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G.R. No. L-19190 November 29, 1922 THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. VENANCIO CONCEPCION, defendant-appellant.
By telegrams and a letter of confirmation to the manager of the Aparri branch of the Philippine National Bank, Venancio Concepcion, President of the Philippine National Bank, between April !, " ", and #ay $, " ", a%thori&ed an e'tension of credit in favor of (P%no y Concepcion, ). en C.( in the amo%nt of P*!!,!!!. +his special a%thori&ation was essential in view of the memorand%m order of President Concepcion dated #ay $, " ,, limiting the discretional power of the local manager at Aparri, Cagayan, to grant loans and disco%nt negotiable doc%ments to P-,!!!, which, in certain cases, co%ld be increased to P !,!!!. P%rs%ant to this a%thori&ation, credit aggregating P*!!,!!!, was granted the firm of (P%no y Concepcion, ). en C.,( the only sec%rity re.%ired consisting of si' demand notes. +he notes, together with the interest, were taken %p and paid by /%ly $, " ". (P%no y Concepcion, ). en C.( was a copartnership capitali&ed at P !!,!!!. Anacleto Concepcion contrib%ted P-,!!!0 Clara Vda. de Concepcion, P-,!!!0 #ig%el ). Concepcion, P1!,!!!0 Clemente P%no, P1!,!!!0 and 2osario )an Ag%stin, (casada con 3ral. Venancio Concepcion,( P-!,!!!. #ember #ig%el ). Concepcion was the administrator of the company. 4n the facts reco%nted, Venancio Concepcion, as President of the Philippine National Bank and as member of the board of directors of this bank, was charged in the Co%rt of 5irst 6nstance of Cagayan with a violation of section *- of Act No. 1$7$. 8e was fo%nd g%ilty by the 8onorable 9nri.%e V. 5ilamor, /%dge of 5irst 6nstance, and was sentenced to imprisonment for one year and si' months, to pay a fine of P*,!!!, with s%bsidiary imprisonment in case of insolvency, and the costs. )ection *- of Act No. 1$7$, effective on 5ebr%ary 1!, " ,, :%st mentioned, to which reference m%st hereafter repeatedly be made, reads as follows; (+he National Bank shall not, directly or indirectly, grant loans to any of the members of the board of directors of the bank nor to agents of the branch banks.( )ection 7" of the same Act provides; (Any person who shall violate any of the provisions of this Act shall be p%nished by a fine not to e'ceed ten tho%sand pesos, or by imprisonment not to e'ceed five years, or by both s%ch fine and imprisonment.( +hese two sections were in effect in " " when the alleged %nlawf%l acts took place, b%t were repealed by Act No. 1"*,, approved on /an%ary *!, "1 . Co%nsel for the defense assign ten errors as having been committed by the trial co%rt. +hese errors they have arg%ed adroitly and e'ha%stively in their printed brief, and again in oral arg%ment. Attorney-3eneral Villa-2eal, in an e'ceptionally acc%rate and comprehensive brief, answers the proposition of appellant one by one. +he .%estion presented are red%ced to their simplest elements in the opinion which follows; 6. <as the granting of a credit of P*!!,!!! to the copartnership (P%no y Concepcion, ). en C.( by Venancio Concepcion, President of the Philippine National Bank, a (loan( within the meaning of section *- of Act No. 1$7$= Co%nsel arg%e that the doc%ments of record do not prove that a%thority to make a loan was given, b%t only show the concession of a credit. 6n this statement of fact, co%nsel is correct, for the e'hibits in .%estion speak of a (credito( >credit? and not of a ( prestamo( >loan?. +he (credit( of an individ%al means his ability to borrow money by virt%e of the confidence or tr%st reposed by a lender that he will pay what he may promise. >@onnell vs. /ones A ,7,B, * Ala., 7"!0 Bo%vierCs Daw @ictionary.? A (loan( means the delivery by one party and the receipt by the other party of a given s%m of money, %pon an agreement, e'press or implied, to repay the s%m loaned, with or witho%t interest. >Payne vs. 3ardiner A ,E7B, 1" N. F., 7E, E$.? +he concession of a (credit( necessarily involves the granting of (loans( %p to the limit of the amo%nt fi'ed in the (credit,( 66. <as the granting of a credit of P*!!,!!! to the copartnership (P%no y Concepcion, ). en C.,( by Venancio Concepcion, President of the Philippine National Bank, a (loan( or a (disco%nt(= Co%nsel arg%e that while section *- of Act No. 1$7$ prohibits the granting of a (loan,( it does not prohibit what is commonly known as a (disco%nt.( 6n a letter dated A%g%st $, " E, 8. Parker <illis, then President of the National Bank, in.%ired of the 6ns%lar A%ditor whether section *$ of Act No. 1E 1 was intended to apply to disco%nts as well as to loans. +he r%ling of the Acting 6ns%lar A%ditor, dated A%g%st , " E, was to the effect that said section referred to loans alone, and placed no restriction %pon disco%nt transactions. 6t becomes material, therefore, to discover the distinction

between a (loan( and a (disco%nt,( and to ascertain if the instant transaction comes %nder the first or the latter denomination. @isco%nts are favored by bankers beca%se of their li.%id nat%re, growing, as they do, o%t of an act%al, live, transaction. B%t in its last analysis, to disco%nt a paper is only a mode of loaning money, with, however, these distinctions; > ? 6n a disco%nt, interest is ded%cted in advance, while in a loan, interest is taken at the e'piration of a credit0 >1? a disco%nt is always on do%ble-name paper0 a loan is generally on single-name paper. Conceding, witho%t deciding, that, as r%led by the 6ns%lar A%ditor, the law covers loans and not disco%nts, yet the concl%sion is inevitable that the demand notes signed by the firm (P%no y Concepcion, ). en C.( were not disco%nt paper b%t were mere evidences of indebtedness, beca%se > ? interest was not ded%cted from the face of the notes, b%t was paid when the notes fell d%e0 and >1? they were single-name and not do%ble-name paper. +he facts of the instant case having relation to this phase of the arg%ment are not essentially different from the facts in the Binalbagan 9state case. /%st as there it was declared that the operations constit%ted a loan and not a disco%nt, so sho%ld we here lay down the same r%ling. 666. <as the granting of a credit of P*!!,!!! to the copartnership, (P%no y Concepcion, ). en C.( by Venancio Concepcion, President of the Philippine National Bank, an (indirect loan( within the meaning of section *- of Act No. 1$7$= Co%nsel arg%e that a loan to the partnership (P%no y Concepcion, ). en C.( was not an (indirect loan.( 6n this connection, it sho%ld be recalled that the wife of the defendant held one-half of the capital of this partnership. 6n the interpretation and constr%ction of stat%tes, the primary r%le is to ascertain and give effect to the intention of the Degislat%re. 6n this instance, the p%rpose of the Degislat%re is plainly to erect a wall of safety against temptation for a director of the bank. +he prohibition against indirect loans is a recognition of the familiar ma'im that no man may serve two masters G that where personal interest clashes with fidelity to d%ty the latter almost always s%ffers. 6f, therefore, it is shown that the h%sband is financially interested in the s%ccess or fail%re of his wifeCs b%siness vent%re, a loan to partnership of which the wife of a director is a member, falls within the prohibition. Vario%s provisions of the Civil serve to establish the familiar relationship called a con:%gal partnership. >Articles * -, *"*, 7! , 7!$, 7!,, and 7 1 can be specially noted.? A loan, therefore, to a partnership of which the wife of a director of a bank is a member, is an indirect loan to s%ch director. +hat it was the intention of the Degislat%re to prohibit e'actly s%ch an occ%rrence is shown by the acknowledged fact that in this instance the defendant was tempted to mingle his personal and family affairs with his official d%ties, and to permit the loan P*!!,!!! to a partnership of no established rep%tation and witho%t asking for collateral sec%rity. 6n the case of Dester and <ife vs. 8oward Bank >A ,$!B, ** #d., --,0 * Am. 2ep., 1 #aryland said; ?, the )%preme Co%rt of

<hat then was the p%rpose of the law when it declared that no director or officer sho%ld borrow of the bank, and (if any director,( etc., (shall be convicted,( etc., (of directly or indirectly violating this section he shall be p%nished by fine and imprisonment=( <e say to protect the stockholders, depositors and creditors of the bank, against the temptation to which the directors and officers might be e'posed, and the power which as s%ch they m%st necessarily possess in the control and management of the bank, and the legislat%re %nwilling to rely %pon the implied %nderstanding that in ass%ming this relation they wo%ld not ac.%ire any interest hostile or adverse to the most e'act and faithf%l discharge of d%ty, declared in e'press terms that they sho%ld not borrow, etc., of the bank.

6n the case of People vs. Hnapp >A " 1B, 1!E N. F., *$*?, relied %pon in the Binalbagan 9state decision, it was said;
<e are of opinion the stat%te forbade the loan to his copartnership firm as well as to himself directly. +he loan was made indirectly to him thro%gh his firm.

6V. Co%ld Venancio Concepcion, President of the Philippine National Bank, be convicted of a violation of section *- of Act No. 1$7$ in relation with section 7" of the same Act, when these portions of Act No. 1$7$ were repealed by Act No. 1"*,, prior to the finding of the information and the rendition of the :%dgment= As noted along toward the beginning of this opinion, section 7" of Act No. 1$7$, in relation to section *- of the same Act, provides a p%nishment for any person who shall violate any of the provisions of the Act. 6t is

contended, however, by the appellant, that the repeal of these sections of Act No. 1$7$ by Act No. 1"*, has served to take away the basis for criminal prosec%tion. +his same .%estion has been previo%sly s%bmitted and has received an answer adverse to s%ch contention in the cases of United Stated vs. Cuna >A "!,B, 1 Phil., 17 ?0 People vs. Concepcion >A "11B, 7* Phil., E-*?0 and 4ng Chang <ing and Hwong 5ok vs. Inited )tates >A " !B, 1 , I. )., 1$10 7! Phil., !7E?. 6n other words, it has been the holding, and it m%st again be the holding, that where an Act of the Degislat%re which penali&es an offense, s%ch repeals a former Act which penali&ed the same offense, s%ch repeal does not have the effect of thereafter depriving the co%rts of :%risdiction to try, convict, and sentenced offenders charged with violations of the old law. V. <as the granting of a credit of P*!!,!!! to the copartnership (P%no y Concepcion, ). en C.( by Venancio Concepcion, President of the Philippine National Bank, in violation of section *- of Act No. 1$7$, penali&ed by this law= Co%nsel arg%e that since the prohibition contained in section *- of Act No. 1$7$ is on the bank, and since section 7" of said Act provides a p%nishment not on the bank when it violates any provisions of the law, b%t on a person violating any provisions of the same, and imposing imprisonment as a part of the penalty, the prohibition contained in said section *- is witho%t penal sanction.
lawph!l.net

+he answer is that when the corporation itself is forbidden to do an act, the prohibition e'tends to the board of directors, and to each director separately and individ%ally. >People vs. Concepcion, supra.? V6. @oes the alleged good faith of Venancio Concepcion, President of the Philippine National Bank, in e'tending the credit of P*!!,!!! to the copartnership (P%no y Concepcion, ). en C.( constit%te a legal defense= Co%nsel arg%e that if defendant committed the acts of which he was convicted, it was beca%se he was misled by r%lings coming from the 6ns%lar A%ditor. 6t is f%rthermore stated that since the loans made to the copartnership (P%no y Concepcion, ). en C.( have been paid, no loss has been s%ffered by the Philippine National Bank. Neither arg%ment, even if conceded to be tr%e, is concl%sive. Inder the stat%te which the defendant has violated, criminal intent is not necessarily material. +he doing of the inhibited act, inhibited on acco%nt of p%blic policy and p%blic interest, constit%tes the crime. And, in this instance, as previo%sly demonstrated, the acts of the President of the Philippine National Bank do not fall within the p%rview of the r%lings of the 6ns%lar A%ditor, even conceding that s%ch r%lings have controlling effect. #orse, in his work, Banks and Banking, section 1-, says;
6t is fra%d for directors to sec%re by means of their tr%st, and advantage not common to the other stockholders. +he law will not allow private profit from a tr%st, and will not listen to any proof of honest intent.

/I@3#9N+ 4n a review of the evidence of record, with reference to the decision of the trial co%rt, and the errors assigned by the appellant, and with reference to previo%s decisions of this co%rt on the same s%b:ect, we are irresistibly led to the concl%sion that no reversible error was committed in the trial of this case, and that the defendant has been proved g%ilty beyond a reasonable do%bt of the crime charged in the information. +he penalty imposed by the trial :%dge falls within the limits of the p%nitive provisions of the law. /%dgment is affirmed, with the costs of this instance against the appellant. )o ordered. Araullo, C. J., Johnson, Street, Avancea, Villamor, Ostrand, Johns, and Romualde , JJ., concur.

G.R. No. 154878 March 16, 2007 CAROLYN M. GARCIA, Petitioner, !. RICA MARI" #. $%IO, Re!&on'ent. Assailed in this petition for review on certiorari1 are the June 19, 2002 decision2 and August 20, 2002 resolution3 of the Court of Appeals (CA) in CA- !"! C# $o! %&%'' which set aside the (e)ruar* 2+, 199' decision of the "egional ,rial Court (",C) of -a.ati Cit*, /ranch %+!

0o1eti1e in (e)ruar* 199%, respondent "ica -arie 0! ,hio received fro1 petitioner Carol*n -! arcia a crossed chec.2 dated (e)ruar* 22, 199% in the a1ount of 304100,000 pa*a)le to the order of a certain -arilou 0antiago!% ,hereafter, petitioner received fro1 respondent ever* 1onth (specificall*, on -arch 22, April 2&, June 2& and Jul* 2&, all in 199%) the a1ount of 3043,000& and 5'&,%00' on Jul* 2&,+ August 2&, 0epte1)er 2& and 6cto)er 2&, 199%! 7n June 199%, respondent received fro1 petitioner another crossed chec.9 dated June 29, 199% in the a1ount of 5%00,000, also pa*a)le to the order of -arilou 0antiago!10 Conse8uentl*, petitioner received fro1 respondent the a1ount of 520,000 ever* 1onth on August %, 0epte1)er %, 6cto)er % and $ove1)er %, 199%!11 According to petitioner, respondent failed to pa* the principal a1ounts of the loans (304100,000 and 5%00,000) when the* fell due! ,hus, on (e)ruar* 22, 199&, petitioner filed a co1plaint for su1 of 1one* and da1ages in the ",C of -a.ati Cit*, /ranch %+ against respondent, see.ing to collect the su1s of 304100,000, with interest thereon at 39 a 1onth fro1 6cto)er 2&, 199% and 5%00,000, with interest thereon at 29 a 1onth fro1 $ove1)er %, 199%, plus attorne*:s fees and actual da1ages!12 5etitioner alleged that on (e)ruar* 22, 199%, respondent )orrowed fro1 her the a1ount of 304100,000 with interest thereon at the rate of 39 per 1onth, which loan would 1ature on 6cto)er 2&, 199%!13 ,he a1ount of this loan was covered )* the first chec.! 6n June 29, 199%, respondent again )orrowed the a1ount of 5%00,000 at an agreed 1onthl* interest of 29, the 1aturit* date of which was on $ove1)er %, 199%!12 ,he a1ount of this loan was covered )* the second chec.! (or )oth loans, no pro1issor* note was e;ecuted since petitioner and respondent were close friends at the ti1e!1% "espondent paid the stipulated 1onthl* interest for )oth loans )ut on their 1aturit* dates, she failed to pa* the principal a1ounts despite repeated de1ands!1&1awphi1!n<t "espondent denied that she contracted the two loans with petitioner and countered that it was -arilou 0antiago to who1 petitioner lent the 1one*! 0he clai1ed she was 1erel* as.ed )* petitioner to give the crossed chec.s to 0antiago!1' 0he issued the chec.s for 5'&,000 and 520,000 not as pa*1ent of interest )ut to acco11odate petitioner:s re8uest that respondent use her own chec.s instead of 0antiago:s!1+ 7n a decision dated (e)ruar* 2+, 199', the ",C ruled in favor of petitioner!19 7t found that respondent )orrowed fro1 petitioner the a1ounts of 304100,000 with 1onthl* interest of 39 and 5%00,000 at a 1onthl* interest of 29=20 >?@"@(6"@, finding preponderance of evidence to sustain the instant co1plaint, Audg1ent is here)* rendered in favor of BpetitionerC, sentencing BrespondentC to pa* the for1er the a1ount of= 1! B304100,000!00C or its peso e8uivalent with interest thereon at 39 per 1onth fro1 6cto)er 2&, 199% until full* paidD 2! 5%00,000!00 with interest thereon at 29 per 1onth fro1 $ove1)er %, 199% until full* paid! 3! 5100,000!00 as and for attorne*:s feesD and 2! 5%0,000!00 as and for actual da1ages! (or lac. of 1erit, Brespondent:sC counterclai1 is perforce dis1issed! >ith costs against BrespondentC! 7, 70 06 6"E@"@E!21 6n appeal, the CA reversed the decision of the ",C and ruled that there was no contract of loan )etween the parties= A perusal of the record of the case shows that BpetitionerC failed to su)stantiate her clai1 that BrespondentC indeed )orrowed 1one* fro1 her! ,here is nothing in the record that shows that BrespondentC received 1one* fro1 BpetitionerC! >hat is evident is the fact that BrespondentC received a -etro/an. BcrossedC chec. dated (e)ruar* 22, 199% in the su1 of 304100,000!00, pa*a)le to the order of -arilou 0antiago and a Cit*,rust BcrossedC chec. dated June 29, 199% in the a1ount of 5%00,000!00, again pa*a)le to the order of -arilou 0antiago, )oth of which were issued )* BpetitionerC! ,he chec.s received )* BrespondentC, )eing crossed, 1a* not )e encashed )ut onl* deposited in the )an. )* the pa*ee thereof, that is, )* -arilou 0antiago herself!

7t 1ust )e noted that crossing a chec. has the following effects= (a) the chec. 1a* not )e encashed )ut onl* deposited in the )an.D ()) the chec. 1a* )e negotiated onl* onceFto one who has an account with the )an.D (c) and the act of crossing the chec. serves as warning to the holder that the chec. has )een issued for a definite purpose so that he 1ust in8uire if he has received the chec. pursuant to that purpose, otherwise, he is not a holder in due course! Conse8uentl*, the receipt of the BcrossedC chec. )* BrespondentC is not the issuance and deliver* to the pa*ee in conte1plation of law since the latter is not the person who could ta.e the chec.s as a holder, i!e!, as a pa*ee or indorsee thereof, with intent to transfer title thereto! $either could she )e dee1ed as an agent of -arilou 0antiago with respect to the chec.s )ecause she was 1erel* facilitating the transactions )etween the for1er and BpetitionerC! >ith the foregoing circu1stances, it 1a* )e fairl* inferred that there were reall* no contracts of loan that e;isted )etween the parties! ; ; ; (e1phasis supplied)22 ?ence this petition!23 As a rule, onl* 8uestions of law 1a* )e raised in a petition for review on certiorari under "ule 2% of the "ules of Court! ?owever, this case falls under one of the e;ceptions, i!e!, when the factual findings of the CA (which held that there were no contracts of loan )etween petitioner and respondent) and the ",C (which held that there were contracts of loan) are contradictor*!22 ,he petition is i1pressed with 1erit! A loan is a real contract, not consensual, and as such is perfected onl* upon the deliver* of the o)Aect of the contract!2% ,his is evident in Art! 1932 of the Civil Code which provides= An accepted pro1ise to deliver so1ething )* wa* of co11odatu1 or si1ple loan is )inding upon the parties, )ut the co11odatu1 or si1ple loan itself shall not )e perfected until the deliver* of the o)Aect of the contract! (@1phasis supplied) 3pon deliver* of the o)Aect of the contract of loan (in this case the 1one* received )* the de)tor when the chec.s were encashed) the de)tor ac8uires ownership of such 1one* or loan proceeds and is )ound to pa* the creditor an e8ual a1ount!2& 7t is undisputed that the chec.s were delivered to respondent! ?owever, these chec.s were crossed and pa*a)le not to the order of respondent )ut to the order of a certain -arilou 0antiago! ,hus the 1ain 8uestion to )e answered is= who )orrowed 1one* fro1 petitioner F respondent or 0antiagoG 5etitioner insists that it was upon respondent:s instruction that )oth chec.s were 1ade pa*a)le to 0antiago!2' 0he 1aintains that it was also upon respondent:s instruction that )oth chec.s were delivered to her (respondent) so that she could, in turn, deliver the sa1e to 0antiago!2+ (urther1ore, she argues that once respondent received the chec.s, the latter had possession and control of the1 such that she had the choice to either forward the1 to 0antiago (who was alread* her de)tor), to retain the1 or to return the1 to petitioner!29 >e agree with petitioner! Eeliver* is the act )* which the res or su)stance thereof is placed within the actual or constructive possession or control of another!30 Although respondent did not ph*sicall* receive the proceeds of the chec.s, these instru1ents were placed in her control and possession under an arrange1ent where)* she actuall* re-lent the a1ounts to 0antiago! 0everal factors support this conclusion! (irst, respondent ad1itted that petitioner did not personall* .now 0antiago!31 7t was highl* i1pro)a)le that petitioner would grant two loans to a co1plete stranger without re8uiring as 1uch as pro1issor* notes or an* written ac.nowledg1ent of the de)t considering that the a1ounts involved were 8uite )ig! "espondent, on the other hand, alread* had transactions with 0antiago at that ti1e!32 0econd, Heticia "uiI, a friend of )oth petitioner and respondent (and whose na1e appeared in )oth parties: list of witnesses) testified that respondent:s plan was for petitioner to lend her 1one* at a 1onthl* interest rate of 39, after which respondent would lend the sa1e a1ount to 0antiago at a higher rate of %9 and realiIe a profit of 29!33 ,his e;plained wh* respondent instructed petitioner to 1a.e the chec.s pa*a)le to 0antiago! "espondent has not shown an* reason wh* "uiI: testi1on* should not )e )elieved!

