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CREDIT TRANSACTIONS (Atty.

Jazzie Sarona-Lozare) 1
1ST EXAM COVERAGE COMPILATION OF CASES
COMMODATUM
PAJUYO v. CA
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146364

June 3, 2004

COLITO T. PAJUYO, petitioner,


vs.
COURT OF APPEALS and EDDIE GUEVARRA,
respondents.

DECISION

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

CARPIO, J.:
The Case

D) pay the cost of suit.


1

Before us is a petition for review of the 21 June 2000


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

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:

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

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 Resolution9 referring the motion for extension to the
Court of Appeals which has concurrent jurisdiction over the
case. The case presented no special and important matter

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for the Supreme Court to take cognizance of at the first
instance.
On 28 January 1997, the Thirteenth Division of the Court of
Appeals issued a Resolution10 granting the motion for
extension conditioned on the timeliness of the filing of the
motion.
On 27 February 1997, the Court of Appeals ordered Pajuyo
to comment on Guevaras petition for review. On 11 April
1997, Pajuyo filed his Comment.
On 21 June 2000, the Court of Appeals issued its decision
reversing the RTC decision. The dispositive portion of the
decision reads:
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 forumshopping.
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
reconsideration is hereby DENIED. No costs.

motion

for

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

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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.

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.

The Issues
We are not persuaded.
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 socalled 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.

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.

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

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

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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.

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 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.

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 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 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

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disputed lot allow the courts to renounce their jurisdiction
over the case? The Court of Appeals believed so and held
that it would just leave the parties where they are since they
are in pari delicto.
We do not agree with the Court of Appeals.
Ownership or the right to possess arising from ownership is
not at issue in an action for recovery of possession. The
parties cannot present evidence to prove ownership or right
to legal possession except to prove the nature of the
possession when necessary to resolve the issue of physical
possession.36 The same is true when the defendant asserts
the absence of title over the property. The absence of title
over the contested lot is not a ground for the courts to
withhold relief from the parties in an ejectment case.
The only question that the courts must resolve in ejectment
proceedings is - who is entitled to the physical possession of
the premises, that is, to the possession de facto and not to
the possession de jure.37 It does not even matter if a partys
title to the property is questionable,38 or when both parties
intruded into public land and their applications to own the
land have yet to be approved by the proper government
agency.39 Regardless of the actual condition of the title to the
property, the party in peaceable quiet possession shall not
be thrown out by a strong hand, violence or terror.40 Neither
is the unlawful withholding of property allowed. Courts will
always uphold respect for prior possession.
Thus, a party who can prove prior possession can recover
such possession even against the owner himself.41 Whatever
may be the character of his possession, if he has in his favor
prior possession in time, he has the security that entitles him
to remain on the property until a person with a better right
lawfully ejects him.42 To repeat, the only issue that the court
has to settle in an ejectment suit is the right to physical
possession.
In Pitargue v. Sorilla,43 the government owned the land in
dispute. The government did not authorize either the plaintiff
or the defendant in the case of forcible entry case to occupy
the land. The plaintiff had prior possession and had already
introduced improvements on the public land. The plaintiff had
a pending application for the land with the Bureau of Lands
when the defendant ousted him from possession. The
plaintiff filed the action of forcible entry against the
defendant. The government was not a party in the case of
forcible entry.
The defendant questioned the jurisdiction of the courts to
settle the issue of possession because while the application
of the plaintiff was still pending, title remained with the
government, and the Bureau of Public Lands had jurisdiction
over the case. We disagreed with the defendant. We ruled
that courts have jurisdiction to entertain ejectment suits even
before the resolution of the application. The plaintiff, by
priority of his application and of his entry, acquired prior
physical possession over the public land applied for as
against other private claimants. That prior physical

possession enjoys legal protection against other private


claimants because only a court can take away such physical
possession in an ejectment case.
While the Court did not brand the plaintiff and the defendant
in Pitargue44 as squatters, strictly speaking, their entry into
the disputed land was illegal. Both the plaintiff and defendant
entered the public land without the owners permission. Title
to the land remained with the government because it had not
awarded to anyone ownership of the contested public land.
Both the plaintiff and the defendant were in effect squatting
on government property. Yet, we upheld the courts
jurisdiction to resolve the issue of possession even if the
plaintiff and the defendant in the ejectment case did not have
any title over the contested land.
Courts must not abdicate their jurisdiction to resolve the
issue of physical possession because of the public need to
preserve the basic policy behind the summary actions of
forcible entry and unlawful detainer. The underlying
philosophy behind ejectment suits is to prevent breach of the
peace and criminal disorder and to compel the party out of
possession to respect and resort to the law alone to obtain
what he claims is his.45 The party deprived of possession
must not take the law into his own hands.46 Ejectment
proceedings are summary in nature so the authorities can
settle speedily actions to recover possession because of the
overriding need to quell social disturbances.47
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

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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 Code48 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

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1ST EXAM COVERAGE COMPILATION OF CASES
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

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1ST EXAM COVERAGE COMPILATION OF CASES
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.

