Credit Cases Digested

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G.R. No.

L-24968 April 27, 1972 ISSUE: Whether or not there was a perfected contract between the
parties. YES. There was indeed a perfected consensual contract.
SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee, vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant. HELD:

FACTS: ·Article 1934 provides: An accepted promise to deliver something by


way of commodatum or simple loan is binding upon the parties, but
In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., the commodatum or simple loan itself shall not be perfected until
now DBP, for an industrial loan of P500,000 to be used for the
delivery of the object of the contract.
construction of a factory building, to pay the balance of the jute mill
machinery and equipment and as additional working capital. In · There was undoubtedly offer and acceptance in the case. The
Resolution No.145, the loan application was approved to be secured application of Saura, Inc. for a loan of P500,000.00 was approved by
first by mortgage on the factory buildings, the land site, and resolution of the defendant, and the corresponding mortgage was
machinery and equipment to be installed. executed and registered. The defendant failed to fulfill its obligation
and the plaintiff is therefore entitled to recover damages.
The mortgage was registered and documents for the promissory
note were executed. But then, later on, was cancelled to make way · When an application for a loan of money was approved by
for the registration of a mortgage contract over the same property resolution of the respondent corporation and the responding
in favor of Prudential Bank and Trust Co., the latter having issued mortgage was executed and registered, there arises a perfected
Saura letter of credit for the release of the jute machinery. As consensual contract.
security, Saura execute a trust receipt in favor of the Prudential. For
failure of Saura to pay said obligation, Prudential sued Saura. · However, it should be noted that RFC imposed two conditions
(availability of raw materials and increased production) when it
After almost 9 years, Saura Inc, commenced an action against RFC, restored the loan to the original amount of P500,000.00.
alleging failure on the latter to comply with its obligations to release
the loan applied for and approved, thereby preventing the plaintiff · Saura, Inc. obviously was in no position to comply with RFC’s
from completing or paying contractual commitments it had entered conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage be
into, in connection with its jute mill project.
cancelled.The action thus taken by both parties was in the nature of
The trial court ruled in favor of Saura, ruling that there was a mutual desistance which is a mode of extinguishing obligations. It is
perfected contract between the parties and that the RFC was guilty a concept that derives from the principle that since mutual
of breach thereof.
agreement can create a contract, mutual disagreement by the Mortgage dated December 6, 1966 as well as the extrajudicial
parties can cause its extinguishment. foreclosure made on September 4, 1968.

G.R. No. L-49101 October 24, 1983 CFI: Dismissed the complaint with costs against the Bonnevies

RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners, CA: Affirmed


vs. THE HONORABLE COURT OF APPEALS and THE PHILIPPINE
BANK OF COMMERCE, respondents. ISSUE: W/N the forclosure on the mortgage is validly executed.

Lessons Applicable: Simple Loan HELD: YES. CA affirmed

A contract of loan being a consensual contract is perfected at the


Facts:
same time the contract of mortgage was executed. The promissory
December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano note executed on December 12, 1966 is only an evidence of
secured their loan of P75K from Philippine Bank of Commerce (PBC) indebtedness and does not indicate lack of consideration of the
by mortgaging their property mortgage at the time of its execution.

December 8, 1966: Executed Deed of Sale with Mortgage to Respondent Bank had every right to rely on the certificate of title. It
Honesto Bonnevie where P75K is payable to PBC and P25K is was not bound to go behind the same to look for flaws in the
payable to Spouses Lanzano. mortgagor's title, the doctrine of innocent purchaser for value being
applicable to an innocent mortgagee for value.
April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of
P18,944.22 to PBC Thru certificate of sale in favor of appellee was registered on
September 2, 1968 and the one year redemption period expired on
May 4, 1968: Honesto Bonnevie assigned all his rights under the September 3, 1969. It was not until September 29, 1969 that
Deed of Sale with Assumption of Mortgage to his brother, Honesto Bonnevie first wrote respondent and offered to redeem
intervenor Raoul Bonnevie the property.
June 10, 1968: PBC applied for the foreclosure of the mortgage, and loan matured on December 26, 1967 so when respondent Bank
notice of sale was published applied for foreclosure, the loan was already six months overdue.
January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Payment of interest on July 12, 1968 does not make the earlier act
Philippine Bank of Commerce for the annulment of the Deed of of PBC inequitous nor does it ipso facto result in the renewal of the
loan. In order that a renewal of a loan may be effected, not only the
payment of the accrued interest is necessary but also the payment March 1981: ALS and Litonjua executed a mortgage deed containing
of interest for the proposed period of renewal as well. Besides, the new stipulation with the provision that the monthly
whether or not a loan may be renewed does not solely depend on amortization will commence on May 1, 1981
the debtor but more so on the discretion of the bank.
August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing
G.R. No. 133632 February 15, 2002 the P500K principal loan to P457,204.90.

BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87,
APPEALS and ALS MANAGEMENT & DEVELOPMENT purporting to be what was left of their loan after full payment of
CORPORATION, respondents. Roa’s loan

Lessons Applicable: Simple Loan June 1984: BPIIC instituted foreclosure proceedings against ALS and
Litonjua on the ground that they failed to pay the mortgage
Facts: indebtedness which from May 1, 1981 to June 30, 1984 amounting
Frank Roa obtained a loan with interest rate of 16 1/4%/annum to P475,585.31
from Ayala Investment and Development Corporation (AIDC), the
August 13, 1984: Notice of sheriff's sale was published
predecessor of BPI Investment Corp. (BPIIC), for the construction of
a house on his lot in New Alabang Village, Muntinlupa. February 28, 1985: ALS and Litonjua filed Civil Case No. 52093
against BPIIC alleging that they are not in arrears and instead they
He mortgaged the house and lot to AIDC as security for the loan. made an overpayment as of June 30, 1984 since the P500K loan was
1980: Roa sold the house and lot to ALS Management & only released September 13, 1982 which marked the start of the
Development Corp. and Antonio Litonjua for P850K who paid P350K amortization and since only P464,351.77 was released applying legal
in cash and assumed the P500K indebtness of ROA with AIDC. compensation the balance of P35,648.23 should be applied to the
monthly amortizations
AIDC proposed to grant ALS and Litonjua a new loan for P500K with
interested rate of 20%/annum and service fee of 1%/annum on the RTC: in favor of ALS and Litonjua and against BPIIC that the loan
outstanding balance payable within 10 years through equal monthly granted by BPI to ALS and Litonjua was only in the principal sum of
amortization of P9,996.58 and penalty interest of 21%/annum/day P464,351.77 and awarding moral damages, exemplary damages and
from the date the amortization becomes due and payable. attorneys fees for the publication
CA: Affirmed reasoning that a simple loan is perfected upon delivery its records on the amount actually released and the date when it
of the object of the contract which is on September 13, 1982 was released. Such negligence resulted in damage for which an
award of nominal damages should be given
ISSUE:
SSS where we awarded attorney’s fees because private respondents
W/N the contract of loan was perfected only on September 13, were compelled to litigate, we sustain the award of P50,000 in favor
1982 or the second release of the loan? of private respondents as attorney’s fees