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,hird, for the 304100,000 loan, respondent ad1itted issuing her own chec.s in the a1ount of 5'&,000 each (peso e8uivalent of 3043,000) for eight 1onths to cover the 1onthl* interest! (or the 5%00,000 loan, she also issued her own chec.s in the a1ount of 520,000 each for four 1onths!32 According to respondent, she 1erel* acco11odated petitioner:s re8uest for her to issue her own chec.s to cover the interest pa*1ents since petitioner was not personall* ac8uainted with 0antiago!3% 0he clai1ed, however, that 0antiago would replace the chec.s with cash!3& ?er e;planation is si1pl* incredi)le! 7t is difficult to )elieve that respondent would put herself in a position where she would )e co1pelled to pa* interest, fro1 her own funds, for loans she allegedl* did not contract! >e declared in one case that= 7n the assess1ent of the testi1onies of witnesses, this Court is guided )* the rule that for evidence to )e )elieved, it 1ust not onl* proceed fro1 the 1outh of a credi)le witness, )ut 1ust )e credi)le in itself such as the co11on e;perience of 1an.ind can approve as pro)a)le under the circu1stances! >e have no test of the truth of hu1an testi1on* e;cept its confor1it* to our .nowledge, o)servation, and e;perience! >hatever is repugnant to these )elongs to the 1iraculous, and is outside of Auridical cogniIance!3' (ourth, in the petition for insolvenc* sworn to and filed )* 0antiago, it was respondent, not petitioner, who was listed as one of her (0antiago:s) creditors!3+ Hast, respondent ine;plica)l* never presented 0antiago as a witness to corro)orate her stor*!39 ,he presu1ption is that Jevidence willfull* suppressed would )e adverse if produced!J20 "espondent was not a)le to overturn this presu1ption! >e hold that the CA co11itted reversi)le error when it ruled that respondent did not )orrow the a1ounts of 304100,000 and 5%00,000 fro1 petitioner! >e instead agree with the ruling of the ",C 1a.ing respondent lia)le for the principal a1ounts of the loans! >e do not, however, agree that respondent is lia)le for the 39 and 29 1onthl* interest for the 304100,000 and 5%00,000 loans respectivel*! ,here was no written proof of the interest pa*a)le e;cept for the ver)al agree1ent that the loans would earn 39 and 29 interest per 1onth! Article 19%& of the Civil Code provides that JBnCo interest shall )e due unless it has )een e;pressl* stipulated in writing!J /e that as it 1a*, while there can )e no stipulated interest, there can )e legal interest pursuant to Article 2209 of the Civil Code! 7t is well-settled that= >hen the o)ligation is )reached, and it consists in the pa*1ent of a su1 of 1one*, i!e!, a loan or for)earance of 1one*, the interest due should )e that which 1a* have )een stipulated in writing! (urther1ore, the interest due shall itself earn legal interest fro1 the ti1e it is Audiciall* de1anded! 7n the a)sence of stipulation, the rate of interest shall )e 129 per annu1 to )e co1puted fro1 default, i!e!, fro1 Audicial or e;traAudicial de1and under and su)Aect to the provisions of Article 11&9 of the Civil Code!21 ?ence, respondent is lia)le for the pa*1ent of legal interest per annu1 to )e co1puted fro1 $ove1)er 21, 199%, the date when she received petitioner:s de1and letter!22 (ro1 the finalit* of the decision until it is full* paid, the a1ount due shall earn interest at 129 per annu1, the interi1 period )eing dee1ed e8uivalent to a for)earance of credit!23 ,he award of actual da1ages in the a1ount of 5%0,000 and 5100,000 attorne*:s fees is deleted since the ",C decision did not e;plain the factual )ases for these da1ages! >?@"@(6"@, the petition is here)* "A$,@E and the June 19, 2002 decision and August 20, 2002 resolution of the Court of Appeals in CA- !"! C# $o! %&%'' are "@#@"0@E and 0@, A07E@! ,he (e)ruar* 2+, 199' decision of the "egional ,rial Court in Civil Case $o! 9&-2&& is A((7"-@E with the -6E7(7CA,76$ that respondent is directed to pa* petitioner the a1ounts of 304100,000 and 5%00,000 at 129 per annu1 interest fro1 $ove1)er 21, 199% until the finalit* of the decision! ,he total a1ount due as of the date of finalit* will earn interest of 129 per annu1 until full* paid! ,he award of actual da1ages and attorne*:s fees is deleted! 06 6"E@"@E! G.R. No. L(24)68 A&ri* 27, 1)72 #A+RA IMPOR$ an' ",POR$ CO., INC., &*ainti--(a&&e**ee,

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!. ."/"LOPM"N$ 0AN1 O2 $%" P%ILIPPIN"#, 'e-en'ant(a&&e**ant. 7n Civil Case $o! %%90+ of the Court of (irst 7nstance of -anila, Audg1ent was rendered on June 2+, 19&% sentencing defendant Eevelop1ent /an. of the 5hilippines (E/5) to pa* actual and conse8uential da1ages to plaintiff 0aura 71port and @;port Co!, 7nc! in the a1ount of 53+3,323!&+, plus interest at the legal rate fro1 the date the co1plaint was filed and attorne*Ks fees in the a1ount of 5%,000!00! ,he present appeal is fro1 that Audg1ent! 7n Jul* 19%3 the plaintiff (hereinafter referred to as 0aura, 7nc!) applied to the "eha)ilitation (inance Corporation ("(C), )efore its conversion into E/5, for an industrial loan of 5%00,000!00, to )e used as follows= 52%0,000!00 for the construction of a factor* )uilding (for the 1anufacture of Aute sac.s)D 5220,900!00 to pa* the )alance of the purchase price of the Aute 1ill 1achiner* and e8uip1entD and 59,100!00 as additional wor.ing capital! 5arentheticall*, it 1a* )e 1entioned that the Aute 1ill 1achiner* had alread* )een purchased )* 0aura on the strength of a letter of credit e;tended )* the 5rudential /an. and ,rust Co!, and arrived in Eavao Cit* in Jul* 19%3D and that to secure its release without first pa*ing the draft, 0aura, 7nc! e;ecuted a trust receipt in favor of the said )an.! 6n Januar* ', 19%2 "(C passed "esolution $o! 12% approving the loan application for 5%00,000!00, to )e secured )* a first 1ortgage on the factor* )uilding to )e constructed, the land site thereof, and the 1achiner* and e8uip1ent to )e installed! A1ong the other ter1s spelled out in the resolution were the following= 1! ,hat the proceeds of the loan shall )e utiliIed e;clusivel* for the following purposes=

(or construction of factor* )uilding 52%0,000!00 (or pa*1ent of the )alance of purchase price of 1achiner* and e8uip1ent (or wor.ing capital ,6,AH 9,100!00 220,900!00

5%00,000!00

2! ,hat -r! L -rs! "a1on @! 0aura, 7nocencia Arellano, Aniceto Caol)o* and regoria @sta)illo and China @ngineers, Htd! shall sign the pro1issor* notes Aointl* with the )orrower-corporationD %! ,hat release shall )e 1ade at the discretion of the "eha)ilitation (inance Corporation, su)Aect to availa)ilit* of funds, and as the construction of the factor* )uildings progresses, to )e certified to )* an appraiser of this CorporationDJ 0aura, 7nc! was officiall* notified of the resolution on Januar* 9, 19%2! ,he da* )efore, however, evidentl* having otherwise )een infor1ed of its approval, 0aura, 7nc! wrote a letter to "(C, re8uesting a 1odification of the ter1s laid down )* it, na1el*= that in lieu of having China @ngineers, Htd! (which was willing to assu1e lia)ilit* onl* to the e;tent of its stoc. su)scription with 0aura, 7nc!) sign as co-1a.er on the corresponding pro1issor* notes, 0aura, 7nc! would put up a )ond for 5123,%00!00, an a1ount e8uivalent to such su)scriptionD and that -aria 0! "oca would )e su)stituted for 7nocencia Arellano as one of the other co-1a.ers, having ac8uired the latterKs shares in 0aura, 7nc! 7n view of such re8uest "(C approved "esolution $o! '3& on (e)ruar* 2, 19%2, designating of the 1e1)ers of its /oard of overnors, for certain reasons stated in the resolution, Jto ree;a1ine all the aspects of this approved loan !!! with special reference as to the advisa)ilit* of financing this particular proAect )ased on present conditions o)taining in the operations of Aute 1ills, and to su)1it his findings thereon at the ne;t 1eeting of the /oard!J 6n -arch 22, 19%2 0aura, 7nc! wrote "(C that China @ngineers, Htd! had again agreed to act as co-signer for the loan, and as.ed that the necessar* docu1ents )e prepared in accordance with the ter1s and conditions specified in "esolution $o! 12%! 7n connection with the ree;a1ination of the proAect to )e financed with the loan applied for, as stated in "esolution $o! '3&, the parties na1ed their respective co11ittees of engineers and technical 1en to 1eet with each other and underta.e the necessar* studies, although in appointing its own co11ittee 0aura, 7nc! 1ade the o)servation that the sa1e Jshould not )e ta.en as an ac8uiescence on (its) part

to novate, or accept new conditions to, the agree1ent alread*) entered into,J referring to its acceptance of the ter1s and conditions 1entioned in "esolution $o! 12%! 6n April 13, 19%2 the loan docu1ents were e;ecuted= the pro1issor* note, with (!"! ?alling, representing China @ngineers, Htd!, as one of the co-signersD and the corresponding deed of 1ortgage, which was dul* registered on the following April 1'! 7t appears, however, that despite the for1al e;ecution of the loan agree1ent the ree;a1ination conte1plated in "esolution $o! '3& proceeded! 7n a 1eeting of the "(C /oard of overnors on June 10, 19%2, at which "a1on 0aura, 5resident of 0aura, 7nc!, was present, it was decided to reduce the loan fro1 5%00,000!00 to 5300,000!00! "esolution $o! 39+9 was approved as follows= "@06H3,76$ $o! 39+9! "educing the Hoan ranted 0aura 71port L @;port Co!, 7nc! under "esolution $o! 12%, C!0!, fro1 5%00,000!00 to 5300,000!00! 5ursuant to /d! "es! $o! '3&, c!s!, authoriIing the re-e;a1ination of all the various aspects of the loan granted the 0aura 71port L @;port Co! under "esolution $o! 12%, c!s!, for the purpose of financing the 1anufacture of Aute sac.s in Eavao, with special reference as to the advisa)ilit* of financing this particular proAect )ased on present conditions o)taining in the operation of Aute 1ills, and after having heard "a1on @! 0aura and after e;tensive discussion on the su)Aect the /oard, upon reco11endation of the Chair1an, "@06H#@E that the loan granted the 0aura 71port L @;port Co! )e "@E3C@E fro1 5%00,000 to 5300,000 and that releases up to 5100,000 1a* )e authoriIed as 1a* )e necessar* fro1 ti1e to ti1e to place the factor* in actual operation= 5"6#7E@E that all ter1s and conditions of "esolution $o! 12%, c!s!, not inconsistent herewith, shall re1ain in full force and effect!J 6n June 19, 19%2 another hitch developed! (!"! ?alling, who had signed the pro1issor* note for China @ngineers Htd! Aointl* and severall* with the other "(C that his co1pan* no longer to of the loan and therefore considered the sa1e as cancelled as far as it was concerned! A follow-up letter dated Jul* 2 re8uested "(C that the registration of the 1ortgage )e withdrawn! 7n the 1eanti1e 0aura, 7nc! had written "(C re8uesting that the loan of 5%00,000!00 )e granted! ,he re8uest was denied )* "(C, which added in its letter-repl* that it was Jconstrained to consider as cancelled the loan of 5300,000!00 !!! in view of a notification !!! fro1 the China @ngineers Htd!, e;pressing their desire to consider the loan insofar as the* are concerned!J 6n Jul* 22, 19%2 0aura, 7nc! too. e;ception to the cancellation of the loan and infor1ed "(C that China @ngineers, Htd! Jwill at an* ti1e reinstate their signature as co-signer of the note if "(C releases to us the 5%00,000!00 originall* approved )* *ou!J! 6n Eece1)er 1', 19%2 "(C passed "esolution $o! 90+3, restoring the loan to the original a1ount of 5%00,000!00, Jit appearing that China @ngineers, Htd! is now willing to sign the pro1issor* notes Aointl* with the )orrower-corporation,J )ut with the following proviso= ,hat in view of o)servations 1ade of the shortage and high cost of i1ported raw 1aterials, the Eepart1ent of Agriculture and $atural "esources shall certif* to the following= 1! ,hat the raw 1aterials needed )* the )orrower-corporation to carr* out its operation are availa)le in the i11ediate vicinit*D and 2! ,hat there is prospect of increased production thereof to provide ade8uatel* for the re8uire1ents of the factor*!J ,he action thus ta.en was co11unicated to 0aura, 7nc! in a letter of "(C dated Eece1)er 22, 19%2, wherein it was e;plained that the certification )* the Eepart1ent of Agriculture and $atural "esources was re8uired Jas the intention of the original approval (of the loan) is to develop the 1anufacture of sac.s on the )asis of locall* availa)le raw 1aterials!J ,his point is i1portant, and sheds light on the su)se8uent actuations of the parties! 0aura, 7nc! does not den* that the factor* he was )uilding in Eavao was for the 1anufacture of )ags fro1 local raw 1aterials! ,he cover page of its )rochure (@;h! -) descri)es the proAect as a JJoint venture )* and )etween the -indanao 7ndustr* Corporation and the 0aura 71port and @;port Co!, 7nc! to finance, 1anage and operate a Menaf 1ill plant, to 1anufacture copra and corn )ags, runners, floor 1attings, carpets, draperiesD out of 1009 local raw 1aterials, principal .enaf!J ,he e;planator* note on page 1 of the sa1e )rochure states that, the venture Jis the first serious atte1pt in this countr* to use 1009 locall* grown raw 1aterials nota)l* .enaf which is presentl* grown co11erciall* in the7sland of -indanao where the proposed Aute1ill is located !!!J

,his fact, according to defendant E/5, is what 1oved "(C to approve the loan application in the first place, and to re8uire, in its "esolution $o! 90+3, a certification fro1 the Eepart1ent of Agriculture and $atural "esources as to the availa)ilit* of local raw 1aterials to provide ade8uatel* for the re8uire1ents of the factor*! 0aura, 7nc! itself confir1ed the defendantKs stand i1pliedl* in its letter of Januar* 21, 19%%= (1) stating that according to a special stud* 1ade )* the /ureau of (orestr* J.enaf will not )e availa)le in sufficient 8uantit* this *ear or pro)a)l* even ne;t *earDJ (2) re8uesting Jassurances (fro1 "(C) that 1* co1pan* and associates will )e a)le to )ring in sufficient Aute 1aterials as 1a* )e necessar* for the full operation of the Aute 1illDJ and (3) as.ing that releases of the loan )e 1ade as follows= a) (or the pa*1ent of the receipt for Aute 1ill 1achineries with the 5rudential /an. L ,rust Co1pan* 52%0,000!00

((or i11ediate release) )) (or the purchase of 1aterials and e8uip1ent per attached list to ena)le the Aute 1ill to operate 1+2,213!91 c) (or raw 1aterials and la)or &',%+&!09

1) 52%,000!00 to )e released on the opening of the letter of credit for raw Aute for 42%,000!00! 2) 52%,000!00 to )e released upon arrival of raw Aute! 3) 51',%+&!09 to )e released as soon as the 1ill is read* to operate! 6n Januar* 2%, 19%% "(C sent to 0aura, 7nc! the following repl*= Eear 0irs= ,his is with reference to *our letter of Januar* 21, 19%%, regarding the release of *our loan under consideration of 5%00,000! As stated in our letter of Eece1)er 22, 19%2, the releases of the loan, if revived, are proposed to )e 1ade fro1 ti1e to ti1e, su)Aect to availa)ilit* of funds towards the end that the sac. factor* shall )e placed in actual operating status! >e shall )e a)le to act on *our re8uest for revised purpose and 1anner of releases upon re-appraisal of the securities offered for the loan! >ith respect to our re8uire1ent that the Eepart1ent of Agriculture and $atural "esources certif* that the raw 1aterials needed are availa)le in the i11ediate vicinit* and that there is prospect of increased production thereof to provide ade8uatel* the re8uire1ents of the factor*, we wish to reiterate that the )asis of the original approval is to develop the 1anufacture of sac.s on the )asis of the locall* availa)le raw 1aterials! Nour state1ent that *ou will have to rel* on the i1portation of Aute and *our re8uest that we give *ou assurance that *our co1pan* will )e a)le to )ring in sufficient Aute 1aterials as 1a* )e necessar* for the operation of *our factor*, would not )e in line with our principle in approving the loan! >ith the foregoing letter the negotiations ca1e to a standstill! 0aura, 7nc! did not pursue the 1atter further! 7nstead, it re8uested "(C to cancel the 1ortgage, and so, on June 1', 19%% "(C e;ecuted the corresponding deed of cancellation and delivered it to "a1on (! 0aura hi1self as president of 0aura, 7nc! 7t appears that the cancellation was re8uested to 1a.e wa* for the registration of a 1ortgage contract, e;ecuted on August &, 19%2, over the sa1e propert* in favor of the 5rudential /an. and ,rust Co!, under which contract 0aura, 7nc! had up to Eece1)er 31 of the sa1e *ear within which to pa* its o)ligation on the trust receipt heretofore 1entioned! 7t appears further that for failure to pa* the said o)ligation the 5rudential /an. and ,rust Co! sued 0aura, 7nc! on -a* 1%, 19%%! 6n Januar* 9, 19&2, ahnost 9 *ears after the 1ortgage in favor of "(C was cancelled at the re8uest of 0aura, 7nc!, the latter co11enced the present suit for da1ages, alleging failure of "(C (as predecessor of the

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defendant E/5) to co1pl* with its o)ligation to release the proceeds of the loan applied for and approved, there)* preventing the plaintiff fro1 co1pleting or pa*ing contractual co11it1ents it had entered into, in connection with its Aute 1ill proAect! ,he trial court rendered Audg1ent for the plaintiff, ruling that there was a perfected contract )etween the parties and that the defendant was guilt* of )reach thereof! ,he defendant pleaded )elow, and reiterates in this appeal= (1) that the plaintiffKs cause of action had prescri)ed, or that its clai1 had )een waived or a)andonedD (2) that there was no perfected contractD and (3) that assu1ing there was, the plaintiff itself did not co1pl* with the ter1s thereof! >e hold that there was indeed a perfected consensual contract, as recogniIed in Article 1932 of the Civil Code, which provides= A",! 19%2! An accepted pro1ise to deliver so1ething, )* wa* of co11odatu1 or si1ple loan is )inding upon the parties, )ut the co11odatu1 or si1ple loan itself shall not )e perferted until the deliver* of the o)Aect of the contract! ,here was undou)tedl* offer and acceptance in this case= the application of 0aura, 7nc! for a loan of 5%00,000!00 was approved )* resolution of the defendant, and the corresponding 1ortgage was e;ecuted and registered! /ut this fact alone falls short of resolving the )asic clai1 that the defendant failed to fulfill its o)ligation and the plaintiff is therefore entitled to recover da1ages! 7t should )e noted that "(C entertained the loan application of 0aura, 7nc! on the assu1ption that the factor* to )e constructed would utiliIe locall* grown raw 1aterials, principall* .enaf! ,here is no serious dispute a)out this! 7t was in line with such assu1ption that when "(C, )* "esolution $o! 90+3 approved on Eece1)er 1', 19%2, restored the loan to the original a1ount of 5%00,000!00! it i1posed two conditions, to wit= J(1) that the raw 1aterials needed )* the )orrower-corporation to carr* out its operation are availa)le in the i11ediate vicinit*D and (2) that there is prospect of increased production thereof to provide ade8uatel* for the re8uire1ents of the factor*!J ,he i1position of those conditions was )* no 1eans a deviation fro1 the ter1s of the agree1ent, )ut rather a step in its i1ple1entation! ,here was nothing in said conditions that contradicted the ter1s laid down in "(C "esolution $o! 12%, passed on Januar* ', 19%2, na1el* F Jthat the proceeds of the loan shall )e utiliIed e;clusivel* for the following purposes= for construction of factor* )uilding F 52%0,000!00D for pa*1ent of the )alance of purchase price of 1achiner* and e8uip1ent F 5220,900!00D for wor.ing capital F 59,100!00!J @videntl* 0aura, 7nc! realiIed that it could not 1eet the conditions re8uired )* "(C, and so wrote its letter of Januar* 21, 19%%, stating that local Aute Jwill not )e a)le in sufficient 8uantit* this *ear or pro)a)l* ne;t *ear,J and as.ing that out of the loan agreed upon the su1 of 5&',%+&!09 )e released Jfor raw 1aterials and la)or!J ,his was a deviation fro1 the ter1s laid down in "esolution $o! 12% and e1)odied in the 1ortgage contract, i1pl*ing as it did a diversion of part of the proceeds of the loan to purposes other than those agreed upon! >hen "(C turned down the re8uest in its letter of Januar* 2%, 19%% the negotiations which had )een going on for the i1ple1entation of the agree1ent reached an i1passe! 0aura, 7nc! o)viousl* was in no position to co1pl* with "(CKs conditions! 0o instead of doing so and insisting that the loan )e released as agreed upon, 0aura, 7nc! as.ed that the 1ortgage )e cancelled, which was done on June 1%, 19%%! ,he action thus ta.en )* )oth parties was in the nature cf 1utual desistance F what -anresa ter1s J1utuo disensoJ 1 F which is a 1ode of e;tinguishing o)ligations! 7t is a concept that derives fro1 the principle that since 1utual agree1ent can create a contract, 1utual disagree1ent )* the parties can cause its e;tinguish1ent! 2 ,he su)se8uent conduct of 0aura, 7nc! confir1s this desistance! 7t did not protest against an* alleged )reach of contract )* "(C, or even point out that the latterKs stand was legall* unAustified! 7ts re8uest for cancellation of the 1ortgage carried no reservation of whatever rights it )elieved it 1ight have against "(C for the latterKs nonco1pliance! 7n 19&2 it even applied with E/5 for another loan to finance a rice and corn proAect, which application was disapproved! 7t was onl* in 19&2, nine *ears after the loan agree1ent had )een cancelled at its own re8uest, that 0aura, 7nc! )rought this action for da1ages!All these circu1stances de1onstrate )e*ond dou)t that the said agree1ent had )een e;tinguished )* 1utual desistance F and that on the initiative of the plaintiffappellee itself! >ith this view we ta.e of the case, we find it unnecessar* to consider and resolve the other issues raised in the respective )riefs of the parties! >?@"@(6"@, the Audg1ent appealed fro1 is reversed and the co1plaint dis1issed, with costs against the plaintiff-appellee!