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1ST EXAM COVERAGE COMPILATION OF CASES
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.

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1ST EXAM COVERAGE COMPILATION OF CASES
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.
PRODUCERS BANK v. CA
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
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 Decision1 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. 100320. 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

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1ST EXAM COVERAGE COMPILATION OF CASES
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:

APPEALED FROM, AS THE FINDINGS OF THE REGIONAL


TRIAL COURT WERE BASED ON A MISAPPREHENSION
OF FACTS;

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

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;

(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

IV.

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 reply12 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

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1ST EXAM COVERAGE COMPILATION OF CASES
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.1a\^/phi1.net
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

CREDIT TRANSACTIONS (Atty. Jazzie Sarona-Lozare) 13


1ST EXAM COVERAGE COMPILATION OF CASES
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.1awphi1.nt
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.

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1ST EXAM COVERAGE COMPILATION OF CASES
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.

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 interests34 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.
MINA v. PASCUAL
Republic of the Philippines
SUPREME COURT
Manila

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

EN BANC
G.R. No. L-8321

October 14, 1913

ALEJANDRA MINA, ET AL., plaintiffs-appellants,


vs.
RUPERTA PASCUAL, ET AL., defendants-appellees.
N. Segundo for appellants.
Iigo Bitanga for appellees.

ARELLANO, C.J.:
Francisco Fontanilla and Andres Fontanilla were brothers.
Francisco Fontanilla acquired during his lifetime, on March
12, 1874, a lot in the center of the town of Laoag, the capital
of the Province of Ilocos Norte, the property having been
awarded to him through its purchase at a public auction held
by the alcalde mayor of that province. The lot has a frontage
of 120 meters and a depth of 15.

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1ST EXAM COVERAGE COMPILATION OF CASES
Andres Fontanilla, with the consent of his brother Francisco,
erected a warehouse on a part of the said lot, embracing 14
meters of its frontage by 11 meters of its depth.
Francisco Fontanilla, the former owner of the lot, being dead,
the herein plaintiffs, Alejandro Mina, et al., were recognized
without discussion as his heirs.
Andres Fontanilla, the former owner of the warehouse, also
having died, the children of Ruperta Pascual were
recognized likes without discussion, though it is not said
how, and consequently are entitled to the said building, or
rather, as Ruperta Pascual herself stated, to only sixsevenths of one-half of it, the other half belonging, as it
appears, to the plaintiffs themselves, and the remaining oneseventh of the first one-half to the children of one of the
plaintiffs, Elena de Villanueva. The fact is that the plaintiffs
and the defendants are virtually, to all appearance, the
owners of the warehouse; while the plaintiffs are
undoubtedly, the owners of the part of the lot occupied by
that building, as well as of the remainder thereof.
This was the state of affairs, when, on May 6, 1909, Ruperta
Pascual, as the guardian of her minor children, the herein
defendants, petitioned the Curt of First Instance of Ilocos
Norte for authorization to sell "the six-sevenths of the onehalf of the warehouse, of 14 by 11 meters, together with its
lot." The plaintiffs that is Alejandra Mina, et al. opposed
the petition of Ruperta Pascual for the reason that the latter
had included therein the lot occupied by the warehouse,
which they claimed was their exclusive property. All this
action was taken in a special proceeding in re guardianship.
The plaintiffs did more than oppose Pascual's petition; they
requested the court, through motion, to decide the question
of the ownership of the lot before it pass upon the petition for
the sale of the warehouse. But the court before determining
the matter of the ownership of the lot occupied by the
warehouse, ordered the sale of this building, saying:

When the judgment became final and executory, a writ of


execution issued and the plaintiffs were given possession of
the lot; but soon thereafter the trial court annulled this
possession for the reason that it affected Cu Joco, who had
not been a party to the suit in which that writ was served.
It was then that the plaintiffs commenced the present action
for the purpose of having the sale of the said lot declared null
and void and of no force and effect.
An agreement was had ad to the facts, the ninth paragraph
of which is as follows:
9. That the herein plaintiffs excepted to the judgment and
appealed therefrom to the Supreme Court which found for
them by holding that they are the owners of the lot in
question, although there existed and still exists a
commodatum by virtue of which the guardianship (meaning
the defendants) had and has the use, and the plaintiffs the
ownership, of the property, with no finding concerning the
decree of the lower court that ordered the sale.
The obvious purport of the cause "although there existed and
still exists a commodatum," etc., appears to be that it is a
part of the decision of the Supreme Court and that, while
finding the plaintiffs to be the owners of the lot, we
recognized in principle the existence of a commodatum
under which the defendants held the lot. Nothing could be
more inexact. Possibly, also, the meaning of that clause is
that, notwithstanding the finding made by the Supreme Court
that the plaintiffs were the owners, these former and the
defendants agree that there existed, and still exists, a
commodatum, etc. But such an agreement would not affect
the truth of the contents of the decision of this court, and the
opinions held by the litigants in regard to this point could
have no bearing whatever on the present decision.

While the trial continues with respect to the ownership of the


lot, the court orders the sale at public auction of the said
warehouse and of the lot on which it is built, with the present
boundaries of the land and condition of the building, at a
price of not less than P2,890 Philippine currency . . . .

Nor did the decree of the lower court that ordered the sale
have the least influence in our previous decision to require
our making any finding in regard thereto, for, with or without
that decree, the Supreme Court had to decide the ownership
of the lot consistently with its titles and not in accordance
with the judicial acts or proceedings had prior to the setting
up of the issue in respect to the ownership of the property
that was the subject of the judicial decree.

So, the warehouse, together with the lot on which it stands,


was sold to Cu Joco, the other defendant in this case, for the
price mentioned.

What is essentially pertinent to the case is the fact that the


defendant agree that the plaintiffs have the ownership, and
they themselves only the use, of the said lot.

The plaintiffs insisted upon a decision of the question of the


ownership of the lot, and the court decided it by holding that
this land belonged to the owner of the warehouse which had
been built thereon thirty years before.

On this premise, the nullity of the sale of the lot is in all


respects quite evident, whatsoever be the manner in which
the sale was effected, whether judicially or extrajudicially.

The plaintiffs appealed and this court reversed the judgment


of the lower court and held that the appellants were the
owners of the lot in question. 1

He who has only the use of a thing cannot validly sell the
thing itself. The effect of the sale being a transfer of the
ownership of the thing, it is evident that he who has only the
mere use of the thing cannot transfer its ownership. The sale
of a thing effected by one who is not its owner is null and
void. The defendants never were the owners of the lot sold.

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1ST EXAM COVERAGE COMPILATION OF CASES
The sale of it by them is necessarily null and void. On cannot
convey to another what he has never had himself.
The returns of the auction contain the following statements:
I, Ruperta Pascual, the guardian of the minors, etc., by virtue
of the authorization conferred upon me on the 31st of July,
1909, by the Court of First Instance of Ilocos Norte,
proceeded with the sale at public auction of the six-sevenths
part of the one-half of the warehouse constructed of rubble
stone, etc.
Whereas I, Ruperta Pascual, the guardian of the minors,
etc., sold at public auction all the land and all the rights title,
interest, and ownership in the said property to Cu Joco, who
was the highest bidder, etc.
Therefore, . . . I cede and deliver forever to the said
purchaser, Cu Joco, his heirs and assigns, all the interest,
ownership and inheritance rights and others that, as the
guardian of the said minors, I have and may have in the said
property, etc.
The purchaser could not acquire anything more than the
interest that might be held by a person to whom realty in
possession of the vendor might be sold, for at a judicial
auction nothing else is disposed of. What the minor children
of Ruperta Pascual had in their possession was the
ownership of the six-sevenths part of one-half of the
warehouse and the use of the lot occupied by his building.
This, and nothing more, could the Chinaman Cu Joco
acquire at that sale: not the ownership of the lot; neither the
other half, nor the remaining one-seventh of the said first
half, of the warehouse. Consequently, the sale made to him
of this one-seventh of one-half and the entire other half of
the building was null and void, and likewise with still more
reason the sale of the lot the building occupies.
The purchaser could and should have known what it was
that was offered for sale and what it was that he purchased.
There is nothing that can justify the acquisition by the
purchaser of the warehouse of the ownership of the lot that
this building occupies, since the minors represented by
Ruperta Pascual never were the owners of the said lot, nor
were they ever considered to be such.
The trial court, in the judgment rendered, held that there
were no grounds for the requested annulment of the sale,
and that the plaintiffs were entitled to the P600 deposited
with the clerk of the court as the value of the lot in question.
The defendants, Ruperta Pascual and the Chinaman Cu
Joco, were absolved from the complaint, without express
finding as to costs.
The plaintiffs cannot be obliged to acquiesce in or allow the
sale made and be compelled to accept the price set on the
lot by expert appraisers, not even though the plaintiffs be
considered as coowner of the warehouse. It would be much
indeed that, on the ground of coownership, they should have
to abide by and tolerate the sale of the said building, which

