 15 December 1995 decision [5] of the
Metropolitan Trial Court of Quezon City, Branch 31.[6]
The Antecedents
In June 1979, petitioner Colito T. Pajuyo (Pajuyo) paid P400 to a certain Pedro
Perez for the rights over a 250-square meter lot in Barrio Payatas, Quezon City. Pajuyo
then constructed a house made of light materials on the lot. Pajuyo and his family lived
in the house from 1979 to 7 December 1985.
On 8 December 1985, Pajuyo and private respondent Eddie Guevarra (Guevarra)
executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed
Guevarra to live in the house for free provided Guevarra would maintain the cleanliness
and orderliness of the house. Guevarra promised that he would voluntarily vacate the
premises on Pajuyos demand.
In September 1994, Pajuyo informed Guevarra of his need of the house and
demanded that Guevarra vacate the house. Guevarra refused.
Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court
of Quezon City, Branch 31 (MTC).
In his Answer, Guevarra claimed that Pajuyo had no valid title or right of
possession over the lot where the house stands because the lot is within the 150
hectares set aside by Proclamation No. 137 for socialized housing. Guevarra pointed
out that from December 1985 to September 1994, Pajuyo did not show up or
communicate with him. Guevarra insisted that neither he nor Pajuyo has valid title to
the lot.
On 15 December 1995, the MTC rendered its decision in favor of Pajuyo. The
dispositive portion of the MTC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff
and against defendant, ordering the latter to:
A) vacate the house and lot occupied by the defendant or any other person
or persons claiming any right under him;
B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00)
monthly as reasonable compensation for the use of the premises starting
from the last demand;
C) pay plaintiff the sum of P3,000.00 as and by way of attorneys fees; and
D) pay the cost of suit.
SO ORDERED.[7]
Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon City, Branch
81 (RTC).
On 11 November 1996, the RTC affirmed the MTC decision. The dispositive
portion of the RTC decision reads:
WHEREFORE, premises considered, the Court finds no reversible error in the
decision appealed from, being in accord with the law and evidence presented, and
the same is hereby affirmed en toto.
SO ORDERED.[8]
Guevarra received the RTC decision on 29 November 1996. Guevarra had only
until 14 December 1996 to file his appeal with the Court of Appeals. Instead of filing his
appeal with the Court of Appeals, Guevarra filed with the Supreme Court a Motion for
Extension of Time to File Appeal by Certiorari Based on Rule 42 (motion for
extension). Guevarra theorized that his appeal raised pure questions of law. The
Receiving Clerk of the Supreme Court received the motion for extension on 13
December 1996 or one day before the right to appeal expired.
On 3 January 1997, Guevarra filed his petition for review with the Supreme Court.
On 8 January 1997, the First Division of the Supreme Court issued a
Resolution[9] 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[10] granting the motion for extension conditioned on the timeliness of the
filing of the motion.
On 27 February 1997, the Court of Appeals ordered Pajuyo to comment on
Guevaras petition for review. On 11 April 1997, Pajuyo filed his Comment.
On 21 June 2000, the Court of Appeals issued its decision reversing the RTC
decision. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the assailed Decision of the court a quo in Civil
Case No. Q-96-26943 is REVERSED and SET ASIDE; and it is hereby declared that
the ejectment case filed against defendant-appellant is without factual and legal
basis.
SO ORDERED.[11]
Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that
the Court of Appeals should have dismissed outright Guevarras petition for review
because it was filed out of time. Moreover, it was Guevarras counsel and not Guevarra
who signed the certification against forum-shopping.
On 14 December 2000, the Court of Appeals issued a resolution denying Pajuyos
motion for reconsideration. The dispositive portion of the resolution reads:
WHEREFORE, for lack of merit, the motion for reconsideration is hereby DENIED. No
costs.
SO ORDERED.[12]
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, Guevarras refusal to vacate the house on
Pajuyos demand made Guevarras continued possession of the house illegal.
The Ruling of the RTC
The RTC upheld the Kasunduan, which established the landlord and tenant
relationship between Pajuyo and Guevarra. The terms of the Kasunduan bound
Guevarra to return possession of the house on demand.
The RTC rejected Guevarras claim of a better right under Proclamation No. 137,
the Revised National Government Center Housing Project Code of Policies and other
pertinent laws. In an ejectment suit, the RTC has no power to decide Guevarras rights
under these laws. The RTC declared that in an ejectment case, the only issue for
resolution is material or physical possession, not ownership.
The Ruling of the Court of Appeals
The Court of Appeals declared that Pajuyo and Guevarra are squatters. Pajuyo
and Guevarra illegally occupied the contested lot which the government owned.
