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did not object, he could not return the animals nor pay their value and prayed for thedismissal 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 bothsums 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 courtgranted on 18 October and issued on 11 November 1958. On 2 December 1958 granted anex-parte motion filed by the plaintiff on November 1958 for the appointment of a specialsheriff to serve the writ outside Manila. Of this order appointing a special sheriff, on 6December 1958, Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtaswho died on 23 October 1951 and as administratrix of his estate, was notified. On 7January 1959 she file a motion alleging that on 26 June 1952 the two bull Sindhi andBhagnari 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 onHacienda Felicidad Intal, and praying that the writ of execution be quashed and that a writof 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 Courtdenied her motion. Hence, this appeal certified by the Court of Appeals to this Court asstated at the beginning of this opinion.

It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the latedefendant, returned the Sindhi and Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station, Bureau of Animal Industry, Bayombong, Nueva Vizcaya, as evidenced bya 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 whichalready had been returned to and received by the appellee.

The appellant contends that the Sahiniwal bull was accidentally killed during a raid by theHuk 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 sheis relieved from the duty of returning the bull or paying its value to the appellee. Thecontention 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 May1949, 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 contendsthat the contract was commodatum and that, for that reason, as the appellee retainedownership or title to the bull it should suffer its loss due to force majeure. A contractof 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 thelessee would be subject to the responsibilities of a possessor in bad faith, because she hadcontinued possession of the bull after the expiry of the contract. And even if the contract





quoted rule, and there was no reason for such failure to notify, because the attorney whoappeared for the defendant was the same who represented the administratrix in the specialproceedings instituted for the administration and settlement of his estate. The appellee or itsattorney 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 requiredby the rule.

As the appellant already had returned the two bulls to the appellee, the estate of the latedefendant is only liable for the sum of P859.63, the value of the bull which has not beenreturned 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 1959to 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 deceasedJose 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, theadministratrix appointed by the court.

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

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

Footnotes

1 Article 1933 of the Civil Code.



SECOND DIVISION

G.R. No. L-46145 November 26, 1986

REPUBLIC OF THE PHILIPPINES (BUREAU OF

LANDS), petitioner,

-versus-

THE HON. COURT OF APPEALS, HEIRS OF DOMINGO

P. BALOY, represented by RICARDO BALOY, ET

AL., respondents.

Pelaez, Jalondoni, Adriano and Associates for respondents.

PARAS, J.:p

This case originally emanated from a decision of the then Court

of First Instance of Zambales in LRC Case No. 11-0, LRC

Record No. N-29355, denying respondents' application for registration. From said order of denial the applicants, heirs of

Domingo Baloy, represented by Ricardo P. Baloy, (herein

private respondents) interposed on appeal to the Court of

Appeals which was docketed as CA-G.R. No. 52039-R. The

appellate court, thru its Fifth Division with the Hon. Justice

Magno Gatmaitan as ponente, rendered a decision dated

February 3, 1977 reversing the decision appealed from and thusapproving the application for registration. Oppositors

(petitioners herein) filed their Motion for Reconsideration

alleging among other things that applicants' possessory

information title can no longer be invoked and that they were



not able to prove a registerable title over the land. Said Motion

for Reconsideration was denied, hence this petition for review

on certiorari.

Applicants' claim is anchored on their possessory informationtitle (Exhibit F which had been translated in Exhibit F-1)

coupled with their continuous, adverse and public possession

over the land in question. An examination of the possessory

information title shows that the description and the area of the

land stated therein substantially coincides with the land applied

for and that said possessory information title had been regularly

issued having been acquired by applicants' predecessor,Domingo Baloy, under the provisions of the Spanish Mortgage

Law. Applicants presented their tax declaration on said lands on

April 8, 1965.

The Director of Lands opposed the registration alleging that this

land had become public land thru the operation of Act 627 of the

Philippine Commission. On November 26, 1902 pursuant to the

executive order of the President of the U.S., the area wasdeclared within the U.S. Naval Reservation. Under Act 627 as

amended by Act 1138, a period was fixed within which persons

affected thereby could file their application, (that is within 6

months from July 8, 1905) otherwise "the said lands or interest

therein will be conclusively adjudged to be public lands and all

claims on the part of private individuals for such lands or

interests therein not to presented will be forever barred."Petitioner argues that since Domingo Baloy failed to file his

claim within the prescribed period, the land had become

irrevocably public and could not be the subject of a valid

registration for private ownership.



Considering the foregoing facts respondents Court of Appeals

ruled as follows:

... perhaps, the consequence was that upon failure of

Domingo Baloy to have filed his application withinthat period the land had become irrevocably public;

but perhaps also, for the reason that warning was from

the Clerk of the Court of Land Registration, named

J.R. Wilson and there has not been presented a formal

order or decision of the said Court of Land

Registration so declaring the land public because of

that failure, it can with plausibility be said that after all, there was no judicial declaration to that effect, it is

true that the U.S. Navy did occupy it apparently for

some time, as a recreation area, as this Court

understands from the communication of the

Department of Foreign Affairs to the U.S. Embassy

exhibited in the record, but the very tenor of the

communication apparently seeks to justify the title of herein applicants, in other words, what this Court has

taken from the occupation by the U.S. Navy is that

during the interim, the title of applicants was in a state

of suspended animation so to speak but it had not died

either; and the fact being that this land was really

originally private from and after the issuance and

inscription of the possessory information Exh. F

during the Spanish times, it would be most difficult tosustain position of Director of Lands that it was land

of no private owner; open to public disposition, and

over which he has control; and since immediately after

U.S. Navy had abandoned the area, applicant came in



and asserted title once again, only to be troubled by

first Crispiniano Blanco who however in due time,

quitclaimed in favor of applicants, and then by private

oppositors now, apparently originally tenants of Blanco, but that entry of private oppositors sought to

be given color of ownership when they sought to and

did file tax declaration in 1965, should not prejudice

the original rights of applicants thru their possessory

information secured regularly so long ago, the

conclusion must have to be that after all, applicants

had succeeded in bringing themselves within the

provisions of Sec. 19 of Act 496, the land should beregistered in their favor;

IN VIEW WHEREOF, this Court is constrained to

reverse, as it now reverses, judgment appealed from

the application is approved, and once this decision

shall have become final, if ever it would be, let decree

issue in favor of applicants with the personalcircumstances outlined in the application, costs against

private oppositors.

