Choco CredTrans Cases

Contents
People vs Concepcion ................................................................................................................................... 1
Naguit vs CA .................................................................................................................................................. 6
Catholic Vicar vs CA ....................................................................................................................................... 9
Producers Bank vs CA.................................................................................................................................. 16

People vs Concepcion
G.R. No. L-19190

November 29, 1922

THE
PEOPLE
OF
THE
PHILIPPINE
vs.
VENANCIO CONCEPCION, defendant-appellant.
Recaredo
Ma.
Calvo
Attorney-General Villa-Real for appellee.

ISLANDS, plaintiff-appellee,

for

appellant.

MALCOLM, J.:
By telegrams and a letter of confirmation to the manager of the Aparri branch of the
Philippine National Bank, Venancio Concepcion, President of the Philippine National
Bank, between April 10, 1919, and May 7, 1919, authorized an extension of credit in
favor of "Puno y Concepcion, S. en C." in the amount of P300,000. This special
authorization was essential in view of the memorandum order of President Concepcion
dated May 17, 1918, limiting the discretional power of the local manager at Aparri,
Cagayan, to grant loans and discount negotiable documents to P5,000, which, in certain
cases, could be increased to P10,000. Pursuant to this authorization, credit aggregating
P300,000, was granted the firm of "Puno y Concepcion, S. en C.," the only security
required consisting of six demand notes. The notes, together with the interest, were
taken up and paid by July 17, 1919.
"Puno y Concepcion, S. en C." was a copartnership capitalized at P100,000. Anacleto
Concepcion contributed P5,000; Clara Vda. de Concepcion, P5,000; Miguel S.
Concepcion, P20,000; Clemente Puno, P20,000; and Rosario San Agustin, "casada con

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Gral. Venancio Concepcion," P50,000. Member Miguel S. Concepcion was the

administrator of the company.
On the facts recounted, Venancio Concepcion, as President of the Philippine National
Bank and as member of the board of directors of this bank, was charged in the Court of
First Instance of Cagayan with a violation of section 35 of Act No. 2747. He was found
guilty by the Honorable Enrique V. Filamor, Judge of First Instance, and was sentenced
to imprisonment for one year and six months, to pay a fine of P3,000, with subsidiary
imprisonment in case of insolvency, and the costs.
Section 35 of Act No. 2747, effective on February 20, 1918, just mentioned, to which
reference must hereafter repeatedly be made, reads as follows: "The National Bank
shall not, directly or indirectly, grant loans to any of the members of the board of
directors of the bank nor to agents of the branch banks." Section 49 of the same Act
provides: "Any person who shall violate any of the provisions of this Act shall be
punished by a fine not to exceed ten thousand pesos, or by imprisonment not to exceed
five years, or by both such fine and imprisonment." These two sections were in effect in
1919 when the alleged unlawful acts took place, but were repealed by Act No. 2938,
approved on January 30, 1921.
Counsel for the defense assign ten errors as having been committed by the trial court.
These errors they have argued adroitly and exhaustively in their printed brief, and again
in oral argument. Attorney-General Villa-Real, in an exceptionally accurate and
comprehensive brief, answers the proposition of appellant one by one.
The question presented are reduced to their simplest elements in the opinion which
follows:
I. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S.
en C." by Venancio Concepcion, President of the Philippine National Bank, a "loan"
within the meaning of section 35 of Act No. 2747?
Counsel argue that the documents of record do not prove that authority to make a loan
was given, but only show the concession of a credit. In this statement of fact, counsel is
correct, for the exhibits in question speak of a "credito" (credit) and not of a " prestamo"
(loan).
The "credit" of an individual means his ability to borrow money by virtue of the
confidence or trust reposed by a lender that he will pay what he may promise.
(Donnell vs. Jones [1848], 13 Ala., 490; Bouvier's Law Dictionary.) A "loan" means the
delivery by one party and the receipt by the other party of a given sum of money, upon
an agreement, express or implied, to repay the sum loaned, with or without interest.
(Payne vs. Gardiner [1864], 29 N. Y., 146, 167.) The concession of a "credit"
necessarily involves the granting of "loans" up to the limit of the amount fixed in the
"credit,"