point this court does not decide as it is not a question


submitted to us for decision, but, as regards the sale of the
lot, it is in all respects impossible to hold that the plaintiffs
must abide by it and tolerate, it, and this conclusion is based
on the fact that they did not give their consent (art. 1261,
Civil Code), and only the contracting parties who have given
it are obliged to comply (art. 1091, idem).
The sole purpose of the action in the beginning was to obtain
an annulment of the sale of the lot; but subsequently the
plaintiffs, through motion, asked for an amendment by their
complaint in the sense that the action should be deemed to
be one for the recovery of possession of a lot and for the
annulment of its sale. The plaintiff's petition was opposed by
the defendant's attorney, but was allowed by the court;
therefore the complaint seeks, after the judicial annulment of
the sale of the lot, to have the defendants sentenced
immediately to deliver the same to the plaintiffs.
Such a finding appears to be in harmony with the decision
rendered by the Supreme Court in previous suit, wherein it
was held that the ownership of the lot lay in the plaintiffs, and
for this reason steps were taken to give possession thereof
to the defendants; but, as the purchaser Cu Joco was not a
party to that suit, the present action is strictly one for recover
against Cu Joco to compel him, once the sale has been
annulled, to deliver the lot to its lawful owners, the plaintiffs.
As respects this action for recovery, this Supreme Court
finds:
1. That it is a fact admitted by the litigating parties, both in
this and in the previous suit, that Andres Fontanilla, the
defendants' predecessor in interest, erected the warehouse
on the lot, some thirty years ago, with the explicit consent of
his brother Francisco Fontanilla, the plaintiff's predecessor in
interest.
2. That it also appears to be an admitted fact that the
plaintiffs and the defendants are the coowners of the
warehouse.
3. That it is a fact explicitly admitted in the agreement, that
neither Andres Fontanilla nor his successors paid any
consideration or price whatever for the use of the lot
occupied by the said building; whence it is, perhaps, that
both parties have denominated that use a commodatum.
Upon the premise of these facts, or even merely upon that of
the first of them, the sentencing of the defendants to deliver
the lot to the plaintiffs does not follow as a necessary
corollary of the judicial declaration of ownership made in the
previous suit, nor of that of the nullity of the sale of the lot,
made in the present case.
The defendants do not hold lawful possession of the lot in
question.1awphil.net
But, although both litigating parties may have agreed in their
idea of the commodatum, on account of its not being, as

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1ST EXAM COVERAGE COMPILATION OF CASES
indeed it is not, a question of fact but of law, yet that
denomination given by them to the use of the lot granted by
Francisco Fontanilla to his brother, Andres Fontanilla, is not
acceptable. Contracts are not to be interpreted in conformity
with the name that the parties thereto agree to give them, but
must be construed, duly considering their constitutive
elements, as they are defined and denominated by law.

The judgment appealed from is reversed and the sale of the


lot in question is held to be null and void and of no force or
effect. No special finding is made as to the costs of both
instances.
DE LOS SANTOS v. JARRA
Republic of the Philippines
SUPREME COURT
Manila

