Table of Contents

REPUBLIC ....................................................................................................................................................... 2
CATHOLIC VICAR APOSTOLIC ........................................................................................................................ 4
REPUBLIC ....................................................................................................................................................... 8
MARGARITA QUINTOS ................................................................................................................................ 10
FELIX DE LOS SANTOS.................................................................................................................................. 12
CHEE KIONG YAM........................................................................................................................................ 15
PRODUCERS BANK OF THE PHILIPPINES ..................................................................................................... 18
G.R. No. L-17474 October 25, 1962

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.
JOSE V. BAGTAS, defendant,
FELICIDAD M. BAGTAS, Administratrix of the Intestate Estate left by the late Jose V. Bagtas, petitioner-appellant.

D. T. Reyes, Liaison and Associates for petitioner-appellant.

Office of the Solicitor General for plaintiff-appellee.

PADILLA, J.:

The Court of Appeals certified this case to this Court because only questions of law are raised.

On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry
three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a
period of one year from 8 May 1948 to 7 May 1949 for breeding purposes subject to a government charge of breeding
fee of 10% of the book value of the bulls. Upon the expiration on 7 May 1949 of the contract, the borrower asked for a
renewal for another period of one year. However, the Secretary of Agriculture and Natural Resources approved a
renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and requested the return of the
other two. On 25 March 1950 Jose V. Bagtas wrote to the Director of Animal Industry that he would pay the value of
the three bulls. On 17 October 1950 he reiterated his desire to buy them at a value with a deduction of yearly
depreciation to be approved by the Auditor General. On 19 October 1950 the Director of Animal Industry advised him
that the book value of the three bulls could not be reduced and that they either be returned or their book value paid
not later than 31 October 1950. Jose V. Bagtas failed to pay the book value of the three bulls or to return them. So, on
20 December 1950 in the Court of First Instance of Manila the Republic of the Philippines commenced an action
against him praying that he be ordered to return the three bulls loaned to him or to pay their book value in the total
sum of P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with interests, and costs; and that other
just and equitable relief be granted in (civil No. 12818).

On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the bad peace
and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending appeal he had taken to
the Secretary of Agriculture and Natural Resources and the President of the Philippines from the refusal by the
Director of Animal Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8% from
the date of acquisition, to which depreciation the Auditor General did not object, he could not return the animals nor
pay their value and prayed for the dismissal of the complaint.

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

. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total value of the three bulls plus the breeding
fees in the amount of P626.17 with interest on both sums of (at) the legal rate from the filing of this complaint and
costs.

On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted on 18 October and
issued on 11 November 1958. On 2 December 1958 granted an ex-parte motion filed by the plaintiff on November
1958 for the appointment of a special sheriff to serve the writ outside Manila. Of this order appointing a special
sheriff, on 6 December 1958, Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who died on 23
October 1951 and as administratrix of his estate, was notified. On 7 January 1959 she file a motion alleging that on 26
June 1952 the two bull Sindhi and Bhagnari were returned to the Bureau Animal of Industry and that sometime in
November 1958 the third bull, the Sahiniwal, died from gunshot wound inflicted during a Huk raid on Hacienda
Felicidad Intal, and praying that the writ of execution be quashed and that a writ of preliminary injunction be issued.
On 31 January 1959 the plaintiff objected to her motion. On 6 February 1959 she filed a reply thereto. On the same
day, 6 February, the Court denied her motion. Hence, this appeal certified by the Court of Appeals to this Court as
stated at the beginning of this opinion.

It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late defendant, returned the Sindhi and
Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station, Bureau of Animal Industry, Bayombong, Nueva
Vizcaya, as evidenced by a memorandum receipt signed by the latter (Exhibit 2). That is why in its objection of 31
January 1959 to the appellant's motion to quash the writ of execution the appellee prays "that another writ of
execution in the sum of P859.53 be issued against the estate of defendant deceased Jose V. Bagtas." She cannot be
held liable for the two bulls which already had been returned to and received by the appellee.
The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk in November 1953 upon
the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan, where the animal was kept, and that as such
death was due to force majeure she is relieved from the duty of returning the bull or paying its value to the appellee.
The contention is without merit. The loan by the appellee to the late defendant Jose V. Bagtas of the three bulls for
breeding purposes for a period of one year from 8 May 1948 to 7 May 1949, later on renewed for another year as
regards one bull, was subject to the payment by the borrower of breeding fee of 10% of the book value of the bulls.
The appellant contends that the contract was commodatum and that, for that reason, as the appellee retained
ownership or title to the bull it should suffer its loss due to force majeure. A contract of commodatum is essentially
gratuitous.1 If the breeding fee be considered a compensation, then the contract would be a lease of the bull. Under
article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith, because
she had continued possession of the bull after the expiry of the contract. And even if the contract becommodatum,
still the appellant is liable, because article 1942 of the Civil Code provides that a bailee in a contract
of commodatum

. . . is liable for loss of the things, even if it should be through a fortuitous event:

(2) If he keeps it longer than the period stipulated . . .

