YAM v MALIK
Amin charges
This is a petition for certiorari, prohibition, and mandamus with preliminary
injunction. Petitioners alleged that respondent Municipal Judge Nabdar J.
Malik of Jolo, Sulu, acted without jurisdiction, in excess of jurisdiction and
with grave abuse of discretion when:
(a) he held in the preliminary investigation of the charges of estafa filed by
respondents Rosalinda Amin, Tan Chu Kao and Augusto Sajor against
petitioners that there was a prima facie case against the latter;
(b) he issued warrants of arrest against petitioners after making the above
determination; and
(c) he undertook to conduct trial on the merits of the charges which were
docketed in his court as Criminal Cases No. M-111, M-183 and M-208.
Respondent judge is said to have acted without jurisdiction, in excess of
jurisdiction and with grave abuse of discretion because the facts recited in
the complaints did not constitute the crime of estafa, and assuming they
did, they were not within the jurisdiction of the respondent judge.
In a resolution dated May 23, 1979, we required respondents to comment
in the petition and issued a temporary restraining order against the
respondent judge from further proceeding with Criminal Cases Nos. M-111,
M-183 and M-208 or from enforcing the warrants of arrest he had issued in
connection with said cases.
Comments by the respondent judge and the private respondents pray for
the dismissal of the petition but the Solicitor General has manifested that
the People of the Philippines have no objection to the grant of the reliefs
prayed for, except the damages. We considered the comments as answers
and gave due course to the petition.
The position of the Solicitor General is well taken. We have to grant the
petition in order to prevent manifest injustice and the exercise of palpable
excess of authority.
1
In Criminal Case No. M-111, respondent Rosalinda M.
petitioners Yam Chee Kiong and Yam Yap Kieng with estafa through
misappropriation of the amount of P50,000.00. But the complaint states on
its face that said petitioners received the amount from respondent
Rosalinda M. Amin "as a loan." Moreover, the complaint in Civil Case No. N-
5, an independent action for the collection of the same amount filed by
respondent Rosalinda M. Amin with the Court of First Instance of Sulu on
September 11, 1975, likewise states that the P50,000.00 was a "simple
business loan" which earned interest and was originally demandable six (6)
months from July 12, 1973. (Annex E of the petition.)
In Criminal Case No. M-183, respondent Tan Chu Kao charges petitioners
Yam Chee Kiong, Jose Y.C. Yam, Ampang Mah and Anita Yam, alias Yong Tay,
with estafa through misappropriation of the amount of P30,000.00.
Likewise, the complaint states on its face that the P30,000.00 was "a simple
loan." So does the complaint in Civil Case No. N-8 filed by respondent Tan
Chu Kao on April 6, 1976 with the Court of First Instance of Sulu for the
collection of the same amount. (Annex D of the petition.).
In Criminal Case No. M-208, respondent Augusto Sajor charges petitioners
Jose Y.C. Yam, Anita Yam alias Yong Tai Mah, Chee Kiong Yam and Richard
Yam, with estafa through misappropriation of the amount of P20,000.00.
Unlike the complaints in the other two cases, the complaint in Criminal Case
No. M-208 does not state that the amount was received as loan. However,
in a sworn statement dated September 29, 1976, submitted to respondent
judge to support the complaint, respondent Augusto Sajor states that the
amount was a "loan." (Annex G of the petition.).
We agree with the petitioners that the facts alleged in the three criminal
complaints do not constitute estafa through misappropriation.
Estafa through misappropriation is committed according to Article 315,
paragraph 1, subparagraph (b), of the Revised Penal Code as follows:
Art. 315. Swindling (Estafa). Any person who shall
defraud another by any of the means mentioned herein
below shall be punished by:
 xxx xxx xxx
1. With unfaithfulness or abuse of confidence namely:
xxx xxx xxx
b) By misappropriating or converting, to the prejudice of
another, money, goods, or any other personal property
received by the offender in trust or on commission, or for
administration, or under any other obligation involving
the duty to make delivery of or to return the same, even
though such obligation be totally or partially guaranteed
by a bond; or by denying having received such money,
goods, or other property.
In order that a person can be convicted under the abovequoted provision, it
must be proven that he has the obligation to deliver or return the same
money, goods or personal property that he received. Petitioners had no
such obligation to return the same money, i.e., the bills or coins, which they
received from private respondents. This is so because as clearly stated in
criminal complaints, the related civil complaints and the supporting sworn
statements, the sums of money that petitioners received were loans.
The nature of simple loan is defined in Articles 1933 and 1953 of the Civil
Code.
Art. 1933. By the contract of loan, one of the parties
delivers to another, either something not consumable so
that the latter may use the same for a certain time and
return it, in which case the contract is called a
commodatum; or money or other consumable thing upon
the condition that the same amount of the same kind and
quality shall be paid, in which case the contract is simply
called a loan or mutuum.
Commodatum is essentially gratuitous.
2
Simple loan may be gratuitous or with a stipulation to pay
interest.
In commodatum the bailor retains the ownership of the
thing loaned, while in simple loam ownership passes to
the borrower.
Art. 1953. A person who receives a loan of money or
any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the
same kind and quality.
It can be readily noted from the above-quoted provisions that in simple loan
(mutuum), as contrasted to commodatum, the borrower acquires
ownership of the money, goods or personal property borrowed. Being the
owner, the borrower can dispose of the thing borrowed (Article 248, Civil
Code) and his act will not be considered misappropriation thereof.
In U.S. vs. Ibaez, 19 Phil. 559, 560 (1911), this Court held that it is not estafa
for a person to refuse to nay his debt or to deny its existence.
We are of the opinion and so decide that when the
relation is purely that of debtor and creditor, the debtor
can not be held liable for the crime of estafa, under said
article, by merely refusing to pay or by denying the
indebtedness.
It appears that respondent judge failed to appreciate the distinction
between the two types of loan, mutuum and commodatum, when he
performed the questioned acts, He mistook the transaction between
petitioners and respondents Rosalinda Amin, Tan Chu Kao and Augusto
Sajor to be commodatum wherein the borrower does not acquire ownership
over the thing borrowed and has the duty to return the same thing to the
lender.
Under Sec. 87 of the Judiciary Act, the municipal court of a provincial capital,
which the Municipal Court of Jolo is, has jurisdiction over criminal cases
where the penalty provided by law does not exceed prision correccional or
imprisonment for not more than six (6) years, or fine not exceeding
P6,000.00 or both, The amounts allegedly misappropriated by petitioners
range from P20,000.00 to P50,000.00. The penalty for misappropriation of
this magnitude exceeds prision correccional or 6 year imprisonment. (Article
315, Revised Penal Code), Assuming then that the acts recited in the
complaints constitute the crime of estafa, the Municipal Court of Jolo has
no jurisdiction to try them on the merits. The alleged offenses are under the
jurisdiction of the Court of First Instance.
Respondents People of the Philippines being the sovereign authority can not
be sued for damages. They are immune from such type of suit.
With respect to the other respondents, this Court is not the proper forum
for the consideration of the claim for damages against them.
WHEREFORE, the petition is hereby granted; the temporary restraining
order previously issued is hereby made permanent; the criminal complaints
against petitioners are hereby declared null and void; respondent judge is
hereby ordered to dismiss said criminal cases and to recall the warrants of
arrest he had issued in connection therewith. Moreover, respondent judge
is hereby rebuked for manifest ignorance of elementary law. Let a copy of
this decision be included in his personal life. Costs against private
respondents.
SO ORDERED.
SAURA IMPORT & EXPORT CO v DBP
In Civil Case No. 55908 of the Court of First Instance of Manila, judgment
was rendered on June 28, 1965 sentencing defendant Development Bank of
the Philippines (DBP) to pay actual and consequential damages to plaintiff
Saura Import and Export Co., Inc. in the amount of P383,343.68, plus
interest at the legal rate from the date the complaint was filed and
3
attorney's fees in the amount of P5,000.00. The present appeal is from that
judgment.
In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to
the Rehabilitation Finance Corporation (RFC), before its conversion into
DBP, for an industrial loan of P500,000.00, to be used as follows:
P250,000.00 for the construction of a factory building (for the manufacture
of jute sacks); P240,900.00 to pay the balance of the purchase price of the
jute mill machinery and equipment; and P9,100.00 as additional working
capital.
Parenthetically, it may be mentioned that the jute mill machinery had
already been purchased by Saura on the strength of a letter of credit
extended by the Prudential Bank and Trust Co., and arrived in Davao City in
July 1953; and that to secure its release without first paying the draft, Saura,
Inc. executed a trust receipt in favor of the said bank.
On January 7, 1954 RFC passed Resolution No. 145 approving the loan
application for P500,000.00, to be secured by a first mortgage on the factory
building to be constructed, the land site thereof, and the machinery and
equipment to be installed. Among the other terms spelled out in the
resolution were the following:
1. That the proceeds of the loan shall be utilized
exclusively for the following purposes:
For construction of factory building P250,000.00
For payment of the balance of purchase
price of machinery and equipment 240,900.00
For working capital 9,100.00
T O T A L P500,000.00
4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto Caolboy and
Gregoria Estabillo and China Engineers, Ltd. shall sign the promissory notes
jointly with the borrower-corporation;
5. That release shall be made at the discretion of the Rehabilitation Finance
Corporation, subject to availability of funds, and as the construction of the
factory buildings progresses, to be certified to by an appraiser of this
Corporation;"
Saura, Inc. was officially notified of the resolution on January 9, 1954. The
day before, however, evidently having otherwise been informed of its
approval, Saura, Inc. wrote a letter to RFC, requesting a modification of the
terms laid down by it, namely: that in lieu of having China Engineers, Ltd.
(which was willing to assume liability only to the extent of its stock
subscription with Saura, Inc.) sign as co-maker on the corresponding
promissory notes, Saura, Inc. would put up a bond for P123,500.00, an
amount equivalent to such subscription; and that Maria S. Roca would be
substituted for Inocencia Arellano as one of the other co-makers, having
acquired the latter's shares in Saura, Inc.
In view of such request RFC approved Resolution No. 736 on February 4,
1954, designating of the members of its Board of Governors, for certain
reasons stated in the resolution, "to reexamine all the aspects of this
approved loan ... with special reference as to the advisability of financing
this particular project based on present conditions obtaining in the
operations of jute mills, and to submit his findings thereon at the next
meeting of the Board."
On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had
again agreed to act as co-signer for the loan, and asked that the necessary
documents be prepared in accordance with the terms and conditions
specified in Resolution No. 145. In connection with the reexamination of the
project to be financed with the loan applied for, as stated in Resolution No.
736, the parties named their respective committees of engineers and
technical men to meet with each other and undertake the necessary studies,
although in appointing its own committee Saura, Inc. made the observation
that the same "should not be taken as an acquiescence on (its) part to
4
novate, or accept new conditions to, the agreement already) entered into,"
referring to its acceptance of the terms and conditions mentioned in
Resolution No. 145.
On April 13, 1954 the loan documents were executed: the promissory note,
with F.R. Halling, representing China Engineers, Ltd., as one of the co-
signers; and the corresponding deed of mortgage, which was duly registered
on the following April 17.
It appears, however, that despite the formal execution of the loan
agreement the reexamination contemplated in Resolution No. 736
proceeded. In a meeting of the RFC Board of Governors on June 10, 1954, at
which Ramon Saura, President of Saura, Inc., was present, it was decided to
reduce the loan from P500,000.00 to P300,000.00. Resolution No. 3989 was
approved as follows:
RESOLUTION No. 3989. Reducing the Loan Granted Saura Import & Export
Co., Inc. under Resolution No. 145, C.S., from P500,000.00 to P300,000.00.
Pursuant to Bd. Res. No. 736, c.s., authorizing the re-examination of all the
various aspects of the loan granted the Saura Import & Export Co. under
Resolution No. 145, c.s., for the purpose of financing the manufacture of
jute sacks in Davao, with special reference as to the advisability of financing
this particular project based on present conditions obtaining in the
operation of jute mills, and after having heard Ramon E. Saura and after
extensive discussion on the subject the Board, upon recommendation of the
Chairman, RESOLVED that the loan granted the Saura Import & Export Co.
be REDUCED from P500,000 to P300,000 and that releases up to P100,000
may be authorized as may be necessary from time to time to place the
factory in actual operation: PROVIDED that all terms and conditions of
Resolution No. 145, c.s., not inconsistent herewith, shall remain in full force
and effect."
On June 19, 1954 another hitch developed. F.R. Halling, who had signed the
promissory note for China Engineers Ltd. jointly and severally with the other
RFC that his company no longer to of the loan and therefore considered the
same as cancelled as far as it was concerned. A follow-up letter dated July 2
requested RFC that the registration of the mortgage be withdrawn.
In the meantime Saura, Inc. had written RFC requesting that the loan of
P500,000.00 be granted. The request was denied by RFC, which added in its
letter-reply that it was "constrained to consider as cancelled the loan of
P300,000.00 ... in view of a notification ... from the China Engineers Ltd.,
expressing their desire to consider the loan insofar as they are concerned."
On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan
and informed RFC that China Engineers, Ltd. "will at any time reinstate their
signature as co-signer of the note if RFC releases to us the P500,000.00
originally approved by you.".
On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan
to the original amount of P500,000.00, "it appearing that China Engineers,
Ltd. is now willing to sign the promissory notes jointly with the borrower-
corporation," but with the following proviso:
That in view of observations made of the shortage and
high cost of imported raw materials, the Department of
Agriculture and Natural Resources shall certify to the
following:
1. That the raw materials needed by the borrower-
corporation to carry out its operation are available in the
immediate vicinity; and
2. That there is prospect of increased production thereof
to provide adequately for the requirements of the
factory."
The action thus taken was communicated to Saura, Inc. in a letter of RFC
dated December 22, 1954, wherein it was explained that the certification by
the Department of Agriculture and Natural Resources was required "as the
intention of the original approval (of the loan) is to develop the manufacture
of sacks on the basis of locally available raw materials." This point is
important, and sheds light on the subsequent actuations of the parties.
Saura, Inc. does not deny that the factory he was building in Davao was for
the manufacture of bags from local raw materials. The cover page of its
5
brochure (Exh. M) describes the project as a "Joint venture by and between
the Mindanao Industry Corporation and the Saura Import and Export Co.,
Inc. to finance, manage and operate aKenaf mill plant, to manufacture copra
and corn bags, runners, floor mattings, carpets, draperies; out of 100% local
raw materials, principal kenaf." The explanatory note on page 1 of the same
brochure states that, the venture "is the first serious attempt in this country
to use 100% locally grown raw materials notably kenaf which is presently
grown commercially in theIsland of Mindanao where the proposed jutemill
is located ..."
This fact, according to defendant DBP, is what moved RFC to approve the
loan application in the first place, and to require, in its Resolution No. 9083,
a certification from the Department of Agriculture and Natural Resources as
to the availability of local raw materials to provide adequately for the
requirements of the factory. Saura, Inc. itself confirmed the defendant's
stand impliedly in its letter of January 21, 1955: (1) stating that according to
a special study made by the Bureau of Forestry "kenaf will not be available
in sufficient quantity this year or probably even next year;" (2) requesting
"assurances (from RFC) that my company and associates will be able to bring
in sufficient jute materials as may be necessary for the full operation of the
jute mill;" and (3) asking that releases of the loan be made as follows:
a) For the payment of the receipt for jute mill
machineries with the Prudential Bank &
Trust Company P250,000.00
(For immediate release)
b) For the purchase of materials and equip-
ment per attached list to enable the jute
mill to operate 182,413.91
c) For raw materials and labor 67,586.09
1) P25,000.00 to be released on the
open-
 ing of the letter of credit for raw jute requirements of the factory, we wish to
for $25,000.00. reiterate that the basis of the original
approval is to develop the manufacture
2) P25,000.00 to be released upon of sacks on the basis of the locally
arrival available raw materials. Your statement
of raw jute. that you will have to rely on the
importation of jute and your request
3) P17,586.09 to be released as soon as that we give you assurance that your
the company will be able to bring in
mill is ready to operate. sufficient jute materials as may be
necessary for the operation of your
factory, would not be in line with our
On January 25, 1955 RFC sent to Saura, Inc. the following reply:
principle in approving the loan.
Dear Sirs:
With the foregoing letter the negotiations came to a standstill. Saura, Inc.
did not pursue the matter further. Instead, it requested RFC to cancel the
This is with reference to your letter of
mortgage, and so, on June 17, 1955 RFC executed the corresponding deed
January 21, 1955, regarding the release
of cancellation and delivered it to Ramon F. Saura himself as president of
of your loan under consideration of
Saura, Inc.
P500,000. As stated in our letter of
December 22, 1954, the releases of the
It appears that the cancellation was requested to make way for the
loan, if revived, are proposed to be
registration of a mortgage contract, executed on August 6, 1954, over the
made from time to time, subject to
same property in favor of the Prudential Bank and Trust Co., under which
availability of funds towards the end
contract Saura, Inc. had up to December 31 of the same year within which
that the sack factory shall be placed in
to pay its obligation on the trust receipt heretofore mentioned. It appears
actual operating status. We shall be able
further that for failure to pay the said obligation the Prudential Bank and
to act on your request for revised
Trust Co. sued Saura, Inc. on May 15, 1955.
purpose and manner of releases upon
re-appraisal of the securities offered for
the loan. On January 9, 1964, ahnost 9 years after the mortgage in favor of RFC was
cancelled at the request of Saura, Inc., the latter commenced the present
suit for damages, alleging failure of RFC (as predecessor of the defendant
With respect to our requirement that
DBP) to comply with its obligation to release the proceeds of the loan
the Department of Agriculture and
applied for and approved, thereby preventing the plaintiff from completing
Natural Resources certify that the raw
or paying contractual commitments it had entered into, in connection with
materials needed are available in the
its jute mill project.
immediate vicinity and that there is
prospect of increased production
thereof to provide adequately the

6
The trial court rendered judgment for the plaintiff, ruling that there was a
perfected contract between the parties and that the defendant was guilty
of breach thereof. The defendant pleaded below, and reiterates in this
appeal: (1) that the plaintiff's cause of action had prescribed, or that its claim
had been waived or abandoned; (2) that there was no perfected contract;
and (3) that assuming there was, the plaintiff itself did not comply with the
terms thereof.
We hold that there was indeed a perfected consensual contract, as
recognized in Article 1934 of the Civil Code, which provides:
ART. 1954. An accepted promise to deliver something, by
way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall
not be perferted until the delivery of the object of the
contract.
There was undoubtedly offer and acceptance in this case: the application of
Saura, Inc. for a loan of P500,000.00 was approved by resolution of the
defendant, and the corresponding mortgage was executed and registered.
But this fact alone falls short of resolving the basic claim that the defendant
failed to fulfill its obligation and the plaintiff is therefore entitled to recover
damages.
It should be noted that RFC entertained the loan application of Saura, Inc.
on the assumption that the factory to be constructed would utilize locally
grown raw materials, principally kenaf. There is no serious dispute about
this. It was in line with such assumption that when RFC, by Resolution No.
9083 approved on December 17, 1954, restored the loan to the original
amount of P500,000.00. it imposed two conditions, to wit: "(1) that the raw
materials needed by the borrower-corporation to carry out its operation are
available in the immediate vicinity; and (2) that there is prospect of
increased production thereof to provide adequately for the requirements of
the factory." The imposition of those conditions was by no means a
deviation from the terms of the agreement, but rather a step in its
implementation. There was nothing in said conditions that contradicted the
terms laid down in RFC Resolution No. 145, passed on January 7, 1954,
7
namely "that the proceeds of the loan shall be utilizedexclusively for the
following purposes: for construction of factory building P250,000.00; for
payment of the balance of purchase price of machinery and equipment
P240,900.00; for working capital P9,100.00." Evidently Saura, Inc. realized
that it could not meet the conditions required by RFC, and so wrote its letter
of January 21, 1955, stating that local jute "will not be able in sufficient
quantity this year or probably next year," and asking that out of the loan
agreed upon the sum of P67,586.09 be released "for raw materials and
labor." This was a deviation from the terms laid down in Resolution No. 145
and embodied in the mortgage contract, implying as it did a diversion of part
of the proceeds of the loan to purposes other than those agreed upon.
When RFC turned down the request in its letter of January 25, 1955 the
negotiations which had been going on for the implementation of the
agreement reached an impasse. Saura, Inc. obviously was in no position to
comply with RFC's conditions. So instead of doing so and insisting that the
loan be released as agreed upon, Saura, Inc. asked that the mortgage be
cancelled, which was done on June 15, 1955. The action thus taken by both
parties was in the nature cf mutual desistance what Manresa terms
"mutuo disenso" 1 which is a mode of extinguishing obligations. It is a
concept that derives from the principle that since mutual agreement can
create a contract, mutual disagreement by the parties can cause its
extinguishment. 2
The subsequent conduct of Saura, Inc. confirms this desistance. It did not
protest against any alleged breach of contract by RFC, or even point out that
the latter's stand was legally unjustified. Its request for cancellation of the
mortgage carried no reservation of whatever rights it believed it might have
against RFC for the latter's non-compliance. In 1962 it even applied with DBP
for another loan to finance a rice and corn project, which application was
disapproved. It was only in 1964, nine years after the loan agreement had
been cancelled at its own request, that Saura, Inc. brought this action for
damages.All these circumstances demonstrate beyond doubt that the said
agreement had been extinguished by mutual desistance and that on the
initiative of the plaintiff-appellee itself.
With this view we take of the case, we find it unnecessary to consider and
resolve the other issues raised in the respective briefs of the parties.
WHEREFORE, the judgment appealed from is reversed and the complaint
dismissed, with costs against the plaintiff-appellee.
ESTORES v SPOUSES SUPANGAN
The only issue posed before us is the propriety of the imposition of interest
and attorneys fees.
Assailed in this Petition for Review[1] filed under Rule 45 of the Rules of Court is the
May 12, 2006 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 83123, the
dispositive portion of which reads:
WHEREFORE, the appealed decision is MODIFIED. The
rate of interest shall be six percent (6%) per annum, computed
from September 27, 2000 until its full payment before finality of
the judgment.If the adjudged principal and the interest (or any
part thereof) remain unpaid thereafter, the interest rate shall be
adjusted to twelve percent (12%) per annum, computed from
the time the judgment becomes final and executory until it is
fully satisfied. The award of attorneys fees is hereby reduced
to P100,000.00. Costs against the defendants-appellants.
SO ORDERED.[3]
Also assailed is the August 31, 2006 Resolution[4] denying the motion for
reconsideration.
Factual Antecedents
On October 3, 1993, petitioner Hermojina Estores and respondent-spouses Arturo
and Laura Supangan entered into a Conditional Deed of Sale[5] whereby petitioner
offered to sell, and respondent-spouses offered to buy, a parcel of land covered by
Transfer Certificate of Title No. TCT No. 98720 located at Naic, Cavite for the sum
of P4.7 million. The parties likewise stipulated, among others, to wit:
xxxx
8
1. Vendor will secure approved clearance from DAR
requirements of which are (sic):
a) Letter request
b) Title
c) Tax Declaration
d) Affidavit of Aggregate Landholding Vendor/Vendee
e) Certification from the Provl. Assessors as to Landholdings
of Vendor/Vendee
f) Affidavit of Non-Tenancy
g) Deed of Absolute Sale
xxxx
4. Vendee shall be informed as to the status of DAR clearance
within 10 days upon signing of the documents.
xxxx
6. Regarding the house located within the perimeter of the
subject [lot] owned by spouses [Magbago], said house shall
be moved outside the perimeter of this subject property to
the 300 sq. m. area allocated for [it]. Vendor hereby accepts
the responsibility of seeing to it that such agreement is
carried out before full payment of the sale is made by
vendee.
7. If and after the vendor has completed all necessary
documents for registration of the title and the vendee fails
to complete payment as per agreement, a forfeiture fee of
25% or downpayment, shall be applied.However, if the
vendor fails to complete necessary documents within thirty
days without any sufficient reason, or without informing
the vendee of its status, vendee has the right to demand
return of full amount of down payment.
xxxx
 9. As to the boundaries and partition of the lots (15,018 sq. m. c) Exemplary damages in the amount
and 300 sq. m.) Vendee shall be informed immediately of of P100,000.00;
its approval by the LRC.
d) [Attorneys] fee in the amount
of P50,000.00 plus 20% of recoverable
10. The vendor assures the vendee of a peaceful transfer of
amount from the [petitioner].
ownership.
e) [C]ost of suit.[11]
[6]
xxxx