By the contract of loan, one of the parties delivers to the


other, either anything not perishable, in order that the latter
may use it during the certain period and return it to the
former, in which case it is called commodatum . . . (art. 1740,
Civil Code).
It is, therefore, an essential feature of the commodatum that
the use of the thing belonging to another shall for a certain
period. Francisco Fontanilla did not fix any definite period or
time during which Andres Fontanilla could have the use of
the lot whereon the latter was to erect a stone warehouse of
considerable value, and so it is that for the past thirty years
of the lot has been used by both Andres and his successors
in interest. The present contention of the plaintiffs that Cu
Joco, now in possession of the lot, should pay rent for it at
the rate of P5 a month, would destroy the theory of the
commodatum sustained by them, since, according to the
second paragraph of the aforecited article 1740,
"commodatum is essentially gratuitous," and, if what the
plaintiffs themselves aver on page 7 of their brief is to be
believed, it never entered Francisco's mind to limit the period
during which his brother Andres was to have the use of the
lot, because he expected that the warehouse would
eventually fall into the hands of his son, Fructuoso
Fontanilla, called the adopted son of Andres, which did not
come to pass for the reason that Fructuoso died before his
uncle Andres. With that expectation in view, it appears more
likely that Francisco intended to allow his brother Andres a
surface right; but this right supposes the payment of an
annual rent, and Andres had the gratuitous use of the lot.
Hence, as the facts aforestated only show that a building
was erected on another's ground, the question should be
decided in accordance with the statutes that, thirty years
ago, governed accessions to real estate, and which were
Laws 41 and 42, title 28, of the third Partida, nearly identical
with the provisions of articles 361 and 362 of the Civil Code.
So, then, pursuant to article 361, the owner of the land on
which a building is erected in good faith has a right to
appropriate such edifice to himself, after payment of the
indemnity prescribed in articles 453 and 454, or to oblige the
builder to pay him the value of the land. Such, and no other,
is the right to which the plaintiff are entitled.
For the foregoing reasons, it is only necessary to annul the
sale of the said lot which was made by Ruperta Pascual, in
representation of her minor children, to Cu Joco, and to
maintain the latter in the use of the lot until the plaintiffs shall
choose one or the other of the two rights granted them by
article 361 of the Civil Code.1awphil.net

EN BANC
G.R. No. L-4150

February 10, 1910

FELIX DE LOS SANTOS, plaintiff-appelle,


vs.
AGUSTINA JARRA, administratrix of the estate of
Magdaleno Jimenea, deceased, defendant-appellant.
Matias Hilado, for appellant.
Jose Felix Martinez, for appellee.

TORRES, J.:
On the 1st of September, 1906, Felix de los Santos brought
suit against Agustina Jarra, the administratrix of the estate of
Magdaleno Jimenea, alleging that in the latter part of 1901
Jimenea borrowed and obtained from the plaintiff ten firstclass carabaos, to be used at the animal-power mill of his
hacienda during the season of 1901-2, without recompense
or remuneration whatever for the use thereof, under the sole
condition that they should be returned to the owner as soon
as the work at the mill was terminated; that Magdaleno
Jimenea, however, did not return the carabaos,
notwithstanding the fact that the plaintiff claimed their return
after the work at the mill was finished; that Magdaleno
Jimenea died on the 28th of October, 1904, and the
defendant herein was appointed by the Court of First
Instance of Occidental Negros administratrix of his estate
and she took over the administration of the same and is still
performing her duties as such administratrix; that the plaintiff
presented his claim to the commissioners of the estate of
Jimenea, within the legal term, for the return of the said ten
carabaos, but the said commissioners rejected his claim as
appears in their report; therefore, the plaintiff prayed that
judgment be entered against the defendant as administratrix
of the estate of the deceased, ordering her to return the ten
first-class carabaos loaned to the late Jimenea, or their
present value, and to pay the costs.
The defendant was duly summoned, and on the 25th of
September, 1906, she demurred in writing to the complaint
on the ground that it was vague; but on the 2d of October of
the same year, in answer to the complaint, she said that it
was true that the late Magdaleno Jimenea asked the plaintiff
to loan him ten carabaos, but that he only obtained three