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[G.R. No. 1 ! 2. Febr"#r$ 1%, 2002& 'PI INVEST(ENT CORPORATION, )e*+*+o,er, v-. HON. CO.RT OF APPEALS #,/ ALS (ANAGE(ENT 0 DEVELOP(ENT CORPORATION, re-)o,/e,*-.
,his petition for certiorari assails the decision dated (e)ruar* 2+, 199', of the Court of Appeals and its resolution dated April 21, 199+, in CA- !"! C# $o! 3+++'! ,he appellate court affir1ed the Audg1ent of the "egional ,rial Court of 5asig Cit*, /ranch 1%1, in (a) Civil Case $o! 11+31, for foreclosure of 1ortgage )* petitioner /57 7nvest1ent Corporation (/577C for )revit*) against private respondents AH0 -anage1ent and Eevelop1ent Corporation and Antonio M! HitonAua,B1C consolidated with ()) Civil Case $o! %2093, for da1ages with pra*er for the issuance of a writ of preli1inar* inAunction )* the private respondents against said petitioner! ,he trial court had held that private respondents were not in default in the pa*1ent of their 1onthl* a1ortiIation, hence, the e;traAudicial foreclosure conducted )* /577C was pre1ature and 1ade in )ad faith! 7t awarded private respondents the a1ount of 5300,000 for 1oral da1ages, 5%0,000 for e;e1plar* da1ages, and 5%0,000 for attorne*:s fees and e;penses for litigation! 7t li.ewise dis1issed the foreclosure suit for )eing pre1ature! ,he facts are as follows= (ran. "oa o)tained a loan at an interest rate of 1& 1O29 per annu1 fro1 A*ala 7nvest1ent and Eevelop1ent Corporation (A7EC), the predecessor of petitioner /577C, for the construction of a house on his lot in $ew Ala)ang #illage, -untinlupa! 0aid house and lot were 1ortgaged to A7EC to secure the loan! 0o1eti1e in 19+0, "oa sold the house and lot to private respondents AH0 and Antonio HitonAua for 5+%0,000! ,he* paid 53%0,000 in cash and assu1ed the 5%00,000 )alance of "oa:s inde)tedness with A7EC! ,he latter, however, was not willing to e;tend the old interest rate to private respondents and proposed to grant the1 a new loan of 5%00,000 to )e applied to "oa:s de)t and secured )* the sa1e propert*, at an interest rate of 209 per annu1 and service fee of 19 per annu1 on the outstanding principal )alance pa*a)le within ten *ears in e8ual 1onthl* a1ortiIation of 59,99&!%+ and penalt* interest at the rate of 219 per annu1 per da* fro1 the date the a1ortiIation )eca1e due and pa*a)le! Conse8uentl*, in -arch 19+1, private respondents e;ecuted a 1ortgage deed containing the a)ove stipulations with the provision that pa*1ent of the 1onthl* a1ortiIation shall co11ence on -a* 1, 19+1! 6n August 13, 19+2, AH0 and HitonAua updated "oa:s arrearages )* pa*ing /577C the su1 of 5190,&01!3%! ,his reduced "oa:s principal )alance to 52%',202!90 which, in turn, was li8uidated when /577C applied thereto the proceeds of private respondents: loan of 5%00,000! 6n 0epte1)er 13, 19+2, /577C released to private respondents 5',12&!+', purporting to )e what was left of their loan after full pa*1ent of "oa:s loan! 7n June 19+2, /577C instituted foreclosure proceedings against private respondents on the ground that the* failed to pa* the 1ortgage inde)tedness which fro1 -a* 1, 19+1 to June 30, 19+2, a1ounted to (our ?undred 0event* (ive ,housand (ive ?undred @ight* (ive and 31O100 5esos (52'%,%+%!31)! A notice of sheriff:s sale was pu)lished on August 13, 19+2! 6n (e)ruar* 2+, 19+%, AH0 and HitonAua filed Civil Case $o! %2093 against /577C! ,he* alleged, a1ong others, that the* were not in arrears in their pa*1ent, )ut in fact 1ade an overpa*1ent as of June 30, 19+2! ,he* 1aintained that the* should not )e 1ade to pa* a1ortiIation )efore the actual release of the 5%00,000 loan in August and 0epte1)er 19+2! (urther, out of the 5%00,000 loan, onl* the total a1ount of 52&2,3%1!'' was released to private respondents! ?ence, appl*ing the effects of legal co1pensation, the )alance of 53%,&2+!23 should )e applied to the initial 1onthl* a1ortiIation for the loan! 6n August 31, 19++, the trial court rendered its Audg1ent in Civil Case $os! 11+31 and %2093, thus= >?@"@(6"@, Audg1ent is here)* rendered in favor of AH0 -anage1ent and Eevelop1ent Corporation and Antonio M! HitonAua and against /57 7nvest1ent Corporation, holding that the a1ount of loan granted )* /57 to AH0 and HitonAua was onl* in the principal su1 of 52&2,3%1!'', with interest at 209 plus service charge of 19 per annu1, pa*a)le on e8ual 1onthl* and successive a1ortiIations at 59,2+3!+3 for ten (10) *ears or one

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hundred twent* (120) 1onths! ,he a1ortiIation schedule attached as Anne; PAQ to the PEeed of -ortgageQ is correspondingl* refor1ed as aforestated! ,he Court further finds that AH0 and HitonAua suffered co1pensa)le da1ages when /57 caused their pu)lication in a newspaper of general circulation as defaulting de)tors, and therefore orders /57 to pa* AH0 and HitonAua the following su1s= a) 5300,000!00 for and as 1oral da1agesD )) 5%0,000!00 as and for e;e1plar* da1agesD c) 5%0,000!00 as and for attorne*:s fees and e;penses of litigation! ,he foreclosure suit (Civil Case $o! 11+31) is here)* E70-700@E for )eing pre1ature! Costs against /57! 06 6"E@"@E!B2C /oth parties appealed to the Court of Appeals! ?owever, private respondents: appeal was dis1issed for nonpa*1ent of doc.et fees! 6n (e)ruar* 2+, 199', the Court of Appeals pro1ulgated its decision, the dispositive portion reads= >?@"@(6"@, finding no error in the appealed decision the sa1e is here)* A((7"-@E in toto! 06 6"E@"@E!B3C 7n its decision, the Court of Appeals reasoned that a si1ple loan is perfected onl* upon the deliver* of the o)Aect of the contract! ,he contract of loan )etween /577C and AH0 L HitonAua was perfected onl* on 0epte1)er 13, 19+2, the date when /577C released the purported )alance of the 5%00,000 loan after deducting therefro1 the value of "oa:s inde)tedness! ,hus, pa*1ent of the 1onthl* a1ortiIation should co11ence onl* a 1onth after the said date, as can )e inferred fro1 the stipulations in the contract! ,his, despite the e;press agree1ent of the parties that pa*1ent shall co11ence on -a* 1, 19+1! (ro1 6cto)er 19+2 to June 19+2, the total a1ortiIation due was onl* 5192,9&0!23! @vidence showed that private respondents had an overpa*1ent, )ecause as of June 19+2, the* alread* paid a total a1ount of 5201,'91!9&! ,herefore, there was no )asis for /577C to e;traAudiciall* foreclose the 1ortgage and cause the pu)lication in newspapers concerning private respondents: delin8uenc* in the pa*1ent of their loan! ,his fact constituted sufficient ground for 1oral da1ages in favor of private respondents! ,he 1otion for reconsideration filed )* petitioner /577C was li.ewise denied, hence this petition, where /577C su)1its for resolution the following issues= 7! >?@,?@" 6" $6, A C6$,"AC, 6( H6A$ 70 A C6$0@$03AH C6$,"AC, 7$ ,?@ H7 ?, 6( ,?@ "3H@ HA7E E6>$ 7$ /6$$@#7@ #0! C63", 6( A55@AH0, 12% 0C"A 122! 77! >?@,?@" 6" $6, /57 0?63HE /@ ?@HE H7A/H@ (6" -6"AH A$E @R@-5HA"N EA-A @0 A$E A,,6"$@N:0 (@@0 7$ ,?@ (AC@ 6( 7""@ 3HA" 5AN-@$,0 -AE@ /N AH0 A$E 65560@E ,6 ,?@ "3H@ HA7E E6>$ 7$ 06C7AH 0@C3"7,N 0N0,@- #0! C63", 6( A55@AH0, 120 0C"A '0'! 6n the first issue, petitioner contends that the Court of Appeals erred in ruling that )ecause a si1ple loan is perfected upon the deliver* of the o)Aect of the contract, the loan contract in this case was perfected onl* on 0epte1)er 13, 19+2! 5etitioner clai1s that a contract of loan is a consensual contract, and a loan contract is perfected at the ti1e the contract of 1ortgage is e;ecuted confor1a)l* with our ruling in /onnevie v! Court of Appeals, 12% 0C"A 122! 7n the present case, the loan contract was perfected on -arch 31, 19+1, the date when the 1ortgage deed was e;ecuted, hence, the a1ortiIation and interests on the loan should )e co1puted fro1 said date! 5etitioner also argues that while the docu1ents showed that the loan was released onl* on August 19+2, the loan was actuall* released on -arch 31, 19+1, when /577C issued a cancellation of 1ortgage of (ran. "oa:s loan! ,his finds support in the registration on -arch 31, 19+1 of the Eeed of A)solute 0ale e;ecuted )* "oa in

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favor of AH0, transferring the title of the propert* to AH0, and AH0 e;ecuting the -ortgage Eeed in favor of /577C! -oreover, petitioner clai1s, the dela* in the release of the loan should )e attri)uted to private respondents! As /577C onl* agreed to e;tend a 5%00,000 loan, private respondents were re8uired to reduce (ran. "oa:s loan )elow said a1ount! According to petitioner, private respondents were onl* a)le to do so in August 19+2! 7n their co11ent, private respondents assert that )ased on Article 1932 of the Civil Code,B2C a si1ple loan is perfected upon the deliver* of the o)Aect of the contract, hence a real contract! 7n this case, even though the loan contract was signed on -arch 31, 19+1, it was perfected onl* on 0epte1)er 13, 19+2, when the full loan was released to private respondents! ,he* su)1it that petitioner 1isread /onnevie! ,o give 1eaning to Article 1932, according to private respondents, /onnevie 1ust )e construed to 1ean that the contract to e;tend the loan was perfected on -arch 31, 19+1 )ut the contract of loan itself was onl* perfected upon the deliver* of the full loan to private respondents on 0epte1)er 13, 19+2! 5rivate respondents further 1aintain that even granting, arguendo, that the loan contract was perfected on -arch 31, 19+1, and their pa*1ent did not start a 1onth thereafter, still no default too. place! According to private respondents, a perfected loan agree1ent i1poses reciprocal o)ligations, where the o)ligation or pro1ise of each part* is the consideration of the other part*! 7n this case, the consideration for /577C in entering into the loan contract is the pro1ise of private respondents to pa* the 1onthl* a1ortiIation! (or the latter, it is the pro1ise of /577C to deliver the 1one*! 7n reciprocal o)ligations, neither part* incurs in dela* if the other does not co1pl* or is not read* to co1pl* in a proper 1anner with what is incu1)ent upon hi1! ,herefore, private respondents conclude, the* did not incur in dela* when the* did not co11ence pa*ing the 1onthl* a1ortiIation on -a* 1, 19+1, as it was onl* on 0epte1)er 13, 19+2 when petitioner full* co1plied with its o)ligation under the loan contract! >e agree with private respondents! A loan contract is not a consensual contract )ut a real contract! 7t is perfected onl* upon the deliver* of the o)Aect of the contract!B%C 5etitioner 1isapplied /onnevie! ,he contract in /onnevie declared )* this Court as a perfected consensual contract falls under the first clause of Article 1932, Civil Code! 7t is an accepted pro1ise to deliver so1ething )* wa* of si1ple loan! 7n 0aura 71port and @;port Co! 7nc! vs! Eevelop1ent /an. of the 5hilippines, 22 0C"A 22%, petitioner applied for a loan of 5%00,000 with respondent )an.! ,he latter approved the application through a )oard resolution! ,hereafter, the corresponding 1ortgage was e;ecuted and registered! ?owever, )ecause of acts attri)uta)le to petitioner, the loan was not released! Hater, petitioner instituted an action for da1ages! >e recogniIed in this case, a perfected consensual contract which under nor1al circu1stances could have 1ade the )an. lia)le for not releasing the loan! ?owever, since the fault was attri)uta)le to petitioner therein, the court did not award it da1ages! A perfected consensual contract, as shown a)ove, can give rise to an action for da1ages! ?owever, said contract does not constitute the real contract of loan which re8uires the deliver* of the o)Aect of the contract for its perfection and which gives rise to o)ligations onl* on the part of the )orrower!B&C 7n the present case, the loan contract )etween /57, on the one hand, and AH0 and HitonAua, on the other, was perfected onl* on 0epte1)er 13, 19+2, the date of the second release of the loan! (ollowing the intentions of the parties on the co11ence1ent of the 1onthl* a1ortiIation, as found )* the Court of Appeals, private respondents: o)ligation to pa* co11enced onl* on 6cto)er 13, 19+2, a 1onth after the perfection of the contract!B'C >e also agree with private respondents that a contract of loan involves a reciprocal o)ligation, wherein the o)ligation or pro1ise of each part* is the consideration for that of the other!B+C As averred )* private respondents, the pro1ise of /577C to e;tend and deliver the loan is upon the consideration that AH0 and HitonAua shall pa* the 1onthl* a1ortiIation co11encing on -a* 1, 19+1, one 1onth after the supposed release of the loan! 7t is a )asic principle in reciprocal o)ligations that neither part* incurs in dela*, if the other does not co1pl* or is not read* to co1pl* in a proper 1anner with what is incu1)ent upon hi1!B9C 6nl* when a part* has perfor1ed his part of the contract can he de1and that the other part* also fulfills his own o)ligation and if the latter fails, default sets in! Conse8uentl*, petitioner could onl* de1and for the pa*1ent of the 1onthl* a1ortiIation after 0epte1)er 13, 19+2 for it was onl* then when it co1plied with its o)ligation under the loan contract! ,herefore, in co1puting the a1ount due as of the date when /577C e;traAudiciall* caused the foreclosure of the 1ortgage, the starting date is 6cto)er 13, 19+2 and not -a* 1, 19+1!

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6ther points raised )* petitioner in connection with the first issue, such as the date of actual release of the loan and whether private respondents were the cause of the dela* in the release of the loan, are factual! 0ince petitioner has not shown that the instant case is one of the e;ceptions to the )asic rule that onl* 8uestions of law can )e raised in a petition for review under "ule 2% of the "ules of Court,B10C factual 1atters need not tarr* us now! 6n these points we are )ound )* the findings of the appellate and trial courts! 6n the second issue, petitioner clai1s that it should not )e held lia)le for 1oral and e;e1plar* da1ages for it did not act 1aliciousl* when it initiated the foreclosure proceedings! 7t 1erel* e;ercised its right under the 1ortgage contract )ecause private respondents were irregular in their 1onthl* a1ortiIation! 7t invo.ed our ruling in 0ocial 0ecurit* 0*ste1 vs! Court of Appeals, 120 0C"A '0', where we said= $or can the 000 )e held lia)le for 1oral and te1perate da1ages! As concluded )* the Court of Appeals Pthe negligence of the appellant is not so gross as to warrant 1oral and te1perate da1ages,Q e;cept that, said Court reduced those da1ages )* onl* 5%,000!00 instead of eli1inating the1! $either can we agree with the findings of )oth the ,rial Court and respondent Court that the 000 had acted 1aliciousl* or in )ad faith! ,he 000 was of the )elief that it was acting in the legiti1ate e;ercise of its right under the 1ortgage contract in the face of irregular pa*1ents 1ade )* private respondents and placed reliance on the auto1atic acceleration clause in the contract! ,he filing alone of the foreclosure application should not )e a ground for an award of 1oral da1ages in the sa1e wa* that a clearl* unfounded civil action is not a1ong the grounds for 1oral da1ages! 5rivate respondents counter that /577C was guilt* of )ad faith and should )e lia)le for said da1ages )ecause it insisted on the pa*1ent of a1ortiIation on the loan even )efore it was released! (urther, it did not 1a.e the corresponding deduction in the 1onthl* a1ortiIation to confor1 to the actual a1ount of loan released, and it i11ediatel* initiated foreclosure proceedings when private respondents failed to 1a.e ti1el* pa*1ent! /ut as ad1itted )* private respondents the1selves, the* were irregular in their pa*1ent of 1onthl* a1ortiIation! Confor1a)l* with our ruling in 000, we can not properl* declare /577C in )ad faith! Conse8uentl*, we should rule out the award of 1oral and e;e1plar* da1ages!B11C ?owever, in our view, /577C was negligent in rel*ing 1erel* on the entries found in the deed of 1ortgage, without chec.ing and correspondingl* adAusting its records on the a1ount actuall* released to private respondents and the date when it was released! 0uch negligence resulted in da1age to private respondents, for which an award of no1inal da1ages should )e given in recognition of their rights which were violated )* /577C!B12C (or this purpose, the a1ount of 52%,000 is sufficient! Hastl*, as in 000 where we awarded attorne*:s fees )ecause private respondents were co1pelled to litigate, we sustain the award of 5%0,000 in favor of private respondents as attorne*:s fees! >?@"@(6"@, the decision dated (e)ruar* 2+, 199', of the Court of Appeals and its resolution dated April 21, 199+, are A((7"-@E >7,? -6E7(7CA,76$ as to the award of da1ages! ,he award of 1oral and e;e1plar* da1ages in favor of private respondents is E@H@,@E, )ut the award to the1 of attorne*:s fees in the a1ount of 5%0,000 is 35?@HE! Additionall*, petitioner is 6"E@"@E to pa* private respondents 52%,000 as no1inal da1ages! Costs against petitioner! 06 6"E@"@E! /ellosillo, (Chair1an), -endoIa, /uena, and Ee Heon, Jr!, JJ!, concur! B1C >hile Antonio M! HitonAua was not included in the caption of the petition )efore this court, apparentl*, the intention of petitioner was to include HitonAua as private respondent for he was a part* in all stages of the case )oth )efore the "egional ,rial Court and the Court of Appeals and it was clearl* indicated in the petition that PAH0Q collectivel* referred to as AH0 -anage1ent and Eevelop1ent Corporation and Antonio M! HitonAua! B2C ",C "ecords, p! 2'+! B3C "ollo, p! 32! B2C Art! 1932! An accepted pro1ise to deliver so1ething )* wa* of co11odatu1 or si1ple loan is )inding upon the parties, )ut the co11odatu1 or si1ple loan itself shall not )e perfected until the deliver* of the o)Aect of the contract!

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B%C Art! 1932, Civil Code of the 5hilippinesD -onte de 5iedad vs! Javier, et al!, 3& 6 21'&D A! 5adilla, Civil Code of the 5hilippines Annotated, #ol! #7, pp! 2'2-2'% (19+')D @! 5aras, Civil Code of the 5hilippines Annotated, #ol! #, p! ++% (199%)! B&C A! ,olentino, Civil Code of the 5hilippines, #! %, p! 223 (1992)! B'C 0upra, note 3 at 30! B+C "ose 5ac.ing Co! 7nc! vs! Court of Appeals, $o! H-330+2, 1&' 0C"A 309, 31+-319 (19++)! B9C Art! 11&9, Civil Code= ;;; 7n reciprocal o)ligations, neither part* incurs in dela* if the other does not co1pl* or is not read* to co1pl* in a proper 1anner with what is incu1)ent upon hi1! (ro1 the 1o1ent one of the parties fulfills his o)ligation, dela* )* the other )egins! B10C A1erican 5resident Hines, Htd! vs! Court of Appeals, !"! $o! 110+%3, 33& 0C"A %+2, %+& (2000)! B11C Art! 2232, Civil Code= >hile the a1ount of the e;e1plar* da1ages need not )e proved, the plaintiff 1ust show that he is entitled to 1oral, te1perate or co1pensator* da1ages )efore the court 1a* consider the 8uestion of whether or not e;e1plar* da1ages should )e awarded! 7n case li8uidated da1ages have )een agreed upon, although no proof of loss is necessar* in order that such li8uidated da1ages 1a* )e recovered, nevertheless, )efore the court 1a* consider the 8uestion of granting e;e1plar* in addition to the li8uidated da1ages, the plaintiff 1ust show that he would )e entitled to 1oral, te1perate or co1pensator* da1ages were it not for the stipulation for li8uidated da1ages! B12C Art! 2221, Civil Code= $o1inal da1ages are adAudicated in order that a right of the plaintiff, which has )een violated or invaded )* the defendant, 1a* )e vindicated or recogniIed, and not for the purpose of inde1nif*ing the plaintiff for an* loss suffered )* hi1!

G.R. No. 1122!9 POLO S. PANTALEON A(ERICAN E3PRESS INTERNATIONAL, INC.,

- ver-"-

,he petitioner, law*er 5olo 5antaleon, his wife Julialinda, daughter Anna "egina and son Adrian "o)erto, Aoined an escorted tour of >estern @urope organiIed )* ,rafalgar ,ours of @urope, Htd!, in 6cto)er of 1991! ,he tour group arrived in A1sterda1 in the afternoon of 2% 6cto)er 1991, the second to the last da* of the tour! As the group had arrived late in the cit*, the* failed to engage in an* sight-seeing! 7nstead, it was agreed upon that the* would start earl* the ne;t da* to see the entire cit* )efore ending the tour! ,he following da*, the last da* of the tour, the group arrived at the Coster Eia1ond ?ouse in A1sterda1 around 10 1inutes )efore 9=00 a!1! ,he group had agreed that the visit to Coster should end )* 9=30 a!1! to allow enough ti1e to ta.e in a guided cit* tour of A1sterda1! ,he group was ushered into Coster shortl* )efore 9=00 a!1!, and listened to a lecture on the art of dia1ond polishing that lasted for around ten 1inutes!B1C Afterwards, the group was led to the store:s showroo1 to allow the1 to select ite1s for purchase! -rs! 5antaleon had alread* planned to purchase even )efore the tour )egan a 2!% .arat dia1ond )rilliant cut, and she found a dia1ond close enough in appro;i1ation that she decided to )u*!B2C -rs! 5antaleon also selected for purchase a pendant and a chain,B3C all of which totaled 3!0! 413,+2&!00! ,o pa* for these purchases, 5antaleon presented his A1erican @;press credit card together with his passport to the Coster sales cler.! ,his occurred at around 9=1% a!1!, or 1% 1inutes )efore the tour group was slated to depart fro1 the store! ,he sales cler. too. the card:s i1print, and as.ed 5antaleon to sign the charge slip! ,he charge purchase was then referred electronicall* to respondent:s A1sterda1 office at 9=20 a!1!