In their Answer with Counterclaim,[12] petitioner and Arias averred that

After almost seven years from the time of the execution of the contract
they are willing to return the principal amount of P3.5 million but without any
and notwithstanding payment of P3.5 million on the part of respondent-spouses,
interest as the same was not agreed upon. In their Pre-Trial Brief,[13] they reiterated
petitioner still failed to comply with her obligation as expressly provided in
that the only remaining issue between the parties is the imposition of interest. They
paragraphs 4, 6, 7, 9 and 10 of the contract. Hence, in a letter[7] dated September 27,
argued that since the Conditional Deed of Sale provided only for the return of the
2000, respondent-spouses demanded the return of the amount of P3.5 million
downpayment in case of breach, they cannot be held liable to pay legal interest as
within 15 days from receipt of the letter. In reply,[8] petitioner acknowledged receipt
well.[14]
of the P3.5 million and promised to return the same within 120 days. Respondent-
spouses were amenable to the proposal provided an interest of 12% compounded
In its Pre-Trial Order[15] dated June 29, 2001, the RTC noted that the parties
annually shall be imposed on the P3.5 million.[9] When petitioner still failed to return
agreed that the principal amount of 3.5 million pesos should be returned to the
the amount despite demand, respondent-spouses were constrained to file a
[respondent-spouses] by the [petitioner] and the issue remaining [is] whether x x x
Complaint[10] for sum of money before the Regional Trial Court (RTC) of Malabon
[respondent-spouses] are entitled to legal interest thereon, damages and attorneys
against herein petitioner as well as Roberto U. Arias (Arias) who allegedly acted as
fees.[16]
petitioners agent. The case was docketed as Civil Case No. 3201-MN and raffled off
to Branch 170. In their complaint, respondent-spouses prayed that petitioner and
Trial ensued thereafter. After the presentation of the respondent-spouses
Arias be ordered to:
evidence, the trial court set the presentation of Arias and petitioners evidence on
September 3, 2003.[17]However, despite several postponements, petitioner and
1. Pay the principal amount of P3,500,000.00
Arias failed to appear hence they were deemed to have waived the presentation of
plus interest of 12% compounded annually
their evidence. Consequently, the case was deemed submitted for decision.[18]
starting October 1, 1993 or an estimated amount
of P8,558,591.65;
Ruling of the Regional Trial Court
2. Pay the following items of damages:
On May 7, 2004, the RTC rendered its Decision[19] finding respondent-spouses
entitled to interest but only at the rate of 6% per annum and not 12% as prayed by
a) Moral damages in the amount
them.[20] It also found respondent-spouses entitled to attorneys fees as they were
of P100,000.00;
compelled to litigate to protect their interest.[21]
b) Actual damages in the amount
of P100,000.00; The dispositive portion of the RTC Decision reads:

9

WHEREFORE, premises considered, judgment is
hereby rendered in favor of the [respondent-spouses] and
ordering the [petitioner and Roberto Arias] to jointly and
severally:
1. Pay [respondent-spouses] the principal
amount of Three Million Five Hundred Thousand pesos
(P3,500,000.00) with an interest of 6% compounded annually
starting October 1, 1993 and attorneys fee in the amount of Fifty
Thousand pesos (P50,000.00) plus 20% of the recoverable
amount from the defendants and cost of the suit.
The Compulsory Counter Claim is hereby dismissed for
lack of factual evidence.
SO ORDERED.[22]
Ruling of the Court of Appeals
Aggrieved, petitioner and Arias filed their notice of appeal.[23] The CA noted that the
only issue submitted for its resolution is whether it is proper to impose interest for
an obligation that does not involve a loan or forbearance of money in the absence
of stipulation of the parties.[24]
On May 12, 2006, the CA rendered the assailed Decision affirming the
ruling of the RTC finding the imposition of 6% interest proper.[25] However, the same
shall start to run only from September 27, 2000 when respondent-spouses formally
demanded the return of their money and not from October 1993 when the contract
was executed as held by the RTC. The CA also modified the RTCs ruling as regards
the liability of Arias. It held that Arias could not be held solidarily liable with petitioner
because he merely acted as agent of the latter. Moreover, there was no showing
that he expressly bound himself to be personally liable or that he exceeded the limits
of his authority. More importantly, there was even no showing that Arias was
authorized to act as agent of petitioner.[26] Anent the award of attorneys fees, the
CA found the award by the trial court (P50,000.00 plus 20% of the recoverable
amount) excessive[27] and thus reduced the same to P100,000.00.[28]
10
The dispositive portion of the CA Decision reads:
WHEREFORE, the appealed decision is MODIFIED. The rate of
interest shall be six percent (6%) per annum, computed from
September 27, 2000 until its full payment before finality of the
judgment. If the adjudged principal and the interest (or any part
thereof) remain[s] unpaid thereafter, the interest rate shall be
adjusted to twelve percent (12%) per annum, computed from
the time the judgment becomes final and executory until it is
fully satisfied. The award of attorneys fees is hereby reduced
to P100,000.00. Costs against the [petitioner].
SO ORDERED.[29]
Petitioner moved for reconsideration which was denied in the August 31, 2006
Resolution of the CA.
Hence, this petition raising the sole issue of whether the imposition of interest and
attorneys fees is proper.
Petitioners Arguments
Petitioner insists that she is not bound to pay interest on the P3.5 million because
the Conditional Deed of Sale only provided for the return of the downpayment in
case of failure to comply with her obligations. Petitioner also argues that the award
of attorneys fees in favor of the respondent-spouses is unwarranted because it
cannot be said that the latter won over the former since the CA even sustained her
contention that the imposition of 12% interest compounded annually is totally
uncalled for.
Respondent-spouses Arguments
Respondent-spouses aver that it is only fair that interest be imposed on the amount
they paid considering that petitioner failed to return the amount upon demand and
had been using the P3.5 million for her benefit. Moreover, it is undisputed that
petitioner failed to perform her obligations to relocate the house outside the
perimeter of the subject property and to complete the necessary documents. As
regards the attorneys fees, they claim that they are entitled to the same because parties.[31] Absent any stipulation, the applicable rate of interest shall be 12% per
they were forced to litigate when petitioner unjustly withheld the amount. Besides, annum when the obligation arises out of a loan or a forbearance of money, goods
the amount awarded by the CA is even smaller compared to the filing fees they paid. or credits. In other cases, it shall be six percent (6%).[32] In this case, the parties did
not stipulate as to the applicable rate of interest. The only question remaining
Our Ruling therefore is whether the 6% as provided under Article 2209 of the Civil Code, or 12%
under Central Bank Circular No. 416, is due.
The petition lacks merit.
The contract involved in this case is admittedly not a loan but a Conditional
Interest may Deed of Sale. However, the contract provides that the seller (petitioner) must return
be imposed the payment made by the buyer (respondent-spouses) if the conditions are not
even in the fulfilled. There is no question that they have in fact, not been fulfilled as the seller
absence of (petitioner) has admitted this. Notwithstanding demand by the buyer (respondent-
stipulation in spouses), the seller (petitioner) has failed to return the money and
the contract.
should be considered in default from the time that demand was made on
September 27, 2000.
We sustain the ruling of both the RTC and the CA that it is proper to impose
interest notwithstanding the absence of stipulation in the contract. Article 2210 of Even if the transaction involved a Conditional Deed of Sale, can the
the Civil Code expressly provides that [i]nterest may, in the discretion of the court, stipulation governing the return of the money be considered as a forbearance of
be allowed upon damages awarded for breach of contract. In this case, there is no money which required payment of interest at the rate of 12%? We believe so.
question that petitioner is legally obligated to return the P3.5 million because of her
failure to fulfill the obligation under the Conditional Deed of Sale, despite In Crismina Garments, Inc. v. Court of Appeals,[33] forbearance was defined
demand. She has in fact admitted that the conditions were not fulfilled and that she as a contractual obligation of lender or creditor to refrain during a given period of
was willing to return the full amount of P3.5 million but has not actually done time, from requiring the borrower or debtor to repay a loan or debt then due and
so. Petitioner enjoyed the use of the money from the time it was given to her[30] until payable. This definition describes a loan where a debtor is given a period within
now. Thus, she is already in default of her obligation from the date of demand, i.e., which to pay a loan or debt. In such case, forbearance of money, goods or credits
on September 27, 2000. will have no distinct definition from a loan. We believe however, that the phrase
forbearance of money, goods or credits is meant to have a separate meaning from
The interest at a loan, otherwise there would have been no need to add that phrase as a loan is
the rate of already sufficiently defined in the Civil Code.[34] Forbearance of money, goods or
12% is credits should therefore refer to arrangements other than loan agreements, where
applicable in a person acquiesces to the temporary use of his money, goods or credits pending
the instant happening of certain events or fulfillment of certain conditions. In this case, the
case. respondent-spouses parted with their money even before the conditions were
fulfilled. They have therefore allowed or granted forbearance to the seller
(petitioner) to use their money pending fulfillment of the conditions. They were
Anent the interest rate, the general rule is that the applicable rate of deprived of the use of their money for the period pending fulfillment of the
interest shall be computed in accordance with the stipulation of the conditions and when those conditions were breached, they are entitled not only to