Perez, the person from whom Pajuyo acquired his rights, was also a
squatter. Perez had no right or title over the lot because it is public land. The
assignment of rights between Perez and Pajuyo, and the Kasunduan between Pajuyo
and Guevarra, did not have any legal effect. Pajuyo and Guevarra are in pari delicto or
in equal fault. The court will leave them where they are.
The Court of Appeals reversed the MTC and RTC rulings, which held that
the Kasunduan between Pajuyo and Guevarra created a legal tie akin to that of a
landlord and tenant relationship. The Court of Appeals ruled that the Kasunduan is not
a lease contract but a commodatum because the agreement is not for a price certain.
Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the
appellate court held that Guevarra has a better right over the property under
Proclamation No. 137. President Corazon C. Aquino (President Aquino) issued
Proclamation No. 137 on 7 September 1987. At that time, Guevarra was in physical
possession of the property. Under Article VI of the Code of Policies Beneficiary
Selection and Disposition of Homelots and Structures in the National Housing Project
(the Code), the actual occupant or caretaker of the lot shall have first priority as
beneficiary of the project. The Court of Appeals concluded that Guevarra is first in the
hierarchy of priority.
In denying Pajuyos motion for reconsideration, the appellate court debunked
Pajuyos claim that Guevarra filed his motion for extension beyond the period to appeal.
The Court of Appeals pointed out that Guevarras motion for extension filed before
the Supreme Court was stamped 13 December 1996 at 4:09 PM by the Supreme
Courts Receiving Clerk. The Court of Appeals concluded that the motion for extension
bore a date, contrary to Pajuyos claim that the motion for extension was
undated. Guevarra filed the motion for extension on time on 13 December 1996 since
he filed the motion one day before the expiration of the reglementary period on 14
December 1996. Thus, the motion for extension properly complied with the condition
imposed by the Court of Appeals in its 28 January 1997 Resolution. The Court of
Appeals explained that the thirty-day extension to file the petition for review was
deemed granted because of such compliance.
The Court of Appeals rejected Pajuyos argument that the appellate court should
have dismissed the petition for review because it was Guevarras counsel and not
Guevarra who signed the certification against forum-shopping. The Court of Appeals
pointed out that Pajuyo did not raise this issue in his Comment. The Court of Appeals
held that Pajuyo could not now seek the dismissal of the case after he had extensively
argued on the merits of the case. This technicality, the appellate court opined, was
clearly an afterthought.
 The Issues
Pajuyo raises the following issues for resolution:
WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION:
1) in GRANTING, instead of denying, Private Respondents
Motion for an Extension of thirty days to file petition for review
at the time when there was no more period to extend as the
decision of the Regional Trial Court had already become final
and executory.
2) in giving due course, instead of dismissing, private
respondents Petition for Review even though the certification
against forum-shopping was signed only by counsel instead
of by petitioner himself.
3) in ruling that the Kasunduan voluntarily entered into by the
parties was in fact a commodatum, instead of a Contract of
Lease as found by the Metropolitan Trial Court and in holding
that the ejectment case filed against defendant-appellant is
without legal and factual basis.
4) in reversing and setting aside the Decision of the Regional
Trial Court in Civil Case No. Q-96-26943 and in holding that
the parties are in pari delicto being both squatters, therefore,
illegal occupants of the contested parcel of land.
5) in deciding the unlawful detainer case based on the so-called
Code of Policies of the National Government Center Housing
Project instead of deciding the same under the Kasunduan
voluntarily executed by the parties, the terms and conditions
of which are the laws between themselves.[13]
The Ruling of the Court
The procedural issues Pajuyo is raising are baseless. However, we find merit in
the substantive issues Pajuyo is submitting for resolution.
Procedural Issues
Pajuyo insists that the Court of Appeals should have dismissed outright
Guevarras petition for review because the RTC decision had already become final and
executory when the appellate court acted on Guevarras motion for extension to file the
petition. Pajuyo points out that Guevarra had only one day before the expiry of his
period to appeal the RTC decision. Instead of filing the petition for review with the Court
of Appeals, Guevarra filed with this Court an undated motion for extension of 30 days
to file a petition for review. This Court merely referred the motion to the Court of
Appeals. Pajuyo believes that the filing of the motion for extension with this Court did
not toll the running of the period to perfect the appeal.Hence, when the Court of Appeals
received the motion, the period to appeal had already expired.
We are not persuaded.