1&

,en 1inutes later, the store cler. infor1ed 5antaleon that his A1e;Card had not *et )een approved! ?is son, who had alread* )oarded the tour )us, soon returned to Coster and infor1ed the other 1e1)ers of the 5antaleon fa1il* that the entire tour group was waiting for the1! As it was alread* 9=20 a!1!, and he was alread* worried a)out further inconveniencing the tour group, 5antaleon as.ed the store cler. to cancel the sale! ,he store 1anager though as.ed plaintiff to wait a few 1ore 1inutes! After 1% 1inutes, the store 1anager infor1ed 5antaleon that respondent had de1anded )an. references! 5antaleon supplied the na1es of his depositar* )an.s, then instructed his daughter to return to the )us and apologiIe to the tour group for the dela*! At around 10=00 a!1, or around 2% 1inutes after 5antaleon had presented his A1e;Card, and 30 1inutes after the tour group was supposed to have left the store, Coster decided to release the ite1s even without respondent:s approval of the purchase! ,he spouses 5antaleon returned to the )us! 7t is alleged that their offers of apolog* were 1et )* their tour1ates with ston* silence!B2C ,he tour group:s visi)le irritation was aggravated when the tour guide announced that the cit* tour of A1sterda1 was to )e canceled due to lac. of re1aining ti1e, as the* had to catch a 3=00 p!1! ferr* at Calais, /elgiu1 to Hondon!B%C -rs! 5antaleon ended up weeping, while her hus)and had to ta.e a tran8uiliIer to cal1 his nerves!

7t later e1erged that 5antaleon:s purchase was first trans1itted for approval to respondent:s A1sterda1 office at 9=20 a!1!, A1sterda1 ti1e, then referred to respondent:s -anila office at 9=33 a!1, then finall* approved at 10=19 a!1!, A1sterda1 ti1e!B&C ,he Approval Code was trans1itted to respondent:s A1sterda1 office at 10=3+ a!1!, several 1inutes after petitioner had alread* left Coster, and '+ 1inutes fro1 the ti1e the purchases were electronicall* trans1itted )* the Aewelr* store to respondent:s A1sterda1 office! After the star-crossed tour had ended, the 5antaleon fa1il* proceeded to the 3nited 0tates )efore returning to -anila on 12 $ove1)er 1992! >hile in the 3nited 0tates, 5antaleon continued to use his A1@; card, several ti1es without hassle or dela*, )ut with two other incidents si1ilar to the A1sterda1 )rouhaha! 6n 30 6cto)er 1991, 5antaleon purchased golf e8uip1ent a1ounting to 30 41,2'%!00 using his A1@; card, )ut he cancelled his credit card purchase and )orrowed 1one* instead fro1 a friend, after 1ore than 30 1inutes had transpired without the purchase having )een approved! 6n 3 $ove1)er 1991, 5antaleon used the card to purchase children:s shoes worth 4+'!00 at a store in /oston, and it too. 20 1inutes )efore this transaction was approved )* respondent! 6n 2 -arch 1992, after co1ing )ac. to -anila, 5antaleon sent a letterB'C through counsel to the respondent, de1anding an apolog* for the Pinconvenience, hu1iliation and e1)arrass1ent he and his fa1il* there)* sufferedQ for respondent:s refusal to provide credit authoriIation for the afore1entioned purchases!B+C 7n response, respondent sent a letter dated 22 -arch 1992,B9C stating a1ong others that the dela* in authoriIing the purchase fro1 Coster was attri)uta)le to the circu1stance that the charged purchase of 30 413,+2&!00 Pwas out of the usual charge purchase pattern esta)lished!QB10C 0ince respondent refused to accede to 5antaleon:s de1and for an apolog*, the aggrieved cardholder instituted an action for da1ages with the "egional ,rial Court (",C) of -a.ati Cit*, /ranch 12%!B11C 5antaleon pra*ed that he )e awarded 52,000,000!00, as 1oral da1agesD 5%00,000!00, as e;e1plar* da1agesD 5100,000!00, as attorne*:s feesD and 5%0,000!00 as litigation e;penses! B12C 6n % August 199&, the -a.ati Cit* ",C rendered a decisionB13C in favor of 5antaleon, awarding hi1 5%00,000!00 as 1oral da1ages, 5300,000!00 as e;e1plar* da1ages, 5100,000!00 as attorne*:s fees, and 5+%,233!01 as e;penses of litigation! "espondent filed a $otice of Appeal, while 5antaleon 1oved for partial reconsideration, pra*ing that the trial court award the increased a1ount of 1oral and e;e1plar* da1ages he had pra*ed for!B12C ,he ",C denied 5antaleon:s 1otion for partial reconsideration, and thereafter gave due course to respondent:s $otice of Appeal!B1%C 6n 1+ August 200&, the Court of Appeals rendered a decisionB1&C reversing the award of da1ages in favor of 5antaleon, holding that respondent had not )reached its o)ligations to petitioner! ?ence, this petition! ,he .e* 8uestion is whether respondent, in connection with the afore1entioned transactions, had co11itted a )reach of its o)ligations to 5antaleon! 7n addition, 5antaleon su)1its that even assu1ing that respondent had not )een in )reach of its o)ligations, it still re1ained lia)le for da1ages under Article 21 of the Civil Code!

1'

,he ",C had concluded, )ased on the testi1onial representations of 5antaleon and respondent:s credit authoriIer, @dgardo Jaurigue, that the nor1al approval ti1e for purchases was Pa 1atter of seconds!Q /ased on that standard, respondent had )een in clear dela* with respect to the three su)Aect transactions! As it appears, the Court of Appeals conceded that there had )een dela* on the part of respondent in approving the purchases! ?owever, it 1ade two critical conclusions in favor of respondent! (irst, the appellate court ruled that the dela* was not attended )* )ad faith, 1alice, or gross negligence! 0econd, it ruled that respondent Phad e;ercised diligent efforts to effect the approvalQ of the purchases, which were Pnot in accordance with the charge patternQ petitioner had esta)lished for hi1self, as e;e1plified )* the fact that at Coster, he was P1a.ing his ver* first single charge purchase of 30413,+2&,Q and Pthe record of BpetitionerC:s past spending with BrespondentC at the ti1e does not favora)l* support his a)ilit* to pa* for such purchase!QB1'C 6n the pre1ise that there was an o)ligation on the part of respondent Pto approve or disapprove with dispatch the charge purchase,Q petitioner argues that the failure to ti1el* approve or disapprove the purchase constituted 1ora solvendi on the part of respondent in the perfor1ance of its o)ligation! (or its part, respondent characteriIes the depiction )* petitioner of its o)ligation to hi1 as Pto approve purchases instantaneousl* or in a 1atter of seconds!Q 5etitioner correctl* cites that under 1ora solvendi, the three re8uisites for a finding of default are that the o)ligation is de1anda)le and li8uidatedD the de)tor dela*s perfor1anceD and the creditor Audiciall* or e;traAudiciall* re8uires the de)tor:s perfor1ance!B1+C 5etitioner asserts that the Court of Appeals had wrongl* applied the principle of 1ora accipiendi, which relates to dela* on the part of the o)ligee in accepting the perfor1ance of the o)ligation )* the o)ligor! ,he re8uisites of 1ora accipiendi are= an offer of perfor1ance )* the de)tor who has the re8uired capacit*D the offer 1ust )e to co1pl* with the prestation as it should )e perfor1edD and the creditor refuses the perfor1ance without Aust cause!B19C ,he error of the appellate court, argues petitioner, is in rel*ing on the invocation )* respondent of PAust causeQ for the dela*, since while Aust cause is deter1inative of 1ora accipiendi, it is not so with the case of 1ora solvendi! >e can see the possi)le source of confusion as to which t*pe of 1ora to appreciate! enerall*, the relationship )etween a credit card provider and its card holders is that of creditor-de)tor,B20C with the card co1pan* as the creditor e;tending loans and credit to the card holder, who as de)tor is o)liged to repa* the creditor! ,his relationship alread* ta.es e;ception to the general rule that as )etween a )an. and its depositors, the )an. is dee1ed as the de)tor while the depositor is considered as the creditor!B21C 5etitioner is as.ing us, not )aselessl*, to again shift perspectives and again see the credit card co1pan* as the de)torOo)ligor, insofar as it has the o)ligation to the custo1er as creditorOo)ligee to act pro1ptl* on its purchases on credit! 3lti1atel*, petitioner:s perspective appears 1ore sensi)le than if we were to still regard respondent as the creditor in the conte;t of this cause of action! 7f there was dela* on the part of respondent in its nor1al role as creditor to the cardholder, such dela* would not have )een in the acceptance of the perfor1ance of the de)tor:s o)ligation (i!e!, the repa*1ent of the de)t), )ut it would )e dela* in the e;tension of the credit in the first place! 0uch dela* would not fall under 1ora accipiendi, which conte1plates that the o)ligation of the de)tor, such as the actual purchases on credit, has alread* )een constituted! ?erein, the esta)lish1ent of the de)t itself (purchases on credit of the Aewelr*) had not *et )een perfected, as it re1ained pending the approval or consent of the respondent credit card co1pan*! 0till, in order for us to appreciate that respondent was in 1ora solvendi, we will have to first recogniIe that there was indeed an o)ligation on the part of respondent to act on petitioner:s purchases with Pti1el* dispatch,Q or for the purposes of this case, within a period significantl* less than the one hour it apparentl* too. )efore the purchase at Coster was finall* approved! ,he findings of the trial court, to our 1ind, a1pl* esta)lished that the tardiness on the part of respondent in acting on petitioner:s purchase at Coster did constitute culpa)le dela* on its part in co1pl*ing with its o)ligation to act pro1ptl* on its custo1er:s purchase re8uest, whether such action )e favora)le or unfavora)le! >e 8uote the trial court, thus= As to the first issue, )oth parties have testified that nor1al approval ti1e for purchases was a 1atter of seconds! 5laintiff testified that his personal e;perience with the use of the card was that e;cept for the three charge purchases su)Aect of this case, approvals of his charge purchases were alwa*s o)tained in a 1atter of seconds! Eefendant:s credit authoriIer @dgardo Jauri8ue li.ewise testified= S! T Nou also testified that on nor1al occasions, the nor1al approval ti1e for charges would )e 3 to 2 secondsG

1+

A! T Nes, -a:a1! /oth parties li.ewise presented evidence that the processing and approval of plaintiff:s charge purchase at the Coster Eia1ond ?ouse was wa* )e*ond the nor1al approval ti1e of a P1atter of secondsQ! 5laintiff testified that he presented his A1e;Card to the sales cler. at Coster, at 9=1% a!1! and )* the ti1e he had to leave the store at 10=0% a!1!, no approval had *et )een received! 7n fact, the Credit AuthoriIation 0*ste1 (CA0) record of defendant at 5hoeni; A1e; shows that defendant:s A1sterda1 office received the re8uest to approve plaintiff:s charge purchase at 9=20 a!1!, A1sterda1 ti1e or 01=20, 5hoeni; ti1e, and that the defendant rela*ed its approval to Coster at 10=3+ a!1!, A1sterda1 ti1e, or 2=3+, 5hoeni; ti1e, or a total ti1e lapse of one hour and B1+C 1inutes! And even then, the approval was conditional as it directed in co1puterese BsicC P5ositive 7dentification of Card holder necessar* further charges re8uire )an. infor1ation due to high e;posure! /* Jac. -anila!Q ,he dela* in the processing is apparent to )e undue as shown fro1 the frantic successive 8ueries of A1e;co A1sterda1 which reads= P30413,+2&! Card1e1)er )u*ing Aewels! 7E seen! Advise how long will this ta.eGQ ,he* were sent at 01=33, 01=3', 01=20, 01=2%, 01=%2 and 02=0+, all ti1es 5hoeni;! -anila A1e;co could )e unaware of the need for speed in resolving the charge purchase referred to it, *et it sat on its hand, unconcerned! ; ; ; ,o repeat, the Credit AuthoriIation 0*ste1 (CA0) record on the A1sterda1 transaction shows how A1e;co $etherlands viewed the dela* as unusuall* frustrating! 7n se8uence e;pressed in 5hoeni; ti1e fro1 01=20 when the charge purchased was referred for authoriIation, defendants own record shows= 01=22 T the authoriIation is referred to -anila A1e;co 01=32 T $etherlands gives infor1ation that the identification of the card1e1)er has )een presented and he is )u*ing Aewelries worth 30 413,+2&! 01=33 T $etherlands as.s P?ow long will this ta.eGQ 02=0+ T $etherlands is still as.ing P?ow long will this ta.eGQ ,he Court is convinced that defendants dela* constituteBsC )reach of its contractual o)ligation to act on his use of the card a)road Pwith special handling!QB22C (Citations o1itted) ;;; $otwithstanding the popular notion that credit card purchases are approved Pwithin seconds,Q there reall* is no strict, legall* deter1inative point of de1arcation on how long 1ust it ta.e for a credit card co1pan* to approve or disapprove a custo1er:s purchase, 1uch less one specificall* contracted upon )* the parties! Net this is one of those instances when P*ou:d .now it when *ou:d see it,Q and one hour appears to )e an awfull* long, patentl* unreasona)le length of ti1e to approve or disapprove a credit card purchase! 7t is long enough ti1e for the custo1er to wal. to a )an. a .ilo1eter awa*, withdraw 1one* over the counter, and return to the store! $ota)l*, petitioner fra1es the o)ligation of respondent as Pto approve or disapproveQ the purchase Pin ti1el* dispatch,Q and not Pto approve the purchase instantaneousl* or within seconds!Q Certainl*, had respondent disapproved petitioner:s purchase Pwithin secondsQ or within a ti1el* 1anner, this particular action would have never seen the light of da*! 5etitioner and his fa1il* would have returned to the )us without dela* T internall* hu1iliated perhaps over the reAection of his card T *et spared the sha1e of )eing held accounta)le )* newl*1ade friends for 1a.ing the1 1iss the chance to tour the cit* of A1sterda1! >e do not wish do dispute that respondent has the right, if not the o)ligation, to verif* whether the credit it is e;tending upon on a particular purchase was indeed contracted )* the cardholder, and that the cardholder is within his 1eans to 1a.e such transaction! ,he culpa)le failure of respondent herein is not the failure to ti1el* approve petitioner:s purchase, )ut the 1ore ele1ental failure to ti1el* act on the sa1e, whether favora)l* or unfavora)l*! @ven assu1ing that respondent:s credit authoriIers did not have sufficient )asis on hand to 1a.e a Audg1ent, we see no reason wh* respondent could not have pro1ptl* infor1ed petitioner the reason for the

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dela*, and dul* advised hi1 that resolving the sa1e could ta.e so1e ti1e! 7n that wa*, petitioner would have had infor1ed )asis on whether or not to pursue the transaction at Coster, given the attending circu1stances! 7nstead, petitioner was left unco1forta)l* dangling in the chill* autu1n winds in a foreign land and soon forced to confront the wrath of foreign fol.! -oral da1ages avail in cases of )reach of contract where the defendant acted fraudulentl* or in )ad faith, and the court should find that under the circu1stances, such da1ages are due! ,he findings of the trial court are a1ple in esta)lishing the )ad faith and unAustified neglect of respondent, attri)uta)le in particular to the Pdill*dall*ingQ of respondent:s -anila credit authoriIer, @dgardo Jauri8ue!B23C >rote the trial court= >hile it is true that the Card1e1)ership Agree1ent, which defendant prepared, is silent as to the a1ount of ti1e it should ta.e defendant to grant authoriIation for a charge purchase, defendant ac.nowledged that the nor1al ti1e for approval should onl* )e three to four seconds! 0peciall* so with cards used a)road which re8uires Pspecial handlingQ, 1eaning with priorit*! 6therwise, the o)Aect of credit or charge cards would )e lostD it would )e so inconvenient to use that )u*ers and consu1ers would )e )etter off carr*ing )undles of currenc* or traveller:s chec.s, which can )e delivered and accepted 8uic.l*! 0uch right was not accorded to plaintiff in the instances co1plained off for reasons .nown onl* to defendant at that ti1e! ,his, to the Court:s 1ind, a1ounts to a wanton and deli)erate refusal to co1pl* with its contractual o)ligations, or at least a)use of its rights, under the contract!B22C ; ; ; ,he dela* co11itted )* defendant was clearl* attended )* unAustified neglect and )ad faith, since it alleges to have consu1ed 1ore than one hour to si1pl* go over plaintiff:s past credit histor* with defendant, his pa*1ent record and his credit and )an. references, when all such data are alread* stored and readil* availa)le fro1 its co1puter! ,his Court also ta.es note of the fact that there is nothing in plaintiff:s )illing histor* that would warrant the i1prudent suspension of action )* defendant in processing the purchase! Eefendant:s witness Jauri8ue ad1its= S! T /ut did *ou discover that he did not have an* outstanding accountG A! T $othing in arrears at that ti1e! S! T Nou were well aware of this fact on this ver* dateG A! T Nes, sir! -r! Jauri8ue further testified that there were no Pdelin8uenciesQ in plaintiff:s account!B2%C 7t should )e e1phasiIed that the reason wh* petitioner is entitled to da1ages is not si1pl* )ecause respondent incurred dela*, )ut )ecause the dela*, for which culpa)ilit* lies under Article 11'0, led to the particular inAuries under Article 221' of the Civil Code for which 1oral da1ages are re1unerative!B2&C -oral da1ages do not avail to soothe the plaints of the si1pl* i1patient, so this decision should not )e cause for relief for those who ti1e the length of their credit card transactions with a stopwatch! ,he so1ewhat unusual attending circu1stances to the purchase at Coster T that there was a deadline for the co1pletion of that purchase )* petitioner )efore an* dela* would redound to the inAur* of his several traveling co1panions T gave rise to the 1oral shoc., 1ental anguish, serious an;iet*, wounded feelings and social hu1iliation sustained )* the petitioner, as concluded )* the ",C!B2'C ,hose circu1stances are fairl* unusual, and should not give rise to a general entitle1ent for da1ages under a 1ore 1undane set of facts!

>e sustain the a1ount of 1oral da1ages awarded to petitioner )* the ",C! ,here is no hard-and-fast rule in deter1ining what would )e a fair and reasona)le a1ount of 1oral da1ages, since each case 1ust )e governed )* its own peculiar facts, however, it 1ust )e co11ensurate to the loss or inAur* suffered!B2+C 5etitioner:s original pra*er for 5%,000,000!00 for 1oral da1ages is e;cessive under the circu1stances, and the a1ount awarded )* the trial court of 5%00,000!00 in 1oral da1ages 1ore see1l*! Hi.ewise, we dee1 e;e1plar* da1ages availa)le under the circu1stances, and the a1ount of 5300,000!00 appropriate! ,here is si1ilarl* no cause though to distur) the deter1ined award of 5100,000!00 as attorne*:s fees, and 5+%,233!01 as e;penses of litigation!

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>?@"@(6"@, the petition is "A$,@E! ,he assailed Eecision of the Court of Appeals is "@#@"0@E and 0@, A07E@! ,he Eecision of the "egional ,rial Court of -a.ati, /ranch 12% in Civil Case $o! 92-1&&% is here)* "@7$0,A,@E! Costs against respondent! 06 6"E@"@E!