11
the return of the principal amount paid, but also to compensation for the use of their
money. And the compensation for the use of their money, absent any stipulation,
should be the same rate of legal interest applicable to a loan since the use or
deprivation of funds is similar to a loan.
Petitioners unwarranted withholding of the money which rightfully
pertains to respondent-spouses amounts to forbearance of money which can be
considered as an involuntary loan.Thus, the applicable rate of interest is 12% per
annum. In Eastern Shipping Lines, Inc. v. Court of Appeals,[35]cited in Crismina
Garments, Inc. v. Court of Appeals,[36] the Court suggested the following guidelines:
I. When an obligation, regardless of its source,
i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be
held liable for damages. The provisions under
Title XVIII on Damages of the Civil Code govern in
determining the measure of recoverable
damages.
II. With regard particularly to an award of
interest in the concept of actual and
compensatory damages, the rate of interest, as
well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached, and it
consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the
interest due should be that which may
have been stipulated in
writing. Furthermore, the interest due shall
itself earn legal interest from the time it is
judicially demanded. In the absence of
stipulation, the rate of interest shall be 12%
per annum to be computed from default,
i.e., from judicial or extrajudicial demand
under and subject to the provisions of
Article 1169 of the Civil Code.
12
2. When an obligation, not constituting a
loan or forbearance of money, is breached,
an interest on the amount of damages
awarded may be imposed at the discretion
of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on
unliquidated claims or damages except
when or until the demand can be
established with reasonable
certainty. Accordingly, where the demand is
established with reasonable certainty, the
interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty
cannot be so reasonably established at the
time the demand is made, the interest shall
begin to run only from the date the
judgment of the court is made (at which
time the quantification of damages may be
deemed to have been reasonably
ascertained). The actual base for the
computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court
awarding a sum of money becomes final and
executory, the rate of legal interest, whether
the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this
interim period being deemed to be by then
an equivalent to a forbearance of credit.[37]
Eastern Shipping Lines, Inc. v. Court of Appeals[38]and its predecessor
case, Reformina v. Tongol[39] both involved torts cases and hence, there was no
forbearance of money, goods, or credits. Further, the amount claimed (i.e.,
damages) could not be established with reasonable certainty at the time the claim
was made. Hence, we arrived at a different ruling in those cases.
Since the date of demand which is September 27, 2000 was satisfactorily
established during trial, then the interest rate of 12% should be reckoned from said
date of demand until the principal amount and the interest thereon is fully satisfied.
The award of
attorneys fees
is warranted.
Under Article 2208 of the Civil Code, attorneys fees may be recovered:
xxxx
(2) When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses
to protect his interest;
xxxx
(11) In any other case where the court deems it just and
equitable that attorneys fees and expenses of litigation
should be recovered.
In all cases, the attorneys fees and expenses of litigation must be
reasonable.
Considering the circumstances of the instant case, we find respondent-
spouses entitled to recover attorneys fees. There is no doubt that they were forced
to litigate to protect their interest, i.e., to recover their money. However, we find the
amount of P50,000.00 more appropriate in line with the policy enunciated in Article
2208 of the Civil Code that the award of attorneys fees must always be reasonable.
WHEREFORE, the Petition for Review is DENIED. The May 12, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 83123
is AFFIRMED with MODIFICATIONS that the rate of interest shall be twelve percent
13
(12%) per annum, computed from September 27, 2000 until fully satisfied. The
award of attorneys fees is further reduced to P50,000.00.
SO ORDERED.
GSIS v CA
Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the
spouses Mr. and Mrs Flaviano Lagasca, executed a deed of mortgage, dated
November 13, 1957, in favor of petitioner Government Service Insurance
System (hereinafter referred to as GSIS) and subsequently, another deed of
mortgage, dated April 14, 1958, in connection with two loans granted by the
latter in the sums of P 11,500.00 and P 3,000.00, respectively. 1 A parcel of
land covered by Transfer Certificate of Title No. 38989 of the Register of
Deed of Quezon City, co-owned by said mortgagor spouses, was given as
security under the aforesaid two deeds. 2 They also executed a 'promissory
note" which states in part:
... for value received, we the undersigned ... JOINTLY,
SEVERALLY and SOLIDARILY, promise to pay the
GOVERNMENT SERVICE INSURANCE SYSTEM the sum of .
. . (P 11,500.00) Philippine Currency, with interest at the
rate of six (6%) per centum compounded monthly payable
in . . . (120)equal monthly installments of . . . (P 127.65)
each. 3
On July 11, 1961, the Lagasca spouses executed an instrument denominated
"Assumption of Mortgage" under which they obligated themselves to
assume the aforesaid obligation to the GSIS and to secure the release of the
mortgage covering that portion of the land belonging to herein private
respondents and which was mortgaged to the GSIS. 4 This undertaking was
not fulfilled. 5
Upon failure of the mortgagors to comply with the conditions of the
mortgage, particularly the payment of the amortizations due, GSIS
extrajudicially foreclosed the mortgage and caused the mortgaged property
to be sold at public auction on December 3, 1962. 6
More than two years thereafter, or on August 23, 1965, herein private
respondents filed a complaint against the petitioner and the Lagasca
spouses in the former Court of
First Instance of Quezon City, 7 praying that the extrajudicial foreclosure
"made on, their property and all other documents executed in relation
thereto in favor of the Government Service Insurance System" be declared
null and void. It was further prayed that they be allowed to recover said
property, and/or the GSIS be ordered to pay them the value thereof, and/or
they be allowed to repurchase the land. Additionally, they asked for actual
and moral damages and attorney's fees.
In their aforesaid complaint, private respondents alleged that they signed
the mortgage contracts not as sureties or guarantors for the Lagasca
spouses but they merely gave their common property to the said co-owners
who were solely benefited by the loans from the GSIS.
The trial court rendered judgment on February 25, 1968 dismissing the
complaint for failure to establish a cause of action. 8
Said decision was reversed by the respondent Court of Appeals 9 which held
that:
... although formally they are co-mortgagors, they are so
only for accomodation (sic) in that the GSIS required their
consent to the mortgage of the entire parcel of land which
was covered with only one certificate of title, with full
knowledge that the loans secured thereby were solely for
the benefit of the appellant (sic) spouses who alone
applied for the loan.
xxxx
14
'It is, therefore, clear that as against the GSIS, appellants
have a valid cause for having foreclosed the mortgage
without having given sufficient notice to them as required
either as to their delinquency in the payment of
amortization or as to the subsequent foreclosure of the
mortgage by reason of any default in such payment. The
notice published in the newspaper, 'Daily Record (Exh. 12)
and posted pursuant to Sec 3 of Act 3135 is not the notice
to which the mortgagor is entitled upon the application
being made for an extrajudicial foreclosure. ... 10
On the foregoing findings, the respondent court consequently decreed that-
In view of all the foregoing, the judgment appealed from
is hereby reversed, and another one entered (1) declaring
the foreclosure of the mortgage void insofar as it affects
the share of the appellants; (2) directing the GSIS to
reconvey to appellants their share of the mortgaged
property, or the value thereof if already sold to third party,
in the sum of P 35,000.00, and (3) ordering the appellees
Flaviano Lagasca and Esther Lagasca to pay the appellants
the sum of P 10,00.00 as moral damages, P 5,000.00 as
attorney's fees, and costs. 11
The case is now before us in this petition for review.
In submitting their case to this Court, both parties relied on the provisions
of Section 29 of Act No. 2031, otherwise known as the Negotiable
Instruments Law, which provide that an accommodation party is one who
has signed an instrument as maker, drawer, acceptor of indorser without
receiving value therefor, but is held liable on the instrument to a holder for
value although the latter knew him to be only an accommodation party.
This approach of both parties appears to be misdirected and their reliance
misplaced. The promissory note hereinbefore quoted, as well as the
mortgage deeds subject of this case, are clearly not negotiable instruments.
These documents do not comply with the fourth requisite to be considered
as such under Section 1 of Act No. 2031 because they are neither payable to
order nor to bearer. The note is payable to a specified party, the GSIS.
Absent the aforesaid requisite, the provisions of Act No. 2031 would not
apply; governance shall be afforded, instead, by the provisions of the Civil
Code and special laws on mortgages.
As earlier indicated, the factual findings of respondent court are that private
respondents signed the documents "only to give their consent to the
mortgage as required by GSIS", with the latter having full knowledge that
the loans secured thereby were solely for the benefit of the Lagasca
spouses. 12 This appears to be duly supported by sufficient evidence on
record. Indeed, it would be unusual for the GSIS to arrange for and deduct
the monthly amortizations on the loans from the salary as an army officer
of Flaviano Lagasca without likewise affecting deductions from the salary of
Isabelo Racho who was also an army sergeant. Then there is also the
undisputed fact, as already stated, that the Lagasca spouses executed a so-
called "Assumption of Mortgage" promising to exclude private respondents
and their share of the mortgaged property from liability to the mortgagee.
There is no intimation that the former executed such instrument for a
consideration, thus confirming that they did so pursuant to their original
agreement.
The parol evidence rule 13 cannot be used by petitioner as a shield in this
case for it is clear that there was no objection in the court below regarding
the admissibility of the testimony and documents that were presented to
prove that the private respondents signed the mortgage papers just to
accommodate their co-owners, the Lagasca spouses. Besides, the
introduction of such evidence falls under the exception to said rule, there
being allegations in the complaint of private respondents in the court below
regarding the failure of the mortgage contracts to express the true
agreement of the parties.14
However, contrary to the holding of the respondent court, it cannot be said
that private respondents are without liability under the aforesaid mortgage
contracts. The factual context of this case is precisely what is contemplated
in the last paragraph of Article 2085 of the Civil Code to the effect that third
15
persons who are not parties to the principal obligation may secure the latter
by pledging or mortgaging their own property
So long as valid consent was given, the fact that the loans were solely for
the benefit of the Lagasca spouses would not invalidate the mortgage with
respect to private respondents' share in the property. In consenting thereto,
even assuming that private respondents may not be assuming personal
liability for the debt, their share in the property shall nevertheless secure
and respond for the performance of the principal obligation. The parties to
the mortgage could not have intended that the same would apply only to
the aliquot portion of the Lagasca spouses in the property, otherwise the
consent of the private respondents would not have been required.
The supposed requirement of prior demand on the private respondents
would not be in point here since the mortgage contracts created obligations
with specific terms for the compliance thereof. The facts further show that
the private respondents expressly bound themselves as solidary debtors in
the promissory note hereinbefore quoted.
Coming now to the extrajudicial foreclosure effected by GSIS, We cannot
agree with the ruling of respondent court that lack of notice to the private
respondents of the extrajudicial foreclosure sale impairs the validity thereof.
In Bonnevie, et al. vs. Court of appeals, et al., 15 the Court ruled that Act No.
3135, as amended, does not require personal notice on the mortgagor,
quoting the requirement on notice in such cases as follows:
Section 3. Notice shall be given by posting notices of sale
for not less than twenty days in at least three public places
of the municipality where the property is situated, and if
such property is worth more than four hundred pesos,
such notice shall also be published once a week for at least
three consecutive weeks in a newspaper of general
circulation in the municipality or city.
There is no showing that the foregoing requirement on notice was not
complied with in the foreclosure sale complained of .
The respondent court, therefore, erred in annulling the mortgage insofar as
it affected the share of private respondents or in directing reconveyance of
their property or the payment of the value thereof Indubitably, whether or
not private respondents herein benefited from the loan, the mortgage and
the extrajudicial foreclosure proceedings were valid.
WHEREFORE, judgment is hereby rendered REVERSING the decision of the
respondent Court of Appeals and REINSTATING the decision of the court a
quo in Civil Case No. Q-9418 thereof.
SO ORDERED.
KIM v PEOPLE
This petition seeks the review on certiorari of the following:
1. The decision dated 3 September 1986 of the 15th Municipal
Circuit Trial Court (Guimbal-Igbaras-Tigbauan-Tubungan) in
Guimbal, Iloilo, in Criminal Case No. 628,1 and the affirming
decision of the Regional Trial Court, Branch XXVIII, Iloilo City, in
Criminal Case No. 20958, promulgated on 30 July 1987;2
2. The decision of the Court of Appeals, dated 29 April 1988,3
dismissing petitioner's appeal/petition for review for having been filed out
of time, and the resolution, dated 19 August 1988, denying petitioner's
motion for reconsideration. 4
The antecedent facts are as follows:
Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture
Department of the Southeast Asian Fisheries Development Center
(SEAFDEC) with head station at Tigbauan, Province of Iloilo. As Head of the
Economics Unit of the Research Division, he conducted prawn surveys which
required him to travel to various selected provinces in the country where
there are potentials for prawn culture.
16
On 15 June 1982, petitioner was issued Travel Order No. 2222 which covered
his travels to different places in Luzon from 16 June to 21 July 1982, a period
of thirty five (35) days. Under this travel order, he received P6,438.00 as cash
advance to defray his travel expenses.
Within the same period, petitioner was issued another travel order, T.O.
2268, requiring him to travel from the Head Station at Tigbauan, Iloilo to
Roxas City from 30 June to 4 July 1982, a period of five (5) days. For this
travel order, petitioner received a cash advance of P495.00.
On 14 January 1983, petitioner presented both travel orders for liquidation,
submitting Travel Expense Reports to the Accounting Section. When the
Travel Expense Reports were audited, it was discovered that there was an
overlap of four (4) days (30 June to 3 July 1982) in the two (2) travel orders
for which petitioner collected per diems twice. In sum, the total amount in
the form of per diems and allowances charged and collected by petitioner
under Travel Order No. 2222, when he did not actually and physically travel
as represented by his liquidation papers, was P1,230.00.
Petitioner was required to comment on the internal auditor's report
regarding the alleged anomalous claim for per diems. In his reply, petitioner
denied the alleged anomaly, claiming that he made make-up trips to
compensate for the trips he failed to undertake under T.O. 2222 because he
was recalled to the head office and given another assignment.
In September 1983, two (2) complaints for Estafa were filed against the
petitioner before the Municipal Circuit Trial Court at Guimbal, Iloilo,
docketed as Criminal Case Nos. 628 and 631.
After trial in Criminal Case No. 628, the Municipal Circuit Trial Court
rendered a decision, the dispositive part of which reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the court finds the
accused, Yong Chan Kim, guilty beyond reasonable doubt for the
crime of Estafa penalized under paragraph l(b) of Article 315,
Revised Penal Code. Records disclose there is no aggravating
circumstance proven by the prosecution. Neither there is any
 mitigating circumstance proven by the accused. Considering the
amount subject of the present complaint, the imposable penalty
should be in the medium period of arresto mayor in its maximum
period toprision correccional in its minimum period in accordance
with Article 315, No. 3, Revised Penal Code. Consonantly, the Court
hereby sentences the accused to suffer an imprisonment ranging
from four (4) months as the minimum to one (1) year and six (6)
months as the maximum in accordance with the Indeterminate
Sentence Law and to reimburse the amount of P1,230.00 to
SEAFDEC.
The surety bond of the accused shall remain valid until final
judgment in accordance herewith.
Costs against the accused.5
Criminal Case No. 631 was subsequently dismissed for failure to prosecute.
Petitioner appealed from the decision of the Municipal Circuit Trial Court in
Criminal Case No. 628. On 30 July 1987, the Regional Trial Court in Iloilo City
in Criminal Case No. 20958 affirmed in toto the trial court's decision.6
The decision of the Regional Trial Court was received by petitioner on 10
August 1987. On 11 August 1987, petitioner, thru counsel, filed a notice of
appeal with the Regional Trial Court which ordered the elevation of the
records of the case to the then Intermediate Appellate Court on the
following day, 12 August 1987. The records of the case were received by the
Intermediate Appellate Court on 8 October 1987, and the appeal was
docketed as CA-G.R. No. 05035.
On 30 October 1987, petitioner filed with the appellate court a petition for
review. As earlier stated, on 29 April 1988, the Court of Appeals dismissed
the petition for having been filed out of time. Petitioner's motion for
reconsideration was denied for lack of merit.
Hence, the present recourse.
17
On 19 October 1988, the Court resolved to require the respondents to
comment on the petition for review. The Solicitor General filed his Comment
on 20 January 1989, after several grants of extensions of time to file the
same.
In his Comment, the Solicitor General prayed for the dismissal of the instant
petition on the ground that, as provided for under Section 22, Batas
Pambansa 129, Section 22 of the Interim Rules and Guidelines, and Section
3, Rule 123 of the 1985 Rules of Criminal Procedure, the petitioner should
have filed a petition for review with the then Intermediate Appellate Court
instead of a notice of appeal with the Regional Trial Court, in perfecting his
appeal from the RTC to the Intermediate Appellate Court, since the RTC
judge was rendered in the exercise of its appellate jurisdiction over
municipal trial courts. The failure of petitioner to file the proper petition
rendered the decision of the Regional Trial Court final and executory,
according to the Solicitor General.
Petitioner's counsel submitted a Reply (erroneously termed
Comment) 7 wherein she contended that the peculiar circumstances of a
case, such as this, should be considered in order that the principle barring a
petitioner's right of review can be made flexible in the interest of justice and
equity.
In our Resolution of 29 May 1989, we resolved to deny the petition for
failure of petitioner to sufficiently show that the Court of Appeals had
committed any reversible error in its questioned judgment which had
dismissed petitioner's petition for review for having been filed out of time.8
Petitioner filed a motion for reconsideration maintaining that his petition
for review did not limit itself to the issue upon which the appellate court's
decision of 29 April 1988 was based, but rather it delved into the substance
and merits of the case. 9
On 10 August 1990, we resolved to set aside our resolution dismissing this
case and gave due course to the petition. In the said resolution, we stated:
 In several cases decided by this Court, it had set aside technicalities
in the Rules in order to give way to justice and equity. In the present
case, we note that the petitioner, in filing his Notice of Appeal the
very next day after receiving the decision of the court a quo lost no
time in showing his intention to appeal, although the procedure
taken was not correct. The Court can overlook the wrong pleading
filed, if strict compliance with the rules would mean sacrificing
justice to technicality. The imminence of a person being deprived
unjustly of his liberty due to procedural lapse of counsel is a strong
and compelling reason to warrant suspension of the Rules. Hence,
we shall consider the petition for review filed in the Court of
Appeals as a Supplement to the Notice of Appeal. As the Court
declared in a recent decision, '. . . there is nothing sacred about the
procedure of pleadings. This Court may go beyond the pleadings
when the interest of justice so warrants. It has the prerogative to
suspend its rules for the same purpose. . . . Technicality, when it
deserts its proper office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from
courts. [Alonzo v. Villamor, et al., 16 Phil. 315]
Conscience cannot rest in allowing a man to go straight to jail,
closing the door to his every entreaty for a full opportunity to be
heard, even as he has made a prima facie showing of a meritorious
cause, simply because he had chosen an appeal route, to be sure,
recognized by law but made inapplicable to his case, under altered
rules of procedure. While the Court of Appeals can not be faulted
and, in fact, it has to be lauded for correctly applying the rules of
procedure in appeals to the Court of Appeals from decisions of the
RTC rendered in the exercise of its appellate jurisdiction, yet, this
Court, as the ultimate bulwark of human rights and individual
liberty, will not allow substantial justice to be sacrified at the altar
of procedural rigor. 10
In the same resolution, the parties were required to file their respective
memoranda, and in compliance with said resolution, petitioner filed his
memorandum on 25 October 1989, while private respondent SEAFDEC filed
its required memorandum on 10 April 1990. On the other hand, the Solicitor
18
General filed on 13 March 1990 a Recommendation for Acquittal in lieu of
the required memorandum.
Two (2) issues are raised by petitioner to wit:
I. WHETHER OR NOT THE DECISION (sic) OF THE MUNICIPAL
CIRCUIT TRIAL COURT (GUIMBAL, ILOILO) AND THE REGIONAL
TRIAL COURT, BRANCH 28 (ILOILO CITY) ARE SUPPORTED BY THE
FACTS AND EVIDENCE OR CONTRARY TO LAW AND THAT THE TWO
COURTS A QUO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION OR HAVE ACTED WITHOUT
OR IN EXCESS OF JURISDICTION.
II. WHETHER OR NOT THE DECISION OF THE HONORABLE COURT
OF APPEALS IS CONTRARY TO LAW, ESTABLISHED JURISPRUDENCE,
EQUITY AND DUE PROCESS.
The second issue has been resolved in our Resolution dated 10 August 1990,
when we granted petitioner's second motion for reconsideration. We shall
now proceed to the first issue.
We find merit in the petition.
It is undisputed that petitioner received a cash advance from private
respondent SEAFDEC to defray his travel expenses under T.O. 2222. It is
likewise admitted that within the period covered by T.O. 2222, petitioner
was recalled to the head station in Iloilo and given another assignment
which was covered by T.O. 2268. The dispute arose when petitioner
allegedly failed to return P1,230.00 out of the cash advance which he
received under T.O. 2222. For the alleged failure of petitioner to return the
amount of P1,230.00, he was charged with the crime of Estafa under Article
315, par. 1(b) of the Revised Penal Code, which reads as follows:
Art. 315. Swindling (Estafa). Any person who shall defraud another
by any of the means mentioned herein below shall be punished by:
xxx xxx xxx
 1. With unfaithfulness or abuse of confidence, namely:
(a) x x x xxx xxx
(b) By misappropriating or converting, to the prejudice of
another, money, goods, or any other personal property
received by the offender in trust or on commission, or for
administration, or under any other obligation involving
the duty to make delivery of; or to return, the same, even
though such obligation be fatally or partially guaranteed
by a bond; or by denying having received such money,
goods, or other property.
In order that a person can be convicted under the abovequoted provision, it
must be proven that he had the obligation to deliver or return the same
money, good or personal property that he had received. 11
Was petitioner under obligation to return the same money (cash advance)
which he had received? We belive not. Executive Order No. 10, dated 12
February 1980 provides as follows:
B. Cash Advance for Travel
xxx xxx xxx
4. All cash advances must be liquidated within 30 days after date of
projected return of the person. Otherwise, corresponding salary
deduction shall be made immediately following the expiration day.
Liquidation simply means the settling of an indebtedness. An employee,
such as herein petitioner, who liquidates a cash advance is in fact paying
back his debt in the form of a loan of money advanced to him by his
employer, asper diems and allowances. Similarly, as stated in the assailed
decision of the lower court, "if the amount of the cash advance he received
is less than the amount he spent for actual travel . . . he has the right to
demand reimbursement from his employer the amount he spent coming
from his personal funds. 12 In other words, the money advanced by either
19
party is actually a loan to the other. Hence, petitioner was under no legal
obligation to return the same cash or money, i.e., the bills or coins, which
he received from the private respondent. 13
Article 1933 and Article 1953 of the Civil Code define the nature of a simple
loan.
Art. 1933. By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may
use the same for a certain time and return it, in which case the
contract is called acommodatum; or money or other consumable
thing, upon the condition that the same amount of the same kind
and quality shall be paid, in which case the contract is simply called
a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing
loaned, while in simple loan, ownership passes to the borrower.
Art. 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay
to the creditor an equal amount of the same kind and quality.
The ruling of the trial judge that ownership of the cash advanced to the
petitioner by private respondent was not transferred to the latter is
erroneous. Ownership of the money was transferred to the petitioner. Even
the prosecution witness, Virgilio Hierro, testified thus:
Q When you gave cash advance to the accused in this Travel Order
No. 2222 subject to liquidation, who owns the funds, accused or
SEAFDEC? How do you consider the funds in the possession of the
accused at the time when there is an actual transfer of cash? . . .
 A The one drawing cash advance already owns the money but
subject to liquidation. If he will not liquidate, be is obliged to return
the amount.
Qxxx xxx xxx
So why do you treat the itinerary of travel temporary when in fact
as of that time the accused owned already the cash advance. You
said the cash advance given to the accused is his own money. In
other words, at the time you departed with the money it belongs
already to the accused?
A Yes, but subject for liquidation. He will be only entitled for that
credence if he liquidates.
Q If other words, it is a transfer of ownership subject to a
suspensive condition that he liquidates the amount of cash
advance upon return to station and completion of the travel?
A Yes, sir.
(pp. 26-28, tsn, May 8, 1985). 14
Since ownership of the money (cash advance) was transferred to petitioner,
no fiduciary relationship was created. Absent this fiduciary relationship
between petitioner and private respondent, which is an essential element
of the crime of estafa by misappropriation or conversion, petitioner could
not have committed estafa. 15
Additionally, it has been the policy of private respondent that all cash
advances not liquidated are to be deducted correspondingly from the salary
of the employee concerned. The evidence shows that the corresponding
salary deduction was made in the case of petitioner vis-a-vis the cash
advance in question.
WHEREFORE, the decision dated 3 September 1986 of the 15th Municipal
Circuit Trial Court in Guimbal, Iloilo in Criminal Case No. 628, finding
20
petitioner guilty of estafa under Article 315, par. 1 (b) of the Revised Penal
Code and the affirming decision of the Regional Trial Court, Branch XXVIII,
Iloilo City, in Criminal Case No. 20958, promulgated on 30 July 1987 are both
hereby SET ASIDE. Petitioner is ACQUITTED of criminal charge filed against
him.
SO ORDERED.
LIGUTAN v CA
Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court, assailing the decision and resolutions of the Court of
Appeals in CA-G.R. CV No. 34594, entitled "Security Bank and Trust Co.
vs. Tolomeo Ligutan, et al."
Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on 11
May 1981 a loan in the amount of P120,000.00 from respondent Security
Bank and Trust Company. Petitioners executed a promissory note binding
themselves, jointly and severally, to pay the sum borrowed with an interest
of 15.189% per annum upon maturity and to pay a penalty of 5% every
month on the outstanding principal and interest in case of default. In
addition, petitioners agreed to pay 10% of the total amount due by way of
attorneys fees if the matter were indorsed to a lawyer for collection or if a
suit were instituted to enforce payment. The obligation matured on 8
September 1981; the bank, however, granted an extension but only up
until 29 December 1981.
Despite several demands from the bank, petitioners failed to settle the
debt which, as of 20 May 1982, amounted to P114,416.10. On 30
September 1982, the bank sent a final demand letter to petitioners
informing them that they had five days within which to make full payment.
Since petitioners still defaulted on their obligation, the bank filed on 3
November 1982, with the Regional Trial Court of Makati, Branch 143, a
complaint for recovery of the due amount.
After petitioners had filed a joint answer to the complaint, the bank
presented its evidence and, on 27 March 1985, rested its case. Petitioners,
instead of introducing their own evidence, had the hearing of the case reset
on two consecutive occasions. In view of the absence of petitioners and
their counsel on 28 August 1985, the third hearing date, the bank moved,
and the trial court resolved, to consider the case submitted for decision.
Two years later, or on 23 October 1987, petitioners filed a motion for
reconsideration of the order of the trial court declaring them as having
waived their right to present evidence and prayed that they be allowed to
prove their case. The court a quo denied the motion in an order, dated 5
September 1988, and on 20 October 1989, it rendered its
decision,[1] the dispositiveportion of which read:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendants, ordering the latter to pay, jointly and severally, to
the plaintiff, as follows:
"1. The sum of P114,416.00 with interest thereon at the rate of
15.189% per annum, 2% service charge and 5% per month
penalty charge, commencing on 20 May 1982 until fully paid;
"2. To pay the further sum equivalent to 10% of the total amount
of indebtedness for and as attorneys fees; and
"3. To pay the costs of the suit.[2]
Petitioners interposed an appeal with the Court of Appeals,
questioning the rejection by the trial court of their motion to present
evidence and assailing the imposition of the 2% service charge, the 5% per
month penalty charge and 10% attorney's fees. In its decision[3] of 7 March
1996, the appellate court affirmed the judgment of the trial court except on
the matter of the 2% service charge which was deleted pursuant to Central
Bank Circular No. 783. Not fully satisfied with the decision of the appellate
court, both parties filed their respective motions for
reconsideration.[4] Petitioners prayed for the reduction of the 5% stipulated
penalty for being unconscionable. The bank, on the other hand, asked that
the payment of interest and penalty be commenced not from the date of
filing of complaint but from the time of default as so stipulated in the
contract of the parties.
On 28 October 1998, the Court of Appeals resolved the two motions
thusly:
21
We find merit in plaintiff-appellees claim that the principal sum of
P114,416.00 with interest thereon must commence not on the date of filing
of the complaint as we have previously held in our decision but on the date
when the obligation became due.
Default generally begins from the moment the creditor demands the
performance of the obligation. However, demand is not necessary to render
the obligor in default when the obligation or the law so provides.
In the case at bar, defendants-appellants executed a promissory note where
they undertook to pay the obligation on its maturity date 'without necessity
of demand.' They also agreed to pay the interest in case of non-payment
from the date of default.
xxxxxxxxx
While we maintain that defendants-appellants must be bound by the
contract which they acknowledged and signed, we take cognizance of their
plea for the application of the provisions of Article 1229 x x x.
Considering that defendants-appellants partially complied with their
obligation under the promissory note by the reduction of the original
amount of P120,000.00 to P114,416.00 and in order that they will finally
settle their obligation, it is our view and we so hold that in the interest of
justice and public policy, a penalty of 3% per month or 36% per annum
would suffice.
xxxxxxxxx
WHEREFORE, the decision sought to be reconsidered is hereby
MODIFIED. The defendants-
appellants Tolomeo Ligutan and Leonidas dela Llana are hereby ordered to
pay the plaintiff-appellee Security Bank and Trust Company the following:
1. The sum of P114,416.00 with interest thereon at the rate
of 15.189% per annum and 3% per month penalty charge
commencing May 20, 1982 until fully paid;
 2. The sum equivalent to 10% of the total amount of the
indebtedness as and for attorneys fees.[5]
On 16 November 1998, petitioners filed an omnibus motion for
reconsideration and to admit newly discovered evidence, [6] alleging that
while the case was pending before the trial court,
petitioner Tolomeo Ligutan and his wife Bienvenida Ligutan executed a real
estate mortgage on 18 January 1984 to secure the existing indebtedness of
petitioners Ligutan and dela Llanawith the bank. Petitioners contended that
the execution of the real estate mortgage had the effect of novating the
contract between them and the bank. Petitioners further averred that the
mortgage was extrajudicially foreclosed on 26 August 1986, that they were
not informed about it, and the bank did not credit them with the proceeds
of the sale. The appellate court denied the omnibus motion for
reconsideration and to admit newly discovered evidence, ratiocinating that
such a second motion for reconsideration cannot be entertained under
Section 2, Rule 52, of the 1997 Rules of Civil Procedure. Furthermore, the
appellate court said, the newly-discovered evidence being invoked by
petitioners had actually been known to them when the case was brought on
appeal and when the first motion for reconsideration was filed.[7]
Aggrieved by the decision and resolutions of the Court of Appeals,
petitioners elevated their case to this Court on 9 July 1999 via a petition for
review on certiorari under Rule 45 of the Rules of Court, submitting thusly -
I. The respondent Court of Appeals seriously erred in not holding
that the 15.189% interest and the penalty of three
(3%) percent per month or thirty-six (36%) percent
per annum imposed by private respondent bank on
petitioners loan obligation are still manifestly
exorbitant, iniquitous and unconscionable.
II. The respondent Court of Appeals gravely erred in not reducing
to a reasonable level the ten (10%) percent award of
attorneys fees which is highly and grossly excessive,
unreasonable and unconscionable.
III. The respondent Court of Appeals gravely erred in not
admitting petitioners newly discovered evidence
22
which could not have been timely produced during
the trial of this case.
IV. The respondent Court of Appeals seriously erred in not
holding that there was a novation of the cause of
action of private respondents complaint in the
instant case due to the subsequent execution of the
real estate mortgage during the pendency of this
case and the subsequent foreclosure of the
mortgage.[8]
Respondent bank, which did not take an appeal, would, however, have
it that the penalty sought to be deleted by petitioners was even insufficient
to fully cover and compensate for the cost of money brought about by the
radical devaluation and decrease in the purchasing power of the peso,
particularly vis-a-vis the U.S. dollar, taking into account the time frame of its
occurrence. The Bank would stress that only the amount of P5,584.00 had
been remitted out of the entire loan of P120,000.00.[9]
A penalty clause, expressly recognized by law,[10] is an accessory
undertaking to assume greater liability on the part of an obligor in case of
breach of an obligation. It functions to strengthen the coercive force of the
obligation[11] and to provide, in effect, for what could be the liquidated
damages resulting from such a breach. The obligor would then be bound to
pay the stipulated indemnity without the necessity of proof on the existence
and on the measure of damages caused by the breach.[12] Although a court
may not at liberty ignore the freedom of the parties to agree on such terms
and conditions as they see fit that contravene neither law nor morals, good
customs, public order or public policy, a stipulated penalty, nevertheless,
may be equitably reduced by the courts if it is iniquitous or unconscionable
or if the principal obligation has been partly or irregularly complied with. [13]
The question of whether a penalty is reasonable or iniquitous can be
partly subjective and partly objective. Its resolution would depend on such
factors as, but not necessarily confined to, the type, extent and purpose of
the penalty, the nature of the obligation, the mode of breach and its
consequences, the supervening realities, the standing and relationship of
the parties, and the like, the application of which, by and large, is addressed
to the sound discretion of the court. In Rizal Commercial Banking Corp. vs.
Court of Appeals,[14] just an example, the Court has tempered the penalty
charges after taking into account the debtors pitiful situation and its offer to
settle the entire obligation with the creditor bank. The stipulated penalty
might likewise be reduced when a partial or irregular performance is made
by the debtor.[15] The stipulated penalty might even be deleted such as when
there has been substantial performance in good faith by the
obligor,[16] when the penalty clause itself suffers from fatal infirmity, or
when exceptional circumstances so exist as to warrant it.[17]
The Court of Appeals, exercising its good judgment in the instant case,
has reduced the penalty interest from 5% a month to 3% a month which
petitioner still disputes. Given the circumstances, not to mention the
repeated acts of breach by petitioners of their contractual obligation, the
Court sees no cogent ground to modify the ruling of the appellate court..
Anent the stipulated interest of 15.189% per annum, petitioners, for
the first time, question its reasonableness and prays that the Court reduce
the amount. This contention is a fresh issue that has not been raised and
ventilated before the courts below. In any event, the interest stipulation, on
its face, does not appear as being that excessive. The essence or rationale
for the payment of interest, quite often referred to as cost of money, is not
exactly the same as that of a surcharge or a penalty. A penalty stipulation is
not necessarily preclusive of interest, if there is an agreement to that effect,
the two being distinct concepts which may separately be
demanded.[18] What may justify a court in not allowing the creditor to
impose full surcharges and penalties, despite an express
stipulation therefor in a valid agreement, may not equally justify the non-
payment or reduction of interest. Indeed, the interest prescribed in loan
financing arrangements is a fundamental part of the banking business and
the core of a bank's existence.[19]
Petitioners next assail the award of 10% of the total amount of
indebtedness by way of attorney's fees for being grossly excessive,
exorbitant and unconscionable vis-a-vis the time spent and the extent of
services rendered by counsel for the bank and the nature of the
case. Bearing in mind that the rate of attorneys fees has been agreed to by
the parties and intended to answer not only for litigation expenses but also
for collection efforts as well, the Court, like the appellate court, deems the
award of 10% attorneys fees to be reasonable.
23
Neither can the appellate court be held to have erred in rejecting
petitioners' call for a new trial or to admit newly discovered evidence. As the
appellate court so held in its resolution of14 May 1999 -
Under Section 2, Rule 52 of the 1997 Rules of Civil Procedure, no second
motion for reconsideration of a judgment or final resolution by the same
party shall be entertained. Considering that the instant motion is already a
second motion for reconsideration, the same must therefore be denied.
Furthermore, it would appear from the records available to this court that
the newly-discovered evidence being invoked by defendants-appellants
have actually been existent when the case was brought on appeal to this
court as well as when the first motion for reconsideration was filed. Hence,
it is quite surprising why defendants-appellants raised the alleged newly-
discovered evidence only at this stage when they could have done so in the
earlier pleadings filed before this court.
The propriety or acceptability of such a second motion for reconsideration
is not contingent upon the averment of 'new' grounds to assail the
judgment, i.e., grounds other than those theretofore presented and
rejected. Otherwise, attainment of finality of a judgment might be stayed
off indefinitely, depending on the partys ingenuousness or cleverness in
conceiving and formulating 'additional flaws' or 'newly discovered errors'
therein, or thinking up some injury or prejudice to the rights of
the movant for reconsideration.[20]
At any rate, the subsequent execution of the real estate mortgage as
security for the existing loan would not have resulted in the extinguishment
of the original contract of loan because ofnovation. Petitioners
acknowledge that the real estate mortgage contract does not contain any
express stipulation by the parties intending it to supersede the existing loan
agreement between the petitioners and the bank.[21] Respondent bank has
correctly postulated that the mortgage is but an accessory contract to
secure the loan in the promissory note.
Extinctive novation requires, first, a previous valid obligation; second,
the agreement of all the parties to the new contract; third, the
extinguishment of the obligation; and fourth, the validity of the new
one.[22] In order that an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligation be on every point incompatible
with each other.[23] An obligation to pay a sum of money is
not extinctively novated by a new instrument which merely changes the
terms of payment or adding compatible covenants or where the old contract
is merely supplemented by the new one.[24] When not expressed,
incompatibility is required so as to ensure that the parties have indeed
intended such novation despite their failure to express it in categorical
terms. The incompatibility, to be sure, should take place in any of the
essential elements of the obligation, i.e., (1) the juridical relation or tie, such
as from a mere commodatum to lease of things,
[25]
from negotiorum gestio to agency, or from a mortgage to antichresis, or
from a sale to one of loan;[26] (2) the object or principal conditions, such as
a change of the nature of the prestation; or (3) the subjects, such as the
substitution of a debtor[27] or the subrogation of
creditor. Extinctive novation does not necessarily imply that the new
agreement should be complete by itself; certain terms and conditions may
be carried, expressly or by implication, over to the new obligation.
WHEREFORE, the petition is DENIED.
SO ORDERED.
EASTERN SHIPPING LINES v CA
The issues, albeit not completely novel, are: (a) whether or not a claim for
damage sustained on a shipment of goods can be a solidary, or joint and
several, liability of the common carrier, the arrastre operator and the
customs broker; (b) whether the payment of legal interest on an award for
loss or damage is to be computed from the time the complaint is filed or
from the date the decision appealed from is rendered; and (c) whether the
applicable rate of interest, referred to above, is twelve percent (12%) or six
percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the
antecedent and undisputed facts that have led to the controversy are
hereunder reproduced:
This is an action against defendants shipping company,
arrastre operator and broker-forwarder for damages
sustained by a shipment while in defendants' custody,
filed by the insurer-subrogee who paid the consignee the
value of such losses/damages.
On December 4, 1981, two fiber drums of riboflavin were
or shipped from Yokohama, Japan for delivery vessel "SS
EASTERN COMET" owned by defendant Eastern Shipping
Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under
the plaintiff's Marine Insurance Policy No. 81/01177 for
P36,382,466.38.
Upon arrival of the shipment in Manila on December 12,
1981, it was discharged unto the custody of defendant
Metro Port Service, Inc. The latter excepted to one drum,
said to be in bad order, which damage was unknown to
plaintiff.
On January 7, 1982 defendant Allied Brokerage
Corporation received the shipment from defendant Metro
Port Service, Inc., one drum opened and without seal (per
"Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage
Corporation made deliveries of the shipment to the
consignee's warehouse. The latter excepted to one drum
which contained spillages, while the rest of the contents
was adulterated/fake (per "Bad Order Waybill" No. 10649,
Exh. E).
24
 Plaintiff contended that due to the losses/damage
sustained by said drum, the consignee suffered losses
totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants
who failed and refused to pay the same (Exhs. H, I, J, K, L).
As a consequence of the losses sustained, plaintiff was
compelled to pay the consignee P19,032.95 under the
aforestated marine insurance policy, so that it became
subrogated to all the rights of action of said consignee
against defendants (per "Form of Subrogation", "Release"
and Philbanking check, Exhs. M, N, and O). (pp. 85-
86, Rollo.)
There were, to be sure, other factual issues that confronted both courts.
Here, the appellate court said:
Defendants filed their respective answers, traversing the
material allegations of the complaint contending that: As
for defendant Eastern Shipping it alleged that the
shipment was discharged in good order from the vessel
unto the custody of Metro Port Service so that any
damage/losses incurred after the shipment was incurred
after the shipment was turned over to the latter, is no
longer its liability (p. 17, Record); Metroport averred that
although subject shipment was discharged unto its
custody, portion of the same was already in bad order (p.
11, Record); Allied Brokerage alleged that plaintiff has no
cause of action against it, not having negligent or at fault
for the shipment was already in damage and bad order
condition when received by it, but nonetheless, it still
exercised extra ordinary care and diligence in the
handling/delivery of the cargo to consignee in the same
condition shipment was received by it.
From the evidence the court found the following:
25
The issues are:
1. Whether or not the shipment
sustained losses/damages;
2. Whether or not these losses/damages
were sustained while in the custody of
defendants (in whose respective
custody, if determinable);
3. Whether or not defendant(s) should
be held liable for the losses/damages
(see plaintiff's pre-Trial Brief, Records,
p. 34; Allied's pre-Trial Brief, adopting
plaintiff's Records, p. 38).
As to the first issue, there can be no
doubt that the shipment sustained
losses/damages. The two drums were
shipped in good order and condition, as
clearly shown by the Bill of Lading and
Commercial Invoice which do not
indicate any damages drum that was
shipped (Exhs. B and C). But when on
December 12, 1981 the shipment was
delivered to defendant Metro Port
Service, Inc., it excepted to one drum in
bad order.
Correspondingly, as to the second issue,
it follows that the losses/damages were
sustained while in the respective and/or
successive custody and possession of
defendants carrier (Eastern), arrastre
operator (Metro Port) and broker (Allied
Brokerage). This becomes evident when
the Marine Cargo Survey Report (Exh.
G), with its "Additional Survey Notes", that on December 12, 1981 one drum
are considered. In the latter notes, it is was found "open".
stated that when the shipment was
"landed on vessel" to dock of Pier # 15, and thus held:
South Harbor, Manila on December 12,
1981, it was observed that "one (1) fiber WHEREFORE, PREMISES CONSIDERED,
drum (was) in damaged condition, judgment is hereby rendered:
covered by the vessel's Agent's Bad
Order Tally Sheet No. 86427." The
A. Ordering defendants to pay plaintiff, jointly and
report further states that when
severally:
defendant Allied Brokerage withdrew
the shipment from defendant arrastre
1. The amount of P19,032.95, with the
operator's custody on January 7, 1982,
present legal interest of 12% per
one drum was found opened without
annum from October 1, 1982, the date
seal, cello bag partly torn but contents
of filing of this complaints, until fully
intact. Net unrecovered spillages was
paid (the liability of defendant Eastern
15 kgs. The report went on to state that
Shipping, Inc. shall not exceed US$500
when the drums reached the consignee,
per case or the CIF value of the loss,
one drum was found with
whichever is lesser, while the liability of
adulterated/faked contents. It is
defendant Metro Port Service, Inc. shall
obvious, therefore, that these
be to the extent of the actual invoice
losses/damages occurred before the
value of each package, crate box or
shipment reached the consignee while
container in no case to exceed
under the successive custodies of
P5,000.00 each, pursuant to Section
defendants. Under Art. 1737 of the New
6.01 of the Management Contract);
Civil Code, the common carrier's duty to
observe extraordinary diligence in the
vigilance of goods remains in full force 2. P3,000.00 as attorney's fees, and
and effect even if the goods are
temporarily unloaded and stored in 3. Costs.
transit in the warehouse of the carrier at
the place of destination, until the B. Dismissing the
consignee has been advised and has had counterclaims and
reasonable opportunity to remove or crossclaim of
dispose of the goods (Art. 1738, NCC). defendant/cross-
Defendant Eastern Shipping's own claimant Allied
exhibit, the "Turn-Over Survey of Bad Brokerage
Order Cargoes" (Exhs. 3-Eastern) states Corporation.