Decisions of the regional trial courts in the exercise of their appellate jurisdiction
are appealable to the Court of Appeals by petition for review in cases involving
questions of fact or mixed questions of fact and law. [14] Decisions of the regional trial
courts involving pure questions of law are appealable directly to this Court by petition
for review.[15] These modes of appeal are now embodied in Section 2, Rule 41 of the
1997 Rules of Civil Procedure.
Guevarra believed that his appeal of the RTC decision involved only questions of
law. Guevarra thus filed his motion for extension to file petition for review before this
Court on 14 December 1996. On 3 January 1997, Guevarra then filed his petition for
review with this Court. A perusal of Guevarras petition for review gives the impression
that the issues he raised were pure questions of law. There is a question of law when
the doubt or difference is on what the law is on a certain state of facts.[16] There is a
question of fact when the doubt or difference is on the truth or falsity of the facts
alleged.[17]
In his petition for review before this Court, Guevarra no longer disputed the
facts. Guevarras petition for review raised these questions: (1) Do ejectment cases
pertain only to possession of a structure, and not the lot on which the structure stands?
(2) Does a suit by a squatter against a fellow squatter constitute a valid case for
ejectment? (3) Should a Presidential Proclamation governing the lot on which a
squatters structure stands be considered in an ejectment suit filed by the owner of the
structure?
These questions call for the evaluation of the rights of the parties under the law
on ejectment and the Presidential Proclamation. At first glance, the questions Guevarra
raised appeared purely legal. However, some factual questions still have to be resolved
because they have a bearing on the legal questions raised in the petition for
review. These factual matters refer to the metes and bounds of the disputed property
and the application of Guevarra as beneficiary of Proclamation No. 137.
The Court of Appeals has the power to grant an extension of time to file a petition
for review. In Lacsamana v. Second Special Cases Division of the Intermediate
Appellate Court,[18] we declared that the Court of Appeals could grant extension of
time in appeals by petition for review. In Liboro v. Court of Appeals,[19] we clarified
that the prohibition against granting an extension of time applies only in a case where
ordinary appeal is perfected by a mere notice of appeal.The prohibition does not apply
in a petition for review where the pleading needs verification. A petition for review,
unlike an ordinary appeal, requires preparation and research to present a persuasive
position.[20] The drafting of the petition for review entails more time and effort than filing
a notice of appeal.[21] Hence, the Court of Appeals may allow an extension of time to
file a petition for review.
In the more recent case of Commissioner of Internal Revenue v. Court of
Appeals,[22] we held that Liboros clarification of Lacsamana is consistent with the
Revised Internal Rules of the Court of Appeals and Supreme Court Circular No. 1-91.
They all allow an extension of time for filing petitions for review with the Court of
Appeals. The extension, however, should be limited to only fifteen days save in
exceptionally meritorious cases where the Court of Appeals may grant a longer period.
A judgment becomes final and executory by operation of law. Finality of judgment
becomes a fact on the lapse of the reglementary period to appeal if no appeal is
perfected.[23] The RTC decision could not have gained finality because the Court of
Appeals granted the 30-day extension to Guevarra.
The Court of Appeals did not commit grave abuse of discretion when it approved
Guevarras motion for extension. The Court of Appeals gave due course to the motion
for extension because it complied with the condition set by the appellate court in its
resolution dated 28 January 1997. The resolution stated that the Court of Appeals
would only give due course to the motion for extension if filed on time. The motion for
extension met this condition.
The material dates to consider in determining the timeliness of the filing of the
motion for extension are (1) the date of receipt of the judgment or final order or
resolution subject of the petition, and (2) the date of filing of the motion for
extension.[24] It is the date of the filing of the motion or pleading, and not the date of
execution, that determines the timeliness of the filing of that motion or pleading. Thus,
even if the motion for extension bears no date, the date of filing stamped on it is the
reckoning point for determining the timeliness of its filing.
Guevarra had until 14 December 1996 to file an appeal from the RTC
decision. Guevarra filed his motion for extension before this Court on 13 December
1996, the date stamped by this Courts Receiving Clerk on the motion for extension.
Clearly, Guevarra filed the motion for extension exactly one day before the lapse of the
reglementary period to appeal.
Assuming that the Court of Appeals should have dismissed Guevarras appeal on
technical grounds, Pajuyo did not ask the appellate court to deny the motion for
extension and dismiss the petition for review at the earliest opportunity.Instead, Pajuyo
vigorously discussed the merits of the case. It was only when the Court of Appeals
ruled in Guevarras favor that Pajuyo raised the procedural issues against Guevarras
petition for review.
A party who, after voluntarily submitting a dispute for resolution, receives an
adverse decision on the merits, is estopped from attacking the jurisdiction of the
court.[25] Estoppel sets in not because the judgment of the court is a valid and
conclusive adjudication, but because the practice of attacking the courts jurisdiction
after voluntarily submitting to it is against public policy. [26]
In his Comment before the Court of Appeals, Pajuyo also failed to discuss
Guevarras failure to sign the certification against forum shopping. Instead, Pajuyo
harped on Guevarras counsel signing the verification, claiming that the counsels
verification is insufficient since it is based only on mere information.