G.R. No. 118375 October 3, 2003


HELD: CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and
YES. AFFIRMED WITH MODIFICATION as to the award of damages. AURORA QUEAÑO, respondents.
The award of moral and exemplary damages in favor of private
ART. 1934
respondents is DELETED, but the award to them of attorney’s fees in
the amount of P50,000 is UPHELD. Additionally, petitioner is Emergency Recit: Queano applied for a loan with Naguiat. Naguiat
ORDERED to pay private respondents P25,000 as nominal damages. indorsed to Queano 2 checks for said loan. In return Queano
Costs against petitioner. executed a Real Estate Mortgage in favour of Naguiat. After
receiving a letter from Naqguiat’s lawyer demanding the settlement
obligation to pay commenced only on October 13, 1982, a month of the loan, Queano and Ruebenfeldt (supposedly Naguiat’s agent)
after the perfection of the contract telling the latter that she was not able to receive the proceeds of
contract of loan involves a reciprocal obligation, wherein the the loan. Queano thus filed a case for the annulment of the
obligation or promise of each party is the consideration for that of mortgage. The mortgage was declared null and void by the
the other. It is a basic principle in reciprocal obligations that neither lowercourts, hence this petition. Naguiat cites the rule that public
party incurs in delay, if the other does not comply or is not ready to documents enjoy the presumption of validity and truthfulness of its
comply in a proper manner with what is incumbent upon him. contents. However, the presumption of the truthfulness of the
Consequently, petitioner could only demand for the payment of the contents ina public document was defeated by the clear and
monthly amortization after September 13, 1982 for it was only then convincing evidence that pointed to the absence of consideration.
when it complied with its obligation under the loan contract. No evidence was presented by Naguiat proving that the checks she
issued were actually encashed or deposited. The mere issuance of
BPIIC was negligent in relying merely on the entries found in the checks does not result to the perfection of a loan. A loan isa real
deed of mortgage, without checking and correspondingly adjusting
contract and is perfected only upon the delivery of the object of the (1) Whether or not the issuance of check resulted in the perfection
contract. of the loan contract, thereby allowing petitioner to validly foreclose
the mortgage properties.
Facts:
(2) Agency by estoppel between petitioner and Ruebenfeldt.
Queaño applied with Naguiat for a loan in the amount of
P200,000.00, which Naguiat granted. Naguiat indorsed to Queaño Rulings:
Associated Bank Check for the amountP95,000.00, which was earlier
(1) Absolutely no evidence was submitted by Naguiat that the
issued to Naguiat by the Corporate Resources FinancingCorporation.
She also issued her own Filmanbank Check, to the order of Queaño, checks she issuedor endorsed were actually encashed or deposited.
and for theamount of P95,000.00. The proceeds of these checks The mere issuance of the checks did not resultin the perfection of
the contract of loan. For the Civil Code provides that the delivery of
were to constitute the loan granted by Naguiat to Queaño. To
secure the loan, Queaño executed a Deed of Real Estate Mortgage bills of exchange and mercantile documents such as checks shall
in favor of Naguiat, and surrendered to the latter the owner’s produce the effect of payment onlywhen they have been cashed. It
duplicates of the titles covering the mortgaged properties. Queaño is only after the checks have produced the effect of payment
thatthe contract of loan may be deemed perfected. A loan contract
issued to Naguiat a promissory note for the amount of P200,000.00,
with interest at 12% per annum. Queaño also issued a Security Bank is a real contract, not consensual,and, as such, is perfected only
and TrustCompany check, postdated for the amount of P200,000.00 upon the delivery of the object of the contract. In this case,
theobjects of the contract are the loan proceeds which Queaño
and payable to the order of Naguiat.
would enjoy only upon theencashment of the checks signed or
Upon presentment on its maturity date, the Security Bank check indorsed by Naguiat. Since Naguiat presented no such proof, it
was dishonored for insufficiency of funds. Queaño received a letter follows that the checks were not encashed or credited to Queaño’s
from Naguiat’s lawyer, demanding settlement of the loan. Queaño account. No compelling reason to disturb the finding of the courts a
and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the quo that the lender did not remit and the borrower didnot receive
meeting,Queaño told Naguiat that she did not receive the proceeds the proceeds of the loan. That being the case, it follows that the
of the loan, adding that the checks were retained by Ruebenfeldt, mortgage which issupposed to secure the loan is null and void.
who purportedly was Naguiat’s agent. Naguiat applied for
theextrajudicial foreclosure of the mortgage. Before the scheduled (2) The existence of an agency relationship between Naguiat and
sale, Queaño filed annulment of the mortgage deed. Ruebenfeldt issupported by ample evidence. Naguiat instructed
Ruebenfeldt to withhold from Queaño thechecks she issued or
Issues: indorsed to Queaño, pending delivery by the latter of additional
collateral. Itwas also Ruebenfeldt who accompanied Queaño in her (1) The Court held in the affirmative. A loan is a real contract,
meeting with Naguiat. not consensual, and as such I perfected only upon the delivery of
the object of the contract. Upon delivery of the contract of loan (in
G.R. No. 154878 March 16, 2007 this case the money received by the debtor when the checks were
CAROLYN M. GARCIA, Petitioner, vs. RICA MARIE S. THIO, encashed) the debtor acquires ownership of such money or loan
Respondent. proceeds and is bound to pay the creditor an equal amount. It is
undisputed that the checks were delivered to respondent.
Respondent Thio received from petitioner Garcia two crossed
checks which amount to US$100,000 and US$500,000, respectively, (2) However, the checks were crossed and payable not to the
payable to the order of Marilou Santiago. According to petitioner, order of the respondent but to the order of a certain Marilou
respondent failed to pay the principal amounts of the loans when Santiago. Delivery is the act by which the res or substance is thereof
they fell due and so she filed a complaint for sum of money and placed within the actual or constructive possession or control of
damages with the RTC. Respondent denied that she contracted the another. Although respondent did not physically receive the
two loans and countered that it was Marilou Satiago to whom proceeds of the checks, these instruments were placed in her
petitioner lent the money. She claimed she was merely asked y control and possession under an arrangement whereby she actually
petitioner to give the checks to Santiago. She issued the checks for re-lent the amount to Santiago.
P76,000 and P20,000 not as payment of interest but to POLO S. PANTALEON, Petitioner, vs. AMERICAN EXPRESS
accommodate petitioner’s request that respondent use her own
INTERNATIONAL, INC., Respondent.
checks instead of Santiago’s.
G.R. No. 174269 August 25, 2010
RTC ruled in favor of petitioner. CA reversed RTC and ruled
that there was no contract of loan between the parties. FACTS:

ISSUE After the Amsterdam incident that happened involving the delay of
American Express Card to approve his credit card purchases worth
(1) Whether or not there was a contract of loan between US$13,826.00 at the Coster store, Pantaleon commenced a
petitioner and respondent. complaint for moral and exemplary damages before the RTC against
(2) Who borrowed money from petitioner, the respondent or American Express. He said that he and his family experienced
Marilou Santiago? inconvenience and humiliation due to the delays in credit
authorization. RTC rendered a decision in favor of Pantaleon. CA
HELD reversed the award of damages in favor of Pantaleon, holding that
AmEx had not breached its obligations to Pantaleon, as the injuries under Article 2217 of the Civil Code for which moral
purchase at Coster deviated from Pantaleon's established charge damages are remunerative. The somewhat unusual attending
purchase pattern. circumstances to the purchase at Coster – that there was a deadline
for the completion of that purchase by petitioner before any delay
ISSUE: would redound to the injury of his several traveling companions –
1. Whether or not AmEx had committed a breach of its obligations gave rise to the moral shock, mental anguish, serious anxiety,
to Pantaleon. wounded feelings and social humiliation sustained by Pantaleon, as
concluded by the RTC.
2. Whether or not AmEx is liable for damages.
G.R. No. L-8321 October 14, 1913
RULING:
ALEJANDRA MINA, ET AL., plaintiffs-appellants, vs. RUPERTA
1. Yes. The popular notion that credit card purchases are approved PASCUAL, ET AL., defendants-appellees.
“within seconds,” there really is no strict, legally determinative
point of demarcation on how long must it take for a credit card Art. 1933
company to approve or disapprove a customer’s purchase, much Francisco Fontanilla and Andres Fontanilla were brothers. Francisco
less one specifically contracted upon by the parties. One hour
Fontanilla acquired during his lifetime, on March 12, 1874, a lot.
appears to be patently unreasonable length of time to approve or
disapprove a credit card purchase. Andres Fontanilla, with the consent of his brother Francisco,
erected a warehouse on a part of the said lot, embracing 14 meters
The culpable failure of AmEx herein is not the failure to timely
of its frontage by 11 meters of its depth.
approve petitioner’s purchase, but the more elemental failure to
timely act on the same, whether favorably or unfavorably. Even Francisco Fontanilla, the former owner of the lot, being dead, the
assuming that AmEx’s credit authorizers did not have sufficient herein plaintiffs, Alejandro Mina, et al., were recognized without
basis on hand to make a judgment, we see no reason why it could discussion as his heirs.
not have promptly informed Pantaleon the reason for the delay,
and duly advised him that resolving the same could take some time. Andres Fontanilla, the former owner of the warehouse, also having
died, the children of Ruperta Pascual were recognized, though it is
2. Yes. The reason why Pantaleon is entitled to damages is not not said how, and consequently are entitled to the said building, or
simply because AmEx incurred delay, but because the delay, for rather, as Ruperta Pascual herself stated, to only six-sevenths of
which culpability lies under Article 1170, led to the particular one-half of it, the other half belonging, as it appears, to the
plaintiffs themselves, and the remaining one-seventh of the first Francisco Fontanilla did not fix any definite period or time during
one-half to the children of one of the plaintiffs, Elena de Villanueva. which Andres Fontanilla could have the use of the lot whereon the
latter was to erect a stone warehouse of considerable value, and so
Ruperta Pascual, as the guardian of her minor children, the herein it is that for the past thirty years of the lot has been used by both
defendants, petitioned the Curt of First Instance of Ilocos Norte for
Andres and his successors in interest.
authorization to sell "the six-sevenths of the one-half of the
warehouse, of 14 by 11 meters, together with its lot. NOTA BENE: It would seem that the Supreme Court failed to
consider the possibility of a contract of precardium between
The warehouse, together with the lot on which it stands, was sold Francisco and Andres. Precardium is a kind of commodatum
to Cu Joco, the other defendant in this case. wherein the bailor may demand the object at will if the contract
Issue: does not stipulate a period or use to which the thing is devoted.

WoN there exist a contract of commodatum G.R. No. L-46240 November 3, 1939

Held: MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-


appellants, vs. BECK, defendant-appellee.
Although both litigating parties may have agreed in their idea of the
commodatum, on account of its not being, as indeed it is not, a FACTS:
question of fact but of law. Beck is a tenantof defendant Margarita Quintos. Quintos granted
Contracts are not to be interpreted in conformity with the name gratuitously Beck the use of the furniture found on the leased
that the parties thereto agree to give them, but must be construed, house, among thesewere three gas heaters and 4 electric lamps,
duly considering their constitutive elements, as they are defined subject to the condition that the defendant wouldreturn them to
and denominated by law. the plaintiff upon the latter's demand.