Petitioner now comes to Us with the following:

ASSIGNMENT OF ERRORS:

1. Respondent court erred in holding that to bar private

respondents from asserting any right under their possessory information title there is need for a court

order to that effect.



2. Respondent court erred in not holding that private

respondents' rights by virtue of their possessory

information title was lost by prescription.

3. Respondent court erred in concluding thatapplicants have registerable title.

A cursory reading of Sec. 3, Act 627 reveals that several steps

are to be followed before any affected land can "be conclusively

adjudged to be public land ." Sec. 3, Act 627 reads as follows:

SEC. 3. Immediately upon receipt of the notice from

the civil Governor in the preceeding sectionmentioned it shall be the duty of the judge of the Court

of Land Registration to issue a notice, stating that the

lands within the limits aforesaid have been reserved

for military purposes, and announced and declared to

be military reservations, and that claims for all private

lands, buildings, and interests therein, within the limits

aforesaid, must be presented for registration under theLand Registration Act within six calendar months

from the date of issuing the notice, and that all lands,

buildings, and interests therein within the limits

aforesaid not so presented within the time therein

limited will be conclusively adjudged to be public

lands and all claims on the part of private individuals

for such lands, buildings, or an interest therein not so

presented will be forever barred. The clerk of the

Court of Land Registration shall immediately upon the

issuing of such notice by the judge cause the same to

be published once a week for three successive weeks

in two newspapers, one of which newspapers shall be



in the English Language, and one in the Spanish

language in the city or province where the land lies, if

there be no such Spanish or English newspapers

having a general circulation in the city or provincewherein the land lies, then it shall be a sufficient

compliance with this section if the notice be published

as herein provided, in a daily newspaper in the

Spanish language and one in the English language, in

the City of Manila, having a general circulation. The

clerk shall also cause a duly attested copy of the notice

in the Spanish language to be posted in conspicuous

place at each angle formed by the lines of the limits of the land reserved. The clerk shall also issue and cause

to be personally served the notice in the Spanish

language upon every person living upon or in visible

possession of any part of the military reservation. If

the person in possession is the head of the family

living upon the hand, it shall be sufficient to serve the

notice upon him, and if he is absent it shall besufficient to leave a copy at his usual place of

residence. The clerk shall certify the manner in which

the notices have been published, posted, and served,

and his certificate shall be conclusive proof of such

publication, posting, and service, but the court shall

have the power to cause such further notice to be

given as in its opinion may be necessary.

Clearly under said provisions, private land could be deemed to

have become public land only by virtue of a judicial declaration

after due notice and hearing. It runs contrary therefore to the

contention of petitioners that failure to present claims set forth



under Sec. 2 of Act 627 made the land ipso facto public without

any deed of judicial pronouncement. Petitioner in making such

declaration relied on Sec. 4 of Act 627 alone. But in construing a

statute the entire provisions of the law must be considered inorder to establish the correct interpretation as intended by the

law-making body. Act 627 by its terms is not self-executory and

requires implementation by the Court of Land Registration. Act

627, to the extent that it creates a forfeiture, is a penal statute in

derogation of private rights, so it must be strictly construed so as

to safeguard private respondents' rights. Significantly, petitioner

does not even allege the existence of any judgment of the Land

Registration court with respect to the land in question. Without a judgment or order declaring the land to be public, its private

character and the possessory information title over it must be

respected. Since no such order has been rendered by the Land

Registration Court it necessarily follows that it never became

public land thru the operation of Act 627. To assume otherwise

is to deprive private respondents of their property without due

process of law. In fact it can be presumed that the noticerequired by law to be given by publication and by personal

service did not include the name of Domingo Baloy and the

subject land, and hence he and his lane were never brought

within the operation of Act 627 as amended. The procedure laid

down in Sec. 3 is a requirement of due process. "Due process

requires that the statutes which under it is attempted to deprive a

citizen of private property without or against his consent must,

as in expropriation cases, be strictly complied with, because

such statutes are in derogation of general rights." (Arriete vs.

Director of Public Works, 58 Phil. 507, 508, 511).



We also find with favor private respondents' views that court

judgments are not to be presumed. It would be absurd to speak

of a judgment by presumption. If it could be contended that such

a judgment may be presumed, it could equally be contended thatapplicants' predecessor Domingo Baloy presumably seasonably

filed a claim, in accordance with the legal presumption that a

person takes ordinary care of his concerns, and that a judgment

in his favor was rendered.

The finding of respondent court that during the interim of 57

years from November 26, 1902 to December 17, 1959 (when the

U.S. Navy possessed the area) the possessory rights of Baloy or heirs were merely suspended and not lost by prescription, is

supported by Exhibit "U," a communication or letter No. 1108-

63, dated June 24, 1963, which contains an official statement of

the position of the Republic of the Philippines with regard to the

status of the land in question. Said letter recognizes the fact that

Domingo Baloy and/or his heirs have been in continuous

possession of said land since 1894 as attested by an"Informacion Possessoria" Title, which was granted by the

Spanish Government. Hence, the disputed property is private

land and this possession was interrupted only by the occupation

of the land by the U.S. Navy in 1945 for recreational purposes.

