st-cases.docx

7/29/2019 ST-cases.docx

1/115

Republic of the Philippines

SUPREME COURTManila

FIRST DIVISION

G.R. No. 80294-95 September 21, 1988

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,vs.COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ,respondents.

Valdez, Ereso, Polido & Associates for petitioner.

Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner.

Jaime G. de Leon for the Heirs of Egmidio Octaviano.

Cotabato Law Office for the Heirs of Juan Valdez.

GANCAYCO, J.:

The principal issue in this case is whether or not a decision of the Court of Appealspromulgated a long time ago can properly be considered res judicataby respondent

Court of Appeals in the present two cases between petitioner and two privaterespondents.

Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of theNinth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No.3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery ofPossession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge ofthe Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and CivilCase No. 3655 (429), with the dispositive portion as follows:

WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic VicarApostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to

the plaintiffs. Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set ofplaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.). For lack orinsufficiency of evidence, the plaintiffs' claim or damages is hereby denied. Saiddefendant is ordered to pay costs. (p. 36, Rollo)

Respondent Court of Appeals, in affirming the trial court's decision, sustained the trialcourt's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on the


2/115

ownership of lots 2 and 3 in question; that the two lots were possessed by thepredecessors-in-interest of private respondents under claim of ownership in good faithfrom 1906 to 1951; that petitioner had been in possession of the same lots as bailee incommodatum up to 1951, when petitioner repudiated the trust and when it applied forregistration in 1962; that petitioner had just been in possession as owner for eleven

years, hence there is no possibility of acquisitive prescription which requires 10 yearspossession with just title and 30 years of possession without; that the principle of resjudicataon these findings by the Court of Appeals will bar a reopening of thesequestions of facts; and that those facts may no longer be altered.

Petitioner's motion for reconsideation of the respondent appellate court's Decision in thetwo aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.

The facts and background of these cases as narrated by the trail court are as follows

... The documents and records presented reveal that the wholecontroversy started when the defendant Catholic Vicar Apostolic of the

Mountain Province (VICAR for brevity) filed with the Court of FirstInstance of Baguio Benguet on September 5, 1962 an application forregistration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated atPoblacion Central, La Trinidad, Benguet, docketed as LRC N-91, saidLots being the sites of the Catholic Church building, convents, highschool building, school gymnasium, school dormitories, social hall,stonewalls, etc. On March 22, 1963 the Heirs of Juan Valdez and theHeirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2and 3, respectively, asserting ownership and title thereto. After trial onthe merits, the land registration court promulgated its Decision, datedNovember 17, 1965, confirming the registrable title of VICAR to Lots 1, 2,3, and 4.

The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655)and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil CaseNo. 3607) appealed the decision of the land registration court to the thenCourt of Appeals, docketed as CA-G.R. No. 38830-R. The Court ofAppeals rendered its decision, dated May 9, 1977, reversing the decisionof the land registration court and dismissing the VICAR's application asto Lots 2 and 3, the lots claimed by the two sets of oppositors in the landregistration case (and two sets of plaintiffs in the two cases now at bar),the first lot being presently occupied by the convent and the second bythe women's dormitory and the sister's convent.

On May 9, 1977, the Heirs of Octaviano filed a motion for reconsiderationpraying the Court of Appeals to order the registration of Lot 3 in the

names of the Heirs of Egmidio Octaviano, and on May 17, 1977, theHeirs of Juan Valdez and Pacita Valdez filed their motion forreconsideration praying that both Lots 2 and 3 be ordered registered inthe names of the Heirs of Juan Valdez and Pacita Valdez. On August12,1977, the Court of Appeals denied the motion for reconsideration filedby the Heirs of Juan Valdez on the ground that there was "no sufficientmerit to justify reconsideration one way or the other ...," and likewisedenied that of the Heirs of Egmidio Octaviano.


3/115

Thereupon, the VICAR filed with the Supreme Court a petition for reviewon certiorari of the decision of the Court of Appeals dismissing his (its)application for registration of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs.Court of Appeals and Heirs of Egmidio Octaviano.'