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1ST EXAM COVERAGE COMPILATION OF CASES
second-class animals, which were afterwards transferred by
sale by the plaintiff to the said Jimenea; that she denied the
allegations contained in paragraph 3 of the complaint; for all
of which she asked the court to absolve her of the complaint
with the cost against the plaintiff.
By a writing dated the 11th of December, 1906, Attorney
Jose Felix Martinez notified the defendant and her counsel,
Matias Hilado, that he had made an agreement with the
plaintiff to the effect that the latter would not compromise the
controversy without his consent, and that as fees for his
professional services he was to receive one half of the
amount allowed in the judgment if the same were entered in
favor of the plaintiff.
The case came up for trial, evidence was adduced by both
parties, and either exhibits were made of record. On the 10th
of January, 1907, the court below entered judgment
sentencing Agustina Jarra, as administratrix of the estate of
Magdaleno Jimenea, to return to the plaintiff, Felix de los
Santos, the remaining six second and third class carabaos,
or the value thereof at the rate of P120 each, or a total of
P720 with the costs.
Counsel for the defendant excepted to the foregoing
judgment, and, by a writing dated January 19, moved for
anew trial on the ground that the findings of fact were openly
and manifestly contrary to the weight of the evidence. The
motion was overruled, the defendant duly excepted, and in
due course submitted the corresponding bill of exceptions,
which was approved and submitted to this court.
The defendant has admitted that Magdaleno Jimenea asked
the plaintiff for the loan of ten carabaos which are now
claimed by the latter, as shown by two letters addressed by
the said Jimenea to Felix de los Santos; but in her answer
the said defendant alleged that the late Jimenea only
obtained three second-class carabaos, which were
subsequently sold to him by the owner, Santos; therefore, in
order to decide this litigation it is indispensable that proof be
forthcoming that Jimenea only received three carabaos from
his son-in-law Santos, and that they were sold by the latter to
him.

affirming it satisfactory; for said reason it can not be


considered that Jimenea only received three carabaos on
loan from his son-in-law, and that he afterwards kept them
definitely by virtue of the purchase.
By the laws in force the transfer of large cattle was and is still
made by means of official documents issued by the local
authorities; these documents constitute the title of ownership
of the carabao or horse so acquired. Furthermore, not only
should the purchaser be provided with a new certificate or
credential, a document which has not been produced in
evidence by the defendant, nor has the loss of the same
been shown in the case, but the old documents ought to be
on file in the municipality, or they should have been delivered
to the new purchaser, and in the case at bar neither did the
defendant present the old credential on which should be
stated the name of the previous owner of each of the three
carabaos said to have been sold by the plaintiff.
From the foregoing it may be logically inferred that the
carabaos loaned or given on commodatum to the now
deceased Magdaleno Jimenea were ten in number; that they,
or at any rate the six surviving ones, have not been returned
to the owner thereof, Felix de los Santos, and that it is not
true that the latter sold to the former three carabaos that the
purchaser was already using; therefore, as the said six
carabaos were not the property of the deceased nor of any
of his descendants, it is the duty of the administratrix of the
estate to return them or indemnify the owner for their value.
The Civil Code, in dealing with loans in general, from which
generic denomination the specific one of commodatum is
derived, establishes prescriptions in relation to the lastmentioned contract by the following articles:
ART. 1740. By the contract of loan, one of the parties
delivers to the other, either anything not perishable, in order
that the latter may use it during a certain period and return it
to the former, in which case it is called commodatum, or
money or any other perishable thing, under the condition to
return an equal amount of the same kind and quality, in
which case it is merely called a loan.
Commodatum is essentially gratuitous.

The record discloses that it has been fully proven from the
testimony of a sufficient number of witnesses that the
plaintiff, Santos, sent in charge of various persons the ten
carabaos requested by his father-in-law, Magdaleno
Jimenea, in the two letters produced at the trial by the
plaintiff, and that Jimenea received them in the presence of
some of said persons, one being a brother of said Jimenea,
who saw the animals arrive at the hacienda where it was
proposed to employ them. Four died of rinderpest, and it is
for this reason that the judgment appealed from only deals
with six surviving carabaos.
The alleged purchase of three carabaos by Jimenea from his
son-in-law Santos is not evidenced by any trustworthy
documents such as those of transfer, nor were the
declarations of the witnesses presented by the defendant

A simple loan may be gratuitous, or made under a stipulation


to pay interest.
ART. 1741. The bailee acquires retains the ownership of the
thing loaned. The bailee acquires the use thereof, but not its
fruits; if any compensation is involved, to be paid by the
person requiring the use, the agreement ceases to be a
commodatum.
ART. 1742. The obligations and rights which arise from the
commodatum pass to the heirs of both contracting parties,
unless the loan has been in consideration for the person of
the bailee, in which case his heirs shall not have the right to
continue using the thing loaned.