The U.S. Navy eventually abandoned the premises. The heirs of

the late Domingo P. Baloy, are now in actual possession, and

this has been so since the abandonment by the U.S. Navy. A

new recreation area is now being used by the U.S. Navy personnel and this place is remote from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept

of owner. It partakes of the character of acommodatum. It cannot



therefore militate against the title of Domingo Baloy and his

successors-in-interest. One's ownership of a thing may be lost by

prescription by reason of another's possession if such possession

be under claim of ownership, not where the possession is onlyintended to be transient, as in the case of the U.S. Navy's

occupation of the land concerned, in which case the owner is not

divested of his title, although it cannot be exercised in the

meantime.

WHEREFORE, premises considered, finding no merit in the

petition the appealed decision is hereby AFFIRMED.

SO ORDERED.

Feria (Chairman), Alampay and Feliciano, * JJ., concur.

Gutierrez, Jr., J., concurs in the results.

Fernan J., took no part.

Endnotes

* Feliciano was designated in lieu of J. Fernan.



EN BANC

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 furniturewhich she lent him for his use. She appealed from the judgment of the Court of FirstInstance of Manila which ordered that the defendant return to her the three has heaters andthe four electric lamps found in the possession of the Sheriff of said city, that she call for theother furniture from the said sheriff of Manila at her own expense, and that the fees whichthe 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 onM. 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 tothe 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 vacatethe 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 housewhere 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 theplaintiff informing her that he could not give up the three gas heaters and the four electriclamps because he would use them until the 15th of the same month when the lease in dueto expire. The plaintiff refused to get the furniture in view of the fact that the defendant haddeclined to make delivery of all of them. On November 15th, before vacating thehouse, the defendant deposited with the Sheriff all the furniture belonging to the plaintiff andthey are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in thecustody of the said sheriff.

In their seven assigned errors the plaintiffs contend that the trial court incorrectlyapplied the law: in holding that they violated the contract by not calling for all the furnitureon 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 holdingthat they should get all the furniture from the Sheriff at their expenses; in ordering them topay-half of the expenses claimed by the Sheriff for the deposit of the furniture; in ruling thatboth parties should pay their respective legal expenses or the costs; and in denying paytheir respective legal expenses or the costs; and in denying the motions for reconsiderationand new trial. To dispose of the case, it is only necessary to decide whether the defendantcomplied with his obligation to return the furniture upon the plaintiff's demand; whether thelatter 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 thefurniture to the plaintiff, upon the latters demand (clause 7 of the contract, Exhibit A; articles1740, paragraph 1, and 1741 of the Civil Code). The obligation voluntarily assumed by thedefendant to return the furniture upon the plaintiff's demand, means that he should return allof 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 hisbenefit the three gas heaters and the four eletric lamps. The provisions of article 1169 of theCivil 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 withher 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 expensesoccasioned 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 acceptthe offer to return the furniture, because the defendant wanted to retain the three gasheaters and the four electric lamps.

As to the value of the furniture, we do not believe that the plaintiff is entitled to thepayment thereof by the defendant in case of his inability to return some of the furniturebecause under paragraph 6 of the stipulation of facts, the defendant has neither agreed tonor 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 throughevidence which the parties may desire to present.

The costs in both instances should be borne by the defendant because the plaintiff isthe prevailing party (section 487 of the Code of Civil Procedure). The defendant was theone who breached the contract of commodatum, and without any reason he refused to

return and deliver all the furniture upon the plaintiff's demand. In these circumstances, it is just and equitable that he pay the legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed.

The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff, in the residence to return and deliver to the plaintiff, in the residence or house of the latter, all the furniture described in paragraph 3 of the stipulation of factsExhibit 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 paythe costs in both instances. So ordered.

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



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, theadministratrix of the estate of Magdaleno Jimenea, alleging that in the latter part of 1901Jimenea borrowed and obtained from the plaintiff ten first-class carabaos, to be used at theanimal-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 bereturned to the owner as soon as the work at the mill was terminated; that MagdalenoJimenea, 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 onthe 28th of October, 1904, and the defendant herein was appointed by the Court of FirstInstance of Occidental Negros administratrix of his estate and she took over theadministration of the same and is still performing her duties as such administratrix; that theplaintiff 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 claimas appears in their report; therefore, the plaintiff prayed that judgment be entered againstthe defendant as administratrix of the estate of the deceased, ordering her to return the tenfirst-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 inwriting to the complaint on the ground that it was vague; but on the 2d of October of thesame year, in answer to the complaint, she said that it was true that the late MagdalenoJimenea asked the plaintiff to loan him ten carabaos, but that he only obtained threesecond-class animals, which were afterwards transferred by sale by the plaintiff to the saidJimenea; that she denied the allegations contained in paragraph 3 of the complaint; for allof which she asked the court to absolve her of the complaint with the cost against theplaintiff.

By a writing dated the 11th of December, 1906, Attorney Jose Felix Martinez notified thedefendant 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, andthat as fees for his professional services he was to receive one half of the amount allowedin 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 weremade of record. On the 10th of January, 1907, the court below entered judgmentsentencing Agustina Jarra, as administratrix of the estate of Magdaleno Jimenea, to returnto 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 datedJanuary 19, moved for anew trial on the ground that the findings of fact were openly andmanifestly contrary to the weight of the evidence. The motion was overruled, the defendantduly excepted, and in due course submitted the corresponding bill of exceptions, which wasapproved and submitted to this court.