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II. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S.
en C.," by Venancio Concepcion, President of the Philippine National Bank, a "loan" or
a "discount"?
Counsel argue that while section 35 of Act No. 2747 prohibits the granting of a "loan," it
does not prohibit what is commonly known as a "discount."
In a letter dated August 7, 1916, H. Parker Willis, then President of the National Bank,
inquired of the Insular Auditor whether section 37 of Act No. 2612 was intended to apply
to discounts as well as to loans. The ruling of the Acting Insular Auditor, dated August
11, 1916, was to the effect that said section referred to loans alone, and placed no
restriction upon discount transactions. It becomes material, therefore, to discover the
distinction between a "loan" and a "discount," and to ascertain if the instant transaction
comes under the first or the latter denomination.
Discounts are favored by bankers because of their liquid nature, growing, as they do,
out of an actual, live, transaction. But in its last analysis, to discount a paper is only a
mode of loaning money, with, however, these distinctions: (1) In a discount, interest is
deducted in advance, while in a loan, interest is taken at the expiration of a credit; (2) a
discount is always on double-name paper; a loan is generally on single-name paper.
Conceding, without deciding, that, as ruled by the Insular Auditor, the law covers loans
and not discounts, yet the conclusion is inevitable that the demand notes signed by the
firm "Puno y Concepcion, S. en C." were not discount paper but were mere evidences
of indebtedness, because (1) interest was not deducted from the face of the notes, but
was paid when the notes fell due; and (2) they were single-name and not double-name
paper.
The facts of the instant case having relation to this phase of the argument are not
essentially different from the facts in the Binalbagan Estate case. Just as there it was
declared that the operations constituted a loan and not a discount, so should we here
lay down the same ruling.
III. Was the granting of a credit of P300,000 to the copartnership, "Puno y Concepcion,
S. en C." by Venancio Concepcion, President of the Philippine National Bank, an
"indirect loan" within the meaning of section 35 of Act No. 2747?
Counsel argue that a loan to the partnership "Puno y Concepcion, S. en C." was not an
"indirect loan." In this connection, it should be recalled that the wife of the defendant
held one-half of the capital of this partnership.
In the interpretation and construction of statutes, the primary rule is to ascertain and
give effect to the intention of the Legislature. In this instance, the purpose of the
Legislature is plainly to erect a wall of safety against temptation for a director of the
bank. The prohibition against indirect loans is a recognition of the familiar maxim that no
man may serve two masters that where personal interest clashes with fidelity to duty
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the latter almost always suffers. If, therefore, it is shown that the husband is financially
interested in the success or failure of his wife's business venture, a loan to partnership
of which the wife of a director is a member, falls within the prohibition.
Various provisions of the Civil serve to establish the familiar relationship called a
conjugal partnership. (Articles 1315, 1393, 1401, 1407, 1408, and 1412 can be specially
noted.) A loan, therefore, to a partnership of which the wife of a director of a bank is a
member, is an indirect loan to such director.
That it was the intention of the Legislature to prohibit exactly such an occurrence is
shown by the acknowledged fact that in this instance the defendant was tempted to
mingle his personal and family affairs with his official duties, and to permit the loan
P300,000 to a partnership of no established reputation and without asking for collateral
security.
In the case of Lester and Wife vs. Howard Bank ([1870], 33 Md., 558; 3 Am. Rep., 211),
the Supreme Court of Maryland said:
What then was the purpose of the law when it declared that no director or officer
should borrow of the bank, and "if any director," etc., "shall be convicted," etc.,
"of directly or indirectly violating this section he shall be punished by fine and
imprisonment?" We say to protect the stockholders, depositors and creditors of
the bank, against the temptation to which the directors and officers might be
exposed, and the power which as such they must necessarily possess in the
control and management of the bank, and the legislature unwilling to rely upon
the implied understanding that in assuming this relation they would not acquire
any interest hostile or adverse to the most exact and faithful discharge of duty,
declared in express terms that they should not borrow, etc., of the bank.
In the case of People vs. Knapp ([1912], 206 N. Y., 373), relied upon in the Binalbagan
Estate decision, it was said:
We are of opinion the statute forbade the loan to his copartnership firm as well as
to himself directly. The loan was made indirectly to him through his firm.
IV. Could Venancio Concepcion, President of the Philippine National Bank, be convicted
of a violation of section 35 of Act No. 2747 in relation with section 49 of the same Act,
when these portions of Act No. 2747 were repealed by Act No. 2938, prior to the finding
of the information and the rendition of the judgment?
As noted along toward the beginning of this opinion, section 49 of Act No. 2747, in
relation to section 35 of the same Act, provides a punishment for any person who shall
violate any of the provisions of the Act. It is contended, however, by the appellant, that
the repeal of these sections of Act No. 2747 by Act No. 2938 has served to take away
the basis for criminal prosecution.