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The carabaos delivered to be used not being returned by the
defendant upon demand, there is no doubt that she is under
obligation to indemnify the owner thereof by paying him their
value.
Article 1101 of said code reads:

For the reasons above set forth, by which the errors


assigned to the judgment appealed from have been refuted,
and considering that the same is in accordance with the law
and the merits of the case, it is our opinion that it should be
affirmed and we do hereby affirm it with the costs against the
appellant. So ordered.
RP v. BAGTAS

Those who in fulfilling their obligations are guilty of fraud,


negligence, or delay, and those who in any manner
whatsoever act in contravention of the stipulations of the
same, shall be subjected to indemnify for the losses and
damages caused thereby.
The obligation of the bailee or of his successors to return
either the thing loaned or its value, is sustained by the
supreme tribunal of Sapin. In its decision of March 21, 1895,
it sets out with precision the legal doctrine touching
commodatum as follows:
Although it is true that in a contract of commodatum the
bailor retains the ownership of the thing loaned, and at the
expiration of the period, or after the use for which it was
loaned has been accomplished, it is the imperative duty of
the bailee to return the thing itself to its owner, or to pay him
damages if through the fault of the bailee the thing should
have been lost or injured, it is clear that where public
securities are involved, the trial court, in deferring to the
claim of the bailor that the amount loaned be returned him by
the bailee in bonds of the same class as those which
constituted the contract, thereby properly applies law 9 of
title 11 of partida 5.
With regard to the third assignment of error, based on the
fact that the plaintiff Santos had not appealed from the
decision of the commissioners rejecting his claim for the
recovery of his carabaos, it is sufficient to estate that we are
not dealing with a claim for the payment of a certain sum, the
collection of a debt from the estate, or payment for losses
and damages (sec. 119, Code of Civil Procedure), but with
the exclusion from the inventory of the property of the late
Jimenea, or from his capital, of six carabaos which did not
belong to him, and which formed no part of the inheritance.
The demand for the exclusion of the said carabaos
belonging to a third party and which did not form part of the
property of the deceased, must be the subject of a direct
decision of the court in an ordinary action, wherein the right
of the third party to the property which he seeks to have
excluded from the inheritance and the right of the deceased
has been discussed, and rendered in view of the result of the
evidence adduced by the administrator of the estate and of
the claimant, since it is so provided by the second part of
section 699 and by section 703 of the Code of Civil
Procedure; the refusal of the commissioners before whom
the plaintiff unnecessarily appeared can not affect nor reduce
the unquestionable right of ownership of the latter, inasmuch
as there is no law nor principle of justice authorizing the
successors of the late Jimenea to enrich themselves at the
cost and to the prejudice of Felix de los Santos.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
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

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1ST EXAM COVERAGE COMPILATION OF CASES
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 exparte 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

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1ST EXAM COVERAGE COMPILATION OF CASES
substituted for the deceased, within a period of thirty (30)
days, or within such time as may be granted. . . .

Republic of the Philippines


SUPREME COURT
Manila

and after the defendant's death on 23 October 1951 his


counsel failed to comply with section 16 of Rule 3 which
provides that

FIRST DIVISION
G.R. No. 80294

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.
CATHOLIC VICAR v. CA

March 23, 1990

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. Sabino
Padilla, Jr. collaborating counsel for petitioner. Jaime G. de
Leon for the Heirs of E. Octaviano. Fernando P. Cabato for
the Heirs of Juan Valdez.

GANCAYCO, J.:
Before the Court are a motion for reconsideration and a
supplemental motion for reconsideration filed by petitioner
relating to the decision of the Court dated September 21,
1988. The comment and opposition thereto have been filed
by the private respondents and a reply was filed by
petitioner.
Petitioner argues that the findings of facts of the Court of
Appeals in CA-G.R. No. 38830-R are: (1) contrary to the law;
(2) contrary to the findings of the trial court; (3) contrary to
the findings of the Court of Appeals in CA-G.R. No. 08890-R;
(4) contrary to the admissions of the parties; and (5) based
on a clear misapprehension of historical and ecclesiastical
facts made of judicial notice, which are well within the
exceptions consistently adhered to by this Court as in
Republic vs. Court of Appeals. 1
The Court finds no merit in this contention. The said decision
of the Court of Appeals dated May 4, 1977 in CA-G.R. No.
38830-R was already elevated to this Court by petitioner
through a petition for review in G.R. No. L-46832 entitled
Catholic Vicar Apostolic of the Mountain Province vs. Court
of Appeals and Heirs of Egmidio Octaviano, while the heirs
of Juan Valdez and Pacita Valdez also filed a petition for
review of the same decision in this Court docketed as G.R.
No. L-46872 entitled Heirs of Juan Valdez and Pacita Valdez
vs. CA, et al. In a minute resolution dated January 13, 1978,
this Court denied both petitions for lack of merit.
It is in paid petition for review wherein the petitioner should
have questioned the findings of facts of the appellate court in
CA-G.R. No. 38830-R but since said petition had been
denied outright, the aforestated decision of the appellate
court which has long become final and executory, is res
judicata as between the parties and the findings of facts
therein are conclusive. Thus, the factual findings in said final