(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee
from responsibility in case of a fortuitous event;

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for another
period of one year to end on 8 May 1950. But the appellant kept and used the bull until November 1953 when during
a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the deceased husband of the
appellant the bulls had each an appraised book value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and
the Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband
of the appellant would be exempt from liability.

The appellant's contention that the demand or prayer by the appellee for the return of the bull or the payment of its
value being a money claim should be presented or filed in the intestate proceedings of the defendant who died on 23
October 1951, is not altogether without merit. However, the claim that his civil personality having ceased to exist the
trial court lost jurisdiction over the case against him, is untenable, because section 17 of Rule 3 of the Rules of Court
provides that

After a party dies and the claim is not thereby extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and to be substituted for the deceased, within a period of thirty (30) days, or
within such time as may be granted. . . .

and after the defendant's death on 23 October 1951 his counsel failed to comply with section 16 of Rule 3 which
provides that

Whenever a party to a pending case dies . . . it shall be the duty of his attorney to inform the court promptly of such
death . . . and to give the name and residence of the executory administrator, guardian, or other legal representative
of the deceased . . . .

The notice by the probate court and its publication in the Voz de Manila that Felicidad M. Bagtas had been issue
letters of administration of the estate of the late Jose Bagtas and that "all persons having claims for monopoly against
the deceased Jose V. Bagtas, arising from contract express or implied, whether the same be due, not due, or
contingent, for funeral expenses and expenses of the last sickness of the said decedent, and judgment for monopoly
against him, to file said claims with the Clerk of this Court at the City Hall Bldg., Highway 54, Quezon City, within six (6)
months from the date of the first publication of this order, serving a copy thereof upon the aforementioned Felicidad
M. Bagtas, the appointed administratrix of the estate of the said deceased," is not a notice to the court and the
appellee who were to be notified of the defendant's death in accordance with the above-quoted rule, and there was
no reason for such failure to notify, because the attorney who appeared for the defendant was the same who
represented the administratrix in the special proceedings instituted for the administration and settlement of his
estate. The appellee or its attorney or representative could not be expected to know of the death of the defendant or
of the administration proceedings of his estate instituted in another court that if the attorney for the deceased
defendant did not notify the plaintiff or its attorney of such death as required by the rule.

As the appellant already had returned the two bulls to the appellee, the estate of the late defendant is only liable for
the sum of P859.63, the value of the bull which has not been returned to the appellee, because it was killed while in
the custody of the administratrix of his estate. This is the amount prayed for by the appellee in its objection on 31
January 1959 to the motion filed on 7 January 1959 by the appellant for the quashing of the writ of execution.
Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having been
instituted in the Court of First Instance of Rizal (Q-200), the money judgment rendered in favor of the appellee cannot
be enforced by means of a writ of execution but must be presented to the probate court for payment by the
appellant, the administratrix appointed by the court.

ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as to costs

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

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,

vs. CA, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents.

GANCAYCO, J.:

The principal issue in this case is whether or not a decision of the CA promulgated a long time ago can properly be
considered res judicata by respondent CA in the present 2 cases between petitioner and 2 private respondents.

Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth Division of Respondent
CA 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 Hon 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 / insufficiency of evidence, the plaintiffs' claim / damages is hereby
denied. Said defendant is ordered to pay costs. (p. 36, Rollo)

Respondent CA, in affirming the trial court's decision, sustained the trial court's conclusions that the Decision of the
CA, dated May 4,1977 in CA-G.R. No. 38830-R, in the 2 cases affirmed by the SC, touched on the ownership of lots 2
and 3 in question; that the 2 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 CA will bar a reopening of these questions of facts; and that those facts may
no longer be altered.

Petitioner's MR 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 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 CA, docketed as CA-G.R. No.
38830-R. The CA 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 CA denied the MR 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.

On January 13, 1978, the SC 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 SC 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 CA 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 CA 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 predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written demand (Exh. BB-4 )
to defendant Vicar for the return of the land to them; and the reasonable rentals for the use of
the land at P10,000.00 per month. On the 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 CA and the Supreme Court
touching on the ownership of Lot 2, which in effect declared the plaintiffs the owners of the land
constitute res judicata.

In these 2 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 CA 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 CA (Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the SC (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 CA. 2

The alleged errors committed by respondent CA according to petitioner are as follows:

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

2. ERROR IN FINDING THAT THE TC RULED THAT LOTS 2 & 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;
7. ERROR IN FINDING THAT THE DECISION OF THE CA 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 & 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 CA 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 CA 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.
The CA 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 & 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 CA 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 CA 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.

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.
G.R. No. L-46145 November 26, 1986

REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner,

vs.
THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY, represented by RICARDO BALOY, ET AL.,respondents.