The defendant has admitted that Magdaleno Jimenea asked the plaintiff for the loan of tencarabaos which are now claimed by the latter, as shown by two letters addressed by thesaid Jimenea to Felix de los Santos; but in her answer the said defendant alleged that thelate Jimenea only obtained three second-class carabaos, which were subsequently sold tohim 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.

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 carabaosrequested by his father-in-law, Magdaleno Jimenea, in the two letters produced at the trialby 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 itwas 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 notevidenced by any trustworthy documents such as those of transfer, nor were thedeclarations of the witnesses presented by the defendant affirming it satisfactory; for saidreason it can not be considered that Jimenea only received three carabaos on loan from hisson-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 officialdocuments issued by the local authorities; these documents constitute the title of ownershipof the carabao or horse so acquired. Furthermore, not only should the purchaser beprovided with a new certificate or credential, a document which has not been produced inevidence by the defendant, nor has the loss of the same been shown in the case, but theold 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 oldcredential on which should be stated the name of the previous owner of each of the threecarabaos said to have been sold by the plaintiff.

From the foregoing it may be logically inferred that the carabaos loaned or given oncommodatum to the now deceased Magdaleno Jimenea were ten in number; that they, or atany rate the six surviving ones, have not been returned to the owner thereof, Felix de losSantos, 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 estateto return them or indemnify the owner for their value.

The Civil Code, in dealing with loans in general, from which generic denomination thespecific one of commodatum is derived, establishes prescriptions in relation to the last-mentioned 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 andreturn 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 andquality, in which case it is merely called a loan.

Commodatum is essentially gratuitous.

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. Thebailee acquires the use thereof, but not its fruits; if any compensation is involved, tobe paid by the person requiring the use, the agreement ceases to be acommodatum.

ART. 1742. The obligations and rights which arise from the commodatum pass to theheirs of both contracting parties, unless the loan has been in consideration for theperson of the bailee, in which case his heirs shall not have the right to continue usingthe thing loaned.

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 himtheir value.

Article 1101 of said code reads:

Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, andthose who in any manner whatsoever act in contravention of the stipulations of thesame, 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 itsvalue, is sustained by the supreme tribunal of Sapin. In its decision of March 21, 1895, itsets out with precision the legal doctrine touching commodatum as follows:

Although it is true that in a contract of commodatum the bailor retains the ownershipof the thing loaned, and at the expiration of the period, or after the use for which itwas loaned has been accomplished, it is the imperative duty of the bailee to returnthe thing itself to its owner, or to pay him damages if through the fault of the baileethe thing should have been lost or injured, it is clear that where public securities areinvolved, 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 constitutedthe 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 hadnot 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 propertyof the late Jimenea, or from his capital, of six carabaos which did not belong to him, andwhich formed no part of the inheritance.

The demand for the exclusion of the said carabaos belonging to a third party and which didnot form part of the property of the deceased, must be the subject of a direct decision of thecourt in an ordinary action, wherein the right of the third party to the property which heseeks to have excluded from the inheritance and the right of the deceased has beendiscussed, 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 beforewhom the plaintiff unnecessarily appeared can not affect nor reduce the unquestionableright of ownership of the latter, inasmuch as there is no law nor principle of justiceauthorizing the successors of the late Jimenea to enrich themselves at the cost and to theprejudice of Felix de los Santos.

For the reasons above set forth, by which the errors assigned to the judgment appealedfrom have been refuted, and considering that the same is in accordance with the law andthe merits of the case, it is our opinion that it should be affirmed and we do hereby affirm itwith the costs against the appellant. So ordered.

Arellano, C.J., Johnson, Moreland and Elliott, JJ., concur.Carson, J., reserves his vote.



SECOND DIVISION

[G.R. No. 115324. February 19, 2003]

PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONALBANK), Petitioner, vs. HON. COURT OF APPEALS AND FRANKLIN

VIVES, respondents.

D E C I S I O N

CALLEJO, SR., J .:chanroblesvirtuallawlibrary

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated

June 25, 1991 in CA-G.R. CV No. 11791 and of its Resolution[2] dated May 5, 1994, denyingthe motion for reconsideration of said decision filed by petitioner Producers Bank of the

Philippines.chanroblesvirtuallawlibrary

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 hisbusiness, 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 bankaccount 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 respondentasked Sanchez to bring Doronilla to their house so that they could discuss Sanchezs

request.[3]chanroblesvirtuallawlibrary

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 checkin the amount of Two Hundred Thousand Pesos (P200,000.00) in favor of Sterela. Privaterespondent 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 Doronillaauthorizing 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 theaccount, 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]chanroblesvirtuallawlibrary

Subsequently, private respondent learned that Sterela was no longer holding office in theaddress 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 assistantmanager, 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 toldthem 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 andSanchez 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

http://www.chanrobles.com/scdecisions/jurisprudence2003/feb2003/115324.php#_ftn1










amounts necessary to cover overdrawings in Current Account No. 10-0320. In opening saidcurrent 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 weredishonored. 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]chanroblesvirtuallawlibrary

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 bereturned 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, uponpresentment thereof by private respondent to the drawee bank, the check was dishonored.