From the denial by the Court of Appeals of their motion forreconsideration the Heirs of Juan Valdez and Pacita Valdez, onSeptember 8, 1977, filed with the Supreme Court a petition for review,docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and PacitaValdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano andAnnable O. Valdez.

On January 13, 1978, the Supreme Court denied in a minute resolutionboth petitions (of VICAR on the one hand and the Heirs of Juan Valdezand Pacita Valdez on the other) for lack of merit. Upon the finality of bothSupreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872,the Heirs of Octaviano filed with the then Court of First Instance ofBaguio, Branch II, a Motion For Execution of Judgment praying that the

Heirs of Octaviano be placed in possession of Lot 3. The Court, presidedover by Hon. Salvador J. Valdez, on December 7, 1978, denied themotion on the ground that the Court of Appeals decision in CA-G.R. No.38870 did not grant the Heirs of Octaviano any affirmative relief.

On February 7, 1979, the Heirs of Octaviano filed with the Court ofAppeals a petitioner for certiorari and mandamus, docketed as CA-G.R.No. 08890-R, entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J.Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the Court ofAppeals dismissed the petition.

It was at that stage that the instant cases were filed. The Heirs ofEgmidio Octaviano filed Civil Case No. 3607 (419) on July 24, 1979, for

recovery of possession of Lot 3; and the Heirs of Juan Valdez filed CivilCase No. 3655 (429) on September 24, 1979, likewise for recovery ofpossession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).

In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octavianopresented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership ofthe land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C );his written demand (Exh. BB-4 ) to defendant Vicar for the return of the land to them;and the reasonable rentals for the use of the land at P10,000.00 per month. On the otherhand, defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty.Nicanor Sison, who testified that the land in question is not covered by any title in thename of Egmidio Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensedwith the testimony of Mons.William Brasseur when the plaintiffs admitted that the witness

if called to the witness stand, would testify that defendant Vicar has been in possessionof Lot 3, for seventy-five (75) years continuously and peacefully and has constructedpermanent structures thereon.

In Civil Case No. 3655, the parties admitting that the material facts are not in dispute,submitted the case on the sole issue of whether or not the decisions of the Court ofAppeals and the Supreme Court touching on the ownership of Lot 2, which in effectdeclared the plaintiffs the owners of the land constitute res judicata.


4/115

In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting upthe defense of ownership and/or long and continuous possession of the two lots inquestion since this is barred by prior judgment of the Court of Appeals in CA-G.R. No.038830-R under the principle ofres judicata. Plaintiffs contend that the question ofpossession and ownership have already been determined by the Court of Appeals (Exh.C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme Court (Exh. 1, MinuteResolution of the Supreme Court). On his part, defendant Vicar maintains that theprinciple ofres judicatawould not prevent them from litigating the issues of longpossession and ownership because the dispositive portion of the prior judgment in CA-G.R. No. 038830-R merely dismissed their application for registration and titling of lots 2and 3. Defendant Vicar contends that only the dispositive portion of the decision, and notits body, is the controlling pronouncement of the Court of Appeals.

2

The alleged errors committed by respondent Court of Appeals according to petitionerare as follows:

1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;

2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCEPRESENTED;

3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THEFORMER OWNERS WERE VALDEZ AND OCTAVIANO;

4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATERESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM1906, AND NOT PETITIONER;

5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENTAPPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTSALREADY HAD FREE PATENT APPLICATIONS SINCE 1906;

6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 INRELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVEPRESCRIPTION OF 10 YEARS;

7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA

G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT;

8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ONOWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIRPREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OFOWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;


5/115

9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUSLOAN FOR USE;

10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN

GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND ISBARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R.NO. 038830. 3

The petition is bereft of merit.

Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148and 05149, when it clearly held that it was in agreement with the findings of the trialcourt that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No.38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of

Appeals Decision CA-G.R. No. 38830-R) did not positively declare private respondents

as owners of the land, neither was it declared that they were not owners of the land, butit held that the predecessors of private respondents were possessors of Lots 2 and 3,with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession asborrower in commodatum up to 1951, when it repudiated the trust by declaring theproperties in its name for taxation purposes. When petitioner applied for registration ofLots 2 and 3 in 1962, it had been in possession in concept of owner only for elevenyears. Ordinary acquisitive prescription requires possession for ten years, but alwayswith just title. Extraordinary acquisitive prescription requires 30 years. 4

On the above findings of facts supported by evidence and evaluated by the Court ofAppeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent

appellate court's ruling that said findings are res judicatabetween the parties. They canno longer be altered by presentation of evidence because those issues were resolvedwith finality a long time ago. To ignore the principle ofres judicatawould be to open thedoor to endless litigations by continuous determination of issues without end.

An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 inCA-G.R. No. 38830-R, shows that it reversed the trial court's Decision 6 findingpetitioner to be entitled to register the lands in question under its ownership, on itsevaluation of evidence and conclusion of facts.

The Court of Appeals found that petitioner did not meet the requirement of 30 yearspossession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy therequirement of 10 years possession for ordinary acquisitive prescription because of theabsence of just title. The appellate court did not believe the findings of the trial court thatLot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also bypurchase from Egmidio Octaviano by petitioner Vicar because there was absolutely nodocumentary evidence to support the same and the alleged purchases were nevermentioned in the application for registration.


6/115

By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez andOctaviano. Both Valdez and Octaviano had Free Patent Application for those lots since1906. The predecessors of private respondents, not petitioner Vicar, were in possessionof the questioned lots since 1906.

There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question,but not Lots 2 and 3, because the buildings standing thereon were only constructedafter liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposesin 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but saidBishop was appointed only in 1947, the church was constructed only in 1951 and thenew convent only 2 years before the trial in 1963.

When petitioner Vicar was notified of the oppositor's claims, the parish priest offered tobuy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitionerVicar only in 1962.

Private respondents were able to prove that their predecessors' house was borrowed bypetitioner Vicar after the church and the convent were destroyed. They never asked forthe return of the house, but when they allowed its free use, they became bailors incommodatumand the petitioner the bailee. The bailees' failure to return the subjectmatter ofcommodatumto the bailor did not mean adverse possession on the part of theborrower. The bailee held in trust the property subject matter of commodatum. Theadverse claim of petitioner came only in 1951 when it declared the lots for taxationpurposes. The action of petitioner Vicar by such adverse claim could not ripen into titleby way of ordinary acquisitive prescription because of the absence of just title.

The Court of Appeals found that the predecessors-in-interest and private respondents

were possessors under claim of ownership in good faith from 1906; that petitioner Vicarwas only a bailee in commodatum; and that the adverse claim and repudiation of trustcame only in 1951.

We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R.No. 38830-R. Its findings of fact have become incontestible. This Court declined toreview said decision, thereby in effect, affirming it. It has become final and executory along time ago.

Respondent appellate court did not commit any reversible error, much less grave abuseof discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No.38830-R is governing, under the principle of res judicata, hence the rule, in the presentcases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidenceestablished in that decision may no longer be altered.

WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED forlack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, byrespondent Court of Appeals is AFFIRMED, with costs against petitioner.


7/115

SO ORDERED.

Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.


SUPREME COURTManila

EN BANC

DECISION

October 25, 1962

G.R. No. L-17474

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.

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


8/115

approved by the Auditor General. On 19 October 1950 the Director of Animal Industry advised

him that the book value of the three bulls could not be reduced and that they either be returned or

their book value paid not later than 31 October 1950. Jose V. Bagtas failed to pay the book value

of the three bulls or to return them. So, on 20 December 1950 in the Court of First Instance of

Manila the Republic of the Philippines commenced an action against him praying that he be

ordered to return the three bulls loaned to him or to pay their book value in the total sum of

P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with interests, and costs; and

that other just and equitable relief be granted in (civil No. 12818).

On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that

because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of

Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural

Resources and the President of the Philippines from the refusal by the Director of Animal

Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8%

from the date of acquisition, to which depreciation the Auditor General did not object, he couldnot return the animals nor pay their value and prayed for the dismissal of the complaint.