26
 SO ORDERED. (p. 207, Record).
Dissatisfied, defendant's recourse to US.
The appeal is devoid of merit.
After a careful scrutiny of the evidence on record. We find
that the conclusion drawn therefrom is correct. As there
is sufficient evidence that the shipment sustained damage
while in the successive possession of appellants, and
therefore they are liable to the appellee, as subrogee for
the amount it paid to the consignee. (pp. 87-89, Rollo.)
The Court of Appeals thus affirmed in toto the judgment of the court
a quo.
In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes
error and grave abuse of discretion on the part of the appellate court when
I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY
LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS
BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS
GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM
OF PRIVATE RESPONDENT SHOULD COMMENCE FROM
THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE
OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE
DATE OF THE DECISION OF THE TRIAL COURT AND ONLY
AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE
RESPONDENT'S CLAIM BEING INDISPUTABLY
UNLIQUIDATED.
The petition is, in part, granted.
27
In this decision, we have begun by saying that the questions raised by
petitioner carrier are not all that novel. Indeed, we do have a fairly good
number of previous decisions this Court can merely tack to.
The common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance by, the person entitled to receive them (Arts. 1736-1738,
Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar
Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or
arrive in damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express finding
of negligence to hold it liable (Art. 1735, Civil Code; Philippine National
Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of
Appeals, 131 SCRA 365). There are, of course, exceptional cases when such
presumption of fault is not observed but these cases, enumerated in Article
1734 1 of the Civil Code, are exclusive, not one of which can be applied to
this case.
The question of charging both the carrier and the arrastre operator with the
obligation of properly delivering the goods to the consignee has, too, been
passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port
Services (182 SCRA 455), we have explained, in holding the carrier and the
arrastre operator liable in solidum,thus:
The legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and
warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA
5 [1967]. The relationship between the consignee and the
common carrier is similar to that of the consignee and the
arrastre operator (Northern Motors, Inc. v. Prince Line, et
al., 107 Phil. 253 [1960]). Since it is the duty of the
ARRASTRE to take good care of the goods that are in its
custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are
 therefore charged with the obligation to deliver the goods
in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre
operator and the customs broker are themselves always and necessarily
liable solidarily with the carrier, or vice-versa, nor that attendant facts in a
given case may not vary the rule. The instant petition has been brought
solely by Eastern Shipping Lines, which, being the carrier and not having
been able to rebut the presumption of fault, is, in any event, to be held liable
in this particular case. A factual finding of both the court a quo and the
appellate court, we take note, is that "there is sufficient evidence that the
shipment sustained damage while in the successive possession of
appellants" (the herein petitioner among them). Accordingly, the liability
imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is
inevitable regardless of whether there are others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that
deserves more than just a passing remark.
Let us first see a chronological recitation of the major rulings of this Court:
The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money
arising out of short deliveries and pilferage of goods. In this case, appellee
Malayan Insurance (the plaintiff in the lower court) averred in its complaint
that the total amount of its claim for the value of the undelivered goods
amounted to P3,947.20. This demand, however, was neither established in
its totality nor definitely ascertained. In the stipulation of facts later entered
into by the parties, in lieu of proof, the amount of P1,447.51 was agreed
upon. The trial court rendered judgment ordering the appellants
(defendants) Manila Port Service and Manila Railroad Company to pay
appellee Malayan Insurance the sum of P1,447.51 with legal interest
thereon from the date the complaint was filed on 28 December 1962 until
full payment thereof. The appellants then assailed,inter alia, the award of
legal interest. In sustaining the appellants, this Court ruled:
28
Interest upon an obligation which calls for the payment of
money, absent a stipulation, is the legal rate. Such interest
normally is allowable from the date of demand, judicial or
extrajudicial. The trial court opted for judicial demand as
the starting point.
But then upon the provisions of Article 2213 of the Civil
Code, interest "cannot be recovered upon unliquidated
claims or damages, except when the demand can be
established with reasonable certainty." And as was held
by this Court in Rivera vs. Perez, 4 L-6998, February 29,
1956, if the suit were for damages, "unliquidated and not
known until definitely ascertained, assessed and
determined by the courts after proof (Montilla
c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco
v. Guzman,
38 Phil. 302)," then, interest "should be from the date of
the decision." (Emphasis supplied)
The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for
"Recovery of Damages for Injury to Person and Loss of Property." After trial,
the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and third party defendants and against the
defendants and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and
Michael, Incorporated to pay jointly and severally the
following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina
the sum of P131,084.00 which is the value of the boat F B
Pacita III together with its accessories, fishing gear and
equipment minus P80,000.00 which is the value of the
 insurance recovered and the amount of P10,000.00 a
month as the estimated monthly loss suffered by them as
a result of the fire of May 6, 1969 up to the time they are
actually paid or already the total sum of P370,000.00 as of
June 4, 1972 with legal interest from the filing of the
complaint until paid and to pay attorney's fees of
P5,000.00 with costs against defendants and third party
plaintiffs. (Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount
of damages awarded but sustained the trial court in adjudging legal
interest from the filing of the complaint until fully paid. When the
appellate court's decision became final, the case was remanded to
the lower court for execution, and this was when the trial court
issued its assailed resolution which applied the 6% interest per
annum prescribed in Article 2209 of the Civil Code. In their petition
for review on certiorari, the petitioners contended that Central
Bank Circular
No. 416, providing thus
By virtue of the authority granted to it under Section 1 of
Act 2655, as amended, Monetary Board in its Resolution
No. 1622 dated July 29, 1974, has prescribed that the rate
of interest for the loan, or forbearance of any money,
goods, or credits and the rate allowed in judgments, in the
absence of express contract as to such rate of interest,
shall be twelve (12%) percent per annum. This Circular
shall take effect immediately. (Emphasis found in the text)
v. Tomol case, this Court 8 modified the interest award from 12% to 6%
should have, instead, been applied. This Court 6 ruled:
The judgments spoken of and referred to are judgments
in litigations involving loans or forbearance of any money,
goods or credits. Any other kind of monetary judgment
which has nothing to do with, nor involving loans or
forbearance of any money, goods or credits does not fall
29
within the coverage of the said law for it is not within the
ambit of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to
be executed is one rendered in an Action for Damages for
injury to persons and loss of property and does not involve
any loan, much less forbearances of any money, goods or
credits. As correctly argued by the private respondents,
the law applicable to the said case is Article 2209 of the
New Civil Code which reads
Art. 2209. If the obligation consists in
the payment of a sum of money, and the
debtor incurs in delay, the indemnity for
damages, there being no stipulation to
the contrary, shall be the payment of
interest agreed upon, and in the
absence of stipulation, the legal interest
which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc.,
v. Cruz, 7 promulgated on 28 July 1986. The case was for damages
occasioned by an injury to person and loss of property. The trial court
awarded private respondent Pedro Manabat actual and compensatory
damages in the amount of P72,500.00 with legal interest thereon from the
filing of the complaint until fully paid. Relying on the Reformina
interest per annum but sustained the time computation thereof, i.e., from
the filing of the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the
recovery of damages arising from the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the
petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal
rate from November 29, 1968, the date of the filing of the complaint until
full payment . . . ." Save from the modification of the amount granted by the
lower court, the Court of Appeals sustained the trial court's decision. When
taken to this Court for review, the case, on 03 October 1986, was decided,
thus:
WHEREFORE, the decision appealed from is hereby
MODIFIED and considering the special and environmental
circumstances of this case, we deem it reasonable to
render a decision imposing, as We do hereby impose,
upon the defendant and the third-party defendants (with
the exception of Roman Ozaeta) a solidary (Art. 1723, Civil
Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association
of FIVE MILLION (P5,000,000.00) Pesos to cover all
damages (with the exception to attorney's fees)
occasioned by the loss of the building (including interest
charges and lost rentals) and an additional ONE HUNDRED
THOUSAND (P100,000.00) Pesos as and for attorney's
fees, the total sum being payable upon the finality of this
decision. Upon failure to pay on such finality, twelve (12%)
per cent interest per annum shall be imposed upon
aforementioned amounts from finality until paid. Solidary
costs against the defendant and third-party defendants
(Except Roman Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction,
contending that "the interest of twelve (12%) per cent per
annum imposed on the total amount of the monetary award was
in contravention of law." The Court 10 ruled out the applicability of
the Reformina and Philippine Rabbit Bus Lines cases and, in its
resolution of 15 April 1988, it explained:
There should be no dispute that the imposition of 12%
interest pursuant to Central Bank Circular No. 416 . . . is
applicable only in the following: (1) loans; (2) forbearance
of any money, goods or credit; and
30
(3) rate allowed in judgments (judgments spoken of refer
to judgments involving loans or forbearance of any
money, goods or credits. (Philippine Rabbit Bus Lines Inc.
v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr.,
139 SCRA 260 [1985]). It is true that in the instant case,
there is neither a loan or a forbearance, but then no
interest is actually imposed provided the sums referred to
in the judgment are paid upon the finality of the
judgment. It is delay in the payment of such final
judgment, that will cause the imposition of the interest.
It will be noted that in the cases already adverted to, the
rate of interest is imposed on the total sum, from the filing
of the complaint until paid; in other words, as part of the
judgment for damages. Clearly, they are not applicable to
the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc.,
vs. Intermediate Appellate Court 11 was a petition for review
on certiorari from the decision, dated 27 February 1985, of the then
Intermediate Appellate Court reducing the amount of moral and exemplary
damages awarded by the trial court, to P240,000.00 and P100,000.00,
respectively, and its resolution, dated 29 April 1985, restoring the amount
of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages
and P400,000.00 as exemplary damages with interest thereon at 12% per
annum from notice of judgment, plus costs of suit. In a decision of 09
November 1988, this Court, while recognizing the right of the private
respondent to recover damages, held the award, however, for moral
damages by the trial court, later sustained by the IAC, to be inconceivably
large. The Court 12 thus set aside the decision of the appellate court and
rendered a new one, "ordering the petitioner to pay private respondent the
sum of One Hundred Thousand (P100,000.00) Pesos as moral damages,
with
six (6%) percent interest thereon computed from the finality of this decision
until paid. (Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo
v. Ruiz 13 which arose from a breach of employment contract. For having
been illegally dismissed, the petitioner was awarded by the trial court moral
and exemplary damages without, however, providing any legal interest
thereon. When the decision was appealed to the Court of Appeals, the latter
held:
WHEREFORE, except as modified hereinabove the
decision of the CFI of Negros Oriental dated October 31,
1972 is affirmed in all respects, with the modification that
defendants-appellants, except defendant-appellant
Merton Munn, are ordered to pay, jointly and severally,
the amounts stated in the dispositive portion of the
decision, including the sum of P1,400.00 in concept of
compensatory damages, with interest at the legal rate
from the date of the filing of the complaint until fully
paid(Emphasis supplied.)
The petition for review to this Court was denied. The records were
thereupon transmitted to the trial court, and an entry of judgment
was made. The writ of execution issued by the trial court directed
that only compensatory damages should earn interest at 6% per
annum from the date of the filing of the complaint. Ascribing grave
abuse of discretion on the part of the trial judge, a petition
for certiorari assailed the said order. This Court said:
. . . , it is to be noted that the Court of Appeals ordered the
payment of interest "at the legal rate"from the time of the
filing of the complaint. . . Said circular [Central Bank
Circular No. 416] does not apply to actions based on a
breach of employment contract like the case at bar.
(Emphasis supplied)
The Court reiterated that the 6% interest per annum on the
damages should be computed from the time the complaint was
filed until the amount is fully paid.
31
Quite recently, the Court had another occasion to rule on the
matter. National Power Corporation vs. Angas, 14decided on 08 May 1992,
involved the expropriation of certain parcels of land. After conducting a
hearing on the complaints for eminent domain, the trial court ordered the
petitioner to pay the private respondents certain sums of money as just
compensation for their lands so expropriated "with legal interest thereon . .
. until fully paid." Again, in applying the 6% legal interest per annum under
the Civil Code, the Court 15 declared:
. . . , (T)he transaction involved is clearly not a loan or
forbearance of money, goods or credits but expropriation
of certain parcels of land for a public purpose, the
payment of which is without stipulation regarding
interest, and the interest adjudged by the trial court is in
the nature of indemnity for damages. The legal interest
required to be paid on the amount of just compensation
for the properties expropriated is manifestly in the form
of indemnity for damages for the delay in the payment
thereof. Therefore, since the kind of interest involved in
the joint judgment of the lower court sought to be
enforced in this case is interest by way of damages, and
not by way of earnings from loans, etc. Art. 2209 of the
Civil Code shall apply.
Concededly, there have been seeming variances in the above holdings. The
cases can perhaps be classified into two groups according to the similarity
of the issues involved and the corresponding rulings rendered by the court.
The "first group" would consist of the cases of Reformina v. Tomol (1985),
Philippine Rabbit Bus Lines v. Cruz(1986), Florendo v. Ruiz (1989)
and National Power Corporation v. Angas (1992). In the "second group"
would be Malayan Insurance Company v.Manila Port Service (1969), Nakpil
and Sons v. Court of Appeals (1988), and American Express International
v.Intermediate Appellate Court (1988).
In the "first group", the basic issue focuses on the application of either the
6% (under the Civil Code) or 12% (under the Central Bank Circular)
interest per annum. It is easily discernible in these cases that there has been
a consistent holding that the Central Bank Circular imposing the 12%
interest per annum applies only to loans or forbearance 16 of money, goods
or credits, as well as to judgments involving such loan or forbearance of
money, goods or credits, and that the 6% interest under the Civil Code
governs when the transaction involves the payment of indemnities in the
concept of damage arising from the breach or a delay in the performance of
obligations in general. Observe, too, that in these cases, a common time
frame in the computation of the 6% interest per annum has been
applied, i.e., from the time the complaint is filed until the adjudged amount
is fully paid.
The "second group", did not alter the pronounced rule on the application of
the 6% or 12% interest per annum, 17depending on whether or not the
amount involved is a loan or forbearance, on the one hand, or one of
indemnity for damage, on the other hand. Unlike, however, the "first group"
which remained consistent in holding that the running of the legal interest
should be from the time of the filing of the complaint until fully paid, the
"second group" varied on the commencement of the running of the legal
interest.
Malayan held that the amount awarded should bear legal interest from the
date of the decision of the court a quo,explaining that "if the suit were for
damages, 'unliquidated and not known until definitely ascertained, assessed
and determined by the courts after proof,' then, interest 'should be from
the date of the decision.'" American Express International v. IAC, introduced
a different time frame for reckoning the 6% interest by ordering it to be
"computed from the finality of (the) decision until paid." The Nakpil and Sons
case ruled that 12% interest per annum should be imposed from the finality
of the decision until the judgment amount is paid.
The ostensible discord is not difficult to explain. The factual circumstances
may have called for different applications, guided by the rule that the courts
are vested with discretion, depending on the equities of each case, on the
award of interest. Nonetheless, it may not be unwise, by way of clarification
and reconciliation, to suggest the following rules of thumb for future
guidance.
32
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held
liable for damages. 19 The provisions under Title XVIII on "Damages" of the
Civil Code govern in determining the measure of recoverable damages. 20
II. With regard particularly to an award of interest in the concept of actual
and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. 21 Furthermore, the interest
due shall itself earn legal interest from the time it is judicially
demanded. 22 In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article
1169 23 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court 24 at the rate of 6% per annum. 25 No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable
certainty. 26 Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.
WHEREFORE, the petition is partly GRANTED. The appealed decision is
AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX
PERCENT (6%) on the amount due computed from the decision, dated
03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in
lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of
this decision until the payment thereof.
SO ORDERED.
PRODUCERS BANK v CA
This is a petition for review on certiorari of the Decision[1] of the Court
of Appeals dated June 25, 1991 in CA-G.R. CV No. 11791 and of its
Resolution[2] dated May 5, 1994, denying the motion for reconsideration of
said decision filed by petitioner Producers Bank of the Philippines.
Sometime in 1979, private respondent Franklin Vives was asked by his
neighbor and friend Angeles Sanchez to help her friend and townmate, Col.
Arturo Doronilla, in incorporating his business, the Sterela Marketing and
Services (Sterela for brevity). Specifically, Sanchez asked private respondent
to deposit in a bank a certain amount of money in the bank account of
Sterela for purposes of its incorporation. She assured private respondent
that he could withdraw his money from said account within a months
time. Private respondent asked Sanchez to bring Doronilla to their house so
that they could discuss Sanchezs request.[3]
On May 9, 1979, private respondent, Sanchez, Doronilla and a certain
Estrella Dumagpi, Doronillas private secretary, met and discussed the
matter. Thereafter, relying on the assurances and representations of
Sanchez and Doronilla, private respondent issued a check in the amount of
Two Hundred Thousand Pesos (P200,000.00) in favor of Sterela. Private
respondent instructed his wife, Mrs. Inocencia Vives, to accompany
Doronilla and Sanchez in opening a savings account in the name of Sterela
in the Buendia, Makati branch of Producers Bank of the
Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the
bank to deposit the check. They had with them an authorization letter from
Doronilla authorizing Sanchez and her companions, in coordination with Mr.
Rufo Atienza, to open an account for Sterela Marketing Services in the
amount of P200,000.00. In opening the account, the authorized signatories
33
were Inocencia Vives and/or Angeles Sanchez. A passbook for Savings
Account No. 10-1567 was thereafter issued to Mrs. Vives.[4]
Subsequently, private respondent learned that Sterela was no longer
holding office in the address previously given to him. Alarmed, he and his
wife went to the Bank to verify if their money was still intact. The bank
manager referred them to Mr. Rufo Atienza, the assistant manager, who
informed them that part of the money in Savings Account No. 10-1567 had
been withdrawn by Doronilla, and that only P90,000.00 remained
therein. He likewise told them that Mrs. Vives could not withdraw said
remaining amount because it had to answer for some postdated checks
issued by Doronilla. According to Atienza, after Mrs. Vives and Sanchez
opened Savings Account No. 10-1567, Doronilla opened Current Account
No. 10-0320 for Sterela and authorized the Bank to debit Savings Account
No. 10-1567 for the amounts necessary to cover overdrawings in Current
Account No. 10-0320. In opening said current account, Sterela, through
Doronilla, obtained a loan of P175,000.00 from the Bank. To cover payment
thereof, Doronilla issued three postdated checks, all of which were
dishonored. Atienza also said that Doronilla could assign or withdraw the
money in Savings Account No. 10-1567 because he was the sole proprietor
of Sterela.[5]
Private respondent tried to get in touch with Doronilla through
Sanchez. On June 29, 1979, he received a letter from Doronilla, assuring him
that his money was intact and would be returned to him. On August 13,
1979, Doronilla issued a postdated check for Two Hundred Twelve Thousand
Pesos (P212,000.00) in favor of private respondent. However, upon
presentment thereof by private respondent to the drawee bank, the check
was dishonored. Doronilla requested private respondent to present the
same check on September 15, 1979 but when the latter presented the
check, it was again dishonored.[6]
Private respondent referred the matter to a lawyer, who made a
written demand upon Doronilla for the return of his clients money. Doronilla
issued another check for P212,000.00 in private respondents favor but the
check was again dishonored for insufficiency of funds.[7]
Private respondent instituted an action for recovery of sum of money
in the Regional Trial Court (RTC) in Pasig, Metro Manila against Doronilla,
Sanchez, Dumagpi and petitioner. The case was docketed as Civil Case No.
44485. He also filed criminal actions against Doronilla, Sanchez and Dumagpi
in the RTC. However, Sanchez passed away on March 16, 1985 while the
case was pending before the trial court. On October 3, 1995, the RTC of
Pasig, Branch 157, promulgated its Decision in Civil Case No. 44485, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing
defendants Arturo J. Doronila, Estrella Dumagpi and Producers Bank of the
Philippines to pay plaintiff Franklin Vives jointly and severally
(a) the amount of P200,000.00, representing the money deposited, with
interest at the legal rate from the filing of the complaint until the same is
fully paid;
(b) the sum of P50,000.00 for moral damages and a similar amount for
exemplary damages;
(c) the amount of P40,000.00 for attorneys fees; and
(d) the costs of the suit.
SO ORDERED.[8]
Petitioner appealed the trial courts decision to the Court of Appeals. In
its Decision dated June 25, 1991, the appellate court affirmed in toto the
decision of the RTC.[9] It likewise denied with finality petitioners motion for
reconsideration in its Resolution dated May 5, 1994.[10]
On June 30, 1994, petitioner filed the present petition, arguing that
I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE
TRANSACTION BETWEEN THE DEFENDANT DORONILLA AND RESPONDENT
VIVES WAS ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;
34
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT
PETITIONERS BANK MANAGER, MR. RUFO ATIENZA, CONNIVED WITH THE
OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be PRIVATE
RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER SHOULD BE HELD
LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;
III.
THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE
RECORDS OF THE REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT
APPEALED FROM, AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE
BASED ON A MISAPPREHENSION OF FACTS;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED
DECISION IN SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE
LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS
APPLICABLE;
V.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION
OF THE LOWER COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND
SEVERALLY LIABLE WITH THE OTHER DEFENDANTS FOR THE AMOUNT OF
P200,000.00 REPRESENTING THE SAVINGS ACCOUNT DEPOSIT, P50,000.00
FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARY DAMAGES, P40,000.00
FOR ATTORNEYS FEES AND THE COSTS OF SUIT.[11]
Private respondent filed his Comment on September 23,
1994. Petitioner filed its Reply thereto on September 25, 1995. The Court
then required private respondent to submit a rejoinder to the
reply. However, said rejoinder was filed only on April 21, 1997, due to
petitioners delay in furnishing private respondent with copy of the
reply[12] and several substitutions of counsel on the part of private
respondent.[13] On January 17, 2001, the Court resolved to give due course
to the petition and required the parties to submit their respective
memoranda.[14]Petitioner filed its memorandum on April 16, 2001 while
private respondent submitted his memorandum on March 22, 2001.
Petitioner contends that the transaction between private respondent
and Doronilla is a simple loan (mutuum) since all the elements of
a mutuum are present: first, what was delivered by private respondent to
Doronilla was money, a consumable thing; and second, the transaction was
onerous as Doronilla was obliged to pay interest, as evidenced by the check
issued by Doronilla in the amount of P212,000.00, or P12,000 more than
what private respondent deposited in Sterelas bank account.[15] Moreover,
the fact that private respondent sued his good friend Sanchez for his failure
to recover his money from Doronilla shows that the transaction was not
merely gratuitous but had a business angle to it. Hence, petitioner argues
that it cannot be held liable for the return of private
respondents P200,000.00 because it is not privy to the transaction between
the latter and Doronilla.[16]
It argues further that petitioners Assistant Manager, Mr. Rufo Atienza,
could not be faulted for allowing Doronilla to withdraw from the savings
account of Sterela since the latter was the sole proprietor of said
company. Petitioner asserts that Doronillas May 8, 1979 letter addressed to
the bank, authorizing Mrs. Vives and Sanchez to open a savings account for
Sterela, did not contain any authorization for these two to withdraw from
said account. Hence, the authority to withdraw therefrom remained
exclusively with Doronilla, who was the sole proprietor of Sterela, and who
alone had legal title to the savings account.[17] Petitioner points out that no
evidence other than the testimonies of private respondent and Mrs. Vives
was presented during trial to prove that private respondent deposited
his P200,000.00 in Sterelas account for purposes of its
incorporation.[18] Hence, petitioner should not be held liable for allowing
Doronilla to withdraw from Sterelas savings account.
Petitioner also asserts that the Court of Appeals erred in affirming the
trial courts decision since the findings of fact therein were not accord with
the evidence presented by petitioner during trial to prove that the
transaction between private respondent and Doronilla was a mutuum, and
35
that it committed no wrong in allowing Doronilla to withdraw from Sterelas
savings account.[19]
Finally, petitioner claims that since there is no wrongful act or omission
on its part, it is not liable for the actual damages suffered by private
respondent, and neither may it be held liable for moral and exemplary
damages as well as attorneys fees.[20]
Private respondent, on the other hand, argues that the transaction
between him and Doronilla is not a mutuum but an
accommodation,[21] since he did not actually part with the ownership of
his P200,000.00 and in fact asked his wife to deposit said amount in the
account of Sterela so that a certification can be issued to the effect that
Sterela had sufficient funds for purposes of its incorporation but at the same
time, he retained some degree of control over his money through his wife
who was made a signatory to the savings account and in whose possession
the savings account passbook was given.[22]
He likewise asserts that the trial court did not err in finding that
petitioner, Atienzas employer, is liable for the return of his money. He insists
that Atienza, petitioners assistant manager, connived with Doronilla in
defrauding private respondent since it was Atienza who facilitated the
opening of Sterelas current account three days after Mrs. Vives and Sanchez
opened a savings account with petitioner for said company, as well as the
approval of the authority to debit Sterelas savings account to cover any
overdrawings in its current account.[23]
There is no merit in the petition.
At the outset, it must be emphasized that only questions of law may
be raised in a petition for review filed with this Court. The Court has
repeatedly held that it is not its function to analyze and weigh all over again
the evidence presented by the parties during trial.[24] The Courts jurisdiction
is in principle limited to reviewing errors of law that might have been
committed by the Court of Appeals.[25] Moreover, factual findings of courts,
when adopted and confirmed by the Court of Appeals, are final and
conclusive on this Court unless these findings are not supported by the
evidence on record.[26] There is no showing of any misapprehension of facts
on the part of the Court of Appeals in the case at bar that would require this
Court to review and overturn the factual findings of that court, especially
since the conclusions of fact of the Court of Appeals and the trial court are
not only consistent but are also amply supported by the evidence on record.
No error was committed by the Court of Appeals when it ruled that the
transaction between private respondent and Doronilla was
a commodatum and not a mutuum. A circumspect examination of the
records reveals that the transaction between them was
a commodatum. Article 1933 of the Civil Code distinguishes between the
two kinds of loans in this wise:
By the contract of loan, one of the parties delivers to another, either
something not consumable so that the latter may use the same for a certain
time and return it, in which case the contract is called a commodatum; or
money or other consumable thing, upon the condition that the same
amount of the same kind and quality shall be paid, in which case the contract
is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum, the bailor retains the ownership of the thing loaned, while
in simple loan, ownership passes to the borrower.
The foregoing provision seems to imply that if the subject of the
contract is a consumable thing, such as money, the contract would be
a mutuum. However, there are some instances where a commodatum may
have for its object a consumable thing. Article 1936 of the Civil Code
provides:
Consumable goods may be the subject of commodatum if the purpose of
the contract is not the consumption of the object, as when it is merely for
exhibition.
Thus, if consumable goods are loaned only for purposes of exhibition,
or when the intention of the parties is to lend consumable goods and to have
36
the very same goods returned at the end of the period agreed upon, the
loan is a commodatum and not a mutuum.
The rule is that the intention of the parties thereto shall be accorded
primordial consideration in determining the actual character of a
contract.[27] In case of doubt, the contemporaneous and subsequent acts of
the parties shall be considered in such determination.[28]
As correctly pointed out by both the Court of Appeals and the trial
court, the evidence shows that private respondent agreed to deposit his
money in the savings account of Sterela specifically for the purpose of
making it appear that said firm had sufficient capitalization for
incorporation, with the promise that the amount shall be returned within
thirty (30) days.[29]Private respondent merely accommodated Doronilla by
lending his money without consideration, as a favor to his good friend
Sanchez. It was however clear to the parties to the transaction that the
money would not be removed from Sterelas savings account and would be
returned to private respondent after thirty (30) days.
Doronillas attempts to return to private respondent the amount
of P200,000.00 which the latter deposited in Sterelas account together with
an additional P12,000.00, allegedly representing interest on the mutuum,
did not convert the transaction from a commodatum into
a mutuum because such was not the intent of the parties and because the
additionalP12,000.00 corresponds to the fruits of the lending of
the P200,000.00. Article 1935 of the Civil Code expressly states that [t]he
bailee in commodatum acquires the use of the thing loaned but not its
fruits. Hence, it was only proper for Doronilla to remit to private respondent
the interest accruing to the latters money deposited with petitioner.
Neither does the Court agree with petitioners contention that it is not
solidarily liable for the return of private respondents money because it was
not privy to the transaction between Doronilla and private respondent. The
nature of said transaction, that is, whether it is a mutuum or
a commodatum, has no bearing on the question of petitioners liability for
the return of private respondents money because the factual circumstances
of the case clearly show that petitioner, through its employee Mr. Atienza,
was partly responsible for the loss of private respondents money and is
liable for its restitution.
 Petitioners rules for savings deposits written on the passbook it issued
Mrs. Vives on behalf of Sterela for Savings Account No. 10-1567 expressly
states that
2. Deposits and withdrawals must be made by the depositor personally or
upon his written authority duly authenticated, and neither a deposit nor a
withdrawal will be permitted except upon the production of the depositor
savings bank book in which will be entered by the Bank the amount
deposited or withdrawn.[30]
Said rule notwithstanding, Doronilla was permitted by petitioner,
through Atienza, the Assistant Branch Manager for the Buendia Branch of
petitioner, to withdraw therefrom even without presenting the passbook
(which Atienza very well knew was in the possession of Mrs. Vives), not just
once, but several times. Both the Court of Appeals and the trial court found
that Atienza allowed said withdrawals because he was party to
Doronillas scheme of defrauding private respondent:
XXX
But the scheme could not have been executed successfully without the
knowledge, help and cooperation of Rufo Atienza, assistant manager and
cashier of the Makati (Buendia) branch of the defendant bank.Indeed, the
evidence indicates that Atienza had not only facilitated the commission of
the fraud but he likewise helped in devising the means by which it can be
done in such manner as to make it appear that the transaction was in
accordance with banking procedure.
To begin with, the deposit was made in defendants Buendia branch precisely
because Atienza was a key officer therein. The records show that plaintiff
had suggested that the P200,000.00 be deposited in his bank, the Manila
Banking Corporation, but Doronilla and Dumagpi insisted that it must be in
defendants branch in Makati for it will be easier for them to get a
certification. In fact before he was introduced toplaintiff, Doronilla had
already prepared a letter addressed to the Buendia branch manager
authorizing Angeles B. Sanchez and company to open a savings account for
Sterela in the amount of P200,000.00, as per coordination with Mr. Rufo
37
Atienza, Assistant Manager of the Bank x x x (Exh. 1). This is a clear
manifestation that the other defendants had been in consultation with
Atienza from the inception of the scheme. Significantly, there were
testimonies and admission that Atienza is the brother-in-law of a certain
Romeo Mirasol, a friend and business associate of Doronilla.
Then there is the matter of the ownership of the fund. Because of the
coordination between Doronilla and Atienza, the latter knew before hand
that the money deposited did not belong to Doronilla nor to Sterela. Aside
from such foreknowledge, he was explicitly told by Inocencia Vives that the
money belonged to her and her husband and the deposit was merely to
accommodate Doronilla. Atienza even declared that the money came from
Mrs. Vives.
Although the savings account was in the name of Sterela, the bank records
disclose that the only ones empowered to withdraw the same were
Inocencia Vives and Angeles B. Sanchez. In the signature card pertaining to
this account (Exh. J), the authorized signatories were Inocencia Vives &/or
Angeles B. Sanchez. Atienza stated that it is the usual banking procedure
that withdrawals of savings deposits could only be made by persons whose
authorized signatures are in the signature cards on file with the bank. He,
however, said that this procedure was not followed here because Sterela
was owned by Doronilla. He explained that Doronilla had the full authority
to withdraw by virtue of such ownership. The Court is not inclined to agree
with Atienza. In the first place, he was all the time aware that the money
came from Vives and did not belong to Sterela. He was also told by Mrs.
Vives that they were only accommodating Doronilla so that a certification
can be issued to the effect that Sterela had a deposit of so much amount to
be sued in the incorporation of the firm. In the second place, the signature
of Doronilla was not authorized in so far as that account is concerned
inasmuch as he had not signed the signature card provided by the bank
whenever a deposit is opened. In the third place, neither Mrs. Vives nor
Sanchez had given Doronilla the authority to withdraw.
Moreover, the transfer of fund was done without the passbook having been
presented. It is an accepted practice that whenever a withdrawal is made in
a savings deposit, the bank requires the presentation of the passbook. In
this case, such recognized practice was dispensed with. The transfer from
the savings account to the current account was without the submission of
the passbook which Atienza had given to Mrs. Vives. Instead, it was made to
appear in a certification signed by Estrella Dumagpi that a duplicate
passbook was issued to Sterela because the original passbook had been
surrendered to the Makati branch in view of a loan accommodation
assigning the savings account (Exh. C). Atienza, who undoubtedly had a hand
in the execution of this certification, was aware that the contents of the
same are not true. He knew that the passbook was in the hands of Mrs. Vives
for he was the one who gave it to her. Besides, as assistant manager of the
branch and the bank official servicing the savings and current accounts in
question, he also was aware that the original passbook was never
surrendered. He was also cognizant that Estrella Dumagpi was not among
those authorized to withdraw so her certification had no effect whatsoever.
The circumstance surrounding the opening of the current account also
demonstrate that Atienzas active participation in the perpetration of the
fraud and deception that caused the loss. The records indicate that this
account was opened three days later after the P200,000.00 was
deposited. In spite of his disclaimer, the Court believes that Atienza was
mindful and posted regarding the opening of the current account
considering that Doronilla was all the while in coordination with him. That it
was he who facilitated the approval of the authority to debit the savings
account to cover any overdrawings in the current account (Exh. 2) is not hard
to comprehend.
Clearly Atienza had committed wrongful acts that had resulted to the loss
subject of this case. x x x.[31]
Under Article 2180 of the Civil Code, employers shall be held primarily
and solidarily liable for damages caused by their employees acting within
the scope of their assigned tasks. To hold the employer liable under this
provision, it must be shown that an employer-employee relationship exists,
and that the employee was acting within the scope of his assigned task when
the act complained of was committed.[32] Case law in the United States of
America has it that a corporation that entrusts a general duty to its
employee is responsible to the injured party for damages flowing from the
38
employees wrongful act done in the course of his general authority, even
though in doing such act, the employee may have failed in its duty to the
employer and disobeyed the latters instructions.[33]
There is no dispute that Atienza was an employee of
petitioner. Furthermore, petitioner did not deny that Atienza was acting
within the scope of his authority as Assistant Branch Manager when he
assisted Doronilla in withdrawing funds from Sterelas Savings Account No.
10-1567, in which account private respondents money was deposited, and
in transferring the money withdrawn to Sterelas Current Account with
petitioner. Atienzas acts of helping Doronilla, a customer of the petitioner,
were obviously done in furtherance of petitioners interests[34]even though
in the process, Atienza violated some of petitioners rules such as those
stipulated in its savings account passbook.[35] It was established that the
transfer of funds from Sterelas savings account to its current account could
not have been accomplished by Doronilla without the invaluable assistance
of Atienza, and that it was their connivance which was the cause of private
respondents loss.
The foregoing shows that the Court of Appeals correctly held that
under Article 2180 of the Civil Code, petitioner is liable for private
respondents loss and is solidarily liable with Doronilla and Dumagpi for the
return of the P200,000.00 since it is clear that petitioner failed to prove that
it exercised due diligence to prevent the unauthorized withdrawals from
Sterelas savings account, and that it was not negligent in the selection and
supervision of Atienza. Accordingly, no error was committed by the
appellate court in the award of actual, moral and exemplary damages,
attorneys fees and costs of suit to private respondent.
WHEREFORE, the petition is hereby DENIED. The assailed Decision and
Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
GARCIA v THIO
Assailed in this petition for review on certiorari[1] are the June 19,
2002 decision[2] and August 20, 2002 resolution[3] of the Court of Appeals
(CA) in CA-G.R. CV No. 56577 which set aside the February 28, 1997 decision
of the Regional Trial Court (RTC) of Makati City, Branch 58.
Sometime in February 1995, respondent Rica Marie S. Thio
received from petitioner Carolyn M. Garcia a crossed
check[4] dated February 24, 1995 in the amount of US$100,000 payable to
the order of a certain Marilou Santiago.[5] Thereafter, petitioner received
from respondent every month (specifically, on March 24, April 26, June 26
and July 26, all in 1995) the amount of US$3,000[6] and P76,500[7] on July
26,[8] August 26, September 26 and October 26, 1995.
In June 1995, respondent received from petitioner another crossed
check[9] dated June 29, 1995 in the amount of P500,000, also payable to the
order of Marilou Santiago.[10] Consequently, petitioner received from
respondent the amount of P20,000 every month on August 5, September 5,
October 5 and November 5, 1995.[11]
Respondent denied that she contracted the two loans with
petitioner and countered that it was Marilou Santiago to whom petitioner
lent the money. She claimed she was merely asked by petitioner to give the
crossed checks to Santiago.[17] She issued the checks for P76,000
and P20,000 not as payment of interest but to accommodate petitioners
request that respondent use her own checks instead of Santiagos.[18]
In a decision dated February 28, 1997, the RTC ruled in favor of
petitioner.[19] It found that respondent borrowed from petitioner the
amounts of US$100,000 with monthly interest of 3% and P500,000 at a
monthly interest of 4%:[20]
WHEREFORE, finding preponderance of evidence
to sustain the instant complaint, judgment is hereby
rendered in favor of [petitioner], sentencing [respondent]
to pay the former the amount of:

According to petitioner, respondent failed to pay the principal 1. [US$100,000.00] or its

amounts of the loans (US$100,000 and P500,000) when they fell due. Thus, peso equivalent with interest thereon at 3% per month
on February 22, 1996, petitioner filed a complaint for sum of money and from October 26, 1995 until fully paid;
damages in the RTC of Makati City, Branch 58 against respondent, seeking
to collect the sums of US$100,000, with interest thereon at 3% a month 2. P500,000.00 with
from October 26, 1995 and P500,000, with interest thereon at 4% a month interest thereon at 4% per month from November 5,
from November 5, 1995, plus attorneys fees and actual damages.[12] 1995 until fully paid.

Petitioner alleged that on February 24, 1995, respondent 3. P100,000.00 as and for
borrowed from her the amount of US$100,000 with interest thereon at the attorneys fees; and
rate of 3% per month, which loan would mature on October 26, 1995.[13] The 4. P50,000.00 as and for
amount of this loan was covered by the first check. On June 29, 1995, actual damages.
respondent again borrowed the amount of P500,000 at an agreed monthly
interest of 4%, the maturity date of which was on November 5, 1995.[14] The For lack of merit, [respondents] counterclaim is
amount of this loan was covered by the second check. For both loans, no perforce dismissed.
promissory note was executed since petitioner and respondent were close
friends at the time.[15] Respondent paid the stipulated monthly interest for With costs against [respondent].
both loans but on their maturity dates, she failed to pay the principal
amounts despite repeated demands.[16] IT IS SO ORDERED.[21]