Doronilla requested private respondent to present the same check on September 15, 1979but when the latter presented the check, it was again dishonored.[6]chanroblesvirtuallawlibrary

Private respondent referred the matter to a lawyer, who made a written demand uponDoronilla 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]chanroblesvirtuallawlibrary

Private respondent instituted an action for recovery of sum of money in the Regional TrialCourt (RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The

case was docketed as Civil Case No. 44485. He also filed criminal actions against Doronilla,Sanchez and Dumagpi in the RTC. However, Sanchez passed away on March 16, 1985 while

the case was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch157, promulgated its Decision in Civil Case No. 44485, the dispositive portion of which

reads:chanroblesvirtuallawlibrary

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 FranklinVives jointly and severally chanroblesvirtuallawlibrary

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

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

(c) the amount of P40,000.00 for attorneys fees; andchanroblesvirtuallawlibrary

(d) the costs of the suit.chanroblesvirtuallawlibrary

SO ORDERED.[8]chanroblesvirtuallawlibrary

Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision datedJune 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]chanroblesvirtuallawlibrary

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

I.chanroblesvirtuallawlibrary















THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTIONBETWEEN THE DEFENDANT DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE

LOAN AND NOT ACCOMMODATION;

II.chanroblesvirtuallawlibrary

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONERS BANKMANAGER, MR. RUFO ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN

DEFRAUDING PETITIONER (Sic. Should be PRIVATE RESPONDENT) AND AS ACONSEQUENCE, THE PETITIONER SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF

NATURAL JUSTICE;

III.chanroblesvirtuallawlibrary

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THEREGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT APPEALED FROM, AS THE

FINDINGS OF THE REGIONAL TRIAL COURT WERE BASED ON A MISAPPREHENSION OFFACTS;

IV.chanroblesvirtuallawlibrary

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN

SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYERFOR ACTS COMMITTED BY AN EMPLOYEE IS APPLICABLE;

V.chanroblesvirtuallawlibrary

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE

LOWER COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITHTHE OTHER DEFENDANTS FOR THE AMOUNT OF P200,000.00 REPRESENTING THE SAVINGS

ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARYDAMAGES, P40,000.00 FOR ATTORNEYS FEES AND THE COSTS OF SUIT.[11]chanroblesvirtuallawlibrary

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 arejoinder to the reply. However, said rejoinder was filed only on April 21, 1997, due to

petitioners delay in furnishing private respondent with copy of the reply[12] and severalsubstitutions 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 theirrespective memoranda.[14] Petitioner filed its memorandum on April 16, 2001 while private

respondent submitted his memorandum on March 22, 2001. chanroblesvirtuallawlibrary

Petitioner contends that the transaction between private respondent and Doronilla is asimple 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 thecheck 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 privaterespondent 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 andDoronilla.[16] chanroblesvirtuallawlibrary

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 wasthe 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 forSterela, did not contain any authorization for these two to withdraw from said account.Hence, the authority to withdraw therefrom remained exclusively with Doronilla, who was

the sole proprietor of Sterela, and who alone had legal title to the savings account.[17] Petitioner points out that no evidence other than the testimonies of private respondent

and Mrs. Vives was presented during trial to prove that private respondent depositedhis 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 savingsaccount.chanroblesvirtuallawlibrary

Petitioner also asserts that the Court of Appeals erred in affirming the trial courts decisionsince 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 wasa mutuum, and that it committed no wrong in allowing Doronilla to withdraw from Sterelas

savings account.[19]chanroblesvirtuallawlibrary

Finally, petitioner claims that since there is no wrongful act or omission on its part, it is notliable 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]chanroblesvirtuallawlibrary

Private respondent, on the other hand, argues that the transaction between him andDoronilla 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 theaccount 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 somedegree 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]chanroblesvirtuallawlibrary

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 whofacilitated 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 theauthority to debit Sterelas savings account to cover any overdrawings in its current account.[23]chanroblesvirtuallawlibrary

There is no merit in the petition.chanroblesvirtuallawlibrary

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 toanalyze 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 adoptedand 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 wouldrequire 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 butare also amply supported by the evidence on record.chanroblesvirtuallawlibrary

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 circumspectexamination 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:chanroblesvirtuallawlibrary

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 whichcase 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 casethe contract is simply called a loan or mutuum.chanroblesvirtuallawlibrary

Commodatum is essentially gratuitous.chanroblesvirtuallawlibrary

Simple loan may be gratuitous or with a stipulation to pay interest.chanroblesvirtuallawlibrary

In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan,ownership passes to the borrower.chanroblesvirtuallawlibrary

The foregoing provision seems to imply that if the subject of the contract is a consumablething, 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 CivilCode provides:chanroblesvirtuallawlibrary

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.chanroblesvirtuallawlibrary

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 theend of the period agreed upon, the loan is acommodatum and not

a mutuum.chanroblesvirtuallawlibrary

The rule is that the intention of the parties thereto shall be accorded primordialconsideration 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 suchdetermination.[28]chanroblesvirtuallawlibrary

As correctly pointed out by both the Court of Appeals and the trial court, the evidenceshows that private respondent agreed to deposit his money in the savings account of

Sterela specifically for the purpose of making it appear that said firm had sufficientcapitalization for incorporation, with the promise that the amount shall be returned within

thirty (30) days.[29] Private respondent merely accommodated Doronilla by lending hismoney 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 savingsaccount and would be returned to private respondent after thirty (30)

days.chanroblesvirtuallawlibrary









Doronillas attempts to return to private respondent the amount of P200,000.00 which thelatter deposited in Sterelas account together with an additional P12,000.00, allegedly

representing interest on the mutuum, did not convert the transaction froma 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 toprivate respondent the interest accruing to the latters money deposited withpetitioner.chanroblesvirtuallawlibrary

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 betweenDoronilla 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 thereturn 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 lossof private respondents money and is liable for its restitution.chanroblesvirtuallawlibrary

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 thatchanroblesvirtuallawlibrary

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 permittedexcept upon the production of the depositor savings bank book in which will be

entered by the Bank the amount deposited or withdrawn.[30]chanroblesvirtuallawlibrary

Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, theAssistant 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:chanroblesvirtuallawlibrary

X X Xchanroblesvirtuallawlibrary

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) branchof 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 withbanking procedure.chanroblesvirtuallawlibrary

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 thatthe 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 forthem 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.chanroblesvirtuallawlibrary

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 belongto 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 wasmerely to accommodate Doronilla. Atienza even declared that the money came from Mrs.Vives.chanroblesvirtuallawlibrary

Although the savings account was in the name of Sterela, the bank records disclose that theonly 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 wereInocencia 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 whoseauthorized 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. Heexplained 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 thatthe 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 theeffect 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 thataccount 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 hadgiven Doronilla the authority to withdraw.chanroblesvirtuallawlibrary

Moreover, the transfer of fund was done without the passbook having been presented. It isan 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 wasdispensed 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 madeto 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 viewof 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 sameare 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 officialservicing 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 notamong those authorized to withdraw so her certification had no effect

whatsoever.chanroblesvirtuallawlibrary

The circumstance surrounding the opening of the current account also demonstrate thatAtienzas active participation in the perpetration of the fraud and deception that caused theloss. 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 thatDoronilla 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.chanroblesvirtuallawlibrary



Clearly Atienza had committed wrongful acts that had resulted to the loss subject of thiscase. x x x.[31]chanroblesvirtuallawlibrary

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. Tohold 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 taskwhen the act complained of was committed.[32] Case law in the United States of Americahas 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] chanroblesvirtuallawlibrary

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 BranchManager when he assisted Doronilla in withdrawing funds from Sterelas Savings Account

No. 10-1567, in which account private respondents money was deposited, and intransferring the money withdrawn to Sterelas Current Account with petitioner. Atienzas acts

of helping Doronilla, a customer of the petitioner, were obviously done in furtherance of petitioners interests[34] even though in the process, Atienza violated some of petitioners

rules such as those stipulated in its savings account passbook.[35] It was established thatthe 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 wastheir connivance which was the cause of private respondents loss.chanroblesvirtuallawlibrary

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 theP200,000.00 since it is clear that petitionerfailed 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 privaterespondent.chanroblesvirtuallawlibrary

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

SO ORDERED.chanroblesvirtuallawlibrary

Bellosillo, (Chairman), Mendoza, Quisumbing and Austria-Martinez, JJ., concur.













EN BANC

G.R. No. L-24968 April 27, 1972

SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee,vs.DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.

Mabanag, Eliger and Associates and Saura, Magno and Associates for plaintiff-appellee.

Jesus A. Avanceña and Hilario G. Orsolino for defendant-appellant.

MAKALINTAL, J.: p

In Civil Case No. 55908 of the Court of First Instance of Manila, judgment was rendered onJune 28, 1965 sentencing defendant Development Bank of the Philippines (DBP) to payactual and consequential damages to plaintiff Saura Import and Export Co., Inc. in theamount of P383,343.68, plus interest at the legal rate from the date the complaint was filedand attorney's fees in the amount of P5,000.00. The present appeal is from that judgment.

In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to the RehabilitationFinance Corporation (RFC), before its conversion into DBP, for an industrial loan of

P500,000.00, to be used as follows: P250,000.00 for the construction of a factory building(for the manufacture of jute sacks); P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and P9,100.00 as additional working capital.

Parenthetically, it may be mentioned that the jute mill machinery had already beenpurchased by Saura on the strength of a letter of credit extended by the Prudential Bankand Trust Co., and arrived in Davao City in July 1953; and that to secure its release withoutfirst paying the draft, Saura, Inc. executed a trust receipt in favor of the said bank.

On January 7, 1954 RFC passed Resolution No. 145 approving the loan application for P500,000.00, to be secured by a first mortgage on the factory building to be constructed,

the land site thereof, and the machinery and equipment to be installed. Among the other terms spelled out in the resolution were the following:

1. That the proceeds of the loan shall be utilized exclusively for the followingpurposes:

For construction of factory building P250,000.00



For payment of the balance of purchase

price of machinery and equipment 240,900.00

For working capital 9,100.00

T O T A L P500,000.00

4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto Caolboy and GregoriaEstabillo and China Engineers, Ltd. shall sign the promissory notes jointly with theborrower-corporation;

5. That release shall be made at the discretion of the Rehabilitation Finance Corporation,subject to availability of funds, and as the construction of the factory buildings progresses,to be certified to by an appraiser of this Corporation;"

Saura, Inc. was officially notified of the resolution on January 9, 1954. The day before,

however, evidently having otherwise been informed of its approval, Saura, Inc. wrote aletter to RFC, requesting a modification of the terms laid down by it, namely: that in lieu of having China Engineers, Ltd. (which was willing to assume liability only to the extent of itsstock subscription with Saura, Inc.) sign as co-maker on the corresponding promissorynotes, Saura, Inc. would put up a bond for P123,500.00, an amount equivalent to suchsubscription; and that Maria S. Roca would be substituted for Inocencia Arellano as one of the other co-makers, having acquired the latter's shares in Saura, Inc.

In view of such request RFC approved Resolution No. 736 on February 4, 1954,designating of the members of its Board of Governors, for certain reasons stated in theresolution, "to reexamine all the aspects of this approved loan ... with special reference as

to the advisability of financing this particular project based on present conditions obtainingin the operations of jute mills, and to submit his findings thereon at the next meeting of theBoard."