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This same question has been previously submitted and has received an answer
adverse to such contention in the cases of United Stated vs. Cuna ([1908], 12 Phil.,
241); People vs. Concepcion ([1922], 43 Phil., 653); and Ong Chang Wing and Kwong
Fok vs. United States ([1910], 218 U. S., 272; 40 Phil., 1046). In other words, it has
been the holding, and it must again be the holding, that where an Act of the Legislature
which penalizes an offense, such repeals a former Act which penalized the same
offense, such repeal does not have the effect of thereafter depriving the courts of
jurisdiction to try, convict, and sentenced offenders charged with violations of the old
law.
V. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion,
S. en C." by Venancio Concepcion, President of the Philippine National Bank, in
violation of section 35 of Act No. 2747, penalized by this law?
Counsel argue that since the prohibition contained in section 35 of Act No. 2747 is on
the bank, and since section 49 of said Act provides a punishment not on the bank when
it violates any provisions of the law, but on a personviolating any provisions of the
same, and imposing imprisonment as a part of the penalty, the prohibition contained in
said section 35 is without penal sanction.lawph!l.net
The answer is that when the corporation itself is forbidden to do an act, the prohibition
extends to the board of directors, and to each director separately and individually.
(People vs. Concepcion, supra.)
VI. Does the alleged good faith of Venancio Concepcion, President of the Philippine
National Bank, in extending the credit of P300,000 to the copartnership "Puno y
Concepcion, S. en C." constitute a legal defense?
Counsel argue that if defendant committed the acts of which he was convicted, it was
because he was misled by rulings coming from the Insular Auditor. It is furthermore
stated that since the loans made to the copartnership "Puno y Concepcion, S. en C."
have been paid, no loss has been suffered by the Philippine National Bank.
Neither argument, even if conceded to be true, is conclusive. Under the statute which
the defendant has violated, criminal intent is not necessarily material. The doing of the
inhibited act, inhibited on account of public policy and public interest, constitutes the
crime. And, in this instance, as previously demonstrated, the acts of the President of the
Philippine National Bank do not fall within the purview of the rulings of the Insular
Auditor, even conceding that such rulings have controlling effect.
Morse, in his work, Banks and Banking, section 125, says:
It is fraud for directors to secure by means of their trust, and advantage not
common to the other stockholders. The law will not allow private profit from a
trust, and will not listen to any proof of honest intent.

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JUDGMENT
On a review of the evidence of record, with reference to the decision of the trial court,
and the errors assigned by the appellant, and with reference to previous decisions of
this court on the same subject, we are irresistibly led to the conclusion that no reversible
error was committed in the trial of this case, and that the defendant has been proved
guilty beyond a reasonable doubt of the crime charged in the information. The penalty
imposed by the trial judge falls within the limits of the punitive provisions of the law.
Judgment is affirmed, with the costs of this instance against the appellant. So ordered.

Naguit vs CA

[G.R. No. 137675. December 5, 2000]

NOVERNIA P. NAGUIT, petitioner, vs. THE COURT OF APPEALS, OSLER U.