39
 On appeal, the CA reversed the decision of the RTC and ruled that
there was no contract of loan between the parties:
A perusal of the record of the case shows that
[petitioner] failed to substantiate her claim that
[respondent] indeed borrowed money from her. There is
nothing in the record that shows that [respondent]
received money from [petitioner]. What is evident is the
fact that [respondent] received a MetroBank [crossed]
check dated February 24, 1995 in the sum of
US$100,000.00, payable to the order of Marilou Santiago
and a CityTrust [crossed] check dated June 29, 1995 in the
amount of P500,000.00, again payable to the order of
Marilou Santiago, both of which were issued by
[petitioner]. The checks received by [respondent], being
crossed, may not be encashed but only deposited in the
bank by the payee thereof, that is, by Marilou Santiago
herself.
It must be noted that crossing a check has the
following effects: (a) the check may not be encashed but
only deposited in the bank; (b) the check may be
negotiated only onceto one who has an account with the
bank; (c) and the act of crossing the check serves as
warning to the holder that the check has been issued for
a definite purpose so that he must inquire if he has
received the check pursuant to that purpose, otherwise,
he is not a holder in due course.
Consequently, the receipt of the [crossed] check
by [respondent] is not the issuance and delivery to the
payee in contemplation of law since the latter is not the
person who could take the checks as a holder, i.e., as a
payee or indorsee thereof, with intent to transfer title
thereto. Neither could she be deemed as an agent of
Marilou Santiago with respect to the checks because she
was merely facilitating the transactions between the
former and [petitioner].
40
With the foregoing circumstances, it may be
fairly inferred that there were really no contracts of loan
that existed between the parties. x x x (emphasis
supplied)[22]
Hence this petition.[23]
As a rule, only questions of law may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court. However, this case
falls under one of the exceptions, i.e., when the factual findings of the CA
(which held that there were no contracts of loan between petitioner and
respondent) and the RTC (which held that there werecontracts of loan) are
contradictory.[24]
The petition is impressed with merit.
A loan is a real contract, not consensual, and as such is perfected
only upon the delivery of the object of the contract.[25] This is evident in Art.
1934 of the Civil Code which provides:
An accepted promise to deliver something by
way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall
not be perfected until the delivery of the object of the
contract. (Emphasis supplied)
Upon delivery of the object of the contract of loan (in this case the money
received by the debtor when the checks were encashed) the debtor acquires
ownership of such money or loan proceeds and is bound to pay the creditor
an equal amount.[26]
It is undisputed that the checks were delivered to
respondent. However, these checks were crossed and payable not to the
order of respondent but to the order of a certain Marilou Santiago. Thus the
main question to be answered is: who borrowed money from petitioner
respondent or Santiago?
Petitioner insists that it was upon respondents instruction that
both checks were made payable to Santiago.[27] She maintains that it was
also upon respondents instruction that both checks were delivered to her
(respondent) so that she could, in turn, deliver the same
to Santiago.[28] Furthermore, she argues that once respondent received the
checks, the latter had possession and control of them such that she had the
choice to either forward them to Santiago (who was already her debtor), to
retain them or to return them to petitioner.[29]
We agree with petitioner. Delivery is the act by which the res or
substance thereof is placed within the actual or constructive possession or
control of another.[30] Although respondent did not physically receive the
proceeds of the checks, these instruments were placed in her control and
possession under an arrangement whereby she actually re-lent the amounts
to Santiago.
Several factors support this conclusion.
First, respondent admitted that petitioner did not personally
know Santiago.[31] It was highly improbable that petitioner would grant two
loans to a complete stranger without requiring as much as promissory notes
or any written acknowledgment of the debt considering that the amounts
involved were quite big. Respondent, on the other hand, already had
transactions with Santiago at that time.[32]
Second, Leticia Ruiz, a friend of both petitioner and respondent
(and whose name appeared in both parties list of witnesses) testified that
respondents plan was for petitioner to lend her money at a monthly interest
rate of 3%, after which respondent would lend the same amount
to Santiago at a higher rate of 5% and realize a profit of 2%.[33] This explained
why respondent instructed petitioner to make the checks payable
to Santiago. Respondent has not shown any reason why Ruiz testimony
should not be believed.
Third, for the US$100,000 loan, respondent admitted issuing her
own checks in the amount of P76,000 each (peso equivalent of US$3,000)
for eight months to cover the monthly interest. For the P500,000 loan, she
also issued her own checks in the amount of P20,000 each for four
months.[34] According to respondent, she merely accommodated petitioners
request for her to issue her own checks to cover the interest payments since
petitioner was not personally acquainted with Santiago. [35] She claimed,
however, that Santiago would replace the checks with cash. [36] Her
explanation is simply incredible. It is difficult to believe that respondent
41
would put herself in a position where she would be compelled to pay
interest, from her own funds, for loans she allegedly did not contract. We
declared in one case that:
In the assessment of the testimonies of witnesses, this
Court is guided by the rule that for evidence to be
believed, it must not only proceed from the mouth of a
credible witness, but must be credible in itself such as the
common experience of mankind can approve as probable
under the circumstances. We have no test of the truth of
human testimony except its conformity to our knowledge,
observation, and experience. Whatever is repugnant to
these belongs to the miraculous, and is outside of juridical
cognizance.[37]
Fourth, in the petition for insolvency sworn to and filed by
Santiago, it was respondent, not petitioner, who was listed as one of her
(Santiagos) creditors.[38]
Last, respondent inexplicably never presented Santiago as a
witness to corroborate her story.[39] The presumption is that evidence
willfully suppressed would be adverse if produced.[40] Respondent was not
able to overturn this presumption.
We hold that the CA committed reversible error when it ruled that
respondent did not borrow the amounts of US$100,000 and P500,000 from
petitioner. We instead agree with the ruling of the RTC making respondent
liable for the principal amounts of the loans.
We do not, however, agree that respondent is liable for the 3% and
4% monthly interest for the US$100,000 and P500,000 loans
respectively. There was no written proof of the interest payable except for
the verbal agreement that the loans would earn 3% and 4% interest per
month. Article 1956 of the Civil Code provides that [n]o interest shall be due
unless it has been expressly stipulated in writing.
Be that as it may, while there can be no stipulated interest, there
can be legal interest pursuant to Article 2209 of the Civil Code. It is well-
settled that:
 When the obligation is breached, and it consists
in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions
of Article 1169 of the Civil Code.[41]
Hence, respondent is liable for the payment of legal
interest per annum to be computed from November 21, 1995, the date
when she received petitioners demand letter.[42]From the finality of the
decision until it is fully paid, the amount due shall earn interest at
12% per annum, the interim period being deemed equivalent to a
forbearance of credit.[43]
The award of actual damages in the amount of P50,000
and P100,000 attorneys fees is deleted since the RTC decision did not
explain the factual bases for these damages.
WHEREFORE, the petition is hereby GRANTED and the June 19,
2002 decision and August 20, 2002 resolution of the Court of Appeals in CA-
G.R. CV No. 56577 areREVERSED and SET ASIDE. The February 28, 1997
decision of the Regional Trial Court in Civil Case No. 96-266
is AFFIRMED with the MODIFICATION that respondent is directed to pay
petitioner the amounts of US$100,000 and P500,000
12% per annum interest from November 21, 1995 until the finality of the
decision. The total amount due as of the date of finality will earn interest of
12% per annum until fully paid. The award of actual damages and attorneys
fees is deleted.
SO ORDERED.
PAJUYO v CA
The Case
Before us is a petition for review[1] of the 21 June 2000 Decision[2] and
14 December 2000 Resolution of the Court of Appeals in CA-G.R. SP No.
43129. The Court of Appeals set aside the 11 November 1996 decision [3] of
the Regional Trial Court of Quezon City, Branch 81,[4] affirming the 15
December 1995 decision[5] of the Metropolitan Trial Court of Quezon City,
Branch 31.[6]
The Antecedents
In June 1979, petitioner Colito T. Pajuyo (Pajuyo) paid P400 to a certain
Pedro Perez for the rights over a 250-square meter lot in Barrio Payatas,
Quezon City. Pajuyo then constructed a house made of light materials on
the lot. Pajuyo and his family lived in the house from 1979 to 7 December
1985.
On 8 December 1985, Pajuyo and private respondent Eddie Guevarra
(Guevarra) executed a Kasunduan or agreement. Pajuyo, as owner of the
house, allowed Guevarra to live in the house for free provided Guevarra
would maintain the cleanliness and orderliness of the house. Guevarra
promised that he would voluntarily vacate the premises on Pajuyos demand.
In September 1994, Pajuyo informed Guevarra of his need of the house
and demanded that Guevarra vacate the house. Guevarra refused.
at
Pajuyo filed an ejectment case against Guevarra with the Metropolitan
Trial Court of Quezon City, Branch 31 (MTC).
In his Answer, Guevarra claimed that Pajuyo had no valid title or right
of possession over the lot where the house stands because the lot is within
the 150 hectares set aside by Proclamation No. 137 for socialized housing.
Guevarra pointed out that from December 1985 to September 1994, Pajuyo
did not show up or communicate with him. Guevarra insisted that neither
he nor Pajuyo has valid title to the lot.
42
 On 15 December 1995, the MTC rendered its decision in favor of
Pajuyo. The dispositive portion of the MTC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered for the
plaintiff and against defendant, ordering the latter to:
A) vacate the house and lot occupied by the defendant or any
other person or persons claiming any right under him;
B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00)
monthly as reasonable compensation for the use of the
premises starting from the last demand;
C) pay plaintiff the sum of P3,000.00 as and by way of attorneys
fees; and
D) pay the cost of suit.
SO ORDERED.[7]
Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon
City, Branch 81 (RTC).
On 11 November 1996, the RTC affirmed the MTC decision. The
dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, the Court finds no reversible error in the
decision appealed from, being in accord with the law and evidence
presented, and the same is hereby affirmed en toto.
SO ORDERED.[8]
Guevarra received the RTC decision on 29 November 1996. Guevarra
had only until 14 December 1996 to file his appeal with the Court of Appeals.
Instead of filing his appeal with the Court of Appeals, Guevarra filed with the
Supreme Court a Motion for Extension of Time to File Appeal by Certiorari
Based on Rule 42 (motion for extension). Guevarra theorized that his appeal
raised pure questions of law. The Receiving Clerk of the Supreme Court
43
received the motion for extension on 13 December 1996 or one day before
the right to appeal expired.
On 3 January 1997, Guevarra filed his petition for review with the
Supreme Court.
On 8 January 1997, the First Division of the Supreme Court issued a
Resolution[9] referring the motion for extension to the Court of Appeals
which has concurrent jurisdiction over the case. The case presented no
special and important matter for the Supreme Court to take cognizance of
at the first instance.
On 28 January 1997, the Thirteenth Division of the Court of Appeals
issued a Resolution[10] granting the motion for extension conditioned on the
timeliness of the filing of the motion.
On 27 February 1997, the Court of Appeals ordered Pajuyo to
comment on Guevaras petition for review. On 11 April 1997, Pajuyo filed his
Comment.
On 21 June 2000, the Court of Appeals issued its decision reversing the
RTC decision. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the assailed Decision of the court a
quo in Civil Case No. Q-96-26943 is REVERSED and SET ASIDE; and it is
hereby declared that the ejectment case filed against defendant-appellant
is without factual and legal basis.
SO ORDERED.[11]
Pajuyo filed a motion for reconsideration of the decision. Pajuyo
pointed out that the Court of Appeals should have dismissed outright
Guevarras petition for review because it was filed out of time. Moreover, it
was Guevarras counsel and not Guevarra who signed the certification
against forum-shopping.
On 14 December 2000, the Court of Appeals issued a resolution
denying Pajuyos motion for reconsideration. The dispositive portion of the
resolution reads:
WHEREFORE, for lack of merit, the motion for reconsideration is
hereby DENIED. No costs.
SO ORDERED.[12]
The Ruling of the MTC
The MTC ruled that the subject of the agreement between Pajuyo and
Guevarra is the house and not the lot. Pajuyo is the owner of the house, and
he allowed Guevarra to use the house only by tolerance. Thus, Guevarras
refusal to vacate the house on Pajuyos demand made Guevarras continued
possession of the house illegal.
The Ruling of the RTC
The RTC upheld the Kasunduan, which established the landlord and
tenant relationship between Pajuyo and Guevarra. The terms of
the Kasunduan bound Guevarra to return possession of the house on
demand.
The RTC rejected Guevarras claim of a better right under Proclamation
No. 137, the Revised National Government Center Housing Project Code of
Policies and other pertinent laws. In an ejectment suit, the RTC has no power
to decide Guevarras rights under these laws. The RTC declared that in an
ejectment case, the only issue for resolution is material or physical
possession, not ownership.
The Ruling of the Court of Appeals
The Court of Appeals declared that Pajuyo and Guevarra are squatters.
Pajuyo and Guevarra illegally occupied the contested lot which the
government owned.
44
Perez, the person from whom Pajuyo acquired his rights, was also a
squatter. Perez had no right or title over the lot because it is public land. The
assignment of rights between Perez and Pajuyo, and
the Kasunduan between Pajuyo and Guevarra, did not have any legal
effect. Pajuyo and Guevarra are in pari delicto or in equal fault. The court
will leave them where they are.
The Court of Appeals reversed the MTC and RTC rulings, which held
that the Kasunduan between Pajuyo and Guevarra created a legal tie akin to
that of a landlord and tenant relationship. The Court of Appeals ruled that
the Kasunduan is not a lease contract but a commodatum because the
agreement is not for a price certain.
Since Pajuyo admitted that he resurfaced only in 1994 to claim the
property, the appellate court held that Guevarra has a better right over the
property under Proclamation No. 137.President Corazon C. Aquino
(President Aquino) issued Proclamation No. 137 on 7 September 1987. At
that time, Guevarra was in physical possession of the property. Under
Article VI of the Code of Policies Beneficiary Selection and Disposition of
Homelots and Structures in the National Housing Project (the Code), the
actual occupant or caretaker of the lot shall have first priority as beneficiary
of the project. The Court of Appeals concluded that Guevarra is first in the
hierarchy of priority.
In denying Pajuyos motion for reconsideration, the appellate court
debunked Pajuyos claim that Guevarra filed his motion for extension beyond
the period to appeal.
The Court of Appeals pointed out that Guevarras motion for extension
filed before the Supreme Court was stamped 13 December 1996 at 4:09 PM
by the Supreme Courts Receiving Clerk. The Court of Appeals concluded that
the motion for extension bore a date, contrary to Pajuyos claim that the
motion for extension was undated. Guevarra filed the motion for extension
on time on 13 December 1996 since he filed the motion one day before the
expiration of the reglementary period on 14 December 1996. Thus, the
motion for extension properly complied with the condition imposed by the
Court of Appeals in its 28 January 1997 Resolution. The Court of Appeals
explained that the thirty-day extension to file the petition for review was
deemed granted because of such compliance.
 The Court of Appeals rejected Pajuyos argument that the appellate
court should have dismissed the petition for review because it was
Guevarras counsel and not Guevarra who signed the certification against
forum-shopping. The Court of Appeals pointed out that Pajuyo did not raise
this issue in his Comment. The Court of Appeals held that Pajuyo could not
now seek the dismissal of the case after he had extensively argued on the
merits of the case. This technicality, the appellate court opined, was clearly
an afterthought.
The Issues
Pajuyo raises the following issues for resolution:
WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION:
1) in GRANTING, instead of denying, Private
Respondents Motion for an Extension of thirty
days to file petition for review at the time when
there was no more period to extend as the
decision of the Regional Trial Court had already
become final and executory.
2) in giving due course, instead of dismissing, private
respondents Petition for Review even though the
certification against forum-shopping was signed
only by counsel instead of by petitioner himself.
3) in ruling that the Kasunduan voluntarily entered
into by the parties was in fact a commodatum,
instead of a Contract of Lease as found by the
Metropolitan Trial Court and in holding that the
ejectment case filed against defendant-appellant
is without legal and factual basis.
4) in reversing and setting aside the Decision of the
Regional Trial Court in Civil Case No. Q-96-26943
45
and in holding that the parties are in pari delicto
being both squatters, therefore, illegal occupants
of the contested parcel of land.
5) in deciding the unlawful detainer case based on the
so-called Code of Policies of the National
Government Center Housing Project instead of
deciding the same under the Kasunduan
voluntarily executed by the parties, the terms and
conditions of which are the laws between
themselves.[13]
The Ruling of the Court
The procedural issues Pajuyo is raising are baseless. However, we find
merit in the substantive issues Pajuyo is submitting for resolution.
Procedural Issues
Pajuyo insists that the Court of Appeals should have dismissed outright
Guevarras petition for review because the RTC decision had already become
final and executory when the appellate court acted on Guevarras motion for
extension to file the petition. Pajuyo points out that Guevarra had only one
day before the expiry of his period to appeal the RTC decision.Instead of
filing the petition for review with the Court of Appeals, Guevarra filed with
this Court an undated motion for extension of 30 days to file a petition for
review. This Court merely referred the motion to the Court of
Appeals. Pajuyo believes that the filing of the motion for extension with this
Court did not toll the running of the period to perfect the appeal. Hence,
when the Court of Appeals received the motion, the period to appeal had
already expired.
We are not persuaded.
 Decisions of the regional trial courts in the exercise of their appellate
jurisdiction are appealable to the Court of Appeals by petition for review in
cases involving questions of fact or mixed questions of fact and
law.[14] Decisions of the regional trial courts involving pure questions of law
are appealable directly to this Court by petition for review. [15] These modes
of appeal are now embodied in Section 2, Rule 41 of the 1997 Rules of Civil
Procedure.
Guevarra believed that his appeal of the RTC decision involved only
questions of law. Guevarra thus filed his motion for extension to file petition
for review before this Court on 14 December 1996. On 3 January 1997,
Guevarra then filed his petition for review with this Court. A perusal of
Guevarras petition for review gives the impression that the issues he raised
were pure questions of law. There is a question of law when the doubt or
difference is on what the law is on a certain state of facts. [16] There is a
question of fact when the doubt or difference is on the truth or falsity of the
facts alleged.[17]
In his petition for review before this Court, Guevarra no longer
disputed the facts. Guevarras petition for review raised these questions: (1)
Do ejectment cases pertain only to possession of a structure, and not the lot
on which the structure stands? (2) Does a suit by a squatter against a fellow
squatter constitute a valid case for ejectment? (3) Should a Presidential
Proclamation governing the lot on which a squatters structure stands be
considered in an ejectment suit filed by the owner of the structure?
These questions call for the evaluation of the rights of the parties
under the law on ejectment and the Presidential Proclamation. At first
glance, the questions Guevarra raised appeared purely legal. However,
some factual questions still have to be resolved because they have a bearing
on the legal questions raised in the petition for review. These factual
matters refer to the metes and bounds of the disputed property and the
application of Guevarra as beneficiary of Proclamation No. 137.
The Court of Appeals has the power to grant an extension of time to
file a petition for review. In Lacsamana v. Second Special Cases Division of
the Intermediate Appellate Court,[18] we declared that the Court of Appeals
could grant extension of time in appeals by petition for review. In Liboro v.
Court of Appeals,[19] we clarified that the prohibition against granting an
46
extension of time applies only in a case where ordinary appeal is perfected
by a mere notice of appeal. The prohibition does not apply in a petition for
review where the pleading needs verification. A petition for review, unlike
an ordinary appeal, requires preparation and research to present a
persuasive position.[20] The drafting of the petition for review entails more
time and effort than filing a notice of appeal.[21] Hence, the Court of Appeals
may allow an extension of time to file a petition for review.
In the more recent case of Commissioner of Internal Revenue v. Court
of Appeals,[22] we held that Liboros clarification of Lacsamana is consistent
with the Revised Internal Rules of the Court of Appeals and Supreme Court
Circular No. 1-91. They all allow an extension of time for filing petitions for
review with the Court of Appeals. The extension, however, should be limited
to only fifteen days save in exceptionally meritorious cases where the Court
of Appeals may grant a longer period.
A judgment becomes final and executory by operation of law. Finality
of judgment becomes a fact on the lapse of the reglementary period to
appeal if no appeal is perfected.[23] The RTC decision could not have gained
finality because the Court of Appeals granted the 30-day extension to
Guevarra.
The Court of Appeals did not commit grave abuse of discretion when it
approved Guevarras motion for extension. The Court of Appeals gave due
course to the motion for extension because it complied with the condition
set by the appellate court in its resolution dated 28 January 1997. The
resolution stated that the Court of Appeals would only give due course to
the motion for extension if filed on time. The motion for extension met this
condition.
The material dates to consider in determining the timeliness of the
filing of the motion for extension are (1) the date of receipt of the judgment
or final order or resolution subject of the petition, and (2) the date of filing
of the motion for extension.[24] It is the date of the filing of the motion or
pleading, and not the date of execution, that determines the timeliness of
the filing of that motion or pleading. Thus, even if the motion for extension
bears no date, the date of filing stamped on it is the reckoning point for
determining the timeliness of its filing.
 Guevarra had until 14 December 1996 to file an appeal from the RTC
decision. Guevarra filed his motion for extension before this Court on 13
December 1996, the date stamped by this Courts Receiving Clerk on the
motion for extension. Clearly, Guevarra filed the motion for extension
exactly one day before the lapse of the reglementary period to appeal.
Assuming that the Court of Appeals should have dismissed Guevarras
appeal on technical grounds, Pajuyo did not ask the appellate court to deny
the motion for extension and dismiss the petition for review at the earliest
opportunity. Instead, Pajuyo vigorously discussed the merits of the case. It
was only when the Court of Appeals ruled in Guevarras favor that Pajuyo
raised the procedural issues against Guevarras petition for review.
A party who, after voluntarily submitting a dispute for resolution,
receives an adverse decision on the merits, is estopped from attacking the
jurisdiction of the court.[25] Estoppel sets in not because the judgment of the
court is a valid and conclusive adjudication, but because the practice of
attacking the courts jurisdiction after voluntarily submitting to it is against
public policy.[26]
In his Comment before the Court of Appeals, Pajuyo also failed to
discuss Guevarras failure to sign the certification against forum
shopping. Instead, Pajuyo harped on Guevarras counsel signing the
verification, claiming that the counsels verification is insufficient since it is
based only on mere information.
A partys failure to sign the certification against forum shopping is
different from the partys failure to sign personally the verification. The
certificate of non-forum shopping must be signed by the party, and not by
counsel.[27] The certification of counsel renders the petition defective.[28]
On the other hand, the requirement on verification of a pleading is a
formal and not a jurisdictional requisite.[29] It is intended simply to secure an
assurance that what are alleged in the pleading are true and correct and not
the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. [30] The party need not sign the verification. A
partys representative, lawyer or any person who personally knows the truth
of the facts alleged in the pleading may sign the verification. [31]
47
We agree with the Court of Appeals that the issue on the certificate
against forum shopping was merely an afterthought. Pajuyo did not call the
Court of Appeals attention to this defect at the early stage of the
proceedings. Pajuyo raised this procedural issue too late in the proceedings.
Absence of Title over the Disputed Property will not Divest the Courts of
Jurisdiction to Resolve the Issue of Possession
Settled is the rule that the defendants claim of ownership of the
disputed property will not divest the inferior court of its jurisdiction over the
ejectment case.[32] Even if the pleadings raise the issue of ownership, the
court may pass on such issue to determine only the question of possession,
especially if the ownership is inseparably linked with the possession.[33] The
adjudication on the issue of ownership is only provisional and will not bar
an action between the same parties involving title to the land. [34] This
doctrine is a necessary consequence of the nature of the two summary
actions of ejectment, forcible entry and unlawful detainer, where the only
issue for adjudication is the physical or material possession over the real
property.[35]
In this case, what Guevarra raised before the courts was that he and
Pajuyo are not the owners of the contested property and that they are mere
squatters. Will the defense that the parties to the ejectment case are not
the owners of the disputed lot allow the courts to renounce their jurisdiction
over the case? The Court of Appeals believed so and held that it would just
leave the parties where they are since they are in pari delicto.
We do not agree with the Court of Appeals.
Ownership or the right to possess arising from ownership is not at issue
in an action for recovery of possession. The parties cannot present evidence
to prove ownership or right to legal possession except to prove the nature
of the possession when necessary to resolve the issue of physical
possession.[36] The same is true when the defendant asserts the absence of
title over the property. The absence of title over the contested lot is not a
ground for the courts to withhold relief from the parties in an ejectment
case.
 The only question that the courts must resolve in ejectment
proceedings is - who is entitled to the physical possession of the premises,
that is, to the possession de facto and not to the possession de jure.[37] It
does not even matter if a partys title to the property is questionable, [38] or
when both parties intruded into public land and their applications to own
the land have yet to be approved by the proper government
agency.[39] Regardless of the actual condition of the title to the property, the
party in peaceable quiet possession shall not be thrown out by a strong
hand, violence or terror.[40] Neither is the unlawful withholding of property
allowed. Courts will always uphold respect for prior possession.
Thus, a party who can prove prior possession can recover such
possession even against the owner himself.[41] Whatever may be the
character of his possession, if he has in his favor prior possession in time, he
has the security that entitles him to remain on the property until a person
with a better right lawfully ejects him.[42] To repeat, the only issue that the
court has to settle in an ejectment suit is the right to physical possession.
In Pitargue v. Sorilla,[43] the government owned the land in
dispute. The government did not authorize either the plaintiff or the
defendant in the case of forcible entry case to occupy the land. The plaintiff
had prior possession and had already introduced improvements on the
public land. The plaintiff had a pending application for the land with the
Bureau of Lands when the defendant ousted him from possession. The
plaintiff filed the action of forcible entry against the defendant. The
government was not a party in the case of forcible entry.
The defendant questioned the jurisdiction of the courts to settle the
issue of possession because while the application of the plaintiff was still
pending, title remained with the government, and the Bureau of Public
Lands had jurisdiction over the case. We disagreed with the defendant. We
ruled that courts have jurisdiction to entertain ejectment suits even before
the resolution of the application. The plaintiff, by priority of his application
and of his entry, acquired prior physical possession over the public land
applied for as against other private claimants. That prior physical possession
enjoys legal protection against other private claimants because only a court
can take away such physical possession in an ejectment case.
48
While the Court did not brand the plaintiff and the defendant
in Pitargue[44] as squatters, strictly speaking, their entry into the disputed
land was illegal. Both the plaintiff and defendant entered the public land
without the owners permission. Title to the land remained with the
government because it had not awarded to anyone ownership of the
contested public land. Both the plaintiff and the defendant were in effect
squatting on government property. Yet, we upheld the courts jurisdiction to
resolve the issue of possession even if the plaintiff and the defendant in the
ejectment case did not have any title over the contested land.
Courts must not abdicate their jurisdiction to resolve the issue of
physical possession because of the public need to preserve the basic policy
behind the summary actions of forcible entry and unlawful detainer. The
underlying philosophy behind ejectment suits is to prevent breach of the
peace and criminal disorder and to compel the party out of possession to
respect and resort to the law alone to obtain what he claims is his. [45] The
party deprived of possession must not take the law into his own
hands.[46] Ejectment proceedings are summary in nature so the authorities
can settle speedily actions to recover possession because of the overriding
need to quell social disturbances.[47]
We further explained in Pitargue the greater interest that is at stake in
actions for recovery of possession. We made the following pronouncements
in Pitargue:
The question that is before this Court is: Are courts without jurisdiction to
take cognizance of possessory actions involving these public lands before
final award is made by the Lands Department, and before title is given any
of the conflicting claimants? It is one of utmost importance, as there are
public lands everywhere and there are thousands of settlers, especially in
newly opened regions. It also involves a matter of policy, as it requires the
determination of the respective authorities and functions of two coordinate
branches of the Government in connection with public land conflicts.
Our problem is made simple by the fact that under the Civil Code, either in
the old, which was in force in this country before the American occupation,
or in the new, we have a possessory action, the aim and purpose of which is
the recovery of the physical possession of real property, irrespective of the
question as to who has the title thereto. Under the Spanish Civil Code we
had the accion interdictal, a summary proceeding which could be brought
within one year from dispossession (Roman Catholic Bishop of Cebu vs.
Mangaron, 6 Phil. 286, 291); and as early as October 1, 1901, upon the
enactment of the Code of Civil Procedure (Act No. 190 of the Philippine
Commission) we implanted the common law action of forcible entry (section
80 of Act No. 190), the object of which has been stated by this Court to be to
prevent breaches of the peace and criminal disorder which would ensue
from the withdrawal of the remedy, and the reasonable hope such
withdrawal would create that some advantage must accrue to those
persons who, believing themselves entitled to the possession of property,
resort to force to gain possession rather than to some appropriate action
in the court to assert their claims. (Supia and Batioco vs. Quintero and
Ayala, 59 Phil. 312, 314.) So before the enactment of the first Public Land
Act (Act No. 926) the action of forcible entry was already available in the
courts of the country. So the question to be resolved is, Did the Legislature
intend, when it vested the power and authority to alienate and dispose of
the public lands in the Lands Department, to exclude the courts from
entertaining the possessory action of forcible entry between rival claimants
or occupants of any land before award thereof to any of the parties? Did
Congress intend that the lands applied for, or all public lands for that matter,
be removed from the jurisdiction of the judicial Branch of the Government,
so that any troubles arising therefrom, or any breaches of the peace or
disorders caused by rival claimants, could be inquired into only by the Lands
Department to the exclusion of the courts? The answer to this question
seems to us evident. The Lands Department does not have the means to
police public lands; neither does it have the means to prevent disorders
arising therefrom, or contain breaches of the peace among settlers; or to
pass promptly upon conflicts of possession. Then its power is clearly limited
to disposition and alienation, and while it may decide conflicts of
possession in order to make proper award, the settlement of conflicts of
possession which is recognized in the court herein has another ultimate
purpose, i.e., the protection of actual possessors and occupants with a
view to the prevention of breaches of the peace. The power to dispose and
alienate could not have been intended to include the power to prevent or
settle disorders or breaches of the peace among rival settlers or claimants
prior to the final award. As to this, therefore, the corresponding branches
of the Government must continue to exercise power and jurisdiction within
49
the limits of their respective functions. The vesting of the Lands
Department with authority to administer, dispose, and alienate public
lands, therefore, must not be understood as depriving the other branches
of the Government of the exercise of the respective functions or powers
thereon, such as the authority to stop disorders and quell breaches of the
peace by the police, the authority on the part of the courts to take
jurisdiction over possessory actions arising therefrom not involving,
directly or indirectly, alienation and disposition.
Our attention has been called to a principle enunciated in American courts
to the effect that courts have no jurisdiction to determine the rights of
claimants to public lands, and that until the disposition of the land has
passed from the control of the Federal Government, the courts will not
interfere with the administration of matters concerning the same. (50 C. J.
1093-1094.) We have no quarrel with this principle. The determination of