A partys failure to sign the certification against forum shopping is different from
the partys failure to sign personally the verification. The certificate of non-forum
shopping must be signed by the party, and not by counsel. [27] The certification of
counsel renders the petition defective.[28]
On the other hand, the requirement on verification of a pleading is a formal and
not a jurisdictional requisite.[29] It is intended simply to secure an assurance that what
are alleged in the pleading are true and correct and not the product of the imagination
or a matter of speculation, and that the pleading is filed in good faith. [30] The party need
not sign the verification. A partys representative, lawyer or any person who personally
knows the truth of the facts alleged in the pleading may sign the verification. [31]
We agree with the Court of Appeals that the issue on the certificate against forum
shopping was merely an afterthought. Pajuyo did not call the Court of Appeals attention
to this defect at the early stage of the proceedings. Pajuyo raised this procedural issue
too late in the proceedings.
Absence of Title over the Disputed Property will not Divest the Courts of
Jurisdiction to Resolve the Issue of Possession
Settled is the rule that the defendants claim of ownership of the disputed property
will not divest the inferior court of its jurisdiction over the ejectment case. [32] Even if the
pleadings raise the issue of ownership, the court may pass on such issue to determine
only the question of possession, especially if the ownership is inseparably linked with
the possession.[33] The adjudication on the issue of ownership is only provisional and
will not bar an action between the same parties involving title to the land. [34] This
doctrine is a necessary consequence of the nature of the two summary actions of
ejectment, forcible entry and unlawful detainer, where the only issue for adjudication is
the physical or material possession over the real property. [35]
In this case, what Guevarra raised before the courts was that he and Pajuyo are
not the owners of the contested property and that they are mere squatters. Will the
defense that the parties to the ejectment case are not the owners of the disputed lot
allow the courts to renounce their jurisdiction over the case? The Court of Appeals
believed so and held that it would just leave the parties where they are since they are
in pari delicto.
We do not agree with the Court of Appeals.
Ownership or the right to possess arising from ownership is not at issue in an
action for recovery of possession. The parties cannot present evidence to prove
ownership or right to legal possession except to prove the nature of the possession
when necessary to resolve the issue of physical possession.[36] The same is true when
the defendant asserts the absence of title over the property. The absence of title over
the contested lot is not a ground for the courts to withhold relief from the parties in an
ejectment case.
The only question that the courts must resolve in ejectment proceedings is - who
is entitled to the physical possession of the premises, that is, to the possession de
facto and not to the possession de jure.[37] It does not even matter if a partys title to the
property is questionable,[38] or when both parties intruded into public land and their
applications to own the land have yet to be approved by the proper government
agency.[39] Regardless of the actual condition of the title to the property, the party in
peaceable quiet possession shall not be thrown out by a strong hand, violence or
terror.[40] Neither is the unlawful withholding of property allowed. Courts will always
uphold respect for prior possession.
Thus, a party who can prove prior possession can recover such possession even
against the owner himself.[41] Whatever may be the character of his possession, if he
has in his favor prior possession in time, he has the security that entitles him to remain
on the property until a person with a better right lawfully ejects him. [42] To repeat, the
only issue that the court has to settle in an ejectment suit is the right to physical
possession.
In Pitargue v. Sorilla,[43] the government owned the land in dispute. The
government did not authorize either the plaintiff or the defendant in the case of forcible
entry case to occupy the land. The plaintiff had prior possession and had already
introduced improvements on the public land. The plaintiff had a pending application for
the land with the Bureau of Lands when the defendant ousted him from
possession. The plaintiff filed the action of forcible entry against the defendant. The
government was not a party in the case of forcible entry.
The defendant questioned the jurisdiction of the courts to settle the issue of
possession because while the application of the plaintiff was still pending, title remained
with the government, and the Bureau of Public Lands had jurisdiction over the case. We
disagreed with the defendant. We ruled that courts have jurisdiction to entertain
ejectment suits even before the resolution of the application. The plaintiff, by priority of
his application and of his entry, acquired prior physical possession over the public land
applied for as against other private claimants. That prior physical possession enjoys
legal protection against other private claimants because only a court can take away
such physical possession in an ejectment case.
While the Court did not brand the plaintiff and the defendant in Pitargue[44] as
squatters, strictly speaking, their entry into the disputed land was illegal. Both the
plaintiff and defendant entered the public land without the owners permission.Title to
the land remained with the government because it had not awarded to anyone
ownership of the contested public land. Both the plaintiff and the defendant were in
effect squatting on government property. Yet, we upheld the courts jurisdiction to
resolve the issue of possession even if the plaintiff and the defendant in the ejectment
case did not have any title over the contested land.