PADUA and NORBERTO B. MAGSAJO, respondents.
DECISION
GONZAGA-REYES, J.:
In a decision rendered on 15 October 1991, the Regional Trial Court (RTC) of
Makati, Branch 133, found Rolando Naguit liable for violation of Batas Pambansa Blg.
22, and ordered him to idemnify private respondent Osler U. Padua in the amount of
P260,000.00 and to pay the costs of the action (Criminal Case No. 90-2645). A writ of
execution was issued by said court on 23 June 1992 and pursuant thereto, respondent
Sheriff Norberto B. Magsajo levied upon a condominium unit covered by Condominium
Certificate of Title No. 7362 of the Registry of Deeds for the City of Makati, which notice
of levy was annotated at the back of the title. Consequently, the property was sold at a
public auction for P318,050.00 in favor of private respondent, as the highest bidder. The
certificate of sale was issued in the name of private respondent and registered with the
Registry of Deeds on 25 August 1994.
On 8 August 1995, petitioner filed a complaint with the RTC of Makati against
private respondent Padua and respondent Sheriff Magsajo for the annulment of sale
and for damages, with a prayer for the issuance of a writ of preliminary injunction in
order to enjoin the final conveyance of title over the condominium unit to private
respondent (Civil Case No. 95-1182). Petitioner claimed that the debt contracted by her
husband did not redound to the benefit of the family, nor was it made with her consent,
and therefore, should not be charged to the conjugal partnership of gains or to her
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exclusive property; that the condominium unit levied upon and sold to private
respondent is her exclusive property, not the judgment obligors; and that consequently,
the levy and sale of the condominium unit are void.[1]
On 20 September 1995, Branch 136 of the RTC of Makati denied petitioners prayer
for the issuance of preliminary injunction, explaining that
The perceived anomaly in the auction sale of the property subject of this case, which [is]
claimed to be owned by the petitioner is a matter within the competence of the Court
which authorized the levy on execution of judgment, of property of plaintiff in this case.
If plaintiff believes that there were irregularities in the auction sale of the property
subject of this case which [is] claimed to be owned by the petitioner, the problems
should have been threshed out before [the] RTC Makati, Branch 133, which court
authorized the levy on execution of judgment of property of plaintiff in this case.
Besides, the petitioner should have elevated the matter to the higher tribunal, and seek
proper injunctive relief, and not to refer to this Court which does not exercise an
appellate authority over the court that issued the aforesaid writ of execution.
The Court agrees with the argument of the defendant that the present action of the
plaintiff in seeking relief with this Court is legally misplaced.
It is an elementary rule of procedure, which is too well settled to be ignored, that trial
courts have no power to interfere by injunction and are enjoined from intervening with
the proceedings of a co-equal, concurrent and coordinate court of the same
jurisdiction.[2]
On 5 July 1996, the trial court issued an order denying petitioners motion for
reconsideration and dismissing the case on the ground of lack of jurisdiction. [3] The
Court of Appeals upheld the trial courts decision to dismiss the case. In its decision
promulgated on 18 November 1998, the appellate court explained that since petitioner
is the spouse of the judgment debtor she cannot be considered a stranger to the case
wherein the writ of execution was issued and thus, she should have presented her thirdparty claim therein. In the event that her claim is denied, only then should petitioner
bring the matter before the appellate court.[4] Petitioner filed a motion for
reconsideration, which was denied by the Court of Appeals on 9 February 1999.
Hence, the present petition, wherein petitioner asks that the 18 November 1998
Decision and 9 February 1999 Resolution of the Court of Appeals be set aside and that
the action for annulment of sale be tried on the merits.[5]
The petition is imbued with merit. A third-party claimants right to bring an
independent action to assert his claim of ownership over the properties seized is
sanctioned by Section 17 of Rule 39 of the old Rules of Civil Procedure, which provides
that
Proceedings where property claimed by third person. - If property levied on be claimed
by any other person than the judgment debtor or his agent, and such person make an