By the contract of loan, one of the parties delivers to the other, Quintos sold the pieces of furniture to MariaLopez and Rosario
either anything not perishable, in order that the latter may use it Lopez and thereafter notified Beck of the conveyance, giving him
during the certain period and return it to the former, in which case sixty days to vacate the premises under one of the clauses of the
it is called commodatum. contract of lease. On November 5, 1936, Beck informedQuintos that
the latter can get the furniture at the ground floor of the house.
It is, therefore, an essential feature of the commodatum that the However, at a laterdate, Beck told Quintos that he will return only
use of the thing belonging to another shall BE for a certain period. the other furniture but not the gas heaters and theelectric lamps as
he is to return them only after the expiration of the lease house. The defendant did not comply with this obligation when he
contract.Quintos refused to get the furniture in view of the fact that merely placed them at the disposal of the plaintiff, retaining for his
the defendant had declined to make delivery of all of them. benefit the three gas heaters and the four eletric lamps. The trial
court, therefore, erred when it came to the legal conclusion that the
When thelease contract expires, Beck deposited all of the furniture plaintiff failed to comply with her obligation to get the furniture
to the sheriff’s warehouse. Consequently, Quintos brought an when they were offered to her.
action to compel Beck to return her certain furniturewhich she lent
him for his use. The trial court ruled in favor of Beck, holding that As the defendant had voluntarily undertaken to return all the
Quintos failedto comply with her obligation to get the furniture furniture to the plaintiff, upon the latter's demand, the Court could
when they were offered to her. On appeal ofthe case, the Court of not legally compel her to bear the expenses occasioned by the
First Instance of Manila affirmed the lower court’s decision. deposit of the furniture at the defendant's behest. The latter, as
bailee, was not entitled to place the furniture on deposit; nor was
ISSUE: the plaintiff under a duty to accept the offer to return the furniture,
WON the trial court erred in ruling that Quintos failed to comply because the defendant wanted to retain the three gas heaters and
with herobligation to get the furniture when they were offered to the four electric lamps.
her? The costs in both instances should be borne by the defendant
RULING: because the plaintiff is the prevailing party (Sec. 487 of the Code of
Civil Procedure). Defendant Beck was the one who breached the
YES. It should be Beck to be declared the one who failed to contract of commodatum, and without any reason he refused to
comply with her obligation as a bailee to return all the furniture return and deliver all the furniture upon the plaintiff's demand. In
upon bailorQuintos’ demand. these circumstances, it is just and equitable that he pay the legal
expenses and other judicial costs which the plaintiff would not have
The contract entered into between the parties is one of
otherwise defrayed.
commadatum, because under it the plaintiff gratuitously granted
the use of the furniture to the defendant, reserving for herself the G.R. No. L-46145 November 26, 1986
ownership thereof; by this contract, defendant Beck bound himself
to return the furniture to plaintiff, Quintosupon the latter’s REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner, vs.
demand. The obligation voluntarily assumed by the defendant to THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY,
return the furniture upon the plaintiff's demand, means that he represented by RICARDO BALOY, ET AL., respondents.
should return all of them to the plaintiff at the latter's residence or
This case originally emanated from a decision of the CFI of presented will be forever barred." Petitioner argues that since
Zambales, denying respondents' application for registration. From Domingo Baloy failed to file his claim within the prescribed period,
said order of denial the applicants, heirs of Domingo Baloy (herein the land had become irrevocably public and could not be the
private respondents) interposed on appeal to the CA. The CA subject of a valid registration for private ownership.
reversed the decision appealed from and thus approving the
application for registration. Oppositors (petitioners herein) filed Considering the foregoing facts respondents Court of Appeals ruled
their MR alleging among other things that applicants' possessory as follows:
information title can no longer be invoked and that they were not ... perhaps, the consequence was that upon failure of Domingo
able to prove a registerable title over the land. Such was denied, Baloy to have filed his application within that period the land had
hence this petition for review on certiorari. become irrevocably public; but perhaps also, for the reason that
Applicants' claim is anchored on their possessory information title warning was from the Clerk of the Court of Land Registration, and
coupled with their continuous, adverse and public possession over there has not been presented a formal order or decision of the said
the land in question. An examination of the possessory information Court of Land Registration so declaring the land public because of
title shows that the description and the area of the land stated that failure, it can with plausibility be said that after all, there was
therein substantially coincides with the land applied for and that no judicial declaration to that effect, it is true that the U.S. Navy did
occupy it apparently for some time, as a recreation area, but what
said possessory information title had been regularly issued having
been acquired by applicants' predecessor, Domingo Baloy, under this Court has taken from the occupation by the U.S. Navy is that
the provisions of the Spanish Mortgage Law. Applicants presented during the interim, the title of applicants was in a state of
suspended animation so to speak but it had not died either; and
their tax declaration on said lands on April 8, 1965.
the fact being that this land was really originally private from and
The Director of Lands opposed the registration alleging that this after the issuance and inscription of the possessory information
land had become public land thru the operation of Act 627 of the during the Spanish times, it would be most difficult to sustain
Philippine Commission. On November 26, 1902 pursuant to the position of Director of Lands that it was land of no private owner;
executive order of the President of the U.S., the area was declared open to public disposition, and over which he has control; and since
within the U.S. Naval Reservation. Under Act 627 as amended by Act immediately after U.S. Navy had abandoned the area, applicant
1138, a period was fixed within which persons affected thereby came in and asserted title once again, only to be troubled by first
could file their application, (that is within 6 months from July 8, Crispiniano Blanco who however, quitclaimed in favor of applicants,
1905) otherwise "the said lands or interest therein will be and then by private oppositors now, apparently originally tenants of
conclusively adjudged to be public lands and all claims on the part Blanco, but that entry of private oppositors sought to be given color
of private individuals for such lands or interests therein not to of ownership when they sought to and did file tax declaration in
1965, should not prejudice the original rights of applicants thru their necessarily follows that it never became public land thru the
possessory information secured regularly so long ago, the conclusion operation of Act 627. To assume otherwise is to deprive private
must have to be that after all, applicants had succeeded in bringing respondents of their property without due process of law. In fact it
themselves within the provisions of Sec. 19 of Act 496, the land can be presumed that the notice required by law to be given by
should be registered in their favor; publication and by personal service did not include the name of
Domingo Baloy and the subject land, and hence he and his lane
Petitioner now comes to Us with the following: were never brought within the operation of Act 627 as amended.
HELD: CA WAS AFFIRMED The procedure laid down in Sec. 3 is a requirement of due process.
"Due process requires that the statutes which under it is attempted
A cursory reading of Sec. 3, Act 627 reveals that several steps are to to deprive a citizen of private property without or against his
be followed before any affected land can "be conclusively adjudged consent must, as in expropriation cases, be strictly complied with,
to be public land." Under said provision, private land could be because such statutes are in derogation of general rights."
deemed to have become public land only by virtue of a judicial
declaration after due notice and hearing. It runs contrary therefore We also find with favor private respondents' views that court
to the contention of petitioners that failure to present claims set judgments are not to be presumed.
forth under Sec. 2 of Act 627 made the land ipso facto public The finding of respondent court that during the interim of 57 years
without any deed of judicial pronouncement. Petitioner in making from November 26, 1902 to December 17, 1959 (when the U.S.
such declaration relied on Sec. 4 of Act 627 alone. But in construing
Navy possessed the area) the possessory rights of Baloy or heirs
a statute the entire provisions of the law must be considered in were merely suspended and not lost by prescription, is supported
order to establish the correct interpretation as intended by the law- by a communication dated June 24, 1963, which contains an official
making body. Act 627 by its terms is not self-executory and requires