On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had again agreed toact as co-signer for the loan, and asked that the necessary documents be prepared inaccordance with the terms and conditions specified in Resolution No. 145. In connectionwith the reexamination of the project to be financed with the loan applied for, as stated inResolution No. 736, the parties named their respective committees of engineers andtechnical men to meet with each other and undertake the necessary studies, although inappointing its own committee Saura, Inc. made the observation that the same "should notbe taken as an acquiescence on (its) part to novate, or accept new conditions to, the

agreement already) entered into," referring to its acceptance of the terms and conditionsmentioned in Resolution No. 145.

On April 13, 1954 the loan documents were executed: the promissory note, with F.R.Halling, representing China Engineers, Ltd., as one of the co-signers; and thecorresponding deed of mortgage, which was duly registered on the following April 17.



It appears, however, that despite the formal execution of the loan agreement thereexamination contemplated in Resolution No. 736 proceeded. In a meeting of the RFCBoard of Governors on June 10, 1954, at which Ramon Saura, President of Saura, Inc.,was present, it was decided to reduce the loan from P500,000.00 to P300,000.00.Resolution No. 3989 was approved as follows:

RESOLUTION No. 3989. Reducing the Loan Granted Saura Import & Export Co., Inc. under Resolution No. 145, C.S., from P500,000.00 to P300,000.00. Pursuant to Bd. Res. No. 736,c.s., authorizing the re-examination of all the various aspects of the loan granted the SauraImport & Export Co. under Resolution No. 145, c.s., for the purpose of financing themanufacture of jute sacks in Davao, with special reference as to the advisability of financingthis particular project based on present conditions obtaining in the operation of jute mills,and after having heard Ramon E. Saura and after extensive discussion on the subject theBoard, upon recommendation of the Chairman, RESOLVED that the loan granted the SauraImport & Export Co. be REDUCED from P500,000 to P300,000 and that releases up toP100,000 may be authorized as may be necessary from time to time to place the factory inactual operation: PROVIDED that all terms and conditions of Resolution No. 145, c.s., not

inconsistent herewith, shall remain in full force and effect."

On June 19, 1954 another hitch developed. F.R. Halling, who had signed the promissorynote for China Engineers Ltd. jointly and severally with the other RFC that his company nolonger to of the loan and therefore considered the same as cancelled as far as it wasconcerned. A follow-up letter dated July 2 requested RFC that the registration of themortgage be withdrawn.

In the meantime Saura, Inc. had written RFC requesting that the loan of P500,000.00 begranted. The request was denied by RFC, which added in its letter-reply that it was"constrained to consider as cancelled the loan of P300,000.00 ... in view of a notification ...

from the China Engineers Ltd., expressing their desire to consider the loan insofar as theyare concerned."

On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan and informedRFC that China Engineers, Ltd. "will at any time reinstate their signature as co-signer of thenote if RFC releases to us the P500,000.00 originally approved by you.".

On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan to the originalamount of P500,000.00, "it appearing that China Engineers, Ltd. is now willing to sign thepromissory notes jointly with the borrower-corporation," but with the following proviso:

That in view of observations made of the shortage and high cost of imported

raw materials, the Department of Agriculture and Natural Resources shallcertify to the following:

1. That the raw materials needed by the borrower-corporation to carry out itsoperation are available in the immediate vicinity; and

2. That there is prospect of increased production thereof to provideadequately for the requirements of the factory."



The action thus taken was communicated to Saura, Inc. in a letter of RFC dated December 22, 1954, wherein it was explained that the certification by the Department of Agricultureand Natural Resources was required "as the intention of the original approval (of the loan) isto develop the manufacture of sacks on the basis of locally available raw materials." Thispoint is important, and sheds light on the subsequent actuations of the parties. Saura, Inc.does not deny that the factory he was building in Davao was for the manufacture of bagsfrom local raw materials. The cover page of its brochure (Exh. M) describes the project as a"Joint venture by and between the Mindanao Industry Corporation and the Saura Importand Export Co., Inc. to finance, manage and operate a Kenaf mill plant, to manufacturecopra and corn bags, runners, floor mattings, carpets, draperies; out of 100% local rawmaterials, principal kenaf ." The explanatory note on page 1 of the same brochure statesthat, the venture "is the first serious attempt in this country to use 100% locally grown rawmaterials notably kenaf which is presently grown commercially in theIsland of Mindanaowhere the proposed jutemill is located ..."

This fact, according to defendant DBP, is what moved RFC to approve the loan applicationin the first place, and to require, in its Resolution No. 9083, a certification from the

Department of Agriculture and Natural Resources as to the availability of local raw materialsto provide adequately for the requirements of the factory. Saura, Inc. itself confirmed thedefendant's stand impliedly in its letter of January 21, 1955: (1) stating that according to aspecial study made by the Bureau of Forestry "kenaf will not be available in sufficientquantity this year or probably even next year;" (2) requesting "assurances (from RFC) thatmy company and associates will be able to bring in sufficient jute materials as may benecessary for the full operation of the jute mill;" and (3) asking that releases of the loan bemade as follows:

a) For the payment of the receipt for jute millmachineries with the Prudential Bank &

Trust Company P250,000.00

(For immediate release)

b) For the purchase of materials and equip-ment per attached list to enable the jutemill to operate 182,413.91

c) For raw materials and labor 67,586.09

1) P25,000.00 to be released on the open-

ing of the letter of credit for raw jutefor $25,000.00.

2) P25,000.00 to be released upon arrivalof raw jute.

3) P17,586.09 to be released as soon as themill is ready to operate.



On January 25, 1955 RFC sent to Saura, Inc. the following reply:

Dear Sirs:

This is with reference to your letter of January 21, 1955,

regarding the release of your loan under consideration of P500,000. As stated in our letter of December 22, 1954, thereleases of the loan, if revived, are proposed to be made fromtime to time, subject to availability of funds towards the end thatthe sack factory shall be placed in actual operating status. Weshall be able to act on your request for revised purpose andmanner of releases upon re-appraisal of the securities offeredfor the loan.