After hearing, on 30 July 1956 the trial court render judgment

. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total value of the three bulls

plus the breeding fees in the amount of P626.17 with interest on both sums of (at) the legal rate

from the filing of this complaint and costs.

On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted

on 18 October and issued on 11 November 1958. On 2 December 1958 granted an ex-partemotion 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 onHacienda 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


9/115

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 ofHacienda Felicidad Intal, Baggao, Cagayan,

where the animal was kept, and that as such death was due toforce 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 duetoforce majeure. A contract ofcommodatum 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 ofcommodatum

. . . 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.


10/115

However, the claim that his civil personality having ceased to exist the trial court lost jurisdiction

over the case against him, is untenable, because section 17 of Rule 3 of the Rules of Court

provides that

After a party dies and the claim is not thereby extinguished, the court shall order, upon proper

notice, the legal representative of the deceased to appear and to be substituted for the deceased,

within a period of thirty (30) days, or within such time as may be granted. . . .

and after the defendant's death on 23 October 1951 his counsel failed to comply with section 16

of Rule 3 which provides that

Whenever a party to a pending case dies . . . it shall be the duty of his attorney to inform the

court promptly of such death . . . and to give the name and residence of the executory

administrator, guardian, or other legal representative of the deceased . . . .

The notice by the probate court and its publication in the Voz de Manila that Felicidad M. Bagtas

had been issue letters of administration of the estate of the late Jose Bagtas and that "all persons

having claims for monopoly against the deceased Jose V. Bagtas, arising from contract express

or implied, whether the same be due, not due, or contingent, for funeral expenses and expenses

of the last sickness of the said decedent, and judgment for monopoly against him, to file said

claims with the Clerk of this Court at the City Hall Bldg., Highway 54, Quezon City, within six

(6) months from the date of the first publication of this order, serving a copy thereof upon the

aforementioned Felicidad M. Bagtas, the appointed administratrix of the estate of the said

deceased," is not a notice to the court and the appellee who were to be notified of the defendant's

death in accordance with the above-quoted rule, and there was no reason for such failure tonotify, 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


11/115

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.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala

and Makalintal, JJ., concur.

Barrera, J., concurs in the result.


SUPREME COURTManila

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. Avancea and Hilario G. Orsolino for defendant-appellant.

MAKALINTAL, J.:p

In Civil Case No. 55908 of the Court of First Instance of Manila, judgment was renderedon June 28, 1965 sentencing defendant Development Bank of the Philippines (DBP) to

pay actual and consequential damages to plaintiff Saura Import and Export Co., Inc. inthe amount of P383,343.68, plus interest at the legal rate from the date the complaintwas filed and attorney's fees in the amount of P5,000.00. The present appeal is fromthat judgment.

In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to theRehabilitation Finance Corporation (RFC), before its conversion into DBP, for anindustrial loan of P500,000.00, to be used as follows: P250,000.00 for the construction


12/115

of a factory building (for the manufacture of jute sacks); P240,900.00 to pay the balanceof the purchase price of the jute mill machinery and equipment; and P9,100.00 asadditional working capital.

Parenthetically, it may be mentioned that the jute mill machinery had already been

purchased by Saura on the strength of a letter of credit extended by the Prudential Bankand Trust Co., and arrived in Davao City in July 1953; and that to secure its releasewithout first paying the draft, Saura, Inc. executed a trust receipt in favor of the saidbank.

On January 7, 1954 RFC passed Resolution No. 145 approving the loan application forP500,000.00, to be secured by a first mortgage on the factory building to beconstructed, the land site thereof, and the machinery and equipment to be installed.