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judgment cannot be reviewed anew in the present
proceedings.
The relevant question that should now be asked is,
considering the aforestated decision of the appellate court
and guided by the findings of facts therein, who is entitled to
the possession of the lots in question? Who owns these lots?
CA-G.R. No. 38830-R was a land registration case where
petitioner and private respondents were asking for
confirmation of their alleged imperfect titles to the lots in
question under Section 49 (b) of the Public Land Act. 2
In the said decision, the appellate court found that the
petitioner was not entitled to confirmation of its imperfect title
to Lots 2 and 3. In separate motions for reconsideration filed
by private respondents Heirs of Octaviano and Heirs of Juan
Valdez relating to the same decision, they also asked that
said two lots be registered in their names. On August 12,
1977, the Court of Appeals denied both motions. Effectively,
therefore, in the said decision the appellate court ruled that
neither the petitioner nor the private respondents are entitled
to the confirmation of imperfect title over said two lots. That
is now res judicata.

From the foregoing, it appears that the petitioner was in


possession of the said property as borrower in commodatum
from private respondents since 1906 but in 1951 petitioner
repudiated the trust when it declared the property for tax
purposes under its name. When it filed its application for
registration of the said property in 1962, petitioner had been
in adverse possession of the same for at least 11 years.
Article 555 of the Civil Code provides as follows:
Art. 555. A possessor may lose his possession:
(1) By the abandonment of the thing;
(2) By an assignment made to another either by onerous or
gratuitous title;
(3) By the destruction or total loss of the thing or because it
goes out of commerce;
(4) By the possession of another, subject to the provisions of
Article 537, if the new possession has lasted longer than one
year. But the real right of possession is not lost till after the
lapse of ten years. (460a) (Emphasis supplied.)

What is the nature of these two lots? Pursuant to the said


decision in CA-G.R. No. 38830-R, the two lots in question
remained part of the public lands. This is the only logical
conclusion when the appellate court found that neither the
petitioner nor private respondents are entitled to confirmation
of imperfect title over said lots.

From the foregoing provision of the law, particularly


paragraph 4 thereof, it is clear that the real right of
possession of private respondents over the property was lost
or no longer exists after the lapse of 10 years that petitioner
had been in adverse possession thereof. Thus, the action for
recover of possession of said property filed by private
respondents against petitioner must fail.

Hence, the Court finds the contention of petitioner to be well


taken in that the trial court and the appellate court have no
lawful basis in ordering petitioner to return and surrender
possession of said lots to private respondents. Said property
being a public land its disposition is subject to the provision
of the Public Land Act, as amended. 3

The Court, therefore, finds that the trial court and the Court
of Appeals erred in declaring the private respondents to be
entitled to the possession thereof. Much less can they
pretend to be owners thereof. Said lots are part of the public
domain.

The present actions that were instituted in the Regional Trial


Court by private respondents are actions for recovery of
possession (accion publiciana) and not for recovery of
ownership (accion reivindicatoria).
In the aforestated decision of the appellate court in CA-G.R.
No. 38830-R, the following are among the findings of facts:
9th. The totality of foregoing together with evidence of
oppositors must convince this Court that as to lots 2 and 3, it
was oppositors who were possessors under bona fide claim
of ownership thru their predecessors since around 1906; and
that appellee came in only in the concept of a borrower in
commodatum, but that appellee took it upon itself to claim
and repudiate the trust sometime in 1951, and since from
that time at least, possession of oppositors had been
interrupted, neither can they claim registration under Sec.
48, par. b of the Public Land Law, Com. Act 141, as
amended by R.A. 1942; this must be the final result, and
there would be no more need to rule on the errors impugning
the personality of appellee to secure registration; 4

WHEREFORE, the motion for reconsideration is GRANTED


and the decision of this Court dated September 21, 1988 is
hereby set aside and another judgment is hereby rendered
reversing and setting aside the decision of the appellate
court in CA-G.R. Nos. 05148-49 dated August 31, 1987 and
dismissing the complaints for recovery of possession,
without pronouncement as to costs.
SO ORDERED.

QUINTOS v. BECK
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

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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

CREDIT TRANSACTIONS (Atty. Jazzie Sarona-Lozare) 24


1ST EXAM COVERAGE COMPILATION OF CASES
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.