Courts must not abdicate their jurisdiction to resolve the issue of physical
possession because of the public need to preserve the basic policy behind the
summary actions of forcible entry and unlawful detainer. The underlying philosophy
behind ejectment suits is to prevent breach of the peace and criminal disorder and to
compel the party out of possession to respect and resort to the law alone to obtain what
he claims is his.[45] The party deprived of possession must not take the law into his own
hands.[46] Ejectment proceedings are summary in nature so the authorities can settle
speedily actions to recover possession because of the overriding need to quell social
disturbances.[47]
We further explained in Pitargue the greater interest that is at stake in actions for
recovery of possession. We made the following pronouncements in Pitargue:
The question that is before this Court is: Are courts without jurisdiction to take
cognizance of possessory actions involving these public lands before final award is
made by the Lands Department, and before title is given any of the conflicting
claimants? It is one of utmost importance, as there are public lands everywhere and
there are thousands of settlers, especially in newly opened regions. It also involves a
matter of policy, as it requires the determination of the respective authorities and
functions of two coordinate branches of the Government in connection with public
land conflicts.
Our problem is made simple by the fact that under the Civil Code, either in the old,
which was in force in this country before the American occupation, or in the new, we
have a possessory action, the aim and purpose of which is the recovery of the
physical possession of real property, irrespective of the question as to who has the
title thereto. Under the Spanish Civil Code we had the accion interdictal, a summary
proceeding which could be brought within one year from dispossession (Roman
Catholic Bishop of Cebu vs. Mangaron, 6 Phil. 286, 291); and as early as October 1,
1901, upon the enactment of the Code of Civil Procedure (Act No. 190 of the
Philippine Commission) we implanted the common law action of forcible entry
(section 80 of Act No. 190), the object of which has been stated by this Court to be to
prevent breaches of the peace and criminal disorder which would ensue from
the withdrawal of the remedy, and the reasonable hope such withdrawal would
create that some advantage must accrue to those persons who, believing
themselves entitled to the possession of property, resort to force to gain
possession rather than to some appropriate action in the court to assert their
claims. (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) So before the
enactment of the first Public Land Act (Act No. 926) the action of forcible entry was
already available in the courts of the country. So the question to be resolved is, Did
the Legislature intend, when it vested the power and authority to alienate and dispose
of the public lands in the Lands Department, to exclude the courts from entertaining
the possessory action of forcible entry between rival claimants or occupants of any
land before award thereof to any of the parties? Did Congress intend that the lands
applied for, or all public lands for that matter, be removed from the jurisdiction of the
judicial Branch of the Government, so that any troubles arising therefrom, or any
breaches of the peace or disorders caused by rival claimants, could be inquired into
only by the Lands Department to the exclusion of the courts? The answer to this
question seems to us evident. The Lands Department does not have the means to
police public lands; neither does it have the means to prevent disorders arising
therefrom, or contain breaches of the peace among settlers; or to pass promptly upon
conflicts of possession. Then its power is clearly limited to disposition and
alienation, and while it may decide conflicts of possession in order to make
proper award, the settlement of conflicts of possession which is recognized in
the court herein has another ultimate purpose, i.e., the protection of actual
possessors and occupants with a view to the prevention of breaches of the
peace. The power to dispose and alienate could not have been intended to
include the power to prevent or settle disorders or breaches of the peace
among rival settlers or claimants prior to the final award. As to this, therefore, the
corresponding branches of the Government must continue to exercise power and
jurisdiction within the limits of their respective functions. The vesting of the Lands
Department with authority to administer, dispose, and alienate public lands,
therefore, must not be understood as depriving the other branches of the
Government of the exercise of the respective functions or powers thereon,
such as the authority to stop disorders and quell breaches of the peace by the
police, the authority on the part of the courts to take jurisdiction over
possessory actions arising therefrom not involving, directly or indirectly,
alienation and disposition.
Our attention has been called to a principle enunciated in American courts to the
effect that courts have no jurisdiction to determine the rights of claimants to public
lands, and that until the disposition of the land has passed from the control of the
Federal Government, the courts will not interfere with the administration of matters
concerning the same. (50 C. J. 1093-1094.) We have no quarrel with this principle.
The determination of the respective rights of rival claimants to public lands is different
from the determination of who has the actual physical possession or occupation with
a view to protecting the same and preventing disorder and breaches of the peace. A
judgment of the court ordering restitution of the possession of a parcel of land to the
actual occupant, who has been deprived thereof by another through the use of force
or in any other illegal manner, can never be prejudicial interference with the
disposition or alienation of public lands. On the other hand, if courts were deprived
of jurisdiction of cases involving conflicts of possession, that threat of judicial
action against breaches of the peace committed on public lands would be
eliminated, and a state of lawlessness would probably be produced between
applicants, occupants or squatters, where force or might, not right or justice,
would rule.