With respect to our requirement that the Department of Agriculture and Natural Resources certify that the raw materialsneeded are available in the immediate vicinity and that there is

prospect of increased production thereof to provide adequatelythe requirements of the factory, we wish to reiterate that thebasis of the original approval is to develop the manufacture of sacks on the basis of the locally available raw materials. Your statement that you will have to rely on the importation of juteand your request that we give you assurance that your company will be able to bring in sufficient jute materials as maybe necessary for the operation of your factory, would not be inline with our principle in approving the loan.

With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursue the

matter further. Instead, it requested RFC to cancel the mortgage, and so, on June 17, 1955RFC executed the corresponding deed of cancellation and delivered it to Ramon F. Saurahimself as president of Saura, Inc.

It appears that the cancellation was requested to make way for the registration of amortgage contract, executed on August 6, 1954, over the same property in favor of thePrudential Bank and Trust Co., under which contract Saura, Inc. had up to December 31 of the same year within which to pay its obligation on the trust receipt heretofore mentioned. Itappears further that for failure to pay the said obligation the Prudential Bank and Trust Co.sued Saura, Inc. on May 15, 1955.

On January 9, 1964, ahnost 9 years after the mortgage in favor of RFC was cancelled at the

request of Saura, Inc., the latter commenced the present suit for damages, alleging failureof RFC (as predecessor of the defendant DBP) to comply with its obligation to release theproceeds of the loan applied for and approved, thereby preventing the plaintiff fromcompleting or paying contractual commitments it had entered into, in connection with its jutemill project.

The trial court rendered judgment for the plaintiff, ruling that there was a perfected contractbetween the parties and that the defendant was guilty of breach thereof. The defendant



pleaded below, and reiterates in this appeal: (1) that the plaintiff's cause of action hadprescribed, or that its claim had been waived or abandoned; (2) that there was no perfectedcontract; and (3) that assuming there was, the plaintiff itself did not comply with the termsthereof.

We hold that there was indeed a perfected consensual contract, as recognized in Article1934 of the Civil Code, which provides:

ART. 1954. An accepted promise to deliver something, by way of commodatum or simple loan is binding upon the parties, but thecommodatum or simple loan itself shall not be perferted until the delivery of the object of the contract.

There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of P500,000.00 was approved by resolution of the defendant, and the correspondingmortgage was executed and registered. But this fact alone falls short of resolving the basicclaim that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to

recover damages.

It should be noted that RFC entertained the loan application of Saura, Inc. on theassumption that the factory to be constructed would utilize locally grown raw materials,principally kenaf . There is no serious dispute about this. It was in line with such assumptionthat when RFC, by Resolution No. 9083 approved on December 17, 1954, restored the loanto the original amount of P500,000.00. it imposed two conditions, to wit: "(1) that the rawmaterials needed by the borrower-corporation to carry out its operation are available in theimmediate vicinity; and (2) that there is prospect of increased production thereof to provideadequately for the requirements of the factory." The imposition of those conditions was byno means a deviation from the terms of the agreement, but rather a step in its

implementation. There was nothing in said conditions that contradicted the terms laid downin RFC Resolution No. 145, passed on January 7, 1954, namely — "that the proceeds of the loan shall be utilizedexclusively for the following purposes: for construction of factorybuilding — P250,000.00; for payment of the balance of purchase price of machinery andequipment — P240,900.00; for working capital — P9,100.00." Evidently Saura, Inc. realizedthat it could not meet the conditions required by RFC, and so wrote its letter of January 21,1955, stating that local jute "will not be able in sufficient quantity this year or probably nextyear," and asking that out of the loan agreed upon the sum of P67,586.09 be released "for raw materials and labor." This was a deviation from the terms laid down in Resolution No.145 and embodied in the mortgage contract, implying as it did a diversion of part of theproceeds of the loan to purposes other than those agreed upon.

When RFC turned down the request in its letter of January 25, 1955 the negotiations whichhad been going on for the implementation of the agreement reached an impasse. Saura,Inc. obviously was in no position to comply with RFC's conditions. So instead of doing soand insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgagebe cancelled, which was done on June 15, 1955. The action thus taken by both parties wasin the nature cf mutual desistance — what Manresa terms "mutuo disenso" 1 — which is amode of extinguishing obligations. It is a concept that derives from the principle that since



mutual agreement can create a contract, mutual disagreement by the parties can cause itsextinguishment. 2

The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest againstany alleged breach of contract by RFC, or even point out that the latter's stand was legallyunjustified. Its request for cancellation of the mortgage carried no reservation of whatever rights it believed it might have against RFC for the latter's non-compliance. In 1962 it evenapplied with DBP for another loan to finance a rice and corn project, which application wasdisapproved. It was only in 1964, nine years after the loan agreement had been cancelledat its own request, that Saura, Inc. brought this action for damages.All these circumstancesdemonstrate beyond doubt that the said agreement had been extinguished by mutualdesistance — and that on the initiative of the plaintiff-appellee itself.

With this view we take of the case, we find it unnecessary to consider and resolve the other issues raised in the respective briefs of the parties.

WHEREFORE, the judgment appealed from is reversed and the complaint dismissed, with

costs against the plaintiff-appellee.

Reyes, J.B.L., Actg. C.J., Zaldivar, Castro, Fernando, Teehankee, Barredo and Antonio,JJ., concur.

Makasiar, J., took no part.

Documents

Credit Republic to Saura (Full Cases)