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affidavit of his title thereto or right to the possession thereof, stating the grounds of such
right or title, and serve the same upon the officer making the levy, and copy thereof
upon the judgment creditor, the officer shall not be bound to keep the property, unless
such judgment creditor or his agent, on demand of the officer, indemnify the officer
against such claim by a bond in a sum not greater than the value of the property levied
on. In case of disagreement as to the value, the same shall be determined by the court
issuing the writ of execution.
The officer is not liable for damages, for the taking or keeping of the property, to any
third party claimant unless a claim is made by the latter and unless an action for
damages is brought by him against the officer within one hundred twenty (120) days
from the date ofthe filing of the bond. But nothing herein contained shall prevent such
claimant or any third person from vindicating his claims to the property by any proper
action. [emphasis supplied][6]
xxx xxx xxx
The proper action mentioned in Section 17 would have for its object the recovery of
ownership or possession of the property seized by the sheriff, as well as damages
resulting from the allegedly wrongful seizure and detention thereof despite the third
party claim and it may be brought against the sheriff and such other parties as may be
alleged to have colluded with him in the supposedly wrongful execution proceedings,
such as the judgment creditor himself. If instituted by a stranger to the suit in which
execution has issued, such proper action should be a totally separate and distinct action
from the former suit.[7]
In addition to the filing of a proper action, the third-party claimant may also avail of
the remedy known as terceria, by executing an affidavit of his title or right of possession
over the property seized and serving the same upon the officer making the levy and the
judgment creditor. Thereafter, the officer shall not be bound to keep the property, unless
the judgment creditor or his agent indemnifies the officer against such claim by a bond
in a sum not greater than the value of the property levied on. An action for damages
may be brought against the officer within one hundred twenty (120) days from the date
of the filing of the bond.
These abovementioned remedies are cumulative and any one of them may be
resorted to by a third-party claimant without availing of the others. Thus, the availment
of the remedy of terceria is not a condition sine qua non to the filing of a proper action.
An independent action may be resorted to even before or without need of filing a claim
in the court which issued the writ.[8]
In the case at bar, petitioner filed an independent action for the annulment of the
certificate of sale issued in favor of private respondent, contending that the property
levied upon and sold to private respondent by virtue of the writ of execution issued in
Criminal Case No. 90-2645 was her exclusive property, not that of the judgment
obligor. Pursuant to our ruling in Sy v. Discaya,[9] petitioner is deemed a stranger to the
action wherein the writ of execution was issued and is therefore justified in bringing an
independent action to vindicate her right of ownership over the subject property.
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Contrary to the stand taken by the trial court, the filing of such an independent
action cannot be considered an encroachment upon the jurisdiction of a co-equal and
coordinate court. The court issuing the writ of execution may enforce its authority only
over properties of the judgment debtor; thus, the sheriff acts properly only when he
subjects to execution property undeniably belonging to the judgment debtor. If the
sheriff levies upon the assets of a third person in which the judgment debtor has no
interest, then he is acting beyond the limits of his authority and is amenable to control
and correction by a court of competent jurisdiction in a separate and independent
action.[10] This is in consonance with the well-established principle that no man shall be
affected by any proceeding to which he is a stranger. Execution of a judgment can only
be issued against a party to the action, and not against one who has not yet had his day
in court.[11]
WHEREFORE, the petition is GRANTED. The assailed decision and resolution of
the Court of Appeals, promulgated on 18 November 1998 and 9 February 1999,
respectively, are hereby SET ASIDE. This case is remanded to the trial court for further
proceedings.
SO ORDERED.