G.R. No. 115324 February 19, 2003 PRODUCERS BANK OF !E P!"#"PP"NES $%o& F"RS "N ERNA "ONA# BANK', (e)*)*o%er, +,. !ON. COUR OF APPEA#S AND FRANK#"N -"-ES, re,(o%.e%),. This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated June 25, 1991 in CAG. . C! "o. 11#91 and of its esolution2 dated $a% 5, 199&, den%in' the (otion for reconsideration of said decision filed )% petitioner *roducers +an, of the *hilippines. -o(eti(e in 19#9, private respondent .ran,lin !ives was as,ed )% his nei'h)or and friend An'eles -anche/ to help her friend and town(ate, Col. Arturo Doronilla, in incorporatin' his )usiness, the -terela $ar,etin' and -ervices 01-terela1 for )revit%2. -pecificall%, -anche/ as,ed private respondent to deposit in a )an, a certain a(ount of (one% in the )an, account of -terela for purposes of its incorporation. -he assured private respondent that he could withdraw his (one% fro( said account within a (onth3s ti(e. *rivate respondent as,ed -anche/ to )rin' Doronilla to their house so that the% could discuss -anche/3s re4uest.5 6n $a% 9, 19#9, private respondent, -anche/, Doronilla and a certain 7strella Du(a'pi, Doronilla3s private secretar%, (et and discussed the (atter. Thereafter, rel%in' on the assurances and representations of -anche/ and Doronilla, private respondent issued a chec, in the a(ount of Two 8undred Thousand *esos 0*299,999.992 in favor of -terela. *rivate respondent instructed his wife, $rs. :nocencia !ives, to acco(pan% Doronilla and -anche/ in openin' a savin's account in the na(e of -terela in the +uendia, $a,ati )ranch of *roducers +an, of the *hilippines. 8owever, onl% -anche/, $rs. !ives and Du(a'pi went to the )an, to deposit the chec,. The% had with the( an authori/ation letter fro( Doronilla authori/in' -anche/ and her co(panions, 1in coordination with $r. ufo Atien/a,1 to open an account for -terela $ar,etin' -ervices in the a(ount of *299,999.99. :n openin' the account, the authori/ed si'natories were :nocencia !ives and;or An'eles -anche/. A pass)oo, for -avin's Account "o. 19-15<# was thereafter issued to $rs. !ives.& -u)se4uentl%, private respondent learned that -terela was no lon'er holdin' office in the address previousl% 'iven to hi(. Alar(ed, he and his wife went to the +an, to verif% if their (one% was still intact. The )an, (ana'er referred the( to $r. ufo Atien/a, the assistant (ana'er, who infor(ed the( that part of the (one% in -avin's Account "o. 19-15<# had )een withdrawn )% Doronilla, and that onl% *99,999.99 re(ained therein. 8e li,ewise told the( that $rs. !ives could not withdraw said re(ainin' a(ount )ecause it had to answer for so(e postdated chec,s issued )% Doronilla. Accordin' to Atien/a, after $rs. !ives and -anche/ opened -avin's Account "o. 19-15<#, Doronilla opened Current Account "o. 19-9529 for -terela and authori/ed the +an, to de)it -avin's Account "o. 19-15<# for the a(ounts necessar% to cover overdrawin's in Current Account "o. 19-9529. :n openin' said current account, -terela, throu'h Doronilla, o)tained a loan of *1#5,999.99 fro( the +an,. To cover pa%(ent thereof, Doronilla issued three postdated chec,s, all of which were dishonored. Atien/a also said that Doronilla could assi'n or withdraw the (one% in -avin's Account "o. 19-15<# )ecause he was the sole proprietor of -terela.5 *rivate respondent tried to 'et in touch with Doronilla throu'h -anche/. 6n June 29, 19#9, he received a letter fro( Doronilla, assurin' hi( that his (one% was intact and would )e returned to hi(. 6n Au'ust 15, 19#9, Doronilla issued a postdated chec, for Two 8undred Twelve Thousand *esos 0*212,999.992 in favor of private respondent. 8owever, upon present(ent thereof )% private respondent to the drawee )an,, the chec, was dishonored. Doronilla re4uested private respondent to present the sa(e chec, on -epte()er 15, 19#9 )ut when the latter presented the chec,, it was a'ain dishonored.< *rivate respondent referred the (atter to a law%er, who (ade a written de(and upon Doronilla for the return of his client3s (one%. Doronilla issued another chec, for *212,999.99 in private respondent3s favor )ut the chec, was a'ain dishonored for insufficienc% of funds.# *rivate respondent instituted an action for recover% of su( of (one% in the e'ional Trial Court 0 TC2 in *asi', $etro $anila a'ainst Doronilla, -anche/, Du(a'pi and petitioner. The case was doc,eted as Civil Case "o. &&&=5. 8e also filed cri(inal actions a'ainst Doronilla, -anche/ and Du(a'pi in the TC. 8owever, -anche/ passed awa% on $arch 1<, 19=5 while the case was pendin' )efore the trial court. 6n 6cto)er 5, 1995, the TC of *asi', +ranch 15#, pro(ul'ated its Decision in Civil Case "o. &&&=5, the dispositive portion of which reads>

21

:" !:7? 6. T87 .6 7G6:"G, @ud'(ent is here)% rendered sentencin' defendants Arturo J. Doronila, 7strella Du(a'pi and *roducers +an, of the *hilippines to pa% plaintiff .ran,lin !ives @ointl% and severall% A 0a2 the a(ount of *299,999.99, representin' the (one% deposited, with interest at the le'al rate fro( the filin' of the co(plaint until the sa(e is full% paidB 0)2 the su( of *59,999.99 for (oral da(a'es and a si(ilar a(ount for eCe(plar% da(a'esB 0c2 the a(ount of *&9,999.99 for attorne%3s feesB and 0d2 the costs of the suit. -6 6 D7 7D.= *etitioner appealed the trial court3s decision to the Court of Appeals. :n its Decision dated June 25, 1991, the appellate court affir(ed in toto the decision of the TC.9 :t li,ewise denied with finalit% petitioner3s (otion for reconsideration in its esolution dated $a% 5, 199&.19 6n June 59, 199&, petitioner filed the present petition, ar'uin' that A :. T87 86"6 A+D7 C6E T 6. A**7AD- 7 7D :" E*86DD:"G T8AT T87 T A"-ACT:6" +7T?77" T87 D7.7"DA"T D6 6":DDA A"D 7-*6"D7"T !:!7- ?A- 6"7 6. -:$*D7 D6A" A"D "6T ACC6$$6DAT:6"B ::. T87 86"6 A+D7 C6E T 6. A**7AD- 7 7D :" E*86DD:"G T8AT *7T:T:6"7 3- +A"F $A"AG7 , $ . E.6 AT:7"GA, C6"":!7D ?:T8 T87 6T87 D7.7"DA"T- :" D7. AED:"G *7T:T:6"7 0-ic. -hould )e * :!AT7 7-*6"D7"T2 A"D A- A C6"-7HE7"C7, T87 *7T:T:6"7 -86EDD +7 87DD D:A+D7 E"D7 T87 * :"C:*D7 6. "ATE AD JE-T:C7B :::. T87 86"6 A+D7 C6E T 6. A**7AD- 7 7D :" AD6*T:"G T87 7"T: 7 7C6 D- 6. T87 7G:6"AD T :AD C6E T A"D A..: $:"G T87 JEDG$7"T A**7AD7D . 6$, A- T87 .:"D:"G- 6. T87 7G:6"AD T :AD C6E T ?7 7 +A-7D 6" A $:-A** 787"-:6" 6. .ACT-B :!. T87 86"6 A+D7 C6E T 6. A**7AD- 7 7D :" D7CDA :"G T8AT T87 C:T7D D7C:-:6" :" -ADEDA 7- !-. $A T:"7G, 29 -C A #&5, E*86DD:"G T87 D:A+:D:TI 6. A" 7$*D6I7 .6 ACTC6$$:TT7D +I A" 7$*D6I77 :- A**D:CA+D7B !. T87 86"6 A+D7 C6E T 6. A**7AD- 7 7D :" E*86DD:"G T87 D7C:-:6" 6. T87 D6?7 C6E T T8AT 87 7:" *7T:T:6"7 +A"F :- J6:"TDI A"D -7!7 ADDI D:A+D7 ?:T8 T87 6T87 D7.7"DA"T- .6 T87 A$6E"T 6. *299,999.99 7* 7-7"T:"G T87 -A!:"G- ACC6E"T D7*6-:T, *59,999.99 .6 $6 AD DA$AG7-, *59,999.99 .6 7J7$*DA I DA$AG7-, *&9,999.99 .6 ATT6 "7I3- .77- A"D T87 C6-T- 6. -E:T.11 *rivate respondent filed his Co((ent on -epte()er 25, 199&. *etitioner filed its epl% thereto on -epte()er 25, 1995. The Court then re4uired private respondent to su)(it a re@oinder to the repl%. 8owever, said re@oinder was filed onl% on April 21, 199#, due to petitioner3s dela% in furnishin' private respondent with cop% of the repl%12 and several su)stitutions of counsel on the part of private respondent.15 6n Januar% 1#, 2991, the Court resolved to 'ive due course to the petition and re4uired the parties to su)(it their respective (e(oranda.1& *etitioner filed its (e(orandu( on April 1<, 2991 while private respondent su)(itted his (e(orandu( on $arch 22, 2991. *etitioner contends that the transaction )etween private respondent and Doronilla is a si(ple loan 0(utuu(2 since all the ele(ents of a (utuu( are present> first, what was delivered )% private respondent to Doronilla was (one%, a consu(a)le thin'B and second, the transaction was onerous as Doronilla was o)li'ed to pa% interest, as evidenced )% the chec, issued )% Doronilla in the a(ount of *212,999.99, or *12,999 (ore than what private respondent deposited in -terela3s )an, account.15 $oreover, the fact that private respondent sued his 'ood friend -anche/ for his failure to recover his (one% fro( Doronilla shows that the transaction

22

was not (erel% 'ratuitous )ut 1had a )usiness an'le1 to it. 8ence, petitioner ar'ues that it cannot )e held lia)le for the return of private respondent3s *299,999.99 )ecause it is not priv% to the transaction )etween the latter and Doronilla.1< :t ar'ues further that petitioner3s Assistant $ana'er, $r. ufo Atien/a, could not )e faulted for allowin' Doronilla to withdraw fro( the savin's account of -terela since the latter was the sole proprietor of said co(pan%. *etitioner asserts that Doronilla3s $a% =, 19#9 letter addressed to the )an,, authori/in' $rs. !ives and -anche/ to open a savin's account for -terela, did not contain an% authori/ation for these two to withdraw fro( said account. 8ence, the authorit% to withdraw therefro( re(ained eCclusivel% with Doronilla, who was the sole proprietor of -terela, and who alone had le'al title to the savin's account.1# *etitioner points out that no evidence other than the testi(onies of private respondent and $rs. !ives was presented durin' trial to prove that private respondent deposited his *299,999.99 in -terela3s account for purposes of its incorporation.1= 8ence, petitioner should not )e held lia)le for allowin' Doronilla to withdraw fro( -terela3s savin's account.1aKL;phi1.net *etitioner also asserts that the Court of Appeals erred in affir(in' the trial court3s decision since the findin's of fact therein were not accord with the evidence presented )% petitioner durin' trial to prove that the transaction )etween private respondent and Doronilla was a (utuu(, and that it co((itted no wron' in allowin' Doronilla to withdraw fro( -terela3s savin's account.19 .inall%, petitioner clai(s that since there is no wron'ful act or o(ission on its part, it is not lia)le for the actual da(a'es suffered )% private respondent, and neither (a% it )e held lia)le for (oral and eCe(plar% da(a'es as well as attorne%3s fees.29 *rivate respondent, on the other hand, ar'ues that the transaction )etween hi( and Doronilla is not a (utuu( )ut an acco((odation,21 since he did not actuall% part with the ownership of his *299,999.99 and in fact as,ed his wife to deposit said a(ount in the account of -terela so that a certification can )e issued to the effect that -terela had sufficient funds for purposes of its incorporation )ut at the sa(e ti(e, he retained so(e de'ree of control over his (one% throu'h his wife who was (ade a si'nator% to the savin's account and in whose possession the savin's account pass)oo, was 'iven.22 8e li,ewise asserts that the trial court did not err in findin' that petitioner, Atien/a3s e(plo%er, is lia)le for the return of his (one%. 8e insists that Atien/a, petitioner3s assistant (ana'er, connived with Doronilla in defraudin' private respondent since it was Atien/a who facilitated the openin' of -terela3s current account three da%s after $rs. !ives and -anche/ opened a savin's account with petitioner for said co(pan%, as well as the approval of the authorit% to de)it -terela3s savin's account to cover an% overdrawin's in its current account.25 There is no (erit in the petition. At the outset, it (ust )e e(phasi/ed that onl% 4uestions of law (a% )e raised in a petition for review filed with this Court. The Court has repeatedl% held that it is not its function to anal%/e and wei'h all over a'ain the evidence presented )% the parties durin' trial.2& The Court3s @urisdiction is in principle li(ited to reviewin' errors of law that (i'ht have )een co((itted )% the Court of Appeals.25 $oreover, factual findin's of courts, when adopted and confir(ed )% the Court of Appeals, are final and conclusive on this Court unless these findin's are not supported )% the evidence on record.2< There is no showin' of an% (isapprehension of facts on the part of the Court of Appeals in the case at )ar that would re4uire this Court to review and overturn the factual findin's of that court, especiall% since the conclusions of fact of the Court of Appeals and the trial court are not onl% consistent )ut are also a(pl% supported )% the evidence on record. "o error was co((itted )% the Court of Appeals when it ruled that the transaction )etween private respondent and Doronilla was a co((odatu( and not a (utuu(. A circu(spect eCa(ination of the records reveals that the transaction )etween the( was a co((odatu(. Article 1955 of the Civil Code distin'uishes )etween the two ,inds of loans in this wise> +% the contract of loan, one of the parties delivers to another, either so(ethin' not consu(a)le so that the latter (a% use the sa(e for a certain ti(e and return it, in which case the contract is called a co((odatu(B or (one% or other consu(a)le thin', upon the condition that the sa(e a(ount of the sa(e ,ind and 4ualit% shall )e paid, in which case the contract is si(pl% called a loan or (utuu(. Co((odatu( is essentiall% 'ratuitous. -i(ple loan (a% )e 'ratuitous or with a stipulation to pa% interest. :n co((odatu(, the )ailor retains the ownership of the thin' loaned, while in si(ple loan, ownership passes to the )orrower.

23

The fore'oin' provision see(s to i(pl% that if the su)@ect of the contract is a consu(a)le thin', such as (one%, the contract would )e a (utuu(. 8owever, there are so(e instances where a co((odatu( (a% have for its o)@ect a consu(a)le thin'. Article 195< of the Civil Code provides> Consu(a)le 'oods (a% )e the su)@ect of co((odatu( if the purpose of the contract is not the consu(ption of the o)@ect, as when it is (erel% for eChi)ition. Thus, if consu(a)le 'oods are loaned onl% for purposes of eChi)ition, or when the intention of the parties is to lend consu(a)le 'oods and to have the ver% sa(e 'oods returned at the end of the period a'reed upon, the loan is a co((odatu( and not a (utuu(. The rule is that the intention of the parties thereto shall )e accorded pri(ordial consideration in deter(inin' the actual character of a contract.2# :n case of dou)t, the conte(poraneous and su)se4uent acts of the parties shall )e considered in such deter(ination.2= As correctl% pointed out )% )oth the Court of Appeals and the trial court, the evidence shows that private respondent a'reed to deposit his (one% in the savin's account of -terela specificall% for the purpose of (a,in' it appear 1that said fir( had sufficient capitali/ation for incorporation, with the pro(ise that the a(ount shall )e returned within thirt% 0592 da%s.129 *rivate respondent (erel% 1acco((odated1 Doronilla )% lendin' his (one% without consideration, as a favor to his 'ood friend -anche/. :t was however clear to the parties to the transaction that the (one% would not )e re(oved fro( -terela3s savin's account and would )e returned to private respondent after thirt% 0592 da%s. Doronilla3s atte(pts to return to private respondent the a(ount of *299,999.99 which the latter deposited in -terela3s account to'ether with an additional *12,999.99, alle'edl% representin' interest on the (utuu(, did not convert the transaction fro( a co((odatu( into a (utuu( )ecause such was not the intent of the parties and )ecause the additional *12,999.99 corresponds to the fruits of the lendin' of the *299,999.99. Article 1955 of the Civil Code eCpressl% states that 1MtNhe )ailee in co((odatu( ac4uires the use of the thin' loaned )ut not its fruits.1 8ence, it was onl% proper for Doronilla to re(it to private respondent the interest accruin' to the latter3s (one% deposited with petitioner. "either does the Court a'ree with petitioner3s contention that it is not solidaril% lia)le for the return of private respondent3s (one% )ecause it was not priv% to the transaction )etween Doronilla and private respondent. The nature of said transaction, that is, whether it is a (utuu( or a co((odatu(, has no )earin' on the 4uestion of petitioner3s lia)ilit% for the return of private respondent3s (one% )ecause the factual circu(stances of the case clearl% show that petitioner, throu'h its e(plo%ee $r. Atien/a, was partl% responsi)le for the loss of private respondent3s (one% and is lia)le for its restitution. *etitioner3s rules for savin's deposits written on the pass)oo, it issued $rs. !ives on )ehalf of -terela for -avin's Account "o. 19-15<# eCpressl% states thatO 12. Deposits and withdrawals (ust )e (ade )% the depositor personall% or upon his written authorit% dul% authenticated, and neither a deposit nor a withdrawal will )e per(itted eCcept upon the production of the depositor savin's )an, )oo, in which will )e entered )% the +an, the a(ount deposited or withdrawn.159 -aid rule notwithstandin', Doronilla was per(itted )% petitioner, throu'h Atien/a, the Assistant +ranch $ana'er for the +uendia +ranch of petitioner, to withdraw therefro( even without presentin' the pass)oo, 0which Atien/a ver% well ,new was in the possession of $rs. !ives2, not @ust once, )ut several ti(es. +oth the Court of Appeals and the trial court found that Atien/a allowed said withdrawals )ecause he was part% to Doronilla3s 1sche(e1 of defraudin' private respondent> JJJ +ut the sche(e could not have )een eCecuted successfull% without the ,nowled'e, help and cooperation of ufo Atien/a, assistant (ana'er and cashier of the $a,ati 0+uendia2 )ranch of the defendant )an,. :ndeed, the evidence indicates that Atien/a had not onl% facilitated the co((ission of the fraud )ut he li,ewise helped in devisin' the (eans )% which it can )e done in such (anner as to (a,e it appear that the transaction was in accordance with )an,in' procedure. To )e'in with, the deposit was (ade in defendant3s +uendia )ranch precisel% )ecause Atien/a was a ,e% officer therein. The records show that plaintiff had su''ested that the *299,999.99 )e deposited in his )an,, the $anila +an,in' Corporation, )ut Doronilla and Du(a'pi insisted that it (ust )e in defendant3s )ranch in $a,ati for 1it will )e easier for the( to 'et a certification1. :n fact )efore he was introduced to plaintiff, Doronilla had alread% prepared a letter addressed to the +uendia )ranch (ana'er authori/in' An'eles +. -anche/ and co(pan% to open a savin's account for -terela in the a(ount of *299,999.99, as 1per coordination with $r. ufo Atien/a, Assistant $ana'er of the +an, C C C1 07Ch. 12. This is a clear (anifestation that the other defendants had )een in consultation with Atien/a fro( the inception of the sche(e. -i'nificantl%, there were

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testi(onies and ad(ission that Atien/a is the )rother-in-law of a certain associate of Doronilla.1awphi1.nPt

o(eo $irasol, a friend and )usiness

Then there is the (atter of the ownership of the fund. +ecause of the 1coordination1 )etween Doronilla and Atien/a, the latter ,new )efore hand that the (one% deposited did not )elon' to Doronilla nor to -terela. Aside fro( such fore,nowled'e, he was eCplicitl% told )% :nocencia !ives that the (one% )elon'ed to her and her hus)and and the deposit was (erel% to acco((odate Doronilla. Atien/a even declared that the (one% ca(e fro( $rs. !ives. Althou'h the savin's account was in the na(e of -terela, the )an, records disclose that the onl% ones e(powered to withdraw the sa(e were :nocencia !ives and An'eles +. -anche/. :n the si'nature card pertainin' to this account 07Ch. J2, the authori/ed si'natories were :nocencia !ives Q;or An'eles +. -anche/. Atien/a stated that it is the usual )an,in' procedure that withdrawals of savin's deposits could onl% )e (ade )% persons whose authori/ed si'natures are in the si'nature cards on file with the )an,. 8e, however, said that this procedure was not followed here )ecause -terela was owned )% Doronilla. 8e eCplained that Doronilla had the full authorit% to withdraw )% virtue of such ownership. The Court is not inclined to a'ree with Atien/a. :n the first place, he was all the ti(e aware that the (one% ca(e fro( !ives and did not )elon' to -terela. 8e was also told )% $rs. !ives that the% were onl% acco((odatin' Doronilla so that a certification can )e issued to the effect that -terela had a deposit of so (uch a(ount to )e sued in the incorporation of the fir(. :n the second place, the si'nature of Doronilla was not authori/ed in so far as that account is concerned inas(uch as he had not si'ned the si'nature card provided )% the )an, whenever a deposit is opened. :n the third place, neither $rs. !ives nor -anche/ had 'iven Doronilla the authorit% to withdraw. $oreover, the transfer of fund was done without the pass)oo, havin' )een presented. :t is an accepted practice that whenever a withdrawal is (ade in a savin's deposit, the )an, re4uires the presentation of the pass)oo,. :n this case, such reco'ni/ed practice was dispensed with. The transfer fro( the savin's account to the current account was without the su)(ission of the pass)oo, which Atien/a had 'iven to $rs. !ives. :nstead, it was (ade to appear in a certification si'ned )% 7strella Du(a'pi that a duplicate pass)oo, was issued to -terela )ecause the ori'inal pass)oo, had )een surrendered to the $a,ati )ranch in view of a loan acco((odation assi'nin' the savin's account 07Ch. C2. Atien/a, who undou)tedl% had a hand in the eCecution of this certification, was aware that the contents of the sa(e are not true. 8e ,new that the pass)oo, was in the hands of $rs. !ives for he was the one who 'ave it to her. +esides, as assistant (ana'er of the )ranch and the )an, official servicin' the savin's and current accounts in 4uestion, he also was aware that the ori'inal pass)oo, was never surrendered. 8e was also co'ni/ant that 7strella Du(a'pi was not a(on' those authori/ed to withdraw so her certification had no effect whatsoever. The circu(stance surroundin' the openin' of the current account also de(onstrate that Atien/a3s active participation in the perpetration of the fraud and deception that caused the loss. The records indicate that this account was opened three da%s later after the *299,999.99 was deposited. :n spite of his disclai(er, the Court )elieves that Atien/a was (indful and posted re'ardin' the openin' of the current account considerin' that Doronilla was all the while in 1coordination1 with hi(. That it was he who facilitated the approval of the authorit% to de)it the savin's account to cover an% overdrawin's in the current account 07Ch. 22 is not hard to co(prehend. Clearl% Atien/a had co((itted wron'ful acts that had resulted to the loss su)@ect of this case. C C C.51 Ender Article 21=9 of the Civil Code, e(plo%ers shall )e held pri(aril% and solidaril% lia)le for da(a'es caused )% their e(plo%ees actin' within the scope of their assi'ned tas,s. To hold the e(plo%er lia)le under this provision, it (ust )e shown that an e(plo%er-e(plo%ee relationship eCists, and that the e(plo%ee was actin' within the scope of his assi'ned tas, when the act co(plained of was co((itted.52 Case law in the Enited -tates of A(erica has it that a corporation that entrusts a 'eneral dut% to its e(plo%ee is responsi)le to the in@ured part% for da(a'es flowin' fro( the e(plo%ee3s wron'ful act done in the course of his 'eneral authorit%, even thou'h in doin' such act, the e(plo%ee (a% have failed in its dut% to the e(plo%er and diso)e%ed the latter3s instructions.55 There is no dispute that Atien/a was an e(plo%ee of petitioner. .urther(ore, petitioner did not den% that Atien/a was actin' within the scope of his authorit% as Assistant +ranch $ana'er when he assisted Doronilla in withdrawin' funds fro( -terela3s -avin's Account "o. 19-15<#, in which account private respondent3s (one% was deposited, and in transferrin' the (one% withdrawn to -terela3s Current Account with petitioner. Atien/a3s acts of helpin' Doronilla, a custo(er of the petitioner, were o)viousl% done in furtherance of petitioner3s interests5& even thou'h in the process, Atien/a violated so(e of petitioner3s rules such as those stipulated in its savin's account pass)oo,.55 :t was esta)lished that the transfer of funds fro( -terela3s savin's account to its current account could not have )een acco(plished )% Doronilla without the invalua)le assistance of Atien/a, and that it was their connivance which was the cause of private respondent3s loss. The fore'oin' shows that the Court of Appeals correctl% held that under Article 21=9 of the Civil Code, petitioner is lia)le for private respondent3s loss and is solidaril% lia)le with Doronilla and Du(a'pi for the return

2%

of the *299,999.99 since it is clear that petitioner failed to prove that it eCercised due dili'ence to prevent the unauthori/ed withdrawals fro( -terela3s savin's account, and that it was not ne'li'ent in the selection and supervision of Atien/a. Accordin'l%, no error was co((itted )% the appellate court in the award of actual, (oral and eCe(plar% da(a'es, attorne%3s fees and costs of suit to private respondent. ?87 7.6 7, the petition is here)% D7":7D. The assailed Decision and Appeals are A..: $7D. esolution of the Court of