It must be borne in mind that the action that would be used to solve conflicts of
possession between rivals or conflicting applicants or claimants would be no other
than that of forcible entry. This action, both in England and the United States and in
our jurisdiction, is a summary and expeditious remedy whereby one in peaceful and
quiet possession may recover the possession of which he has been deprived by a
stronger hand, by violence or terror; its ultimate object being to prevent breach of the
peace and criminal disorder. (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312,
314.) The basis of the remedy is mere possession as a fact, of physical possession,
not a legal possession. (Mediran vs. Villanueva, 37 Phil. 752.) The title or right to
possession is never in issue in an action of forcible entry; as a matter of fact,
evidence thereof is expressly banned, except to prove the nature of the possession.
(Second 4, Rule 72, Rules of Court.) With this nature of the action in mind, by no
stretch of the imagination can conclusion be arrived at that the use of the remedy in
the courts of justice would constitute an interference with the alienation, disposition,
and control of public lands. To limit ourselves to the case at bar can it be pretended at
all that its result would in any way interfere with the manner of the alienation or
disposition of the land contested? On the contrary, it would facilitate adjudication, for
the question of priority of possession having been decided in a final manner by the
courts, said question need no longer waste the time of the land officers making the
adjudication or award. (Emphasis ours)
The Principle of Pari Delicto is not Applicable to Ejectment Cases
The Court of Appeals erroneously applied the principle of pari delicto to this case.
Articles 1411 and 1412 of the Civil Code[48] embody the principle of pari delicto.
We explained the principle of pari delicto in these words:
The rule of pari delicto is expressed in the maxims ex dolo malo non eritur
actio and in pari delicto potior est conditio defedentis. The law will not aid either party
to an illegal agreement. It leaves the parties where it finds them. [49]
The application of the pari delicto principle is not absolute, as there are exceptions
to its application. One of these exceptions is where the application of the pari
delicto rule would violate well-established public policy.[50]
In Drilon v. Gaurana,[51] we reiterated the basic policy behind the summary
actions of forcible entry and unlawful detainer. We held that:
It must be stated that the purpose of an action of forcible entry and detainer is that,
regardless of the actual condition of the title to the property, the party in peaceable
quiet possession shall not be turned out by strong hand, violence or terror. In
affording this remedy of restitution the object of the statute is to prevent breaches of
the peace and criminal disorder which would ensue from the withdrawal of the
remedy, and the reasonable hope such withdrawal would create that some advantage
must accrue to those persons who, believing themselves entitled to the possession of
property, resort to force to gain possession rather than to some appropriate action in
the courts to assert their claims. This is the philosophy at the foundation of all these
actions of forcible entry and detainer which are designed to compel the party out of
possession to respect and resort to the law alone to obtain what he claims is his.[52]
Clearly, the application of the principle of pari delicto to a case of ejectment
between squatters is fraught with danger. To shut out relief to squatters on the ground
of pari delicto would openly invite mayhem and lawlessness. A squatter would oust
another squatter from possession of the lot that the latter had illegally occupied,
emboldened by the knowledge that the courts would leave them where they are.
Nothing would then stand in the way of the ousted squatter from re-claiming his prior
possession at all cost.
Petty warfare over possession of properties is precisely what ejectment cases or
actions for recovery of possession seek to prevent. [53] Even the owner who has title
over the disputed property cannot take the law into his own hands to regain possession
of his property. The owner must go to court.
Courts must resolve the issue of possession even if the parties to the ejectment
suit are squatters. The determination of priority and superiority of possession is a
serious and urgent matter that cannot be left to the squatters to decide. To do so would
make squatters receive better treatment under the law. The law restrains property
owners from taking the law into their own hands. However, the principle of pari
delicto as applied by the Court of Appeals would give squatters free rein to dispossess
fellow squatters or violently retake possession of properties usurped from them. Courts
should not leave squatters to their own devices in cases involving recovery of
possession.
Possession is the only Issue for Resolution in an Ejectment Case
 The case for review before the Court of Appeals was a simple case of
ejectment. The Court of Appeals refused to rule on the issue of physical possession.
Nevertheless, the appellate court held that the pivotal issue in this case is who between
Pajuyo and Guevarra has the priority right as beneficiary of the contested land under
Proclamation No. 137.[54] According to the Court of Appeals, Guevarra enjoys
preferential right under Proclamation No. 137 because Article VI of the Code declares
that the actual occupant or caretaker is the one qualified to apply for socialized housing.
The ruling of the Court of Appeals has no factual and legal basis.
First. Guevarra did not present evidence to show that the contested lot is part of
a relocation site under Proclamation No. 137. Proclamation No. 137 laid down the
metes and bounds of the land that it declared open for disposition to bona
fide residents.
The records do not show that the contested lot is within the land specified by
Proclamation No. 137. Guevarra had the burden to prove that the disputed lot is within
the coverage of Proclamation No. 137. He failed to do so.