Catholic Vicar vs CA
G.R. No. 80294-95 September 21, 1988
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN
VALDEZ, respondents.
Valdez, Ereso, Polido & Associates for petitioner.
Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner.
Jaime G. de Leon for the Heirs of Egmidio Octaviano.
Cotabato Law Office for the Heirs of Juan Valdez.

GANCAYCO, J.:
The principal issue in this case is whether or not a decision of the Court of Appeals
promulgated a long time ago can properly be considered res judicata by respondent
Court of Appeals in the present two cases between petitioner and two private
respondents.
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Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the
Ninth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No.
3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of
Possession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of
the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and Civil
Case No. 3655 (429), with the dispositive portion as follows:
WHEREFORE, Judgment is hereby rendered ordering the defendant,
Catholic Vicar Apostolic of the Mountain Province to return and surrender
Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3
of the same Plan to the other set of plaintiffs, the Heirs of Egmidio
Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence,
the plaintiffs' claim or damages is hereby denied. Said defendant is
ordered to pay costs. (p. 36, Rollo)
Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial
court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CAG.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on the
ownership of lots 2 and 3 in question; that the two lots were possessed by the
predecessors-in-interest of private respondents under claim of ownership in good faith
from 1906 to 1951; that petitioner had been in possession of the same lots as bailee in
commodatum up to 1951, when petitioner repudiated the trust and when it applied for
registration in 1962; that petitioner had just been in possession as owner for eleven
years, hence there is no possibility of acquisitive prescription which requires 10 years
possession with just title and 30 years of possession without; that the principle of res
judicata on these findings by the Court of Appeals will bar a reopening of these
questions of facts; and that those facts may no longer be altered.
Petitioner's motion for reconsideation of the respondent appellate court's Decision in the
two aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.
The facts and background of these cases as narrated by the trail court are as follows
... The documents and records presented reveal that the
whole controversy started when the defendant Catholic Vicar
Apostolic of the Mountain Province (VICAR for brevity) filed
with the Court of First Instance of Baguio Benguet on
September 5, 1962 an application for registration of title over
Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion
Central, La Trinidad, Benguet, docketed as LRC N-91, said
Lots being the sites of the Catholic Church building,
convents, high school building, school gymnasium, school
dormitories, social hall, stonewalls, etc. On March 22, 1963
the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano
filed their Answer/Opposition on Lots Nos. 2 and 3,
respectively, asserting ownership and title thereto. After trial
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on the merits, the land registration court promulgated its

Decision, dated November 17, 1965, confirming the
registrable title of VICAR to Lots 1, 2, 3, and 4.
The Heirs of Juan Valdez (plaintiffs in the herein Civil Case
No. 3655) and the Heirs of Egmidio Octaviano (plaintiffs in
the herein Civil Case No. 3607) appealed the decision of the
land registration court to the then Court of Appeals, docketed
as CA-G.R. No. 38830-R. The Court of Appeals rendered its
decision, dated May 9, 1977, reversing the decision of the
land registration court and dismissing the VICAR's
application as to Lots 2 and 3, the lots claimed by the two
sets of oppositors in the land registration case (and two sets
of plaintiffs in the two cases now at bar), the first lot being
presently occupied by the convent and the second by the
women's dormitory and the sister's convent.
On May 9, 1977, the Heirs of Octaviano filed a motion for
reconsideration praying the Court of Appeals to order the
registration of Lot 3 in the names of the Heirs of Egmidio
Octaviano, and on May 17, 1977, the Heirs of Juan Valdez
and Pacita Valdez filed their motion for reconsideration
praying that both Lots 2 and 3 be ordered registered in the
names of the Heirs of Juan Valdez and Pacita Valdez. On
August 12,1977, the Court of Appeals denied the motion for
reconsideration filed by the Heirs of Juan Valdez on the
ground that there was "no sufficient merit to justify
reconsideration one way or the other ...," and likewise denied
that of the Heirs of Egmidio Octaviano.
Thereupon, the VICAR filed with the Supreme Court a
petition for review on certiorari of the decision of the Court of
Appeals dismissing his (its) application for registration of
Lots 2 and 3, docketed as G.R. No. L-46832, entitled
'Catholic Vicar Apostolic of the Mountain Province vs. Court
of Appeals and Heirs of Egmidio Octaviano.'
From the denial by the Court of Appeals of their motion for
reconsideration the Heirs of Juan Valdez and Pacita Valdez,
on September 8, 1977, filed with the Supreme Court a
petition for review, docketed as G.R. No. L-46872,
entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court of
Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O.
Valdez.