the respective rights of rival claimants to public lands is different from the
determination of who has the actual physical possession or occupation with
a view to protecting the same and preventing disorder and breaches of the
peace. A judgment of the court ordering restitution of the possession of a
parcel of land to the actual occupant, who has been deprived thereof by
another through the use of force or in any other illegal manner, can never
be prejudicial interference with the disposition or alienation of public
lands. On the other hand, if courts were deprived of jurisdiction of cases
involving conflicts of possession, that threat of judicial action against
breaches of the peace committed on public lands would be eliminated, and
a state of lawlessness would probably be produced between applicants,
occupants or squatters, where force or might, not right or justice, would
rule.
It must be borne in mind that the action that would be used to solve conflicts
of possession between rivals or conflicting applicants or claimants would be
no other than that of forcible entry. This action, both in England and the
United States and in our jurisdiction, is a summary and expeditious remedy
whereby one in peaceful and quiet possession may recover the possession
of which he has been deprived by a stronger hand, by violence or terror; its
ultimate object being to prevent breach of the peace and criminal disorder.
(Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) The basis of
the remedy is mere possession as a fact, of physical possession, not a legal
possession. (Mediran vs. Villanueva, 37 Phil. 752.) The title or right to
possession is never in issue in an action of forcible entry; as a matter of fact,
evidence thereof is expressly banned, except to prove the nature of the
possession. (Second 4, Rule 72, Rules of Court.) With this nature of the
action in mind, by no stretch of the imagination can conclusion be arrived at
that the use of the remedy in the courts of justice would constitute an
interference with the alienation, disposition, and control of public lands. To
limit ourselves to the case at bar can it be pretended at all that its result
would in any way interfere with the manner of the alienation or disposition
of the land contested? On the contrary, it would facilitate adjudication, for
the question of priority of possession having been decided in a final manner
by the courts, said question need no longer waste the time of the land
officers making the adjudication or award. (Emphasis ours)
The Principle of Pari Delicto is not Applicable to Ejectment Cases
The Court of Appeals erroneously applied the principle of pari
delicto to this case.
Articles 1411 and 1412 of the Civil Code[48] embody the principle of pari
delicto. We explained the principle of pari delicto in these words:
The rule of pari delicto is expressed in the maxims ex dolo malo non eritur
actio and in pari delicto potior est conditio defedentis. The law will not aid
either party to an illegal agreement. It leaves the parties where it finds
them.[49]
The application of the pari delicto principle is not absolute, as there are
exceptions to its application. One of these exceptions is where the
application of the pari delicto rule would violate well-established public
policy.[50]
In Drilon v. Gaurana,[51] we reiterated the basic policy behind the
summary actions of forcible entry and unlawful detainer. We held that:
50
It must be stated that the purpose of an action of forcible entry and detainer
is that, regardless of the actual condition of the title to the property, the
party in peaceable quiet possession shall not be turned out by strong hand,
violence or terror. In affording this remedy of restitution the object of the
statute is to prevent breaches of the peace and criminal disorder which
would ensue from the withdrawal of the remedy, and the reasonable hope
such withdrawal would create that some advantage must accrue to those
persons who, believing themselves entitled to the possession of property,
resort to force to gain possession rather than to some appropriate action in
the courts to assert their claims. This is the philosophy at the foundation of
all these actions of forcible entry and detainer which are designed to compel
the party out of possession to respect and resort to the law alone to obtain
what he claims is his.[52]
Clearly, the application of the principle of pari delicto to a case of
ejectment between squatters is fraught with danger. To shut out relief to
squatters on the ground of pari delicto would openly invite mayhem and
lawlessness. A squatter would oust another squatter from possession of the
lot that the latter had illegally occupied, emboldened by the knowledge that
the courts would leave them where they are. Nothing would then stand in
the way of the ousted squatter from re-claiming his prior possession at all
cost.
Petty warfare over possession of properties is precisely what
ejectment cases or actions for recovery of possession seek to
prevent.[53] Even the owner who has title over the disputed property cannot
take the law into his own hands to regain possession of his property. The
owner must go to court.
Courts must resolve the issue of possession even if the parties to the
ejectment suit are squatters. The determination of priority and superiority
of possession is a serious and urgent matter that cannot be left to the
squatters to decide. To do so would make squatters receive better
treatment under the law. The law restrains property owners from taking the
law into their own hands. However, the principle of pari delicto as applied
by the Court of Appeals would give squatters free rein to dispossess fellow
squatters or violently retake possession of properties usurped from them.
Courts should not leave squatters to their own devices in cases involving
recovery of possession.
Possession is the only Issue for Resolution in an Ejectment Case
The case for review before the Court of Appeals was a simple case of
ejectment. The Court of Appeals refused to rule on the issue of physical
possession. Nevertheless, the appellate court held that the pivotal issue in
this case is who between Pajuyo and Guevarra has the priority right as
beneficiary of the contested land under Proclamation No. 137.[54] According
to the Court of Appeals, Guevarra enjoys preferential right under
Proclamation No. 137 because Article VI of the Code declares that the actual
occupant or caretaker is the one qualified to apply for socialized housing.
The ruling of the Court of Appeals has no factual and legal basis.
First. Guevarra did not present evidence to show that the contested
lot is part of a relocation site under Proclamation No. 137. Proclamation No.
137 laid down the metes and bounds of the land that it declared open for
disposition to bona fide residents.
The records do not show that the contested lot is within the land
specified by Proclamation No. 137. Guevarra had the burden to prove that
the disputed lot is within the coverage of Proclamation No. 137. He failed to
do so.
Second. The Court of Appeals should not have given credence to
Guevarras unsubstantiated claim that he is the beneficiary of Proclamation
No. 137. Guevarra merely alleged that in the survey the project
administrator conducted, he and not Pajuyo appeared as the actual
occupant of the lot.
There is no proof that Guevarra actually availed of the benefits of
Proclamation No. 137. Pajuyo allowed Guevarra to occupy the disputed
property in 1985. President Aquino signed Proclamation No. 137 into law on
11 March 1986. Pajuyo made his earliest demand for Guevarra to vacate the
property in September 1994.
During the time that Guevarra temporarily held the property up to the
time that Proclamation No. 137 allegedly segregated the disputed lot,
Guevarra never applied as beneficiary of Proclamation No. 137. Even when
Guevarra already knew that Pajuyo was reclaiming possession of the
51
property, Guevarra did not take any step to comply with the requirements
of Proclamation No. 137.
Third. Even assuming that the disputed lot is within the coverage of
Proclamation No. 137 and Guevarra has a pending application over the lot,
courts should still assume jurisdiction and resolve the issue of possession.
However, the jurisdiction of the courts would be limited to the issue of
physical possession only.
In Pitargue,[55] we ruled that courts have jurisdiction over possessory
actions involving public land to determine the issue of physical possession.
The determination of the respective rights of rival claimants to public land
is, however, distinct from the determination of who has the actual physical
possession or who has a better right of physical possession. [56] The
administrative disposition and alienation of public lands should be threshed
out in the proper government agency.[57]
The Court of Appeals determination of Pajuyo and Guevarras rights
under Proclamation No. 137 was premature. Pajuyo and Guevarra were at
most merely potential beneficiaries of the law. Courts should not preempt
the decision of the administrative agency mandated by law to determine the
qualifications of applicants for the acquisition of public lands. Instead,
courts should expeditiously resolve the issue of physical possession in
ejectment cases to prevent disorder and breaches of peace. [58]
Pajuyo is Entitled to Physical Possession of the Disputed Property
Guevarra does not dispute Pajuyos prior possession of the lot and
ownership of the house built on it. Guevarra expressly admitted the
existence and due execution of the Kasunduan.The Kasunduan reads:
Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon
City, ay nagbibigay pahintulot kay G. Eddie Guevarra, na pansamantalang
manirahan sa nasabing bahay at lote ng walang bayad.Kaugnay nito,
kailangang panatilihin nila ang kalinisan at kaayusan ng bahay at lote.
Sa sandaling kailangan na namin ang bahay at lote, silay kusang aalis ng
walang reklamo.
Based on the Kasunduan, Pajuyo permitted Guevarra to reside in the
house and lot free of rent, but Guevarra was under obligation to maintain
the premises in good condition. Guevarra promised to vacate the premises
on Pajuyos demand but Guevarra broke his promise and refused to heed
Pajuyos demand to vacate.
These facts make out a case for unlawful detainer. Unlawful detainer
involves the withholding by a person from another of the possession of real
property to which the latter is entitled after the expiration or termination of
the formers right to hold possession under a contract, express or implied.[59]
Where the plaintiff allows the defendant to use his property by
tolerance without any contract, the defendant is necessarily bound by an
implied promise that he will vacate on demand, failing which, an action for
unlawful detainer will lie.[60] The defendants refusal to comply with the
demand makes his continued possession of the property unlawful. [61] The
status of the defendant in such a case is similar to that of a lessee or tenant
whose term of lease has expired but whose occupancy continues by
tolerance of the owner.[62]
This principle should apply with greater force in cases where a contract
embodies the permission or tolerance to use the
property. The Kasunduan expressly articulated Pajuyos forbearance. Pajuyo
did not require Guevarra to pay any rent but only to maintain the house and
lot in good condition. Guevarra expressly vowed in the Kasunduan that he
would vacate the property on demand. Guevarras refusal to comply with
Pajuyos demand to vacate made Guevarras continued possession of the
property unlawful.
We do not subscribe to the Court of Appeals theory that
the Kasunduan is one of commodatum.
In a contract of commodatum, one of the parties delivers to another
something not consumable so that the latter may use the same for a certain
time and return it.[63] An essential feature of commodatum is that it is
gratuitous. Another feature of commodatum is that the use of the thing
belonging to another is for a certain period.[64] Thus, the bailor cannot
52
demand the return of the thing loaned until after expiration of the period
stipulated, or after accomplishment of the use for which
the commodatum is constituted.[65] If the bailor should have urgent need of
the thing, he may demand its return for temporary use. [66] If the use of the
thing is merely tolerated by the bailor, he can demand the return of the
thing at will, in which case the contractual relation is called
a precarium.[67] Under the Civil Code, precarium is a kind
of commodatum.[68]
The Kasunduan reveals that the accommodation accorded by Pajuyo
to Guevarra was not essentially gratuitous. While the Kasunduan did not
require Guevarra to pay rent, it obligated him to maintain the property in
good condition. The imposition of this obligation makes the Kasunduan a
contract different from a commodatum. The effects of the Kasunduan are
also different from that of a commodatum. Case law on ejectment has
treated relationship based on tolerance as one that is akin to a landlord-
tenant relationship where the withdrawal of permission would result in the
termination of the lease.[69] The tenants withholding of the property would
then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is
one of commodatum, Guevarra as bailee would still have the duty to turn
over possession of the property to Pajuyo, the bailor. The obligation to
deliver or to return the thing received attaches to contracts for safekeeping,
or contracts of commission, administration and commodatum.[70] These
contracts certainly involve the obligation to deliver or return the thing
received.[71]
Guevarra turned his back on the Kasunduan on the sole ground that
like him, Pajuyo is also a squatter. Squatters, Guevarra pointed out, cannot
enter into a contract involving the land they illegally occupy. Guevarra insists
that the contract is void.
Guevarra should know that there must be honor even between
squatters. Guevarra freely entered into the Kasunduan. Guevarra cannot
now impugn the Kasunduan after he had benefited from
it. The Kasunduan binds Guevarra.
The Kasunduan is not void for purposes of determining who between
Pajuyo and Guevarra has a right to physical possession of the contested
property. The Kasunduan is the undeniable evidence of Guevarras
recognition of Pajuyos better right of physical possession. Guevarra is clearly
a possessor in bad faith. The absence of a contract would not yield a
different result, as there would still be an implied promise to vacate.
Guevarra contends that there is a pernicious evil that is sought to be
avoided, and that is allowing an absentee squatter who (sic) makes (sic) a
profit out of his illegal act.[72] Guevarra bases his argument on the
preferential right given to the actual occupant or caretaker under
Proclamation No. 137 on socialized housing.
We are not convinced.
Pajuyo did not profit from his arrangement with Guevarra because
Guevarra stayed in the property without paying any rent. There is also no
proof that Pajuyo is a professional squatter who rents out usurped
properties to other squatters. Moreover, it is for the proper government
agency to decide who between Pajuyo and Guevarra qualifies for socialized
housing. The only issue that we are addressing is physical possession.
Prior possession is not always a condition sine qua non in
ejectment.[73] This is one of the distinctions between forcible entry and
unlawful detainer.[74] In forcible entry, the plaintiff is deprived of physical
possession of his land or building by means of force, intimidation, threat,
strategy or stealth. Thus, he must allege and prove prior possession.[75] But
in unlawful detainer, the defendant unlawfully withholds possession after
the expiration or termination of his right to possess under any contract,
express or implied. In such a case, prior physical possession is not
required.[76]
Pajuyos withdrawal of his permission to Guevarra terminated
the Kasunduan. Guevarras transient right to possess the property ended as
well. Moreover, it was Pajuyo who was in actual possession of the property
because Guevarra had to seek Pajuyos permission to temporarily hold the
property and Guevarra had to follow the conditions set by Pajuyo in
theKasunduan. Control over the property still rested with Pajuyo and this is
evidence of actual possession.
Pajuyos absence did not affect his actual possession of the disputed
property. Possession in the eyes of the law does not mean that a man has
53
to have his feet on every square meter of the ground before he is deemed
in possession.[77] One may acquire possession not only by physical
occupation, but also by the fact that a thing is subject to the action of ones
will.[78]Actual or physical occupation is not always necessary.[79]
Ruling on Possession Does not Bind Title to the Land in Dispute
We are aware of our pronouncement in cases where we declared that
squatters and intruders who clandestinely enter into titled government
property cannot, by such act, acquire any legal right to said property.[80] We
made this declaration because the person who had title or who had the right
to legal possession over the disputed property was a party in the ejectment
suit and that party instituted the case against squatters or usurpers.
In this case, the owner of the land, which is the government, is not a
party to the ejectment case. This case is between squatters. Had the
government participated in this case, the courts could have evicted the
contending squatters, Pajuyo and Guevarra.
Since the party that has title or a better right over the property is not
impleaded in this case, we cannot evict on our own the parties. Such a ruling
would discourage squatters from seeking the aid of the courts in settling the
issue of physical possession. Stripping both the plaintiff and the defendant
of possession just because they are squatters would have the same
dangerous implications as the application of the principle of pari
delicto. Squatters would then rather settle the issue of physical possession
among themselves than seek relief from the courts if the plaintiff and
defendant in the ejectment case would both stand to lose possession of the
disputed property. This would subvert the policy underlying actions for
recovery of possession.
Since Pajuyo has in his favor priority in time in holding the property, he
is entitled to remain on the property until a person who has title or a better
right lawfully ejects him. Guevarra is certainly not that person. The ruling in
this case, however, does not preclude Pajuyo and Guevarra from
introducing evidence and presenting arguments before the proper
administrative agency to establish any right to which they may be entitled
under the law.[81]
In no way should our ruling in this case be interpreted to condone
squatting. The ruling on the issue of physical possession does not affect title
to the property nor constitute a binding and conclusive adjudication on the
merits on the issue of ownership.[82] The owner can still go to court to
recover lawfully the property from the person who holds the property
without legal title. Our ruling here does not diminish the power of
government agencies, including local governments, to condemn, abate,
remove or demolish illegal or unauthorized structures in accordance with
existing laws.
Attorneys Fees and Rentals
The MTC and RTC failed to justify the award of P3,000 attorneys fees
to Pajuyo. Attorneys fees as part of damages are awarded only in the
instances enumerated in Article 2208 of the Civil Code. [83] Thus, the award
of attorneys fees is the exception rather than the rule.[84] Attorneys fees are
not awarded every time a party prevails in a suit because of the policy that
no premium should be placed on the right to litigate.[85] We therefore delete
the attorneys fees awarded to Pajuyo.
We sustain the P300 monthly rentals the MTC and RTC assessed
against Guevarra. Guevarra did not dispute this factual finding of the two
courts. We find the amount reasonable compensation to Pajuyo. The P300
monthly rental is counted from the last demand to vacate, which was on 16
February 1995.
WHEREFORE, we GRANT the petition. The Decision dated 21 June 2000
and Resolution dated 14 December 2000 of the Court of Appeals in CA-G.R.
SP No. 43129 are SET ASIDE.The Decision dated 11 November 1996 of the
Regional Trial Court of Quezon City, Branch 81 in Civil Case No. Q-96-26943,
affirming the Decision dated 15 December 1995 of the Metropolitan Trial
Court of Quezon City, Branch 31 in Civil Case No. 12432, is REINSTATED with
MODIFICATION. The award of attorneys fees is deleted. No costs.
54
SO ORDERED.
PEOPLE v PUIG
This is a Petition for Review under Rule 45 of the Revised Rules of Court with
petitioner People of the Philippines, represented by the Office of the
Solicitor General, praying for the reversal of the Orders dated 30 January
2006 and 9 June 2006 of the Regional Trial Court (RTC) of the 6 th Judicial
Region, Branch 68, Dumangas, Iloilo, dismissing the 112 cases of Qualified
Theft filed against respondents Teresita Puig and Romeo Porras, and
denying petitioners Motion for Reconsideration, in Criminal Cases No. 05-
3054 to 05-3165.
The following are the factual antecedents:
On 7 November 2005, the Iloilo Provincial Prosecutors Office filed before
Branch 68 of the RTC in Dumangas, Iloilo, 112 cases of Qualified Theft
against respondents Teresita Puig (Puig) and Romeo Porras (Porras) who
were the Cashier and Bookkeeper, respectively, of private complainant
Rural Bank of Pototan, Inc. The cases were docketed as Criminal Cases No.
05-3054 to 05-3165.
The allegations in the Informations1 filed before the RTC were uniform and
pro-forma, except for the amounts, date and time of commission, to wit:
INFORMATION
That on or about the 1st day of August, 2002, in the Municipality of
Pototan, Province of Iloilo, Philippines, and within the jurisdiction
of this Honorable Court, above-named [respondents], conspiring,
confederating, and helping one another, with grave abuse of
confidence, being the Cashier and Bookkeeper of the Rural Bank of
Pototan, Inc., Pototan, Iloilo, without the knowledge and/or
consent of the management of the Bank and with intent of gain,
did then and there willfully, unlawfully and feloniously take, steal
and carry away the sum of FIFTEEN THOUSAND PESOS
 (P15,000.00), Philippine Currency, to the damage and prejudice of
the said bank in the aforesaid amount.
After perusing the Informations in these cases, the trial court did not find
the existence of probable cause that would have necessitated the issuance
of a warrant of arrest based on the following grounds:
(1) the element of taking without the consent of the owners was
missing on the ground that it is the depositors-clients, and not the
Bank, which filed the complaint in these cases, who are the owners
of the money allegedly taken by respondents and hence, are the
real parties-in-interest; and
(2) the Informations are bereft of the phrase alleging "dependence,
guardianship or vigilance between the respondents and the
offended party that would have created a high degree of
confidence between them which the respondents could have
abused."
It added that allowing the 112 cases for Qualified Theft filed against the
respondents to push through would be violative of the right of the
respondents under Section 14(2), Article III of the 1987 Constitution which
states that in all criminal prosecutions, the accused shall enjoy the right to
be informed of the nature and cause of the accusation against him.
Following Section 6, Rule 112 of the Revised Rules of Criminal Procedure,
the RTC dismissed the cases on 30 January 2006 and refused to issue a
warrant of arrest against Puig and Porras.
A Motion for Reconsideration2 was filed on 17 April 2006, by the petitioner.
On 9 June 2006, an Order3 denying petitioners Motion for Reconsideration
was issued by the RTC, finding as follows:
Accordingly, the prosecutions Motion for Reconsideration should
be, as it hereby, DENIED. The Order dated January 30, 2006 STANDS
in all respects.
55
Petitioner went directly to this Court via Petition for Review
on Certiorari under Rule 45, raising the sole legal issue of:
WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED THEFT
SUFFICIENTLY ALLEGE THE ELEMENT OF TAKING WITHOUT THE
CONSENT OF THE OWNER, AND THE QUALIFYING CIRCUMSTANCE
OF GRAVE ABUSE OF CONFIDENCE.
Petitioner prays that judgment be rendered annulling and setting aside the
Orders dated 30 January 2006 and 9 June 2006 issued by the trial court, and
that it be directed to proceed with Criminal Cases No. 05-3054 to 05-3165.
Petitioner explains that under Article 1980 of the New Civil Code, "fixed,
savings, and current deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loans." Corollary thereto,
Article 1953 of the same Code provides that "a person who receives a loan
of money or any other fungible thing acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the same kind and quality."
Thus, it posits that the depositors who place their money with the bank are
considered creditors of the bank. The bank acquires ownership of the
money deposited by its clients, making the money taken by respondents as
belonging to the bank.
Petitioner also insists that the Informations sufficiently allege all the
elements of the crime of qualified theft, citing that a perusal of the
Informations will show that they specifically allege that the respondents
were the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc.,
respectively, and that they took various amounts of money with grave abuse
of confidence, and without the knowledge and consent of the bank, to the
damage and prejudice of the bank.
Parenthetically, respondents raise procedural issues. They challenge the
petition on the ground that a Petition for Review on Certiorari via Rule 45 is
the wrong mode of appeal because a finding of probable cause for the
issuance of a warrant of arrest presupposes evaluation of facts and
circumstances, which is not proper under said Rule.
Respondents further claim that the Department of Justice (DOJ), through
the Secretary of Justice, is the principal party to file a Petition for Review on
Certiorari, considering that the incident was indorsed by the DOJ.
We find merit in the petition.
The dismissal by the RTC of the criminal cases was allegedly due to
insufficiency of the Informations and, therefore, because of this defect,
there is no basis for the existence of probable cause which will justify the
issuance of the warrant of arrest. Petitioner assails the dismissal contending
that the Informations for Qualified Theft sufficiently state facts which
constitute (a) the qualifying circumstance of grave abuse of confidence; and
(b) the element of taking, with intent to gain and without the consent of the
owner, which is the Bank.
In determining the existence of probable cause to issue a warrant of arrest,
the RTC judge found the allegations in the Information inadequate. He ruled
that the Information failed to state facts constituting the qualifying
circumstance of grave abuse of confidence and the element of taking
without the consent of the owner, since the owner of the money is not the
Bank, but the depositors therein. He also cites People v. Koc Song,4 in which
this Court held:
There must be allegation in the information and proof of a relation,
by reason of dependence, guardianship or vigilance, between the
respondents and the offended party that has created a high degree
of confidence between them, which the respondents abused.
At this point, it needs stressing that the RTC Judge based his conclusion that
there was no probable cause simply on the insufficiency of the allegations in
the Informations concerning the facts constitutive of the elements of the
offense charged. This, therefore, makes the issue of sufficiency of the
allegations in the Informations the focal point of discussion.
Qualified Theft, as defined and punished under Article 310 of the Revised
Penal Code, is committed as follows, viz:
56
ART. 310. Qualified Theft. The crime of theft shall be punished by
the penalties next higher by two degrees than those respectively
specified in the next preceding article, if committed by a domestic
servant, or with grave abuse of confidence, or if the property stolen
is motor vehicle, mail matter or large cattle or consists of coconuts
taken from the premises of a plantation, fish taken from a fishpond
or fishery or if property is taken on the occasion of fire, earthquake,
typhoon, volcanic eruption, or any other calamity, vehicular
accident or civil disturbance. (Emphasis supplied.)
Theft, as defined in Article 308 of the Revised Penal Code, requires the
physical taking of anothers property without violence or intimidation
against persons or force upon things. The elements of the crime under this
Article are:
1. Intent to gain;
2. Unlawful taking;
3. Personal property belonging to another;
4. Absence of violence or intimidation against persons or force
upon things.
To fall under the crime of Qualified Theft, the following elements must
concur:
1. Taking of personal property;
2. That the said property belongs to another;
3. That the said taking be done with intent to gain;
4. That it be done without the owners consent;
 5. That it be accomplished without the use of violence or
intimidation against persons, nor of force upon things;
6. That it be done with grave abuse of confidence.
On the sufficiency of the Information, Section 6, Rule 110 of the Rules of
Court requires, inter alia, that the information must state the acts or
omissions complained of as constitutive of the offense.
On the manner of how the Information should be worded, Section 9, Rule
110 of the Rules of Court, is enlightening:
Section 9. Cause of the accusation. The acts or omissions
complained of as constituting the offense and the qualifying and
aggravating circumstances must be stated in ordinary and concise
language and not necessarily in the language used in the statute
but in terms sufficient to enable a person of common
understanding to know what offense is being charged as well as its
qualifying and aggravating circumstances and for the court to
pronounce judgment.
It is evident that the Information need not use the exact language of the
statute in alleging the acts or omissions complained of as constituting the
offense. The test is whether it enables a person of common understanding
to know the charge against him, and the court to render judgment properly.5
The portion of the Information relevant to this discussion reads:
A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse
of confidence, being the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo,
without the knowledge and/or consent of the management of the Bank x x x.
It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees
of a Bank who come into possession of the monies deposited therein enjoy
the confidence reposed in them by their employer. Banks, on the other
hand, where monies are deposited, are considered the owners thereof. This
is very clear not only from the express provisions of the law, but from
57
established jurisprudence. The relationship between banks and depositors
has been held to be that of creditor and debtor. Articles 1953 and 1980 of
the New Civil Code, as appropriately pointed out by petitioner, provide as
follows:
Article 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay
to the creditor an equal amount of the same kind and quality.
Article 1980. Fixed, savings, and current deposits of money in banks
and similar institutions shall be governed by the provisions
concerning loan.
In a long line of cases involving Qualified Theft, this Court has firmly
established the nature of possession by the Bank of the money deposits
therein, and the duties being performed by its employees who have custody
of the money or have come into possession of it. The Court has consistently
considered the allegations in the Information that such employees acted
with grave abuse of confidence, to the damage and prejudice of the Bank,
without particularly referring to it as owner of the money deposits, as
sufficient to make out a case of Qualified Theft. For a graphic illustration, we
cite Roque v. People,6 where the accused teller was convicted for Qualified
Theft based on this Information:
That on or about the 16th day of November, 1989, in the
municipality of Floridablanca, province of Pampanga, Philippines
and within the jurisdiction of his Honorable Court, the above-
named accused ASUNCION GALANG ROQUE, being then employed
as teller of the Basa Air Base Savings and Loan Association Inc.
(BABSLA) with office address at Basa Air Base, Floridablanca,
Pampanga, and as such was authorized and reposed with the
responsibility to receive and collect capital contributions from its
member/contributors of said corporation, and having collected
and received in her capacity as teller of the BABSLA the sum of TEN
THOUSAND PESOS (P10,000.00), said accused, with intent of
gain, with grave abuse of confidence and without the knowledge
and consent of said corporation, did then and there willfully,
 unlawfully and feloniously take, steal and carry away the amount
of P10,000.00, Philippine currency, by making it appear that a
certain depositor by the name of Antonio Salazar withdrew from
his Savings Account No. 1359, when in truth and in fact said
Antonio Salazar did not withdr[a]w the said amount of P10,000.00
to the damage and prejudice of BABSLA in the total amount
of P10,000.00, Philippine currency.
In convicting the therein appellant, the Court held that:
[S]ince the teller occupies a position of confidence, and the bank
places money in the tellers possession due to the confidence
reposed on the teller, the felony of qualified theft would be
committed.7
Also in People v. Sison,8 the Branch Operations Officer was convicted of the
crime of Qualified Theft based on the Information as herein cited:
That in or about and during the period compressed between
January 24, 1992 and February 13, 1992, both dates inclusive, in
the City of Manila, Philippines, the said accused did then and there
wilfully, unlawfully and feloniously, with intent of gain and without
the knowledge and consent of the owner thereof, take, steal and
carry away the following, to wit:
Cash money amounting to P6,000,000.00 in different
denominations belonging to the PHILIPPINE COMMERCIAL
INTERNATIONAL BANK (PCIBank for brevity), Luneta Branch,
Manila represented by its Branch Manager, HELEN U. FARGAS, to
the damage and prejudice of the said owner in the aforesaid
amount of P6,000,000.00, Philippine Currency.
That in the commission of the said offense, herein accused acted
with grave abuse of confidence and unfaithfulness, he being
the Branch Operation Officer of the said complainant and as such
he had free access to the place where the said amount of money
was kept.
58
The judgment of conviction elaborated thus:
The crime perpetuated by appellant against his employer, the
Philippine Commercial and Industrial Bank (PCIB), is Qualified
Theft. Appellant could not have committed the crime had he not
been holding the position of Luneta Branch Operation Officer
which gave him not only sole access to the bank vault xxx. The
management of the PCIB reposed its trust and confidence in the
appellant as its Luneta Branch Operation Officer, and it was this
trust and confidence which he exploited to enrich himself to the
damage and prejudice of PCIB x x x.9
From another end, People v. Locson,10 in addition to People v. Sison,
described the nature of possession by the Bank. The money in this case was
in the possession of the defendant as receiving teller of the bank, and the
possession of the defendant was the possession of the Bank. The Court held
therein that when the defendant, with grave abuse of confidence, removed
the money and appropriated it to his own use without the consent of the
Bank, there was taking as contemplated in the crime of Qualified Theft. 11
Conspicuously, in all of the foregoing cases, where the Informations merely
alleged the positions of the respondents; that the crime was committed with
grave abuse of confidence, with intent to gain and without the knowledge
and consent of the Bank, without necessarily stating the phrase being
assiduously insisted upon by respondents, "of a relation by reason of
dependence, guardianship or vigilance, between the respondents and the
offended party that has created a high degree of confidence between
them, which respondents abused,"12 and without employing the word
"owner" in lieu of the "Bank" were considered to have satisfied the test of
sufficiency of allegations.
As regards the respondents who were employed as Cashier and Bookkeeper
of the Bank in this case, there is even no reason to quibble on the allegation
in the Informations that they acted with grave abuse of confidence. In fact,
the Information which alleged grave abuse of confidence by accused herein
is even more precise, as this is exactly the requirement of the law in
qualifying the crime of Theft.
In summary, the Bank acquires ownership of the money deposited by its
clients; and the employees of the Bank, who are entrusted with the
possession of money of the Bank due to the confidence reposed in them,
occupy positions of confidence. The Informations, therefore, sufficiently
allege all the essential elements constituting the crime of Qualified Theft.
On the theory of the defense that the DOJ is the principal party who may file
the instant petition, the ruling in Mobilia Products, Inc. v. Hajime
Umezawa13 is instructive. The Court thus enunciated:
indicate that the respondents may have, indeed, committed the offense
charged.
Before closing, let it be stated that while it is truly imperative upon the fiscal
or the judge, as the case may be, to relieve the respondents from the pain
of going through a trial once it is ascertained that no probable cause exists
to form a sufficient belief as to the guilt of the respondents, conversely, it is
also equally imperative upon the judge to proceed with the case upon a
showing that there is a prima faciecase against the respondents.