Among the other terms spelled out in the resolution were the following:

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

For construction of factory building P250,000.00

For payment of the balance of purchase

price of machinery and equipment 240,900.00

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 Gregoria

Estabillo 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 FinanceCorporation, subject to availability of funds, and as the construction of the factorybuildings 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 lieuof having China Engineers, Ltd. (which was willing to assume liability only to the extent

of its stock subscription with Saura, Inc.) sign as co-maker on the correspondingpromissory notes, Saura, Inc. would put up a bond for P123,500.00, an amountequivalent to such subscription; and that Maria S. Roca would be substituted forInocencia Arellano as one of the other co-makers, having acquired the latter's shares inSaura, Inc.

In view of such request RFC approved Resolution No. 736 on February 4, 1954,designating of the members of its Board of Governors, for certain reasons stated in the


13/115

resolution, "to reexamine all the aspects of this approved loan ... with special referenceas to the advisability of financing this particular project based on present conditionsobtaining in the operations of jute mills, and to submit his findings thereon at the nextmeeting of the Board."

On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had again agreedto act 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 statedin Resolution 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 "shouldnot be taken as an acquiescence on (its) part to novate, or accept new conditions to, theagreement 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 loangranted the Saura Import & Export Co. under Resolution No. 145, c.s., for the purposeof financing the manufacture of jute sacks in Davao, with special reference as to theadvisability of financing this particular project based on present conditions obtaining inthe operation of jute mills, and after having heard Ramon E. Saura and after extensivediscussion on the subject the Board, upon recommendation of the Chairman,RESOLVED that the loan granted the Saura Import & Export Co. be REDUCED fromP500,000 to P300,000 and that releases up to P100,000 may be authorized as may benecessary from time to time to place the factory in actual operation: PROVIDED that allterms and conditions of Resolution No. 145, c.s., not inconsistent herewith, shall remainin full force and effect."

On June 19, 1954 another hitch developed. F.R. Halling, who had signed thepromissory note for China Engineers Ltd. jointly and severally with the other RFC thathis company no longer to of the loan and therefore considered the same as cancelledas far as it was concerned. A follow-up letter dated July 2 requested RFC that theregistration of the mortgage be withdrawn.


14/115

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 asthey are 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 ofthe note if RFC releases to us the P500,000.00 originally approved by you.".

On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan to theoriginal amount of P500,000.00, "it appearing that China Engineers, Ltd. is now willingto sign the promissory notes jointly with the borrower-corporation," but with the followingproviso:

That in view of observations made of the shortage and high cost of imported rawmaterials, the Department of Agriculture and Natural Resources shall certify to the

following:

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

2. That there is prospect of increased production thereof to provide adequately for therequirements of the factory."

The action thus taken was communicated to Saura, Inc. in a letter of RFC datedDecember 22, 1954, wherein it was explained that the certification by the Department of

Agriculture and Natural Resources was required "as the intention of the originalapproval (of the loan) is to develop the manufacture of sacks on the basis of locallyavailable raw materials." This point is important, and sheds light on the subsequentactuations of the parties. Saura, Inc. does not deny that the factory he was building inDavao was for the manufacture of bags from local raw materials. The cover page of itsbrochure (Exh. M) describes the project as a "Joint venture by and between theMindanao Industry Corporation and the Saura Import and Export Co., Inc. to finance,manage and operate a Kenafmill plant, to manufacture copra and corn bags, runners,floor mattings, carpets, draperies; out of 100% local raw materials, principal kenaf." Theexplanatory note on page 1 of the same brochure states that, the venture "is the firstserious attempt in this country to use 100% locally grown raw materials notably kenafwhich is presently grown commercially in theIsland of Mindanao where the proposed

jutemill is located ..."

This fact, according to defendant DBP, is what moved RFC to approve the loanapplication in the first place, and to require, in its Resolution No. 9083, a certificationfrom the Department of Agriculture and Natural Resources as to the availability of localraw materials to provide adequately for the requirements of the factory. Saura, Inc. itselfconfirmed the defendant's stand impliedly in its letter of January 21, 1955: (1) statingthat according to a special study made by the Bureau of Forestry " kenafwill not beavailable in sufficient quantity this year or probably even next year;" (2) requesting


15/115

"assurances (from RFC) that my company and associates will be able to bring insufficient jute materials as may be necessary for the full operation of the jute mill;" and(3) asking that releases of the loan be made as follows:

a) For the payment of the receipt for jute 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 therelease of your loan under consideration of P500,000. As stated in ourletter of December 22, 1954, the releases of the loan, if revived, areproposed to be made from time to time, subject to availability of fundstowards the end that the sack factory shall be placed in actual operatingstatus. We shall be able to act on your request for revised purpose andmanner of releases upon re-appraisal of the securities offered for theloan.