Second. The Court of Appeals should not have given credence to Guevarras
unsubstantiated claim that he is the beneficiary of Proclamation No. 137. Guevarra
merely alleged that in the survey the project administrator conducted, he and not
Pajuyo appeared as the actual occupant of the lot.
There is no proof that Guevarra actually availed of the benefits of Proclamation
No. 137. Pajuyo allowed Guevarra to occupy the disputed property in 1985. President
Aquino signed Proclamation No. 137 into law on 11 March 1986. Pajuyo made his
earliest demand for Guevarra to vacate the property in September 1994.
During the time that Guevarra temporarily held the property up to the time that
Proclamation No. 137 allegedly segregated the disputed lot, Guevarra never applied
as beneficiary of Proclamation No. 137. Even when Guevarra already knew that Pajuyo
was reclaiming possession of the property, Guevarra did not take any step to comply
with the requirements of Proclamation No. 137.
Third. Even assuming that the disputed lot is within the coverage of Proclamation
No. 137 and Guevarra has a pending application over the lot, courts should still assume
jurisdiction and resolve the issue of possession. However, the jurisdiction of the courts
would be limited to the issue of physical possession only.
In Pitargue,[55] we ruled that courts have jurisdiction over possessory actions
involving public land to determine the issue of physical possession. The determination
of the respective rights of rival claimants to public land is, however, distinct from the
determination of who has the actual physical possession or who has a better right of
physical possession.[56] The administrative disposition and alienation of public lands
should be threshed out in the proper government agency. [57]
The Court of Appeals determination of Pajuyo and Guevarras rights under
Proclamation No. 137 was premature. Pajuyo and Guevarra were at most merely
potential beneficiaries of the law. Courts should not preempt the decision of the
administrative agency mandated by law to determine the qualifications of applicants for
the acquisition of public lands. Instead, courts should expeditiously resolve the issue of
physical possession in ejectment cases to prevent disorder and breaches of peace. [58]
Pajuyo is Entitled to Physical Possession of the Disputed Property
Guevarra does not dispute Pajuyos prior possession of the lot and ownership of
the house built on it. Guevarra expressly admitted the existence and due execution of
the Kasunduan. The Kasunduan reads:
Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay
nagbibigay pahintulot kay G. Eddie Guevarra, na pansamantalang manirahan sa
nasabing bahay at lote ng walang bayad. Kaugnay nito, kailangang panatilihin nila
ang kalinisan at kaayusan ng bahay at lote.
Sa sandaling kailangan na namin ang bahay at lote, silay kusang aalis ng walang
reklamo.
Based on the Kasunduan, 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 Pajuyos demand but Guevarra
broke his promise and refused to heed Pajuyos demand to vacate.
These facts make out a case for unlawful detainer. Unlawful detainer involves the
withholding by a person from another of the possession of real property to which the
latter is entitled after the expiration or termination of the formers right to hold
possession under a contract, express or implied.[59]
Where the plaintiff allows the defendant to use his property by tolerance without
any contract, the defendant is necessarily bound by an implied promise that he will
vacate on demand, failing which, an action for unlawful detainer will lie. [60]The
defendants refusal to comply with the demand makes his continued possession of the
property unlawful.[61] The status of the defendant in such a case is similar to that of a
lessee or tenant whose term of lease has expired but whose occupancy continues by
tolerance of the owner.[62]
This principle should apply with greater force in cases where a contract embodies
the permission or tolerance to use the property. The Kasunduan expressly articulated
Pajuyos forbearance. Pajuyo did not require Guevarra to pay any rent but only to
maintain the house and lot in good condition. Guevarra expressly vowed in
the Kasunduan that he would vacate the property on demand. Guevarras refusal to
comply with Pajuyos demand to vacate made Guevarras continued possession of the
property unlawful.
We do not subscribe to the Court of Appeals theory that the Kasunduan is one
of commodatum.
In a contract of commodatum, one of the parties delivers to another something
not consumable so that the latter may use the same for a certain time and return
it.[63] An essential feature of commodatum is that it is gratuitous. Another feature
of commodatum is that the use of the thing belonging to another is for a certain
period.[64] Thus, the bailor cannot demand the return of the thing loaned until after
expiration of the period stipulated, or after accomplishment of the use for which
the commodatum is constituted.[65] If the bailor should have urgent need of the thing,
he may demand its return for temporary use.[66] If the use of the thing is merely tolerated
by the bailor, he can demand the return of the thing at will, in which case the contractual
relation is called a precarium.[67] Under the Civil Code, precarium is a kind
of commodatum.[68]
The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra
was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay
rent, it obligated him to maintain the property in good condition. The imposition of this
obligation makes the Kasunduan a contract different from a commodatum. The
effects of the Kasunduan are also different from that of a commodatum. Case law on
ejectment has treated relationship based on tolerance as one that is akin to a landlord-
tenant relationship where the withdrawal of permission would result in the termination
of the lease.[69] The tenants withholding of the property would then be unlawful. This is
settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is one
of commodatum, Guevarra as bailee would still have the duty to turn over possession
of the property to Pajuyo, the bailor. The obligation to deliver or to return the thing
received attaches to contracts for safekeeping, or contracts of commission,
administration and commodatum.[70] These contracts certainly involve the obligation to
deliver or return the thing received.[71]
Guevarra turned his back on the Kasunduan on the sole ground that like him,
Pajuyo is also a squatter. Squatters, Guevarra pointed out, cannot enter into a contract
involving the land they illegally occupy. Guevarra insists that the contract is void.