In a criminal case in which the offended party is the State, the WHEREFORE, premises considered, the Petition for Review on Certiorari is
interest of the private complainant or the offended party is limited hereby GRANTED. The Orders dated 30 January 2006 and 9 June 2006 of the
to the civil liability arising therefrom. Hence, if a criminal case is RTC dismissing Criminal Cases No. 05-3054 to 05-
dismissed by the trial court or if there is an acquittal, a 3165 are REVERSED and SET ASIDE. Let the corresponding Warrants of
reconsideration of the order of dismissal or acquittal may be Arrest issue against herein respondents TERESITA PUIG and ROMEO
undertaken, whenever legally feasible, insofar as the criminal PORRAS. The RTC Judge of Branch 68, in Dumangas, Iloilo, is directed to
aspect thereof is concerned and may be made only by the public proceed with the trial of Criminal Cases No. 05-3054 to 05-3165, inclusive,
prosecutor; or in the case of an appeal, by the State only, through with reasonable dispatch. No pronouncement as to costs.
the OSG. x x x.
SO ORDERED.
On the alleged wrong mode of appeal by petitioner, suffice it to state that
the rule is well-settled that in appeals by certiorari under Rule 45 of the
Rules of Court, only errors of law may be raised, 14 and herein petitioner
certainly raised a question of law.

As an aside, even if we go beyond the allegations of the Informations in

these cases, a closer look at the records of the preliminary investigation
conducted will show that, indeed, probable cause exists for the indictment
of herein respondents. Pursuant to Section 6, Rule 112 of the Rules of Court,
the judge shall issue a warrant of arrest only upon a finding of probable
cause after personally evaluating the resolution of the prosecutor and its
supporting evidence. Soliven v. Makasiar,15 as reiterated inAllado v.
Driokno,16 explained that probable cause for the issuance of a warrant of
arrest is the existence of such facts and circumstances that would lead a
reasonably discreet and prudent person to believe that an offense has been
committed by the person sought to be arrested. 17 The records reasonably

59