statement of the position of the Republic of the Philippines with
implementation by the Court of Land Registration. Act 627, to the regard to the status of the land in question. Said letter recognizes
extent that it creates a forfeiture, is a penal statute in derogation of the fact that Domingo Baloy and/or his heirs have been in
private rights, so it must be strictly construed so as to safeguard continuous possession of said land since 1894 as attested by an
private respondents' rights. Significantly, petitioner does not even "Informacion Possessoria" Title, which was granted by the Spanish
allege the existence of any judgment of the Land Registration court Government. Hence, the disputed property is private land and this
with respect to the land in question. Without a judgment or order possession was interrupted only by the occupation of the land by
declaring the land to be public, its private character and the the U.S. Navy in 1945 for recreational purposes. The U.S. Navy
possessory information title over it must be respected. Since no eventually abandoned the premises. The heirs of the late Domingo
such order has been rendered by the Land Registration Court it P. Baloy, are now in actual possession, and this has been so since
the abandonment by the U.S. Navy. A new recreation area is now Sanchez asked private respondent to deposit in a bank a certain
being used by the U.S. Navy personnel and this place is remote from amount of money in the bank account of Sterela for purposes of its
the land in question. incorporation. She assured private respondent that he could
withdraw his money from said account within a month’s time. With
Clearly, the occupancy of the U.S. Navy was not in the concept of this, Mrs. Vivies, Sanchez and a certain Estrella Dumagpi, secretary
owner. It partakes of the character of a commodatum. It cannot of Doronilla, went to the bank to open an account with Mrs. Vives
therefore militate against the title of Domingo Baloy and his and Sanchez as signatories. A passbook was then issued to Mrs.
successors-in-interest. One's ownership of a thing may be lost by
Vives. Subsequently, private respondent learned that part of the
prescription by reason of another's possession if such possession be money was withdrawn without presentment of the passbook as it
under claim of ownership, not where the possession is only was his wife got hold of such. Mrs. Vives could not also withdraw
intended to be transient, as in the case of the U.S. Navy's said remaining amount because it had to answer for some
occupation of the land concerned, in which case the owner is not postdated checks issued by Doronilla who opened a current account
divested of his title, although it cannot be exercised in the
for Sterela and authorized the bank to debit savings.
meantime.
Private respondent referred the matter to a lawyer, who made a
WHEREFORE, premises considered, finding no merit in the petition written demand upon Doronilla for the return of his client’s money.
the appealed decision is hereby AFFIRMED. Doronilla issued another check for P212,000.00 in private
SO ORDERED. respondent’s favor but the check was again dishonored for
insufficiency of funds.
G.R. No. 115324 February 19, 2003
Private respondent instituted an action for recovery of sum of
PRODUCERS BANK OF THE PHILIPPINES (now FIRST money in the Regional Trial Court (RTC) in Pasig, Metro Manila
INTERNATIONAL BANK), petitioner, vs. HON. COURT OF APPEALS against Doronilla, Sanchez, Dumagpi and petitioner. The RTC ruled
AND FRANKLIN VIVES, respondents. in favor of the private respondent which was also affirmed in toto
by the CA. Hence this petition.
FACTS:
ISSUE: WON THE TRANSACTION BETWEEN THE DORONILLA AND
Sometime in 1979, private respondent Franklin Vives was asked by
RESPONDENT VIVES WAS ONE OF SIMPLE LOAN.
his neighbor and friend Angeles Sanchez to help her friend and
townmate, Col. Arturo Doronilla, in incorporating his business, the HELD: NO.
Sterela Marketing and Services (“Sterela” for brevity). Specifically,
A circumspect examination of the records reveals that the end of the period agreed upon, the loan is a commodatum and not
transaction between them was a commodatum. Article 1933 of the a mutuum.
Civil Code distinguishes between the two kinds of loans in this wise:
The rule is that the intention of the parties thereto shall be
By the contract of loan, one of the parties delivers to another, either accorded primordial consideration in determining the actual
something not consumable so that the latter may use the same for character of a contract. In case of doubt, the contemporaneous and
a certain time and return it, in which case the contract is called a subsequent acts of the parties shall be considered in such
commodatum; or money or other consumable thing, upon the determination.
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 [SAME CASE]
mutuum. FACTS
Commodatum is essentially gratuitous. Franklin Vives was asked by his friend Angeles Sanchez to help
Arturo Doronilla, in incorporating his business, the Sterela
Simple loan may be gratuitous or with a stipulation to pay interest.
Marketing and Services by depositing in producers bank of the
In commodatum, the bailor retains the ownership of the thing Philippines amount of money in the bank account of Sterela for
loaned, while in simple loan, ownership passes to the borrower. purposes of its incorporation. Relying on the assurances and
representations of Sanchez and Doronilla, private respondent
The foregoing provision seems to imply that if the subject of the
vivesissued a check in the amount of Two Hundred Thousand Pesos
contract is a consumable thing, such as money, the contract would (P200,000.00) in favor of Sterela. Private respondent instructed his
be a mutuum. However, there are some instances where a wife, Mrs. InocenciaVives, to accompany Doronilla and Sanchez in
commodatum may have for its object a consumable thing. Article opening a savings account in the name of Sterela in the Buendia,
1936 of the Civil Code provides: Makati branch of Producers Bank of the Philippines. In opening the
Consumable goods may be the subject of commodatum if the account, the authorized signatories were InocenciaVives and/or
purpose of the contract is not the consumption of the object, as Angeles Sanchez.
when it is merely for exhibition. Subsequently, private respondent learned that Sterela was no
Thus, if consumable goods are loaned only for purposes of longer holding office in the address previously given to him.
exhibition, or when the intention of the parties is to lend Alarmed, he and his wife went to the Bank to verify if their money
consumable goods and to have the very same goods returned at the 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 they opened had been withdrawn by ISSUE: WON the transaction between theVives and Doronilla is a
Doronilla, and that only P90,000.00 remained therein. He likewise simple loan (or one of an accommodation) as to dismiss the case
told them that Mrs. Vives could not withdraw said remaining against Producer Bank being not a privy thereto.
amount because it had to answer for some postdated checks issued
by Doronilla. According to Atienza, after Mrs. Vives and Sanchez SC RULED: It one of an accommodation.
opened Savings Account, Doronilla opened another Current Account Bank’s Defenses: The contract between them was a simple loan or
for Sterela and authorized the Bank to debit Savings Account for the mutuum because the subject was money, there was an interest
amounts necessary to cover overdrawings in Current Account. In amounting to 12,000 and I was not privy thereto!
opening said current account, Sterela, through Doronilla, obtained a
loan of P175,000.00 from the Bank. Atienza, the bank manager, also - since all the elements of a mutuum are present: first, what
said that Doronilla could assign or withdraw the money in Savings was delivered by private respondent to Doronilla was money, a
Account because he was the sole proprietor of Sterela.[5] consumable thing; and second, the transaction was onerous as
Doronilla was obliged to pay interest, as evidenced by the check
Private respondent tried to get in touch with Doronillaand issued by Doronilla in the amount of P212,000.00, or P12,000 more
subsequently he received a letter from Doronilla, assuring him that than what private respondent deposited in Sterela’s bank
his money was intact and would be returned to himDoronilla issued account.[15] Moreover, the fact that private respondent sued his
a postdated check for Two Hundred Twelve Thousand Pesos good friend Sanchez for his failure to recover his money from
(P212,000.00) in favor of private respondent. However, upon Doronilla shows that the transaction was not merely gratuitous but
presentment thereof by private respondent to the drawee bank, the “had a business angle” to it. Hence, petitioner argues that it cannot
check was dishonored. 2 more checks/demand was made, still of no be held liable for the return of private respondent’s P200,000.00
avail. because it is not privy to the transaction between the latter and
Private respondent instituted an action for recovery of sum of Doronilla.
money in the Regional Trial Court (RTC) in Pasig, Metro Manila As regards the “subject”
against Doronilla, Sanchez, Dumagpi and petitioner. RTC ruled that
defendants Arturo J. Doronila, Estrella Dumagpi and Producers Bank - 1933 may seem to imply that if subject of contract is a
of the Philippines to pay plaintiff Franklin Vives jointly and severally. consumable thing, e.g. money, the contract would be a mutuum.
However, there are exceptions to this rule where the loan is
Petitioner bank, Appealed before the us commodatum and not mutuum.
- if consumable goods are loaned only for purposes of In commodatum, the bailor retains the ownership of the thing
exhibition OR loaned, while in simple loan, ownership passes to the borrower.