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On January 13, 1978, the Supreme Court denied in a minute

resolution both petitions (of VICAR on the one hand and the
Heirs of Juan Valdez and Pacita Valdez on the other) for
lack of merit. Upon the finality of both Supreme Court
resolutions in G.R. No. L-46832 and G.R. No. L- 46872, the
Heirs of Octaviano filed with the then Court of First Instance
of Baguio, Branch II, a Motion For Execution of Judgment
praying that the Heirs of Octaviano be placed in possession
of Lot 3. The Court, presided over by Hon. Salvador J.
Valdez, on December 7, 1978, denied the motion on the
ground that the Court of Appeals decision in CA-G.R. No.
38870 did not grant the Heirs of Octaviano any affirmative
relief.
On February 7, 1979, the Heirs of Octaviano filed with the
Court of Appeals a petitioner for certiorari and mandamus,
docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio
Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its
decision dated May 16, 1979, the Court of Appeals
dismissed the petition.
It was at that stage that the instant cases were filed. The
Heirs of Egmidio Octaviano filed Civil Case No. 3607 (419)
on July 24, 1979, for recovery of possession of Lot 3; and
the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on
September 24, 1979, likewise for recovery of possession of
Lot 2 (Decision, pp. 199-201, Orig. Rec.).
In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio
Octaviano presented one (1) witness, Fructuoso Valdez, who testified on
the alleged ownership of the land in question (Lot 3) by their predecessorin-interest, Egmidio Octaviano (Exh. C ); his written demand (Exh. BB-4
) to defendant Vicar for the return of the land to them; and the reasonable
rentals for the use of the land at P10,000.00 per month. On the other
hand, defendant Vicar presented the Register of Deeds for the Province of
Benguet, Atty. Nicanor Sison, who testified that the land in question is not
covered by any title in the name of Egmidio Octaviano or any of the
plaintiffs (Exh. 8). The defendant dispensed with the testimony of
Mons.William Brasseur when the plaintiffs admitted that the witness if
called to the witness stand, would testify that defendant Vicar has been in
possession of Lot 3, for seventy-five (75) years continuously and
peacefully and has constructed permanent structures thereon.
In Civil Case No. 3655, the parties admitting that the material facts are not
in dispute, submitted the case on the sole issue of whether or not the
decisions of the Court of Appeals and the Supreme Court touching on the
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ownership of Lot 2, which in effect declared the plaintiffs the owners of the
land constitute res judicata.
In these two cases , the plaintiffs arque that the defendant Vicar is barred
from setting up the defense of ownership and/or long and continuous
possession of the two lots in question since this is barred by prior
judgment of the Court of Appeals in CA-G.R. No. 038830-R under the
principle of res judicata. Plaintiffs contend that the question of possession
and ownership have already been determined by the Court of Appeals
(Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme
Court (Exh. 1, Minute Resolution of the Supreme Court). On his part,
defendant Vicar maintains that the principle of res judicata would not
prevent them from litigating the issues of long possession and ownership
because the dispositive portion of the prior judgment in CA-G.R. No.
038830-R merely dismissed their application for registration and titling of
lots 2 and 3. Defendant Vicar contends that only the dispositive portion of
the decision, and not its body, is the controlling pronouncement of the
Court of Appeals. 2
The alleged errors committed by respondent Court of Appeals according to petitioner
are as follows:
1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;
2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3
WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE
PRESENTED;
3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3
FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE
FORMER OWNERS WERE VALDEZ AND OCTAVIANO;
4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE
RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM
1906, AND NOT PETITIONER;
5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT
APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS
ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906;
6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN
1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN
RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE
PRESCRIPTION OF 10 YEARS;

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

G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT;
8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON
OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR
PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF
OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2
AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS
LOAN FOR USE;
10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN
GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS
BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R.
NO. 038830. 3
The petition is bereft of merit.
Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148
and 05149, when it clearly held that it was in agreement with the findings of the trial
court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No.
38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of
Appeals Decision CA-G.R. No. 38830-R) did not positively declare private respondents
as owners of the land, neither was it declared that they were not owners of the land, but
it held that the predecessors of private respondents were possessors of Lots 2 and 3,
with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as
borrower in commodatum up to 1951, when it repudiated the trust by declaring the
properties in its name for taxation purposes. When petitioner applied for registration of
Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven
years. Ordinary acquisitive prescription requires possession for ten years, but always
with just title. Extraordinary acquisitive prescription requires 30 years. 4
On the above findings of facts supported by evidence and evaluated by the Court of
Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent
appellate court's ruling that said findings are res judicata between the parties. They can
no longer be altered by presentation of evidence because those issues were resolved
with finality a long time ago. To ignore the principle of res judicata would be to open the
door to endless litigations by continuous determination of issues without end.
An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in
CA-G.R. No. 38830-R, shows that it reversed the trial court's Decision 6 finding
petitioner to be entitled to register the lands in question under its ownership, on its
evaluation of evidence and conclusion of facts.