/G.R. No. 140304. 1u%e 3, 20042 CO#" O . PA1U3O, (e)*)*o%er, +,. COUR OF APPEA#S a%. EDD"E GUE-ARRA, re,(o%.e%),.
The Case +efore us is a petition for reviewM1N of the 21 June 2999 DecisionM2N and 1& Dece()er 2999 esolution of the Court of Appeals in CA-G. . -* "o. &5129. The Court of Appeals set aside the 11 "ove()er 199< decisionM5N of the e'ional Trial Court of Hue/on Cit%, +ranch =1,M&N affir(in' the 15 Dece()er 1995 decisionM5N of the $etropolitan Trial Court of Hue/on Cit%, +ranch 51.M<N The Antecedents :n June 19#9, petitioner Colito T. *a@u%o 0R*a@u%oS2 paid *&99 to a certain *edro *ere/ for the ri'hts over a 259-s4uare (eter lot in +arrio *a%atas, Hue/on Cit%. *a@u%o then constructed a house (ade of li'ht (aterials on the lot. *a@u%o and his fa(il% lived in the house fro( 19#9 to # Dece()er 19=5. 6n = Dece()er 19=5, *a@u%o and private respondent 7ddie Guevarra 0RGuevarraS2 eCecuted a Fasunduan or a'ree(ent. *a@u%o, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra would (aintain the cleanliness and orderliness of the house. Guevarra pro(ised that he would voluntaril% vacate the pre(ises on *a@u%o3s de(and. :n -epte()er 199&, *a@u%o infor(ed Guevarra of his need of the house and de(anded that Guevarra vacate the house. Guevarra refused. *a@u%o filed an e@ect(ent case a'ainst Guevarra with the $etropolitan Trial Court of Hue/on Cit%, +ranch 51 0R$TCS2. :n his Answer, Guevarra clai(ed that *a@u%o had no valid title or ri'ht of possession over the lot where the house stands )ecause the lot is within the 159 hectares set aside )% *rocla(ation "o. 15# for sociali/ed housin'. Guevarra pointed out that fro( Dece()er 19=5 to -epte()er 199&, *a@u%o did not show up or co((unicate with hi(. Guevarra insisted that neither he nor *a@u%o has valid title to the lot. 6n 15 Dece()er 1995, the $TC rendered its decision in favor of *a@u%o. The dispositive portion of the $TC decision reads> ?87 7.6 7, pre(ises considered, @ud'(ent is here)% rendered for the plaintiff and a'ainst defendant, orderin' the latter to> A2 vacate the house and lot occupied )% the defendant or an% other person or persons clai(in' an% ri'ht under hi(B +2 pa% unto plaintiff the su( of T8 77 8E"D 7D *7-6- 0*599.992 (onthl% as reasona)le co(pensation for the use of the pre(ises startin' fro( the last de(andB C2 pa% plaintiff the su( of *5,999.99 as and )% wa% of attorne%3s feesB and D2 pa% the cost of suit. -6 6 D7 7D.M#N A''rieved, Guevarra appealed to the e'ional Trial Court of Hue/on Cit%, +ranch =1 0R TCS2. 6n 11 "ove()er 199<, the TC affir(ed the $TC decision. The dispositive portion of the TC decision reads> ?87 7.6 7, pre(ises considered, the Court finds no reversi)le error in the decision appealed fro(, )ein' in accord with the law and evidence presented, and the sa(e is here)% affir(ed en toto. -6 6 D7 7D.M=N Guevarra received the TC decision on 29 "ove()er 199<. Guevarra had onl% until 1& Dece()er 199< to file his appeal with the Court of Appeals. :nstead of filin' his appeal with the Court of Appeals, Guevarra filed with the -upre(e Court a R$otion for 7Ctension of Ti(e to .ile Appeal )% Certiorari +ased on ule &2S 0R(otion for eCtensionS2. Guevarra theori/ed

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that his appeal raised pure 4uestions of law. The eceivin' Cler, of the -upre(e Court received the (otion for eCtension on 15 Dece()er 199< or one da% )efore the ri'ht to appeal eCpired. 6n 5 Januar% 199#, Guevarra filed his petition for review with the -upre(e Court. 6n = Januar% 199#, the .irst Division of the -upre(e Court issued a esolutionM9N referrin' the (otion for eCtension to the Court of Appeals which has concurrent @urisdiction over the case. The case presented no special and i(portant (atter for the -upre(e Court to ta,e co'ni/ance of at the first instance. 6n 2= Januar% 199#, the Thirteenth Division of the Court of Appeals issued a eCtension conditioned on the ti(eliness of the filin' of the (otion. esolutionM19N 'rantin' the (otion for

6n 2# .e)ruar% 199#, the Court of Appeals ordered *a@u%o to co((ent on Guevara3s petition for review. 6n 11 April 199#, *a@u%o filed his Co((ent. 6n 21 June 2999, the Court of Appeals issued its decision reversin' the decision reads> TC decision. The dispositive portion of the

?87 7.6 7, pre(ises considered, the assailed Decision of the court a 4uo in Civil Case "o. H-9<-2<9&5 is 7!7 -7D and -7T A-:D7B and it is here)% declared that the e@ect(ent case filed a'ainst defendant-appellant is without factual and le'al )asis. -6 6 D7 7D.M11N *a@u%o filed a (otion for reconsideration of the decision. *a@u%o pointed out that the Court of Appeals should have dis(issed outri'ht Guevarra3s petition for review )ecause it was filed out of ti(e. $oreover, it was Guevarra3s counsel and not Guevarra who si'ned the certification a'ainst foru(-shoppin'. 6n 1& Dece()er 2999, the Court of Appeals issued a resolution den%in' *a@u%o3s (otion for reconsideration. The dispositive portion of the resolution reads> ?87 7.6 7, for lac, of (erit, the (otion for reconsideration is here)% D7":7D. "o costs. -6 6 D7 7D.M12N The ulin' of the $TC The $TC ruled that the su)@ect of the a'ree(ent )etween *a@u%o and Guevarra is the house and not the lot. *a@u%o is the owner of the house, and he allowed Guevarra to use the house onl% )% tolerance. Thus, Guevarra3s refusal to vacate the house on *a@u%o3s de(and (ade Guevarra3s continued possession of the house ille'al. The ulin' of the TC The TC upheld the Fasunduan, which esta)lished the landlord and tenant relationship )etween *a@u%o and Guevarra. The ter(s of the Fasunduan )ound Guevarra to return possession of the house on de(and. The TC re@ected Guevarra3s clai( of a )etter ri'ht under *rocla(ation "o. 15#, the evised "ational Govern(ent Center 8ousin' *ro@ect Code of *olicies and other pertinent laws. :n an e@ect(ent suit, the TC has no power to decide Guevarra3s ri'hts under these laws. The TC declared that in an e@ect(ent case, the onl% issue for resolution is (aterial or ph%sical possession, not ownership. The ulin' of the Court of Appeals The Court of Appeals declared that *a@u%o and Guevarra are s4uatters. *a@u%o and Guevarra ille'all% occupied the contested lot which the 'overn(ent owned. *ere/, the person fro( who( *a@u%o ac4uired his ri'hts, was also a s4uatter. *ere/ had no ri'ht or title over the lot )ecause it is pu)lic land. The assi'n(ent of ri'hts )etween *ere/ and *a@u%o, and the Fasunduan )etween *a@u%o and Guevarra, did not have an% le'al effect. *a@u%o and Guevarra are in pari delicto or in e4ual fault. The court will leave the( where the% are. The Court of Appeals reversed the $TC and TC rulin's, which held that the Fasunduan )etween *a@u%o and Guevarra created a le'al tie a,in to that of a landlord and tenant relationship. The Court of Appeals ruled that the Fasunduan is not a lease contract )ut a co((odatu( )ecause the a'ree(ent is not for a price certain. -ince *a@u%o ad(itted that he resurfaced onl% in 199& to clai( the propert%, the appellate court held that Guevarra has a )etter ri'ht over the propert% under *rocla(ation "o. 15#. *resident Cora/on C. A4uino 0R*resident A4uinoS2 issued *rocla(ation "o. 15# on # -epte()er 19=#. At that ti(e, Guevarra was in ph%sical possession of the propert%. Ender Article !: of the Code of *olicies +eneficiar% -election and Disposition of 8o(elots and -tructures in the "ational 8ousin' *ro@ect 0Rthe CodeS2, the actual occupant or careta,er of the lot shall have first priorit% as )eneficiar% of the pro@ect. The Court of Appeals concluded that Guevarra is first in the hierarch% of priorit%. :n den%in' *a@u%o3s (otion for reconsideration, the appellate court de)un,ed *a@u%o3s clai( that Guevarra filed his (otion for eCtension )e%ond the period to appeal.

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The Court of Appeals pointed out that Guevarra3s (otion for eCtension filed )efore the -upre(e Court was sta(ped R15 Dece()er 199< at &>99 *$S )% the -upre(e Court3s eceivin' Cler,. The Court of Appeals concluded that the (otion for eCtension )ore a date, contrar% to *a@u%o3s clai( that the (otion for eCtension was undated. Guevarra filed the (otion for eCtension on ti(e on 15 Dece()er 199< since he filed the (otion one da% )efore the eCpiration of the re'le(entar% period on 1& Dece()er 199<. Thus, the (otion for eCtension properl% co(plied with the condition i(posed )% the Court of Appeals in its 2= Januar% 199# esolution. The Court of Appeals eCplained that the thirt%-da% eCtension to file the petition for review was dee(ed 'ranted )ecause of such co(pliance. The Court of Appeals re@ected *a@u%o3s ar'u(ent that the appellate court should have dis(issed the petition for review )ecause it was Guevarra3s counsel and not Guevarra who si'ned the certification a'ainst foru(-shoppin'. The Court of Appeals pointed out that *a@u%o did not raise this issue in his Co((ent. The Court of Appeals held that *a@u%o could not now see, the dis(issal of the case after he had eCtensivel% ar'ued on the (erits of the case. This technicalit%, the appellate court opined, was clearl% an afterthou'ht. The :ssues *a@u%o raises the followin' issues for resolution> ?87T87 T87 C6E T 6. A**7AD- 7 DACF 6. JE :-D:CT:6"> 7D 6 A+E-7D :T- AET86 :TI A"D D:-C 7T:6" TA"TA$6E"T T6

12 in G A"T:"G, instead of den%in', *rivate espondent3s $otion for an 7Ctension of thirt% da%s to file petition for review at the ti(e when there was no (ore period to eCtend as the decision of the e'ional Trial Court had alread% )eco(e final and eCecutor%. 22 in 'ivin' due course, instead of dis(issin', private respondent3s *etition for a'ainst foru(-shoppin' was si'ned onl% )% counsel instead of )% petitioner hi(self. eview even thou'h the certification

52 in rulin' that the Fasunduan voluntaril% entered into )% the parties was in fact a co((odatu(, instead of a Contract of Dease as found )% the $etropolitan Trial Court and in holdin' that Rthe e@ect(ent case filed a'ainst defendant-appellant is without le'al and factual )asisS. &2 in reversin' and settin' aside the Decision of the e'ional Trial Court in Civil Case "o. H-9<-2<9&5 and in holdin' that the parties are in pari delicto )ein' )oth s4uatters, therefore, ille'al occupants of the contested parcel of land. 52 in decidin' the unlawful detainer case )ased on the so-called Code of *olicies of the "ational Govern(ent Center 8ousin' *ro@ect instead of decidin' the sa(e under the Fasunduan voluntaril% eCecuted )% the parties, the ter(s and conditions of which are the laws )etween the(selves.M15N The ulin' of the Court The procedural issues *a@u%o is raisin' are )aseless. su)(ittin' for resolution. *rocedural :ssues *a@u%o insists that the Court of Appeals should have dis(issed outri'ht Guevarra3s petition for review )ecause the TC decision had alread% )eco(e final and eCecutor% when the appellate court acted on Guevarra3s (otion for eCtension to file the petition. *a@u%o points out that Guevarra had onl% one da% )efore the eCpir% of his period to appeal the TC decision. :nstead of filin' the petition for review with the Court of Appeals, Guevarra filed with this Court an undated (otion for eCtension of 59 da%s to file a petition for review. This Court (erel% referred the (otion to the Court of Appeals. *a@u%o )elieves that the filin' of the (otion for eCtension with this Court did not toll the runnin' of the period to perfect the appeal. 8ence, when the Court of Appeals received the (otion, the period to appeal had alread% eCpired. ?e are not persuaded. Decisions of the re'ional trial courts in the eCercise of their appellate @urisdiction are appeala)le to the Court of Appeals )% petition for review in cases involvin' 4uestions of fact or (iCed 4uestions of fact and law.M1&N Decisions of the re'ional trial courts involvin' pure 4uestions of law are appeala)le directl% to this Court )% petition for review.M15N These (odes of appeal are now e()odied in -ection 2, ule &1 of the 199# ules of Civil *rocedure. Guevarra )elieved that his appeal of the TC decision involved onl% 4uestions of law. Guevarra thus filed his (otion for eCtension to file petition for review )efore this Court on 1& Dece()er 199<. 6n 5 Januar% 199#, Guevarra then filed his petition for review with this Court. A perusal of Guevarra3s petition for review 'ives the i(pression that the issues he raised were pure 4uestions of law. There is a 4uestion of law when the dou)t or difference is on what the law is on a certain state of facts.M1<N There is a 4uestion of fact when the dou)t or difference is on the truth or falsit% of the facts alle'ed.M1#N :n his petition for review )efore this Court, Guevarra no lon'er disputed the facts. Guevarra3s petition for review raised these 4uestions> 012 Do e@ect(ent cases pertain onl% to possession of a structure, and not the lot on which the structure standsT 022 Does a suit )% a s4uatter a'ainst a fellow s4uatter constitute a valid case for e@ect(entT 052 -hould a *residential *rocla(ation 'overnin' the lot on which a s4uatter3s structure stands )e considered in an e@ect(ent suit filed )% the owner of the structureT 8owever, we find (erit in the su)stantive issues *a@u%o is

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These 4uestions call for the evaluation of the ri'hts of the parties under the law on e@ect(ent and the *residential *rocla(ation. At first 'lance, the 4uestions Guevarra raised appeared purel% le'al. 8owever, so(e factual 4uestions still have to )e resolved )ecause the% have a )earin' on the le'al 4uestions raised in the petition for review. These factual (atters refer to the (etes and )ounds of the disputed propert% and the application of Guevarra as )eneficiar% of *rocla(ation "o. 15#. The Court of Appeals has the power to 'rant an eCtension of ti(e to file a petition for review. :n Dacsa(ana v. -econd -pecial Cases Division of the :nter(ediate Appellate Court,M1=N we declared that the Court of Appeals could 'rant eCtension of ti(e in appeals )% petition for review. :n Di)oro v. Court of Appeals,M19N we clarified that the prohi)ition a'ainst 'rantin' an eCtension of ti(e applies onl% in a case where ordinar% appeal is perfected )% a (ere notice of appeal. The prohi)ition does not appl% in a petition for review where the pleadin' needs verification. A petition for review, unli,e an ordinar% appeal, re4uires preparation and research to present a persuasive position.M29N The draftin' of the petition for review entails (ore ti(e and effort than filin' a notice of appeal.M21N 8ence, the Court of Appeals (a% allow an eCtension of ti(e to file a petition for review. :n the (ore recent case of Co((issioner of :nternal evenue v. Court of Appeals,M22N we held that Di)oro3s clarification of Dacsa(ana is consistent with the evised :nternal ules of the Court of Appeals and -upre(e Court Circular "o. 1-91. The% all allow an eCtension of ti(e for filin' petitions for review with the Court of Appeals. The eCtension, however, should )e li(ited to onl% fifteen da%s save in eCceptionall% (eritorious cases where the Court of Appeals (a% 'rant a lon'er period. A @ud'(ent )eco(es Rfinal and eCecutor%S )% operation of law. .inalit% of @ud'(ent )eco(es a fact on the lapse of the re'le(entar% period to appeal if no appeal is perfected.M25N The TC decision could not have 'ained finalit% )ecause the Court of Appeals 'ranted the 59-da% eCtension to Guevarra. The Court of Appeals did not co((it 'rave a)use of discretion when it approved Guevarra3s (otion for eCtension. The Court of Appeals 'ave due course to the (otion for eCtension )ecause it co(plied with the condition set )% the appellate court in its resolution dated 2= Januar% 199#. The resolution stated that the Court of Appeals would onl% 'ive due course to the (otion for eCtension if filed on ti(e. The (otion for eCtension (et this condition. The (aterial dates to consider in deter(inin' the ti(eliness of the filin' of the (otion for eCtension are 012 the date of receipt of the @ud'(ent or final order or resolution su)@ect of the petition, and 022 the date of filin' of the (otion for eCtension.M2&N :t is the date of the filin' of the (otion or pleadin', and not the date of eCecution, that deter(ines the ti(eliness of the filin' of that (otion or pleadin'. Thus, even if the (otion for eCtension )ears no date, the date of filin' sta(ped on it is the rec,onin' point for deter(inin' the ti(eliness of its filin'. Guevarra had until 1& Dece()er 199< to file an appeal fro( the TC decision. Guevarra filed his (otion for eCtension )efore this Court on 15 Dece()er 199<, the date sta(ped )% this Court3s eceivin' Cler, on the (otion for eCtension. Clearl%, Guevarra filed the (otion for eCtension eCactl% one da% )efore the lapse of the re'le(entar% period to appeal. Assu(in' that the Court of Appeals should have dis(issed Guevarra3s appeal on technical 'rounds, *a@u%o did not as, the appellate court to den% the (otion for eCtension and dis(iss the petition for review at the earliest opportunit%. :nstead, *a@u%o vi'orousl% discussed the (erits of the case. :t was onl% when the Court of Appeals ruled in Guevarra3s favor that *a@u%o raised the procedural issues a'ainst Guevarra3s petition for review. A part% who, after voluntaril% su)(ittin' a dispute for resolution, receives an adverse decision on the (erits, is estopped fro( attac,in' the @urisdiction of the court.M25N 7stoppel sets in not )ecause the @ud'(ent of the court is a valid and conclusive ad@udication, )ut )ecause the practice of attac,in' the court3s @urisdiction after voluntaril% su)(ittin' to it is a'ainst pu)lic polic%.M2<N :n his Co((ent )efore the Court of Appeals, *a@u%o also failed to discuss Guevarra3s failure to si'n the certification a'ainst foru( shoppin'. :nstead, *a@u%o harped on Guevarra3s counsel si'nin' the verification, clai(in' that the counsel3s verification is insufficient since it is )ased onl% on R(ere infor(ation.S A part%3s failure to si'n the certification a'ainst foru( shoppin' is different fro( the part%3s failure to si'n personall% the verification. The certificate of non-foru( shoppin' (ust )e si'ned )% the part%, and not )% counsel.M2#N The certification of counsel renders the petition defective.M2=N 6n the other hand, the re4uire(ent on verification of a pleadin' is a for(al and not a @urisdictional re4uisite.M29N :t is intended si(pl% to secure an assurance that what are alle'ed in the pleadin' are true and correct and not the product of the i(a'ination or a (atter of speculation, and that the pleadin' is filed in 'ood faith.M59N The part% need not si'n the verification. A part%3s representative, law%er or an% person who personall% ,nows the truth of the facts alle'ed in the pleadin' (a% si'n the verification.M51N ?e a'ree with the Court of Appeals that the issue on the certificate a'ainst foru( shoppin' was (erel% an afterthou'ht. *a@u%o did not call the Court of Appeals3 attention to this defect at the earl% sta'e of the proceedin's. *a@u%o raised this procedural issue too late in the proceedin's. A)sence of Title over the Disputed *ropert% will not Divest the Courts of Jurisdiction to esolve the :ssue of *ossession -ettled is the rule that the defendant3s clai( of ownership of the disputed propert% will not divest the inferior court of its @urisdiction over the e@ect(ent case.M52N 7ven if the pleadin's raise the issue of ownership, the court (a% pass on such issue to deter(ine onl% the 4uestion of possession, especiall% if the ownership is insepara)l% lin,ed with the possession.