- when the intention of parties is to lend consumable goods The foregoing provision seems to imply that if the subject of the
and to have the very same goods returned at the end of the period contract is a consumable thing, such as money, the contract would
agreed upon be a mutuum. However, there are some instances where a
commodatum may have for its object a consumable thing. Article
- Intention of parties shall be accorded primordial 1936 of the Civil Code provides:
consideration in determining the actual character of a contract. In
case of doubt, the contemporaneous and subsequent acts of the Consumable goods may be the subject of commodatum if the
parties shall be considered. purpose of the contract is not the consumption of the object, as
when it is merely for exhibition.
No error was committed by the Court of Appeals when it ruled that
the transaction between private respondent and Doronilla was a Thus, if consumable goods are loaned only for purposes of
commodatum and not a mutuum. A circumspect examination of exhibition, or when the intention of the parties is to lend
the records reveals that the transaction between them was a consumable goods and to have the very same goods returned at the
commodatum. Article 1933 of the Civil Code distinguishes between end of the period agreed upon, the loan is a commodatum and not
the two kinds of loans in this wise: a mutuum.

By the contract of loan, one of the parties delivers to another, either The rule is that the intention of the parties thereto shall be
something not consumable so that the latter may use the same for accorded primordial consideration in determining the actual
a certain time and return it, in which case the contract is called a character of a contract.[27] In case of doubt, the contemporaneous
commodatum; or money or other consumable thing, upon the and subsequent acts of the parties shall be considered in such
condition that the same amount of the same kind and quality shall determination.[28]
be paid, in which case the contract is simply called a loan or
As correctly pointed out by both the Court of Appeals and the trial
mutuum.
court, the evidence shows that private respondent agreed to
Commodatum is essentially gratuitous. deposit his money in the savings account of Sterela specifically for
the purpose of making it appear “that said firm had sufficient
Simple loan may be gratuitous or with a stipulation to pay interest. 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 “2. Deposits and withdrawals must be made by the depositor
clear to the parties to the transaction that the money would not be personally or upon his written authority duly authenticated, and
removed from Sterela’s savings account and would be returned to neither a deposit nor a withdrawal will be permitted except upon
private respondent after thirty (30) days. the production of the depositor savings bank book in which will be
entered by the Bank the amount deposited or withdrawn.”[30]
Doronilla’s attempts to return to private respondent the amount of
P200,000.00 which the latter deposited in Sterela’s account Said rule notwithstanding, Doronilla was permitted by petitioner,
together with an additional P12,000.00, allegedly representing through Atienza, the Assistant Branch Manager for the Buendia
interest on the mutuum, did not convert the transaction from a Branch of petitioner, to withdraw therefrom even without
commodatum into a mutuum because such was not the intent of presenting the passbook (which Atienza very well knew was in the
the parties and because the additionalP12,000.00 corresponds to possession of Mrs. Vives), not just once, but several times. Both the
the fruits of the lending of the P200,000.00. Article 1935 of the Civil Court of Appeals and the trial court found that Atienza allowed said
Code expressly states that “[t]he bailee in commodatum acquires withdrawals because he was party to Doronilla’s “scheme” of
the use of the thing loaned but not its fruits.” Hence, it was only defrauding private respondent.
proper for Doronilla to remit to private respondent the interest
accruing to the latter’s money deposited with petitioner. As regards the “interest”

Neither does the Court agree with petitioner’s contention that it is - Attempt to return P200,000 with additional P12,000 does not
convert the transaction from commodatum to muttum absent any
not solidarily liable for the return of private respondent’s money
because it was not privy to the transaction between Doronilla and showing of such intention.
private respondent. The nature of said transaction, that is, whether - In fact, the 12k corresponds to the fruits of the thing.
it is a mutuum or a commodatum, has no bearing on the question of
petitioner’s liability for the return of private respondent’s money - 1935: bailee acquires only the USE but NOT the FRUITS.
because the factual circumstances of the case clearly show that
- It was only proper for Doronilla to remit to Vives the interest
petitioner, through its employee Mr. Atienza, was partly responsible
accruing to the money deposited in the bank.
for the loss of private respondent’s money and is liable for its
restitution. As regards the “privity”
Petitioner’s rules for savings deposits written on the passbook it - Whether the transaction was mutuum or commodatum has no
issued Mrs. Vives on behalf of Sterela for Savings Account No. 10- bearing on your liability. Your liability is founded upon your
1567 expressly states that— employee’s fault under 2180 (vicarious).
- Atienza was in conspiracy with Doronilla’s scheme. The passbook said in its decision. (mentioned jurisprudence): legal doctrine
in custody of Vives says that one cannot withdraw without that touching commodatum as follows:
passbook. How come Doronilla was able to get the money?
Although it is true that in a contract of commodatum the bailor
- Atienza also knew very well that Vives was the owner of the retains the ownership of thing loaned at the expiration of the
money as he was expressly told by the wife. period, or after the use for which it was loaned has been
accomplished, it is the imperative duty of the bailee to return the
G.R. No. L-4150 February 10, 1910 thing itself to its owner, or to pay him damages if through the fault
FELIX DE LOS SANTOS, plaintiff-appelle, vs. AGUSTINA JARRA, of the baileethe thing should have been lost or injured…
administratrix of the estate of Magdaleno Jimenea, deceased, Facts: (this is a case of appeal from a judgment of the CFI of
defendant-appellant. Occidental negros)
EMERGENCY RECIT: 1) Felix de los Santos brought suit against Agusitina Jarra (the
De los Santos owned 10 carabaos which he lent to Jimenea to be administratrix of the estate of Magdaleno Jimenea, he alleges that
used in his hacienda. The 10 carabaos were not returned upon de Jimenea borrowed and obtained from the plaintiff 10 first class
los santos’ demand. Jimenea died and Jarra was appointed to be the carabos, to be used at the animal power mill of JImenea’s hacienda,
administratrix of his estate. De los Santos filed for the exclusion of without recompense or remuneration for the use of it and under
his carabaos with the commissioners of Jimenea’s estate. The the sole condition that they should be returned to the owner as
commissioners rejected her claim. Jarra was contending that only 3 soon as the work at the mill was terminated. Jimenea however, did
carabaos were given to Jimenea and afterwards these 3 were also not return the carabaos even though de los Santos claimed their
sold to him (jimenea). The court stated that Jarra had no basis in his return after the work at the mill was finished.
claim and rendered judgment against to him to give 6 carabaos or 2) Jimenea died in 1904 (before the suit)and Jarra was
it’s equivalent value (120 each). Jarra appealed. The supreme court appointed by the CFI as administratrix of his estate.
held that there is no evidence of the sale between Jimenea and de
los Santos. Therefore it is not true.The carabaos delivered to be 3) De los Santos presented his claim to the commissioners of
used were not returned by Jiminea upon demand. There is no doubt the estate of Jimenea for return of the carabaos. (for the carabaos
that Jarra is under the obligation to indemnify delos Santos. to be exluded from the estate of Jimenea). the commissioners
rejected his claim, and thus a lawsuit ensued.
The obligation of the bailee or of his successors to return either the
thing loaned or its value is sustained by the tribunal of Spain which
4) Jarra answered and said that it was true that the late 10) From the foregoing, it may be logically inferred that the
Jimenea asked the plaintiff to loan him ten carabaos, but that he carabaos loaned or given on commodatum to the deceased Jimenea
only obtained THREE (3) second-class carabaos, which were were ten in number, that 6 survived and that these carabaos have
afterwards sold by the Delos Santos to Jimenea. (basically Jarra not been returned to the owner delos Santos, and lastly, that the 6
denied all the allegations in the complaint) carabaos were not the property of the deceased nor any of his
descendants, it is the duty of the administratrix to return them or
5) The case came up for trial and the court rendered judgment indemnify the owner for the value.
against Jarra and ordering her to return to de los Santos 6 second-
class and third class carabaos. The value of which was 120 each so Issue:
720 pesos.
(NOT STATED EXPLICITLY) WON the carabaos belonged to the estate
6) Jarra moved for a new trial on the ground that the findings of Jimenea.
of fact were openly and manifestly contrary to the weight of the
evidence. Held:

7) Jarra needs to prove that Jimenea only received 3 second NO. it was not part of Jimenea’s estate. Therefore Agustina Jarra
class carabaos to substantiate her claim. should exclude it or indemnify De los Santos… “for the reasons
above set forth, by which the erros assigned to the judgment
8) The record however, discloses that it has been fully proven appealed from have been refuted, and considering that the same is
from the testimonies of a number of witnesses that Santos, sent in in accordance with the law and the merits of the case, it is our
charge of various persons, the 10 carabaos requiested by Jiminea (it opinion that it should be affirmed and we do hereby affirm it with
was revealed that Jimenea is the father in law of de los Santos). the costs against appellant.
Also, de los Santos produced 2 letters proving that jimenea received
them in the presence of said persons (brother of Jimenea) who saw Ratio: The ratio differentiates a loan from a commodatum.
the animals arrive at the hacienda. FOUR of the carabaos died of Art 1740. (old civil code) By the contract of loan , one of the parties
rinderpest and thus the judgment appealed from only deals with 6 delivers to the other, either anything not perishable (in the new civil
carabaos. code it’s consumable), in order that the latter may use it during a
9) THE ALLEGED PURCHASE of 3 carabaos by Jimenea from his certain period and return it to the former, in which case it is called
son-in-law Santos is not evidenced by any trustworthy evidence. commodatum, or money or any other perishable thing, under the
condition to return an equal amount of the same kind and quality,
Therefore, it is not true.
in which case it is merely called a loan.
Commodatum is essentially gratuitous. thing itself to its owner, or to pay him damages if through the fault
of the bailee the thing should have been lost or injured…
A simple loan may be gratuitous, or made under a stipulation to pay
interest.
G.R. No. 80294-95 September 21, 1988
Art 1741. The bailor retains ownership of the thing loaned the
bailee acquires the use thereof, but not its fruits; if any CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE,
compensation is involved, to be paid by the person requiring the petitioner, vs. COURT OF APPEALS, HEIRS OF EGMIDIO
use, the agreement ceases to be a commodatum. OCTAVIANO AND JUAN VALDEZ, respondents.

Art 1742. The obligations and rights which arise from the Facts:
commodatum pass to the heirs of both contracting parties, unless
the loan has been made in consideration for the person of the - 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar),
bailee, in which case his heirs shall not have the right to continue petitioner, filed with the court an application for the registration of
title over lots 1, 2, 3 and 4 situated in Poblacion Central, Benguet,
using the thing loaned.
said lots being used as sites of the Catholic Church, building,
The carabaos delivered to be used were not returned by Jiminea convents, high school building, school gymnasium, dormitories,
upon demand. There is no doubt that Jarra is under the obligation social hall and stonewalls.
to indemnify delos Santos.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed
Article 101. those who in fulfilling their obligations are guilty of that they have ownership over lots 1, 2 and 3. (2 separate civil
fraud, negligence or delay…. cases)

The obligation of the bailee or of his successors to return either the - 1965: The land registration court confirmed the registrable title of
thing loaned or its value is sustained by the tribunal of Spain which Vicar to lots 1 , 2, 3 and 4. Upon appeal by the private respondents
said in its decision. (mentioned jurisprudence): legal doctrine (heirs), the decision of the lower court was reversed. Title for lots 2
touching commodatum as follows: and 3 were cancelled.

Although it is true that in a contract of commodatum the bailor - VICAR filed with the Supreme Court a petition for review on
retains the ownership of thing loaned at the expiration of the certiorari of the decision of the Court of Appeals dismissing his
period, or after the use for which it was loaned has been application for registration of Lots 2 and 3.
accomplished, it is the imperative duty of the bailee to return the
- During trial, the Heirs of Octaviano presented one (1) witness, who way of ordinary acquisitive prescription because of the absence of
testified on the alleged ownership of the land in question (Lot 3) by just title.
their predecessor-in-interest, Egmidio Octaviano; his written
demand to Vicar for the return of the land to them; and the The Court of Appeals found that petitioner Vicar did not meet the
reasonable rentals for the use of the land at P10,000 per month. On requirement of 30 years possession for acquisitive prescription over
the other hand, Vicar presented the Register of Deeds for the Lots 2 and 3. Neither did it satisfy the requirement of 10 years
Province of Benguet, Atty. Sison, who testified that the land in possession for ordinary acquisitive prescription because of the
absence of just title. The appellate court did not believe the findings
question is not covered by any title in the name of Egmidio
Octaviano or any of the heirs. Vicar dispensed with the testimony of of the trial court that Lot 2 was acquired from Juan Valdez by
Mons. Brasseur when the heirs admitted that the witness if called to purchase and Lot 3 was acquired also by purchase from Egmidio
the witness stand, would testify that Vicar has been in possession of Octaviano by petitioner Vicar because there was absolutely no
Lot 3, for 75 years continuously and peacefully and has constructed documentary evidence to support the same and the alleged
permanent structures thereon. purchases were never mentioned in the application for registration.

Issue: WON Vicar had been in possession of lots 2 and 3 merely as G.R. No. 146364 June 3, 2004
bailee borrower in commodatum, a gratuitous loan for use. COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE
Held: YES. GUEVARRA, respondents.