With respect to our requirement that the Department of Agriculture andNatural Resources certify that the raw materials needed are available inthe immediate vicinity and that there is prospect of increased production

thereof to provide adequately the requirements of the factory, we wish toreiterate that the basis of the original approval is to develop themanufacture of sacks on the basis of the locally available raw materials.Your statement that you will have to rely on the importation of jute andyour request that we give you assurance that your company will be ableto bring in sufficient jute materials as may be necessary for the operationof your factory, would not be in line with our principle in approving theloan.


16/115

With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursuethe matter further. Instead, it requested RFC to cancel the mortgage, and so, on June17, 1955 RFC executed the corresponding deed of cancellation and delivered it toRamon F. Saura himself 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 December31 of the same year within which to pay its obligation on the trust receipt heretoforementioned. It appears further that for failure to pay the said obligation the PrudentialBank 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 cancelledat the request of Saura, Inc., the latter commenced the present suit for damages,alleging failure of RFC (as predecessor of the defendant DBP) to comply with itsobligation to release the proceeds of the loan applied for and approved, thereby

preventing the plaintiff from completing or paying contractual commitments it hadentered into, in connection with its jute mill project.

The trial court rendered judgment for the plaintiff, ruling that there was a perfectedcontract between the parties and that the defendant was guilty of breach thereof. Thedefendant pleaded below, and reiterates in this appeal: (1) that the plaintiff's cause ofaction had prescribed, or that its claim had been waived or abandoned; (2) that therewas no perfected contract; and (3) that assuming there was, the plaintiff itself did notcomply with the terms thereof.

We hold that there was indeed a perfected consensual contract, as recognized in Article

1934 of the Civil Code, which provides:ART. 1954. An accepted promise to deliver something, by way of commodatum or simpleloan is binding upon the parties, but the commodatum or simple loan itself shall not beperferted 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 thecorresponding mortgage was executed and registered. But this fact alone falls short ofresolving the basic claim that the defendant failed to fulfill its obligation and the plaintiffis 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 suchassumption that when RFC, by Resolution No. 9083 approved on December 17, 1954,restored the loan to the original amount of P500,000.00. it imposed two conditions, towit: "(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 ofincreased production thereof to provide adequately for the requirements of the factory."


17/115

The imposition of those conditions was by no means a deviation from the terms of theagreement, but rather a step in its implementation. There was nothing in said conditionsthat contradicted the terms laid down in RFC Resolution No. 145, passed on January 7,1954, namely "that the proceeds of the loan shall be utilized exclusivelyfor thefollowing purposes: for construction of factory building P250,000.00; for payment of

the balance of purchase price of machinery and equipment

P240,900.00; for workingcapital P9,100.00." Evidently Saura, Inc. realized that it could not meet the conditionsrequired by RFC, and so wrote its letter of January 21, 1955, stating that local jute "willnot be able in sufficient quantity this year or probably next year," and asking that out ofthe 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 inthe mortgage contract, implying as it did a diversion of part of the proceeds of the loanto purposes other than those agreed upon.

When RFC turned down the request in its letter of January 25, 1955 the negotiationswhich had been going on for the implementation of the agreement reached an impasse.

Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead ofdoing so and insisting that the loan be released as agreed upon, Saura, Inc. asked thatthe mortgage be cancelled, which was done on June 15, 1955. The action thus taken byboth parties was in the nature cf mutual desistance what Manresa terms "mutuodisenso" 1 which is a mode of extinguishing obligations. It is a concept that derivesfrom the principle that since mutual agreement can create a contract, mutualdisagreement by the parties can cause its extinguishment. 2

The subsequent conduct of Saura, Inc. confirms this desistance. It did not protestagainst any alleged breach of contract by RFC, or even point out that the latter's standwas legally unjustified. Its request for cancellation of the mortgage carried no

reservation of whatever rights it believed it might have against RFC for the latter's non-compliance. In 1962 it even applied with DBP for another loan to finance a rice and cornproject, which application was disapproved. It was only in 1964, nine years after theloan agreement had been cancelled at its own request, that Saura, Inc. brought thisaction for damages.All these circumstances demonstrate beyond doubt that the saidagreement had been extinguished by mutual desistance and that on the initiative ofthe plaintiff-appellee itself.

With this view we take of the case, we find it unnecessary to consider and resolve theother 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.


18/115


SUPREME COURTManila

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 furniture

which she lent him for his use. She appealed from the judgment of the Court of First Instance ofManila 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 thecosts.

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 conditionthat 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 thefurniture 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 heatersand 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, beforevacating 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.


19/115

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 onNovember 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 partiesshould 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 toreturn 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 ofcommadatum, 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 theplaintiff, 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 thefurniture 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 hemerely 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 legalconclusion 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 toplace 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 becauseunder 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 whobreached the contract ofcommodatum, 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.


20/115

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 thelatter, 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.

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


SUPREME COURTManila

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 1901 Jimenea

borrowed and obtained from the plaintiff ten first-class carabaos, to be used at the animal-power

mill of his hacienda during the season of 1901-2, without recompense or remuneration whateverfor 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 defendantherein 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 commissionersrejected 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 thecosts.

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


21/115

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 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 tothe 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 losSantos, 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.

The record discloses that it has been fully proven from the testimony of a sufficient number ofwitnesses 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 ofsaid 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 affirming it satisfactory; for said reason it can not beconsidered 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.


22/115

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 ofthe 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 inthe 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 anyrate 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 theowner for their value.

The Civil Code, in dealing with loans in general, from which generic denomination the specificone 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 and

return it to the former, in which case it is called commodatum, or money or any otherperishable 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.

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 baileeacquires 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.

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:


23/115

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 withprecision 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 thingitself 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, therebyproperly applies law 9 of title 11 ofpartida 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, Codeof 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 haveexcluded 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 CivilProcedure; 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 enrichthemselves at the cost and to the prejudice of Felix de los Santos.

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.

Arellano, C.J., Johnson, Moreland and Elliott, JJ., concur.

Carson, J., reserves his vote.

SECOND DIVISION


24/115

[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.

D E C I S I O N

CALLEJO, SR.,J.:

This is a petition for review on certiorari of the Decision1[1] of the Court of Appeals dated June

25, 1991 in CA-G.R. CV No. 11791 and of its Resolution2[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 Sterelafor 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[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 assurancesand 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 savingsaccount 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 thecheck. 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 MarketingServices in the amount of P200,000.00. In opening the account, the authorized signatories were


25/115

Inocencia Vives and/or Angeles Sanchez. A passbook for Savings Account No. 10-1567 was

thereafter issued to Mrs. Vives.4[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, whoinformed 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. Vivescould 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 andauthorized the Bank to debit Savings Account No. 10-1567 for the amounts necessary to cover

overdrawings in Current Account No. 10-0320. In opening said current account, Sterela, through

Doronilla, obtained a loan of P175,000.00 from the Bank. To cover payment thereof, Doronilla

issued three postdated checks, all of which were dishonored. Atienza also said that Doronillacould assign or withdraw the money in Savings Account No. 10-1567 because he was the sole

proprietor of Sterela.5[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 TwelveThousand 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[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 forP212,000.00 in privaterespondents favor but the check was again dishonored for insufficiency of funds.7[7]


26/115

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 casewas docketed as Civil Case No. 44485. He also filed criminal actions against Doronilla, Sanchez

and Dumagpi in the RTC. However, Sanchez passed away on March 16, 1985 while the case

was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157,

promulgated its Decision in Civil Case No. 44485, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J.Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin

Vives jointly and severally

(a) the amount of P200,000.00, representing the money deposited, with interest at the legal

rate from the filing of the complaint until the same is fully paid;

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

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

(d) the costs of the suit.