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M55N The ad@udication on the issue of ownership is onl% provisional and will not )ar an action )etween the sa(e parties involvin' title to the land.M5&N This doctrine is a necessar% conse4uence of the nature of the two su((ar% actions of e@ect(ent, forci)le entr% and unlawful detainer, where the onl% issue for ad@udication is the ph%sical or (aterial possession over the real propert%.M55N :n this case, what Guevarra raised )efore the courts was that he and *a@u%o are not the owners of the contested propert% and that the% are (ere s4uatters. ?ill the defense that the parties to the e@ect(ent case are not the owners of the disputed lot allow the courts to renounce their @urisdiction over the caseT The Court of Appeals )elieved so and held that it would @ust leave the parties where the% are since the% are in pari delicto. ?e do not a'ree with the Court of Appeals. 6wnership or the ri'ht to possess arisin' fro( ownership is not at issue in an action for recover% of possession. The parties cannot present evidence to prove ownership or ri'ht to le'al possession eCcept to prove the nature of the possession when necessar% to resolve the issue of ph%sical possession.M5<N The sa(e is true when the defendant asserts the a)sence of title over the propert%. The a)sence of title over the contested lot is not a 'round for the courts to withhold relief fro( the parties in an e@ect(ent case. The onl% 4uestion that the courts (ust resolve in e@ect(ent proceedin's is - who is entitled to the ph%sical possession of the pre(ises, that is, to the possession de facto and not to the possession de @ure.M5#N :t does not even (atter if a part%3s title to the propert% is 4uestiona)le,M5=N or when )oth parties intruded into pu)lic land and their applications to own the land have %et to )e approved )% the proper 'overn(ent a'enc%.M59N e'ardless of the actual condition of the title to the propert%, the part% in peacea)le 4uiet possession shall not )e thrown out )% a stron' hand, violence or terror.M&9N "either is the unlawful withholdin' of propert% allowed. Courts will alwa%s uphold respect for prior possession. Thus, a part% who can prove prior possession can recover such possession even a'ainst the owner hi(self.M&1N ?hatever (a% )e the character of his possession, if he has in his favor prior possession in ti(e, he has the securit% that entitles hi( to re(ain on the propert% until a person with a )etter ri'ht lawfull% e@ects hi(.M&2N To repeat, the onl% issue that the court has to settle in an e@ect(ent suit is the ri'ht to ph%sical possession. :n *itar'ue v. -orilla,M&5N the 'overn(ent owned the land in dispute. The 'overn(ent did not authori/e either the plaintiff or the defendant in the case of forci)le entr% case to occup% the land. The plaintiff had prior possession and had alread% introduced i(prove(ents on the pu)lic land. The plaintiff had a pendin' application for the land with the +ureau of Dands when the defendant ousted hi( fro( possession. The plaintiff filed the action of forci)le entr% a'ainst the defendant. The 'overn(ent was not a part% in the case of forci)le entr%. The defendant 4uestioned the @urisdiction of the courts to settle the issue of possession )ecause while the application of the plaintiff was still pendin', title re(ained with the 'overn(ent, and the +ureau of *u)lic Dands had @urisdiction over the case. ?e disa'reed with the defendant. ?e ruled that courts have @urisdiction to entertain e@ect(ent suits even )efore the resolution of the application. The plaintiff, )% priorit% of his application and of his entr%, ac4uired prior ph%sical possession over the pu)lic land applied for as a'ainst other private clai(ants. That prior ph%sical possession en@o%s le'al protection a'ainst other private clai(ants )ecause onl% a court can ta,e awa% such ph%sical possession in an e@ect(ent case. ?hile the Court did not )rand the plaintiff and the defendant in *itar'ueM&&N as s4uatters, strictl% spea,in', their entr% into the disputed land was ille'al. +oth the plaintiff and defendant entered the pu)lic land without the owner3s per(ission. Title to the land re(ained with the 'overn(ent )ecause it had not awarded to an%one ownership of the contested pu)lic land. +oth the plaintiff and the defendant were in effect s4uattin' on 'overn(ent propert%. Iet, we upheld the courts3 @urisdiction to resolve the issue of possession even if the plaintiff and the defendant in the e@ect(ent case did not have an% title over the contested land. Courts (ust not a)dicate their @urisdiction to resolve the issue of ph%sical possession )ecause of the pu)lic need to preserve the )asic polic% )ehind the su((ar% actions of forci)le entr% and unlawful detainer. The underl%in' philosoph% )ehind e@ect(ent suits is to prevent )reach of the peace and cri(inal disorder and to co(pel the part% out of possession to respect and resort to the law alone to o)tain what he clai(s is his.M&5N The part% deprived of possession (ust not ta,e the law into his own hands.M&<N 7@ect(ent proceedin's are su((ar% in nature so the authorities can settle speedil% actions to recover possession )ecause of the overridin' need to 4uell social distur)ances.M&#N ?e further eCplained in *itar'ue the 'reater interest that is at sta,e in actions for recover% of possession. ?e (ade the followin' pronounce(ents in *itar'ue> The 4uestion that is )efore this Court is> Are courts without @urisdiction to ta,e co'ni/ance of possessor% actions involvin' these pu)lic lands )efore final award is (ade )% the Dands Depart(ent, and )efore title is 'iven an% of the conflictin' clai(antsT :t is one of ut(ost i(portance, as there are pu)lic lands ever%where and there are thousands of settlers, especiall% in newl% opened re'ions. :t also involves a (atter of polic%, as it re4uires the deter(ination of the respective authorities and functions of two coordinate )ranches of the Govern(ent in connection with pu)lic land conflicts. 6ur pro)le( is (ade si(ple )% the fact that under the Civil Code, either in the old, which was in force in this countr% )efore the A(erican occupation, or in the new, we have a possessor% action, the ai( and purpose of which is the recover% of the ph%sical possession of real propert%, irrespective of the 4uestion as to who has the title thereto. Ender the -panish Civil Code we had the accion interdictal, a su((ar% proceedin' which could )e )rou'ht within one %ear fro( dispossession 0 o(an Catholic +ishop of Ce)u vs. $an'aron, < *hil. 2=<, 2912B and as earl% as 6cto)er 1, 1991, upon the enact(ent of the Code of Civil *rocedure 0Act "o. 199 of the *hilippine Co((ission2 we i(planted the co((on law action of forci)le entr% 0section =9 of Act "o. 1992, the o)@ect of which has )een stated )% this Court to )e Rto prevent

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)reaches of the peace and cri(inal disorder which would ensue fro( the withdrawal of the re(ed%, and the reasona)le hope such withdrawal would create that so(e advanta'e (ust accrue to those persons who, )elievin' the(selves entitled to the possession of propert%, resort to force to 'ain possession rather than to so(e appropriate action in the court to assert their clai(s.S 0-upia and +atioco vs. Huintero and A%ala, 59 *hil. 512, 51&.2 -o )efore the enact(ent of the first *u)lic Dand Act 0Act "o. 92<2 the action of forci)le entr% was alread% availa)le in the courts of the countr%. -o the 4uestion to )e resolved is, Did the De'islature intend, when it vested the power and authorit% to alienate and dispose of the pu)lic lands in the Dands Depart(ent, to eCclude the courts fro( entertainin' the possessor% action of forci)le entr% )etween rival clai(ants or occupants of an% land )efore award thereof to an% of the partiesT Did Con'ress intend that the lands applied for, or all pu)lic lands for that (atter, )e re(oved fro( the @urisdiction of the @udicial +ranch of the Govern(ent, so that an% trou)les arisin' therefro(, or an% )reaches of the peace or disorders caused )% rival clai(ants, could )e in4uired into onl% )% the Dands Depart(ent to the eCclusion of the courtsT The answer to this 4uestion see(s to us evident. The Dands Depart(ent does not have the (eans to police pu)lic landsB neither does it have the (eans to prevent disorders arisin' therefro(, or contain )reaches of the peace a(on' settlersB or to pass pro(ptl% upon conflicts of possession. Then its power is clearl% li(ited to disposition and alienation, and while it (a% decide conflicts of possession in order to (a,e proper award, the settle(ent of conflicts of possession which is reco'ni/ed in the court herein has another ulti(ate purpose, i.e., the protection of actual possessors and occupants with a view to the prevention of )reaches of the peace. The power to dispose and alienate could not have )een intended to include the power to prevent or settle disorders or )reaches of the peace a(on' rival settlers or clai(ants prior to the final award. As to this, therefore, the correspondin' )ranches of the Govern(ent (ust continue to eCercise power and @urisdiction within the li(its of their respective functions. The vestin' of the Dands Depart(ent with authorit% to ad(inister, dispose, and alienate pu)lic lands, therefore, (ust not )e understood as deprivin' the other )ranches of the Govern(ent of the eCercise of the respective functions or powers thereon, such as the authorit% to stop disorders and 4uell )reaches of the peace )% the police, the authorit% on the part of the courts to ta,e @urisdiction over possessor% actions arisin' therefro( not involvin', directl% or indirectl%, alienation and disposition. 6ur attention has )een called to a principle enunciated in A(erican courts to the effect that courts have no @urisdiction to deter(ine the ri'hts of clai(ants to pu)lic lands, and that until the disposition of the land has passed fro( the control of the .ederal Govern(ent, the courts will not interfere with the ad(inistration of (atters concernin' the sa(e. 059 C. J. 1995-199&.2 ?e have no 4uarrel with this principle. The deter(ination of the respective ri'hts of rival clai(ants to pu)lic lands is different fro( the deter(ination of who has the actual ph%sical possession or occupation with a view to protectin' the sa(e and preventin' disorder and )reaches of the peace. A @ud'(ent of the court orderin' restitution of the possession of a parcel of land to the actual occupant, who has )een deprived thereof )% another throu'h the use of force or in an% other ille'al (anner, can never )e Rpre@udicial interferenceS with the disposition or alienation of pu)lic lands. 6n the other hand, if courts were deprived of @urisdiction of cases involvin' conflicts of possession, that threat of @udicial action a'ainst )reaches of the peace co((itted on pu)lic lands would )e eli(inated, and a state of lawlessness would pro)a)l% )e produced )etween applicants, occupants or s4uatters, where force or (i'ht, not ri'ht or @ustice, would rule. :t (ust )e )orne in (ind that the action that would )e used to solve conflicts of possession )etween rivals or conflictin' applicants or clai(ants would )e no other than that of forci)le entr%. This action, )oth in 7n'land and the Enited -tates and in our @urisdiction, is a su((ar% and eCpeditious re(ed% where)% one in peaceful and 4uiet possession (a% recover the possession of which he has )een deprived )% a stron'er hand, )% violence or terrorB its ulti(ate o)@ect )ein' to prevent )reach of the peace and cri(inal disorder. 0-upia and +atioco vs. Huintero and A%ala, 59 *hil. 512, 51&.2 The )asis of the re(ed% is (ere possession as a fact, of ph%sical possession, not a le'al possession. 0$ediran vs. !illanueva, 5# *hil. #52.2 The title or ri'ht to possession is never in issue in an action of forci)le entr%B as a (atter of fact, evidence thereof is eCpressl% )anned, eCcept to prove the nature of the possession. 0-econd &, ule #2, ules of Court.2 ?ith this nature of the action in (ind, )% no stretch of the i(a'ination can conclusion )e arrived at that the use of the re(ed% in the courts of @ustice would constitute an interference with the alienation, disposition, and control of pu)lic lands. To li(it ourselves to the case at )ar can it )e pretended at all that its result would in an% wa% interfere with the (anner of the alienation or disposition of the land contestedT 6n the contrar%, it would facilitate ad@udication, for the 4uestion of priorit% of possession havin' )een decided in a final (anner )% the courts, said 4uestion need no lon'er waste the ti(e of the land officers (a,in' the ad@udication or award. 07(phasis ours2 The *rinciple of *ari Delicto is not Applica)le to 7@ect(ent Cases The Court of Appeals erroneousl% applied the principle of pari delicto to this case. Articles 1&11 and 1&12 of the Civil CodeM&=N e()od% the principle of pari delicto. ?e eCplained the principle of pari delicto in these words> The rule of pari delicto is eCpressed in the (aCi(s UeC dolo (alo non eritur actio3 and Uin pari delicto potior est conditio defedentis.3 The law will not aid either part% to an ille'al a'ree(ent. :t leaves the parties where it finds the(.M&9N The application of the pari delicto principle is not a)solute, as there are eCceptions to its application. 6ne of these eCceptions is where the application of the pari delicto rule would violate well-esta)lished pu)lic polic%.M59N :n Drilon v. Gaurana,M51N we reiterated the )asic polic% )ehind the su((ar% actions of forci)le entr% and unlawful detainer. ?e held that> :t (ust )e stated that the purpose of an action of forci)le entr% and detainer is that, re'ardless of the actual condition of the title to the propert%, the part% in peacea)le 4uiet possession shall not )e turned out )% stron' hand, violence or terror. :n affordin' this re(ed% of restitution the o)@ect of the statute is to prevent )reaches of the peace and cri(inal disorder which would ensue fro( the withdrawal of the re(ed%, and the reasona)le hope such withdrawal would create that so(e advanta'e (ust accrue to those persons who, )elievin' the(selves entitled to the possession of propert%, resort to force to 'ain possession rather than to so(e appropriate action in the courts to assert their clai(s. This is the philosoph% at the

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foundation of all these actions of forci)le entr% and detainer which are desi'ned to co(pel the part% out of possession to respect and resort to the law alone to o)tain what he clai(s is his.M52N Clearl%, the application of the principle of pari delicto to a case of e@ect(ent )etween s4uatters is frau'ht with dan'er. To shut out relief to s4uatters on the 'round of pari delicto would openl% invite (a%he( and lawlessness. A s4uatter would oust another s4uatter fro( possession of the lot that the latter had ille'all% occupied, e()oldened )% the ,nowled'e that the courts would leave the( where the% are. "othin' would then stand in the wa% of the ousted s4uatter fro( re-clai(in' his prior possession at all cost. *ett% warfare over possession of properties is precisel% what e@ect(ent cases or actions for recover% of possession see, to prevent.M55N 7ven the owner who has title over the disputed propert% cannot ta,e the law into his own hands to re'ain possession of his propert%. The owner (ust 'o to court. Courts (ust resolve the issue of possession even if the parties to the e@ect(ent suit are s4uatters. The deter(ination of priorit% and superiorit% of possession is a serious and ur'ent (atter that cannot )e left to the s4uatters to decide. To do so would (a,e s4uatters receive )etter treat(ent under the law. The law restrains propert% owners fro( ta,in' the law into their own hands. 8owever, the principle of pari delicto as applied )% the Court of Appeals would 'ive s4uatters free rein to dispossess fellow s4uatters or violentl% reta,e possession of properties usurped fro( the(. Courts should not leave s4uatters to their own devices in cases involvin' recover% of possession. *ossession is the onl% :ssue for esolution in an 7@ect(ent Case The case for review )efore the Court of Appeals was a si(ple case of e@ect(ent. The Court of Appeals refused to rule on the issue of ph%sical possession. "evertheless, the appellate court held that the pivotal issue in this case is who )etween *a@u%o and Guevarra has the Rpriorit% ri'ht as )eneficiar% of the contested land under *rocla(ation "o. 15#.SM5&N Accordin' to the Court of Appeals, Guevarra en@o%s preferential ri'ht under *rocla(ation "o. 15# )ecause Article !: of the Code declares that the actual occupant or careta,er is the one 4ualified to appl% for sociali/ed housin'. The rulin' of the Court of Appeals has no factual and le'al )asis. .irst. Guevarra did not present evidence to show that the contested lot is part of a relocation site under *rocla(ation "o. 15#. *rocla(ation "o. 15# laid down the (etes and )ounds of the land that it declared open for disposition to )ona fide residents. The records do not show that the contested lot is within the land specified )% *rocla(ation "o. 15#. Guevarra had the )urden to prove that the disputed lot is within the covera'e of *rocla(ation "o. 15#. 8e failed to do so. -econd. The Court of Appeals should not have 'iven credence to Guevarra3s unsu)stantiated clai( that he is the )eneficiar% of *rocla(ation "o. 15#. Guevarra (erel% alle'ed that in the surve% the pro@ect ad(inistrator conducted, he and not *a@u%o appeared as the actual occupant of the lot. There is no proof that Guevarra actuall% availed of the )enefits of *rocla(ation "o. 15#. *a@u%o allowed Guevarra to occup% the disputed propert% in 19=5. *resident A4uino si'ned *rocla(ation "o. 15# into law on 11 $arch 19=<. *a@u%o (ade his earliest de(and for Guevarra to vacate the propert% in -epte()er 199&. Durin' the ti(e that Guevarra te(poraril% held the propert% up to the ti(e that *rocla(ation "o. 15# alle'edl% se're'ated the disputed lot, Guevarra never applied as )eneficiar% of *rocla(ation "o. 15#. 7ven when Guevarra alread% ,new that *a@u%o was reclai(in' possession of the propert%, Guevarra did not ta,e an% step to co(pl% with the re4uire(ents of *rocla(ation "o. 15#. Third. 7ven assu(in' that the disputed lot is within the covera'e of *rocla(ation "o. 15# and Guevarra has a pendin' application over the lot, courts should still assu(e @urisdiction and resolve the issue of possession. 8owever, the @urisdiction of the courts would )e li(ited to the issue of ph%sical possession onl%. :n *itar'ue,M55N we ruled that courts have @urisdiction over possessor% actions involvin' pu)lic land to deter(ine the issue of ph%sical possession. The deter(ination of the respective ri'hts of rival clai(ants to pu)lic land is, however, distinct fro( the deter(ination of who has the actual ph%sical possession or who has a )etter ri'ht of ph%sical possession.M5<N The ad(inistrative disposition and alienation of pu)lic lands should )e threshed out in the proper 'overn(ent a'enc%.M5#N The Court of Appeals3 deter(ination of *a@u%o and Guevarra3s ri'hts under *rocla(ation "o. 15# was pre(ature. *a@u%o and Guevarra were at (ost (erel% potential )eneficiaries of the law. Courts should not pree(pt the decision of the ad(inistrative a'enc% (andated )% law to deter(ine the 4ualifications of applicants for the ac4uisition of pu)lic lands. :nstead, courts should eCpeditiousl% resolve the issue of ph%sical possession in e@ect(ent cases to prevent disorder and )reaches of peace.M5=N *a@u%o is 7ntitled to *h%sical *ossession of the Disputed *ropert% Guevarra does not dispute *a@u%o3s prior possession of the lot and ownership of the house )uilt on it. Guevarra eCpressl% ad(itted the eCistence and due eCecution of the Fasunduan. The Fasunduan reads> A,o, si C6DM:NT6 *AJEI6, (a%-ari n' )aha% at lote sa +o. *a%atas, Hue/on Cit%, a% na')i)i'a% pahintulot ,a% G. 7ddie Guevarra, na pansa(antalan' (anirahan sa nasa)in' )aha% at lote n' Rwalan' )a%ad.S Fau'na% nito, ,ailan'an' panatilihin nila an' ,alinisan at ,aa%usan n' )aha% at lote.

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-a sandalin' ,ailan'an na na(in an' )aha% at lote, sila3% ,usan' aalis n' walan' re,la(o. +ased on the Fasunduan, *a@u%o per(itted Guevarra to reside in the house and lot free of rent, )ut Guevarra was under o)li'ation to (aintain the pre(ises in 'ood condition. Guevarra pro(ised to vacate the pre(ises on *a@u%o3s de(and )ut Guevarra )ro,e his pro(ise and refused to heed *a@u%o3s de(and to vacate. These facts (a,e out a case for unlawful detainer. Enlawful detainer involves the withholdin' )% a person fro( another of the possession of real propert% to which the latter is entitled after the eCpiration or ter(ination of the for(er3s ri'ht to hold possession under a contract, eCpress or i(plied.M59N ?here the plaintiff allows the defendant to use his propert% )% tolerance without an% contract, the defendant is necessaril% )ound )% an i(plied pro(ise that he will vacate on de(and, failin' which, an action for unlawful detainer will lie.M<9N The defendant3s refusal to co(pl% with the de(and (a,es his continued possession of the propert% unlawful.M<1N The status of the defendant in such a case is si(ilar to that of a lessee or tenant whose ter( of lease has eCpired )ut whose occupanc% continues )% tolerance of the owner.M<2N This principle should appl% with 'reater force in cases where a contract e()odies the per(ission or tolerance to use the propert%. The Fasunduan eCpressl% articulated *a@u%o3s for)earance. *a@u%o did not re4uire Guevarra to pa% an% rent )ut onl% to (aintain the house and lot in 'ood condition. Guevarra eCpressl% vowed in the Fasunduan that he would vacate the propert% on de(and. Guevarra3s refusal to co(pl% with *a@u%o3s de(and to vacate (ade Guevarra3s continued possession of the propert% unlawful. ?e do not su)scri)e to the Court of Appeals3 theor% that the Fasunduan is one of co((odatu(. :n a contract of co((odatu(, one of the parties delivers to another so(ethin' not consu(a)le so that the latter (a% use the sa(e for a certain ti(e and return it.M<5N An essential feature of co((odatu( is that it is 'ratuitous. Another feature of co((odatu( is that the use of the thin' )elon'in' to another is for a certain period.M<&N Thus, the )ailor cannot de(and the return of the thin' loaned until after eCpiration of the period stipulated, or after acco(plish(ent of the use for which the co((odatu( is constituted.M<5N :f the )ailor should have ur'ent need of the thin', he (a% de(and its return for te(porar% use.M<<N :f the use of the thin' is (erel% tolerated )% the )ailor, he can de(and the return of the thin' at will, in which case the contractual relation is called a precariu(.M<#N Ender the Civil Code, precariu( is a ,ind of co((odatu(. M<=N The Fasunduan reveals that the acco((odation accorded )% *a@u%o to Guevarra was not essentiall% 'ratuitous. ?hile the Fasunduan did not re4uire Guevarra to pa% rent, it o)li'ated hi( to (aintain the propert% in 'ood condition. The i(position of this o)li'ation (a,es the Fasunduan a contract different fro( a co((odatu(. The effects of the Fasunduan are also different fro( that of a co((odatu(. Case law on e@ect(ent has treated relationship )ased on tolerance as one that is a,in to a landlord-tenant relationship where the withdrawal of per(ission would result in the ter(ination of the lease.M<9N The tenant3s withholdin' of the propert% would then )e unlawful. This is settled @urisprudence. 7ven assu(in' that the relationship )etween *a@u%o and Guevarra is one of co((odatu(, Guevarra as )ailee would still have the dut% to turn over possession of the propert% to *a@u%o, the )ailor. The o)li'ation to deliver or to return the thin' received attaches to contracts for safe,eepin', or contracts of co((ission, ad(inistration and co((odatu(.M#9N These contracts certainl% involve the o)li'ation to deliver or return the thin' received.M#1N Guevarra turned his )ac, on the Fasunduan on the sole 'round that li,e hi(, *a@u%o is also a s4uatter. -4uatters, Guevarra pointed out, cannot enter into a contract involvin' the land the% ille'all% occup%. Guevarra insists that the contract is void. Guevarra should ,now that there (ust )e honor even )etween s4uatters. Guevarra freel% entered into the Fasunduan. Guevarra cannot now i(pu'n the Fasunduan after he had )enefited fro( it. The Fasunduan )inds Guevarra. The Fasunduan is not void for purposes of deter(inin' who )etween *a@u%o and Guevarra has a ri'ht to ph%sical possession of the contested propert%. The Fasunduan is the undenia)le evidence of Guevarra3s reco'nition of *a@u%o3s )etter ri'ht of ph%sical possession. Guevarra is clearl% a possessor in )ad faith. The a)sence of a contract would not %ield a different result, as there would still )e an i(plied pro(ise to vacate. Guevarra contends that there is Ra pernicious evil that is sou'ht to )e avoided, and that is allowin' an a)sentee s4uatter who 0sic2 (a,es 0sic2 a profit out of his ille'al act.SM#2N Guevarra )ases his ar'u(ent on the preferential ri'ht 'iven to the actual occupant or careta,er under *rocla(ation "o. 15# on sociali/ed housin'. ?e are not convinced. *a@u%o did not profit fro( his arran'e(ent with Guevarra )ecause Guevarra sta%ed in the propert% without pa%in' an% rent. There is also no proof that *a@u%o is a professional s4uatter who rents out usurped properties to other s4uatters. $oreover, it is for the proper 'overn(ent a'enc% to decide who )etween *a@u%o and Guevarra 4ualifies for sociali/ed housin'. The onl% issue that we are addressin' is ph%sical possession. *rior possession is not alwa%s a condition sine 4ua non in e@ect(ent.M#5N This is one of the distinctions )etween forci)le entr% and unlawful detainer.M#&N :n forci)le entr%, the plaintiff is deprived of ph%sical possession of his land or )uildin' )% (eans of force, inti(idation, threat, strate'% or stealth. Thus, he (ust alle'e and prove prior possession.M#5N +ut in unlawful detainer, the defendant unlawfull% withholds possession after the eCpiration or ter(ination of his ri'ht to possess under an% contract, eCpress or i(plied. :n such a case, prior ph%sical possession is not re4uired.M#<N