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The Court of Appeals found that petitioner did not meet the requirement of 30 years
possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the
requirement of 10 years possession for ordinary acquisitive prescription because of the
absence of just title. The appellate court did not believe the findings of the trial court that
Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by
purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no
documentary evidence to support the same and the alleged purchases were never
mentioned in the application for registration.
By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and
Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots since
1906. The predecessors of private respondents, not petitioner Vicar, were in possession
of the questioned lots since 1906.
There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question,
but not Lots 2 and 3, because the buildings standing thereon were only constructed
after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes
in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said
Bishop was appointed only in 1947, the church was constructed only in 1951 and the
new convent only 2 years before the trial in 1963.
When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to
buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner
Vicar only in 1962.
Private respondents were able to prove that their predecessors' house was borrowed by
petitioner Vicar after the church and the convent were destroyed. They never asked for
the return of the house, but when they allowed its free use, they became bailors
in commodatum and the petitioner the bailee. The bailees' failure to return the subject
matter of commodatum to the bailor did not mean adverse possession on the part of the
borrower. The bailee held in trust the property subject matter of commodatum. The
adverse claim of petitioner came only in 1951 when it declared the lots for taxation
purposes. The action of petitioner Vicar by such adverse claim could not ripen into title
by way of ordinary acquisitive prescription because of the absence of just title.
The Court of Appeals found that the predecessors-in-interest and private respondents
were possessors under claim of ownership in good faith from 1906; that petitioner Vicar
was only a bailee in commodatum; and that the adverse claim and repudiation of trust
came only in 1951.
We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R.
No. 38830-R. Its findings of fact have become incontestible. This Court declined to
review said decision, thereby in effect, affirming it. It has become final and executory a
long time ago.

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Respondent appellate court did not commit any reversible error, much less grave abuse
of discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No.
38830-R is governing, under the principle of res judicata, hence the rule, in the present
cases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidence
established in that decision may no longer be altered.
WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for
lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by
respondent Court of Appeals is AFFIRMED, with costs against petitioner.
SO ORDERED.

Producers Bank vs CA

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

PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL

BANK), petitioner, vs. HON. COURT OF APPEALS AND FRANKLIN
VIVES, respondents.
DECISION
CALLEJO, SR., J.:
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
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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 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. 101567 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:
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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;
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
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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 respondentsP200,000.00 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 hisP200,000.00 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
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by petitioner during trial to prove that the transaction between private respondent and
Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla to
withdraw from Sterelas savings account.[19]
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
acommodatum. 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

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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 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
acommodatum into a mutuum because such was not the intent of the parties and
because the additional P12,000.00 corresponds to the fruits of the lending of
the P200,000.00. Article 1935 of the Civil Code expressly states that [t]he bailee
in commodatum acquires the use of the thing loaned but not its fruits. Hence, it was only
proper for Doronilla to remit to private respondent the interest accruing to the latters
money deposited with petitioner.
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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 to plaintiff, Doronilla had already prepared a letter addressed to the
Buendia branch manager authorizing Angeles B. Sanchez and company to open a savings
account for Sterela in the amount of P200,000.00, as per coordination with Mr. Rufo Atienza,
Assistant Manager of the Bank x x x (Exh. 1). This is a clear manifestation that the other
defendants had been in consultation with Atienza from the inception of the
scheme. Significantly, there were testimonies and admission that Atienza is the brother-in-law of
a certain Romeo Mirasol, a friend and business associate of Doronilla.
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

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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]

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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 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.

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