Private respondents were able to prove that their predecessors' FACTS:


house was borrowed by petitioner Vicar after the church and the Petitioner Pajuyo paid P400 to a certain Pedro Perez for the rights
convent were destroyed. They never asked for the return of the over a lot, where Pajuyo subsequently built a house. In 1985, Pajuyo
house, but when they allowed its free use, they became bailors in and private respondent Guevarra executed a Kasunduan wherein
commodatum and the petitioner the bailee. Pajuyo allowed Guevarra to live in the house for free, on the
condition that Guevarra would maintain the cleanliness and
The bailees' failure to return the subject matter of commodatum to
the bailor did not mean adverse possession on the part of the orderliness of the house. Guevarra promised that he would vacate
borrower. The bailee held in trust the property subject matter of the premises upon Pajuyo’s demand.
commodatum. The adverse claim of petitioner came only in 1951 In 1994, Pajuyo informed Guevarra of his need of the house and
when it declared the lots for taxation purposes. The action of demanded that the latter vacate the house. Guevarra refused.
petitioner Vicar by such adverse claim could not ripen into title by Pajuyo filed an ejectment case against Guevarra before the MTC.
Guevarra claimed that Pajuyo had no valid title over the lot since it commodatum. The Kasunduan reveals that the accommodation
is within the area set aside for socialized housing. MTC rendered its accorded by Pajuyo to Guevarra was not essentially gratuitous.
decision in favor of Pajuyo, which was affirmed by RTC. (MTC and While the Kasunduan did not require Guevarra to pay rent, it
RTC basically ruled that the Kasunduan created a legal tie akin to obligated him to maintain the property in good condition. The
that of a landlord and tenant relationship). CA reversed the RTC imposition of this obligation makes the Kasunduan a contract
decision, stating that the ejectment case is without legal basis since different from a commodatum. The effects of the Kasunduan are
both Pajuyo and Guevarra illegally occupied the said lot. CA further also different from that of a commodatum. Case law on ejectment
stated that both parties are in pari delicto; thus, the court will leave has treated relationship based on tolerance as one that is akin to a
them where they are. CA ruled that the Kasunduan is not a lease landlord-tenant relationship where the withdrawal of permission
contract, but a commodatum because the agreement is not for a would result in the termination of the lease. The tenant’s
price certain. withholding of the property would then be unlawful. Even assuming
that the relationship between Pajuyo and Guevarra is one of
ISSUE: W/N the contractual relationship between Pajuyo and commodatum, Guevarra as bailee would still have the duty to turn
Guevarra was that of a commodatum over possession of the property to Pajuyo, the bailor. The obligation
HELD: NO. to deliver or to return the thing received attaches to contracts for
safekeeping, or contracts of commission, administration and
In a contract of commodatum, one of the parties delivers to another commodatum.70 These contracts certainly involve the obligation to
something not consumable so that the latter may use the same for deliver or return the thing received. Guevarra turned his back on
a certain time and return it. An essential feature of commodatum is the Kasunduan on the sole ground that like him, Pajuyo is also a
that it is gratuitous. squatter. Guevarra should know that there must be honor even
between squatters. Guevarra freely entered into the Kasunduan.
Another feature of commodatum is that the use of the thing
Guevarra cannot now impugn the Kasunduan after he had benefited
belonging to another is for a certain period. Thus, the bailor cannot
from it. The Kasunduan binds Guevarra. The Kasunduan is not void
demand the return of the thing loaned until after expiration of the
for purposes of determining who between Pajuyo and Guevarra has
period stipulated, or after accomplishment of the use for which the
a right to physical possession of the contested property. The
commodatum is constituted. If the bailor should have urgent need
Kasunduan is the undeniable evidence of Guevarra’s recognition of
of the thing, he may demand its return for temporary use. If the use
Pajuyo’s better right of physical possession. Guevarra is clearly a
of the thing is merely tolerated by the bailor, he can demand the
possessor in bad faith. The absence of a contract would not yield a
return of the thing at will, in which case the contractual relation is
different result, as there would still be an implied promise to vacate.
called a precarium. Under the Civil Code, precarium is a kind of
G.R. No. L-17474 October 25, 1962 cannot be reduced and the they either be returned or their book
value paid not later than 31 October 1950. Subsequently, Jose failed
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. JOSE V. to either return or pay them.
BAGTAS, defendant, FELICIDAD M. BAGTAS, Administratrix of the
Intestate Estate left by the late Jose V. Bagtas, petitioner- (4) On 20 December 1950, the Republic commenced an action
appellant. against Jose in the CFI of Manila ordering the return of the bulls and
the payment of their book value. On 5 July 1951, however, Jose
PADILLA, J.: replied that he could neither return the bulls nor pay their book
Facts: value due to the bad peace and order situation in Cagayan Valley.
Later on, it was found out that the Sahiniwal died from a gunshot
(1) On 8 May 1948, Jose borrowed from the Republic, through the wound inflicted during a Huk raid sometime in November 1953.
Bureau of Animal Industry, three bulls for a period of one year. This
was for breeding purposes subject to a government charge, which Issue:
was the breeding fee of 10% of the book value of the bulls. The
Whether or not Jose is liable for the death of the Sahiniwal.
three bulls and their book values are as follows:
Ruling:
(a) Red Sindhi – PhP 1,176.46;
Yes, Jose is liable for the death of the Sahiniwal. This liability is
(b) Bhagnari – PhP 1,320.56; and based on Article 1942 of the New Civil Code (NCC) regarding the
(c) Sahiniwal – PhP 744.46 obligations of the bailee in commodatum.

(2) Upon the expiration of the contract on 7 May 1949, Jose asked Ratio:
Republic for a renewal of the same for another year. The Republic, (1) The bailee in commodatum is liable for the loss of the things,
through the Secretary of Agricul ture and Natural Resources,
even if it should be through a fortuitous event if:
however, only approved the renewal of only one bull for another
year. It also requested the return of the other two bulls. (a) he keeps it longer than the period stipulated (Article 1942(2),
NCC); and
(3) On 25 March 1950, Jose wrote to the Director of Animal Industry
that he would pay the value of the three bulls. Moreover, he (b) the thing loaned has been delivered with appraisal of its value,
expressed his desire to buy them at lower value. On 19 October unless there is a stipulation exempting the bailee from responsibility
1950, the Director advised him that the books value of the bulls in case of a fortuitous event.
(2) The original period of loan was from 8 May 1948 to 7 May 1949.
The loan of one bull was renewed for another period of one year to
end on 8 May 1950. Nevertheless, Jose kept and used the bull until
November 1953 when it was killed by stray bullets during a Huk
raid.

(3) Furthermore, when Jose borrowed the three bulls, each of them
had an appraised value, to wit:

(a) Red Sindhi – PhP 1,176.46;

(b) Bhagnari – PhP 1,320.56; and

(c) Sahiniwal – PhP 744.46.

Likewise, the contract between the Republic and Jose did not
stipulate that he would be exempt from liability in case of loss of
the bull due to fortuitous event.

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