SO ORDERED.8[8]

Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision dated June25, 1991, the appellate court affirmed in toto the decision of the RTC.9[9] It likewise denied with

finality petitioners motion for reconsideration in its Resolution dated May 5, 1994.10[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;


27/115

II.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONERSBANK 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 UNDERTHE PRINCIPLE OF NATURAL JUSTICE;

III.

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE

RECORDS OF THE REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT

APPEALED FROM, AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE

BASED ON A MISAPPREHENSION OF FACTS;

IV.

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED

DECISION IN SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE

LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE ISAPPLICABLE;

V.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OFTHE 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 FORMORAL DAMAGES, P50,000.00 FOR EXEMPLARY DAMAGES, P40,000.00 FOR

ATTORNEYS FEES AND THE COSTS OF SUIT.11[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[12] and several substitutions of counsel onthe part of private respondent.13[13] On January 17, 2001, the Court resolved to give due course to


28/115

the petition and required the parties to submit their respective memoranda.14[14] Petitioner filed its

memorandum on April 16, 2001 while private respondent submitted his memorandum on March22, 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 byprivate 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 Doronillain the amount of P212,000.00, or P12,000 more than what private respondent deposited in

Sterelas bank account.15[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[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 soleproprietor of said company. Petitioner asserts that Doronillas May 8, 1979 letter addressed tothe bank, authorizing Mrs. Vives and Sanchez to open a savings account for Sterela, did not

contain any authorization for these two to withdraw from said account. Hence, the authority to

withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of Sterela,and who alone had legal title to the savings account.17[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[18] Hence, petitioner should not be held liable for allowing Doronilla to withdraw

from Sterelas savings account.


29/115

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 trialto 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[19]

Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liablefor 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[20]

Private respondent, on the other hand, argues that the transaction between him and Doronilla is

not a mutuum but an accommodation,21[21] since he did not actually part with the ownership ofhis 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 savingsaccount passbook was given.22[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 asavings 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[23]

There is no merit in the petition.


30/115

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 analyzeand weigh all over again the evidence presented by the parties during trial. 24[24]The Courtsjurisdiction is in principle limited to reviewing errors of law that might have been committed by

the Court of Appeals.25[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 notsupported by the evidence on record.26[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 ofAppeals 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 consumableso 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 aloan 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:


31/115

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 indetermining the actual character of a contract.27[27] In case of doubt, the contemporaneous and

subsequent acts of the parties shall be considered in such determination.28[28]

As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that

private respondent agreed to deposit his money in the savings account of Sterela specifically for

the purpose of making it appear that said firm had sufficient capitalization for incorporation,with the promise that the amount shall be returned within thirty (30) days.29[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 themoney would notbe removed from Sterelas savings account and would be returned to privaterespondent after thirty (30) days.

Doronillas attempts to return to private respondent the amount ofP200,000.00 which the latter

deposited in Sterelas account together with an additional P12,000.00, allegedly representinginterest 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 correspondsto the fruits of the lending of the P200,000.00. Article 1935 of the Civil Code expressly states

that [t]he bailee in commodatumacquires 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,


32/115

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[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:

X X X

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 thecommission 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 bedeposited 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 savingsaccount 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 otherdefendants 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 certainRomeo Mirasol, a friend and business associate of Doronilla.

Then there is the matter of the ownership of the fund. Because of the coordination betweenDoronilla 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


33/115

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 InocenciaVives &/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 arein 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 withAtienza. 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 ofDoronilla was not authorized in so far as that account is concerned inasmuch as he had not

signed the signature card provided by the bank whenever a deposit is opened. In the third place,neither Mrs. Vives nor Sanchez had given Doronilla the authority to withdraw.

Moreover, the transfer of fund was done without the passbook having been presented. It is an

accepted practice that whenever a withdrawal is made in a savings deposit, the bank requires thepresentation of the passbook

st-cases.docx

Documents