Guevarra should know that there must be honor even between
squatters. Guevarra freely entered into the Kasunduan. Guevarra cannot now impugn
the Kasunduan after he had benefited from it. The Kasunduan binds Guevarra.
The Kasunduan is not void for purposes of determining who between Pajuyo and
Guevarra has a right to physical possession of the contested
property. The Kasunduan is the undeniable evidence of Guevarras recognition of
Pajuyos better right of physical possession. Guevarra is clearly a possessor in bad
faith. The absence of a contract would not yield a different result, as there would still
be an implied promise to vacate.
Guevarra contends that there is a pernicious evil that is sought to be avoided, and
that is allowing an absentee squatter who (sic) makes (sic) a profit out of his illegal
act.[72] Guevarra bases his argument on the preferential right given to the actual
occupant or caretaker under Proclamation No. 137 on socialized housing.
We are not convinced.
Pajuyo did not profit from his arrangement with Guevarra because Guevarra
stayed in the property without paying any rent. There is also no proof that Pajuyo is a
professional squatter who rents out usurped properties to other squatters.Moreover, it
is for the proper government agency to decide who between Pajuyo and Guevarra
qualifies for socialized housing. The only issue that we are addressing is physical
possession.
Prior possession is not always a condition sine qua non in ejectment.[73] This is
one of the distinctions between forcible entry and unlawful detainer. [74] In forcible entry,
the plaintiff is deprived of physical possession of his land or building by means of force,
intimidation, threat, strategy or stealth. Thus, he must allege and prove prior
possession.[75] But in unlawful detainer, the defendant unlawfully withholds possession
after the expiration or termination of his right to possess under any contract, express or
implied. In such a case, prior physical possession is not required.[76]
Pajuyos withdrawal of his permission to Guevarra terminated
the Kasunduan. Guevarras transient right to possess the property ended as
well. Moreover, it was Pajuyo who was in actual possession of the property because
Guevarra had to seek Pajuyos permission to temporarily hold the property and
Guevarra had to follow the conditions set by Pajuyo in the Kasunduan. Control over the
property still rested with Pajuyo and this is evidence of actual possession.
Pajuyos absence did not affect his actual possession of the disputed property.
Possession in the eyes of the law does not mean that a man has to have his feet on
every square meter of the ground before he is deemed in possession. [77]One may
acquire possession not only by physical occupation, but also by the fact that a thing is
subject to the action of ones will.[78] Actual or physical occupation is not always
necessary.[79]
Ruling on Possession Does not Bind Title to the Land in Dispute
We are aware of our pronouncement in cases where we declared that squatters
and intruders who clandestinely enter into titled government property cannot, by such
act, acquire any legal right to said property. [80] We made this declaration because the
person who had title or who had the right to legal possession over the disputed property
was a party in the ejectment suit and that party instituted the case against squatters or
usurpers.
In this case, the owner of the land, which is the government, is not a party to the
ejectment case. This case is between squatters. Had the government participated in
this case, the courts could have evicted the contending squatters, Pajuyo and
Guevarra.
Since the party that has title or a better right over the property is not impleaded in
this case, we cannot evict on our own the parties. Such a ruling would discourage
squatters from seeking the aid of the courts in settling the issue of physical
possession. Stripping both the plaintiff and the defendant of possession just because
they are squatters would have the same dangerous implications as the application of
the principle of pari delicto. Squatters would then rather settle the issue of physical
possession among themselves than seek relief from the courts if the plaintiff and
defendant in the ejectment case would both stand to lose possession of the disputed
property. This would subvert the policy underlying actions for recovery of possession.
 Since Pajuyo has in his favor priority in time in holding the property, he is entitled
to remain on the property until a person who has title or a better right lawfully ejects
him. Guevarra is certainly not that person. The ruling in this case, however, does not
preclude Pajuyo and Guevarra from introducing evidence and presenting arguments
before the proper administrative agency to establish any right to which they may be
entitled under the law.[81]

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

Attorneys Fees and Rentals

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

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

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

SO ORDERED.