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*a@u%o3s withdrawal of his per(ission to Guevarra ter(inated the Fasunduan. Guevarra3s transient ri'ht to possess the propert% ended as well. $oreover, it was *a@u%o who was in actual possession of the propert% )ecause Guevarra had to see, *a@u%o3s per(ission to te(poraril% hold the propert% and Guevarra had to follow the conditions set )% *a@u%o in the Fasunduan. Control over the propert% still rested with *a@u%o and this is evidence of actual possession. *a@u%o3s a)sence did not affect his actual possession of the disputed propert%. *ossession in the e%es of the law does not (ean that a (an has to have his feet on ever% s4uare (eter of the 'round )efore he is dee(ed in possession.M##N 6ne (a% ac4uire possession not onl% )% ph%sical occupation, )ut also )% the fact that a thin' is su)@ect to the action of one3s will.M#=N Actual or ph%sical occupation is not alwa%s necessar%.M#9N ulin' on *ossession Does not +ind Title to the Dand in Dispute ?e are aware of our pronounce(ent in cases where we declared that Rs4uatters and intruders who clandestinel% enter into titled 'overn(ent propert% cannot, )% such act, ac4uire an% le'al ri'ht to said propert%.SM=9N ?e (ade this declaration )ecause the person who had title or who had the ri'ht to le'al possession over the disputed propert% was a part% in the e@ect(ent suit and that part% instituted the case a'ainst s4uatters or usurpers. :n this case, the owner of the land, which is the 'overn(ent, is not a part% to the e@ect(ent case. This case is )etween s4uatters. 8ad the 'overn(ent participated in this case, the courts could have evicted the contendin' s4uatters, *a@u%o and Guevarra. -ince the part% that has title or a )etter ri'ht over the propert% is not i(pleaded in this case, we cannot evict on our own the parties. -uch a rulin' would discoura'e s4uatters fro( see,in' the aid of the courts in settlin' the issue of ph%sical possession. -trippin' )oth the plaintiff and the defendant of possession @ust )ecause the% are s4uatters would have the sa(e dan'erous i(plications as the application of the principle of pari delicto. -4uatters would then rather settle the issue of ph%sical possession a(on' the(selves than see, relief fro( the courts if the plaintiff and defendant in the e@ect(ent case would )oth stand to lose possession of the disputed propert%. This would su)vert the polic% underl%in' actions for recover% of possession. -ince *a@u%o has in his favor priorit% in ti(e in holdin' the propert%, he is entitled to re(ain on the propert% until a person who has title or a )etter ri'ht lawfull% e@ects hi(. Guevarra is certainl% not that person. The rulin' in this case, however, does not preclude *a@u%o and Guevarra fro( introducin' evidence and presentin' ar'u(ents )efore the proper ad(inistrative a'enc% to esta)lish an% ri'ht to which the% (a% )e entitled under the law.M=1N :n no wa% should our rulin' in this case )e interpreted to condone s4uattin'. The rulin' on the issue of ph%sical possession does not affect title to the propert% nor constitute a )indin' and conclusive ad@udication on the (erits on the issue of ownership.M=2N The owner can still 'o to court to recover lawfull% the propert% fro( the person who holds the propert% without le'al title. 6ur rulin' here does not di(inish the power of 'overn(ent a'encies, includin' local 'overn(ents, to conde(n, a)ate, re(ove or de(olish ille'al or unauthori/ed structures in accordance with eCistin' laws. Attorne%3s .ees and entals The $TC and TC failed to @ustif% the award of *5,999 attorne%3s fees to *a@u%o. Attorne%3s fees as part of da(a'es are awarded onl% in the instances enu(erated in Article 229= of the Civil Code.M=5N Thus, the award of attorne%3s fees is the eCception rather than the rule.M=&N Attorne%3s fees are not awarded ever% ti(e a part% prevails in a suit )ecause of the polic% that no pre(iu( should )e placed on the ri'ht to liti'ate.M=5N ?e therefore delete the attorne%3s fees awarded to *a@u%o. ?e sustain the *599 (onthl% rentals the $TC and TC assessed a'ainst Guevarra. Guevarra did not dispute this factual findin' of the two courts. ?e find the a(ount reasona)le co(pensation to *a@u%o. The *599 (onthl% rental is counted fro( the last de(and to vacate, which was on 1< .e)ruar% 1995. ?87 7.6 7, we G A"T the petition. The Decision dated 21 June 2999 and esolution dated 1& Dece()er 2999 of the Court of Appeals in CA-G. . -* "o. &5129 are -7T A-:D7. The Decision dated 11 "ove()er 199< of the e'ional Trial Court of Hue/on Cit%, +ranch =1 in Civil Case "o. H-9<-2<9&5, affir(in' the Decision dated 15 Dece()er 1995 of the $etropolitan Trial Court of Hue/on Cit%, +ranch 51 in Civil Case "o. 12&52, is 7:"-TAT7D with $6D:.:CAT:6". The award of attorne%3s fees is deleted. "o costs. -6 6 D7 7D.

G.R. No. #415454 O6)ober 25, 1902 REPUB#"C OF !E P!"#"PP"NES, (7a*%)*884a((e77ee, +,. 1OSE -. BAG AS, .e8e%.a%), FE#"C"DAD 9. BAG AS, A.:*%*,)ra)r*; o8 )<e "%)e,)a)e E,)a)e 7e8) by )<e 7a)e 1o,e -. Ba=)a,, (e)*)*o%er4a((e77a%).
The Court of Appeals certified this case to this Court )ecause onl% 4uestions of law are raised. 6n = $a% 19&= Jose !. +a'tas )orrowed fro( the epu)lic of the *hilippines throu'h the +ureau of Ani(al :ndustr% three )ulls> a ed -indhi with a )oo, value of *1,1#<.&<, a +ha'nari, of *1,529.5< and a -ahiniwal, of *#&&.&<, for a period of one %ear fro( = $a% 19&= to # $a% 19&9 for )reedin' purposes su)@ect to a 'overn(ent char'e of )reedin' fee

32

of 19V of the )oo, value of the )ulls. Epon the eCpiration on # $a% 19&9 of the contract, the )orrower as,ed for a renewal for another period of one %ear. 8owever, the -ecretar% of A'riculture and "atural esources approved a renewal thereof of onl% one )ull for another %ear fro( = $a% 19&9 to # $a% 1959 and re4uested the return of the other two. 6n 25 $arch 1959 Jose !. +a'tas wrote to the Director of Ani(al :ndustr% that he would pa% the value of the three )ulls. 6n 1# 6cto)er 1959 he reiterated his desire to )u% the( at a value with a deduction of %earl% depreciation to )e approved )% the Auditor General. 6n 19 6cto)er 1959 the Director of Ani(al :ndustr% advised hi( that the )oo, value of the three )ulls could not )e reduced and that the% either )e returned or their )oo, value paid not later than 51 6cto)er 1959. Jose !. +a'tas failed to pa% the )oo, value of the three )ulls or to return the(. -o, on 29 Dece()er 1959 in the Court of .irst :nstance of $anila the epu)lic of the *hilippines co((enced an action a'ainst hi( pra%in' that he )e ordered to return the three )ulls loaned to hi( or to pa% their )oo, value in the total su( of *5,2&1.&5 and the unpaid )reedin' fee in the su( of *199.<2, )oth with interests, and costsB and that other @ust and e4uita)le relief )e 'ranted in 0civil "o. 12=1=2. 6n 5 Jul% 1951 Jose !. +a'tas, throu'h counsel "avarro, osete and $analo, answered that )ecause of the )ad peace and order situation in Ca'a%an !alle%, particularl% in the )arrio of +a''ao, and of the pendin' appeal he had ta,en to the -ecretar% of A'riculture and "atural esources and the *resident of the *hilippines fro( the refusal )% the Director of Ani(al :ndustr% to deduct fro( the )oo, value of the )ulls correspondin' %earl% depreciation of =V fro( the date of ac4uisition, to which depreciation the Auditor General did not o)@ect, he could not return the ani(als nor pa% their value and pra%ed for the dis(issal of the co(plaint. After hearin', on 59 Jul% 195< the trial court render @ud'(ent O . . . sentencin' the latter 0defendant2 to pa% the su( of *5,<25.99 the total value of the three )ulls plus the )reedin' fees in the a(ount of *<2<.1# with interest on )oth su(s of 0at2 the le'al rate fro( the filin' of this co(plaint and costs. 6n 9 6cto)er 195= the plaintiff (oved eC parte for a writ of eCecution which the court 'ranted on 1= 6cto)er and issued on 11 "ove()er 195=. 6n 2 Dece()er 195= 'ranted an eC-parte (otion filed )% the plaintiff on "ove()er 195= for the appoint(ent of a special sheriff to serve the writ outside $anila. 6f this order appointin' a special sheriff, on < Dece()er 195=, .elicidad $. +a'tas, the survivin' spouse of the defendant Jose +a'tas who died on 25 6cto)er 1951 and as ad(inistratriC of his estate, was notified. 6n # Januar% 1959 she file a (otion alle'in' that on 2< June 1952 the two )ull -indhi and +ha'nari were returned to the +ureau Ani(al of :ndustr% and that so(eti(e in "ove()er 195= the third )ull, the -ahiniwal, died fro( 'unshot wound inflicted durin' a 8u, raid on 8acienda .elicidad :ntal, and pra%in' that the writ of eCecution )e 4uashed and that a writ of preli(inar% in@unction )e issued. 6n 51 Januar% 1959 the plaintiff o)@ected to her (otion. 6n < .e)ruar% 1959 she filed a repl% thereto. 6n the sa(e da%, < .e)ruar%, the Court denied her (otion. 8ence, this appeal certified )% the Court of Appeals to this Court as stated at the )e'innin' of this opinion. :t is true that on 2< June 1952 Jose $. +a'tas, Jr., son of the appellant )% the late defendant, returned the -indhi and +ha'nari )ulls to o(an e(orin, -uperintendent of the "!+ -tation, +ureau of Ani(al :ndustr%, +a%o()on', "ueva !i/ca%a, as evidenced )% a (e(orandu( receipt si'ned )% the latter 07Chi)it 22. That is wh% in its o)@ection of 51 Januar% 1959 to the appellantWs (otion to 4uash the writ of eCecution the appellee pra%s 1that another writ of eCecution in the su( of *=59.55 )e issued a'ainst the estate of defendant deceased Jose !. +a'tas.1 -he cannot )e held lia)le for the two )ulls which alread% had )een returned to and received )% the appellee. The appellant contends that the -ahiniwal )ull was accidentall% ,illed durin' a raid )% the 8u, in "ove()er 1955 upon the surroundin' )arrios of 8acienda .elicidad :ntal, +a''ao, Ca'a%an, where the ani(al was ,ept, and that as such death was due to force (a@eure she is relieved fro( the dut% of returnin' the )ull or pa%in' its value to the appellee. The contention is without (erit. The loan )% the appellee to the late defendant Jose !. +a'tas of the three )ulls for )reedin' purposes for a period of one %ear fro( = $a% 19&= to # $a% 19&9, later on renewed for another %ear as re'ards one )ull, was su)@ect to the pa%(ent )% the )orrower of )reedin' fee of 19V of the )oo, value of the )ulls. The appellant contends that the contract was co((odatu( and that, for that reason, as the appellee retained ownership or title to the )ull it should suffer its loss due to force (a@eure. A contract of co((odatu( is essentiall% 'ratuitous.1 :f the )reedin' fee )e considered a co(pensation, then the contract would )e a lease of the )ull. Ender article 1<#1 of the Civil Code the lessee would )e su)@ect to the responsi)ilities of a possessor in )ad faith, )ecause she had continued possession of the )ull after the eCpir% of the contract. And even if the contract )e co((odatu(, still the appellant is lia)le, )ecause article 19&2 of the Civil Code provides that a )ailee in a contract of co((odatu( O . . . is lia)le for loss of the thin's, even if it should )e throu'h a fortuitous event> 022 :f he ,eeps it lon'er than the period stipulated . . . 052 :f the thin' loaned has )een delivered with appraisal of its value, unless there is a stipulation eCe(ptin' the )ailee fro( responsi)ilit% in case of a fortuitous eventB The ori'inal period of the loan was fro( = $a% 19&= to # $a% 19&9. The loan of one )ull was renewed for another period of one %ear to end on = $a% 1959. +ut the appellant ,ept and used the )ull until "ove()er 1955 when durin' a 8u, raid it was ,illed )% stra% )ullets. .urther(ore, when lent and delivered to the deceased hus)and of the appellant the )ulls had each an appraised )oo, value, to with> the -indhi, at *1,1#<.&<, the +ha'nari at *1,529.5< and the -ahiniwal at *#&&.&<. :t was not stipulated that in case of loss of the )ull due to fortuitous event the late hus)and of the appellant would )e eCe(pt fro( lia)ilit%. The appellantWs contention that the de(and or pra%er )% the appellee for the return of the )ull or the pa%(ent of its value )ein' a (one% clai( should )e presented or filed in the intestate proceedin's of the defendant who died on 25 6cto)er 1951, is not alto'ether without (erit. 8owever, the clai( that his civil personalit% havin' ceased to eCist the trial court lost @urisdiction over the case a'ainst hi(, is untena)le, )ecause section 1# of ule 5 of the ules of Court provides that O

3%

After a part% dies and the clai( is not there)% eCtin'uished, the court shall order, upon proper notice, the le'al representative of the deceased to appear and to )e su)stituted for the deceased, within a period of thirt% 0592 da%s, or within such ti(e as (a% )e 'ranted. . . . and after the defendantWs death on 25 6cto)er 1951 his counsel failed to co(pl% with section 1< of provides that O ule 5 which

?henever a part% to a pendin' case dies . . . it shall )e the dut% of his attorne% to infor( the court pro(ptl% of such death . . . and to 'ive the na(e and residence of the eCecutor% ad(inistrator, 'uardian, or other le'al representative of the deceased . . . . The notice )% the pro)ate court and its pu)lication in the !o/ de $anila that .elicidad $. +a'tas had )een issue letters of ad(inistration of the estate of the late Jose +a'tas and that 1all persons havin' clai(s for (onopol% a'ainst the deceased Jose !. +a'tas, arisin' fro( contract eCpress or i(plied, whether the sa(e )e due, not due, or contin'ent, for funeral eCpenses and eCpenses of the last sic,ness of the said decedent, and @ud'(ent for (onopol% a'ainst hi(, to file said clai(s with the Cler, of this Court at the Cit% 8all +ld'., 8i'hwa% 5&, Hue/on Cit%, within siC 0<2 (onths fro( the date of the first pu)lication of this order, servin' a cop% thereof upon the afore(entioned .elicidad $. +a'tas, the appointed ad(inistratriC of the estate of the said deceased,1 is not a notice to the court and the appellee who were to )e notified of the defendantWs death in accordance with the a)ove-4uoted rule, and there was no reason for such failure to notif%, )ecause the attorne% who appeared for the defendant was the sa(e who represented the ad(inistratriC in the special proceedin's instituted for the ad(inistration and settle(ent of his estate. The appellee or its attorne% or representative could not )e eCpected to ,now of the death of the defendant or of the ad(inistration proceedin's of his estate instituted in another court that if the attorne% for the deceased defendant did not notif% the plaintiff or its attorne% of such death as re4uired )% the rule. As the appellant alread% had returned the two )ulls to the appellee, the estate of the late defendant is onl% lia)le for the su( of *=59.<5, the value of the )ull which has not )een returned to the appellee, )ecause it was ,illed while in the custod% of the ad(inistratriC of his estate. This is the a(ount pra%ed for )% the appellee in its o)@ection on 51 Januar% 1959 to the (otion filed on # Januar% 1959 )% the appellant for the 4uashin' of the writ of eCecution. -pecial proceedin's for the ad(inistration and settle(ent of the estate of the deceased Jose !. +a'tas havin' )een instituted in the Court of .irst :nstance of i/al 0H-2992, the (one% @ud'(ent rendered in favor of the appellee cannot )e enforced )% (eans of a writ of eCecution )ut (ust )e presented to the pro)ate court for pa%(ent )% the appellant, the ad(inistratriC appointed )% the court. ACC6 D:"GDI, the writ of eCecution appealed fro( is set aside, without pronounce(ent as to costs.

G.R. No. L-2!220 November , 19 9 (ARGARITA 4.INTOS #,/ ANGEL A. ANSALDO, )5#+,*+66--#))e55#,*-, v-. 'EC7, /e6e,/#,*-#))e55ee.
The plaintiff )rou'ht this action to co(pel the defendant to return her certain furniture which she lent hi( for his use. -he appealed fro( the @ud'(ent of the Court of .irst :nstance of $anila which ordered that the defendant return to her the three has heaters and the four electric la(ps found in the possession of the -heriff of said cit%, that she call for the other furniture fro( the said sheriff of $anila at her own eCpense, and that the fees which the -heriff (a% char'e for the deposit of the furniture )e paid pro rata )% )oth parties, without pronounce(ent as to the costs. The defendant was a tenant of the plaintiff and as such occupied the latterWs house on $. 8. del *ilar street, "o. 11#5. 6n Januar% 1&, 195<, upon the novation of the contract of lease )etween the plaintiff and the defendant, the for(er 'ratuitousl% 'ranted to the latter the use of the furniture descri)ed in the third para'raph of the stipulation of facts, su)@ect to the condition that the defendant would return the( to the plaintiff upon the latterWs de(and. The plaintiff sold the propert% to $aria Dope/ and osario Dope/ and on -epte()er 1&, 195<, these three notified the defendant of the conve%ance, 'ivin' hi( siCt% da%s to vacate the pre(ises under one of the clauses of the contract of lease. There after the plaintiff re4uired the defendant to return all the furniture transferred to hi( for the( in the house where the% were found. 6n "ove()er 5, 195<, the defendant, throu'h another person, wrote to the plaintiff reiteratin' that she (a% call for the furniture in the 'round floor of the house. 6n the #th of the sa(e (onth, the defendant wrote another letter to the plaintiff infor(in' her that he could not 'ive up the three 'as heaters and the four electric la(ps )ecause he would use the( until the 15th of the sa(e (onth when the lease in due to eCpire. The plaintiff refused to 'et the furniture in view of the fact that the defendant had declined to (a,e deliver% of all of the(. 6n "ove()er 15th, )efore vacatin' the house, the defendant deposited with the -heriff all the furniture )elon'in' to the plaintiff and the% are now on deposit in the warehouse situated at "o. 1521, i/al Avenue, in the custod% of the said sheriff. :n their seven assi'ned errors the plaintiffs contend that the trial court incorrectl% applied the law> in holdin' that the% violated the contract )% not callin' for all the furniture on "ove()er 5, 195<, when the defendant placed the( at their disposalB in not orderin' the defendant to pa% the( the value of the furniture in case the% are not deliveredB in holdin' that the% should 'et all the furniture fro( the -heriff at their eCpensesB in orderin' the( to pa%-half of the eCpenses clai(ed )% the -heriff for the deposit of the furnitureB in rulin' that )oth parties should pa% their respective le'al eCpenses or the costsB and in den%in' pa% their respective le'al eCpenses or the costsB and in den%in' the (otions for reconsideration and

3&

new trial. To dispose of the case, it is onl% necessar% to decide whether the defendant co(plied with his o)li'ation to return the furniture upon the plaintiffWs de(andB whether the latter is )ound to )ear the deposit fees thereof, and whether she is entitled to the costs of liti'ation.lawphi1.net The contract entered into )etween the parties is one of co((adatu(, )ecause under it the plaintiff 'ratuitousl% 'ranted the use of the furniture to the defendant, reservin' for herself the ownership thereofB )% this contract the defendant )ound hi(self to return the furniture to the plaintiff, upon the latters de(and 0clause # of the contract, 7Chi)it AB articles 1#&9, para'raph 1, and 1#&1 of the Civil Code2. The o)li'ation voluntaril% assu(ed )% the defendant to return the furniture upon the plaintiffWs de(and, (eans that he should return all of the( to the plaintiff at the latterWs residence or house. The defendant did not co(pl% with this o)li'ation when he (erel% placed the( at the disposal of the plaintiff, retainin' for his )enefit the three 'as heaters and the four eletric la(ps. The provisions of article 11<9 of the Civil Code cited )% counsel for the parties are not s4uarel% applica)le. The trial court, therefore, erred when it ca(e to the le'al conclusion that the plaintiff failed to co(pl% with her o)li'ation to 'et the furniture when the% were offered to her. As the defendant had voluntaril% underta,en to return all the furniture to the plaintiff, upon the latterWs de(and, the Court could not le'all% co(pel her to )ear the eCpenses occasioned )% the deposit of the furniture at the defendantWs )ehest. The latter, as )ailee, was not entitled to place the furniture on depositB nor was the plaintiff under a dut% to accept the offer to return the furniture, )ecause the defendant wanted to retain the three 'as heaters and the four electric la(ps. As to the value of the furniture, we do not )elieve that the plaintiff is entitled to the pa%(ent thereof )% the defendant in case of his ina)ilit% to return so(e of the furniture )ecause under para'raph < of the stipulation of facts, the defendant has neither a'reed to nor ad(itted the correctness of the said value. -hould the defendant fail to deliver so(e of the furniture, the value thereof should )e latter deter(ined )% the trial Court throu'h evidence which the parties (a% desire to present. The costs in )oth instances should )e )orne )% the defendant )ecause the plaintiff is the prevailin' part% 0section &=# of the Code of Civil *rocedure2. The defendant was the one who )reached the contract of co((odatu(, and without an% reason he refused to return and deliver all the furniture upon the plaintiffWs de(and. :n these circu(stances, it is @ust and e4uita)le that he pa% the le'al eCpenses and other @udicial costs which the plaintiff would not have otherwise defra%ed. The appealed @ud'(ent is (odified 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 descri)ed in para'raph 5 of the stipulation of facts 7Chi)it A. The eCpenses which (a% )e occasioned )% the deliver% to and deposit of the furniture with the -heriff shall )e for the account of the defendant. the defendant shall pa% the costs in )oth instances. -o ordered. AvanceXa, C.J., !illa- eal, Daurel, Concepcion and $oran, JJ., concur.