PARAS, J.:p

This case originally emanated from a decision of the then Court of First Instance of Zambales in LRC Case No. 11-0,
LRC Record No. N-29355, denying respondents' application for registration. From said order of denial the applicants,
heirs of Domingo Baloy, represented by Ricardo P. Baloy, (herein private respondents) interposed on appeal to the
Court of Appeals which was docketed as CA-G.R. No. 52039-R. The appellate court, thru its Fifth Division with the
Hon. Justice Magno Gatmaitan as ponente, rendered a decision dated February 3, 1977 reversing the decision
appealed from and thus approving the application for registration. Oppositors (petitioners herein) filed their Motion
for Reconsideration alleging among other things that applicants' possessory information title can no longer be
invoked and that they were not able to prove a registerable title over the land. Said Motion for Reconsideration was
denied, hence this petition for review on certiorari.

Applicants' claim is anchored on their possessory information title (Exhibit F which had been translated in Exhibit F-1)
coupled with their continuous, adverse and public possession over the land in question. An examination of the
possessory information title shows that the description and the area of the land stated therein substantially
coincides with the land applied for and that said possessory information title had been regularly issued having been
acquired by applicants' predecessor, Domingo Baloy, under the provisions of the Spanish Mortgage Law. Applicants
presented their tax declaration on said lands on April 8, 1965.

The Director of Lands opposed the registration alleging that this land had become public land thru the operation of
Act 627 of the Philippine Commission. On November 26, 1902 pursuant to the executive order of the President of
the U.S., the area was declared within the U.S. Naval Reservation. Under Act 627 as amended by Act 1138, a period
was fixed within which persons affected thereby could file their application, (that is within 6 months from July 8,
1905) otherwise "the said lands or interest therein will be conclusively adjudged to be public lands and all claims on
the part of private individuals for such lands or interests therein not to presented will be forever barred." Petitioner
argues that since Domingo Baloy failed to file his claim within the prescribed period, the land had become
irrevocably public and could not be the subject of a valid registration for private ownership.

Considering the foregoing facts respondents Court of Appeals ruled as follows:

... perhaps, the consequence was that upon failure of Domingo Baloy to have filed his application within that period
the land had become irrevocably public; but perhaps also, for the reason that warning was from the Clerk of the
Court of Land Registration, named J.R. Wilson and there has not been presented a formal order or decision of the said
Court of Land Registration so declaring the land public because of that failure, it can with plausibility be said that after
all, there was 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, as this Court understands from the communication of the Department of Foreign Affairs
to the U.S. Embassy exhibited in the record, but the very tenor of the communication apparently seeks to justify the
title of herein applicants, in other words, what this Court has taken from the occupation by the U.S. Navy is that
during the interim, the title of applicants was in a state of suspended animation so to speak but it had not died either;
and the fact being that this land was really originally private from and after the issuance and inscription of the
possessory information Exh. F during the Spanish times, it would be most difficult to sustain position of Director of
Lands that it was land of no private owner; open to public disposition, and over which he has control; and since
immediately after U.S. Navy had abandoned the area, applicant came in and asserted title once again, only to be
troubled by first Crispiniano Blanco who however in due time, quitclaimed in favor of applicants, and then by private
oppositors now, apparently originally tenants of Blanco, but that entry of private oppositors sought to be given color
of ownership when they sought to and did file tax declaration in 1965, should not prejudice the original rights of
applicants thru their possessory information secured regularly so long ago, the conclusion must have to be that after
all, applicants had succeeded in bringing themselves within the provisions of Sec. 19 of Act 496, the land should be
registered in their favor;

IN VIEW WHEREOF, this Court is constrained to reverse, as it now reverses, judgment appealed from the application
is approved, and once this decision shall have become final, if ever it would be, let decree issue in favor of applicants
with the personal circumstances outlined in the application, costs against private oppositors.

Petitioner now comes to Us with the following:

ASSIGNMENT OF ERRORS:

1. Respondent court erred in holding that to bar private respondents from asserting any right under their possessory
information title there is need for a court order to that effect.

2. Respondent court erred in not holding that private respondents' rights by virtue of their possessory information
title was lost by prescription.

3. Respondent court erred in concluding that applicants have registerable title.

A cursory reading of Sec. 3, Act 627 reveals that several steps are to be followed before any affected land can "be
conclusively adjudged to be public land." Sec. 3, Act 627 reads as follows:

SEC. 3. Immediately upon receipt of the notice from the civil Governor in the preceeding section mentioned it shall
be the duty of the judge of the Court of Land Registration to issue a notice, stating that the lands within the limits
aforesaid have been reserved for military purposes, and announced and declared to be military reservations, and
that claims for all private lands, buildings, and interests therein, within the limits aforesaid, must be presented for
registration under the Land Registration Act within six calendar months from the date of issuing the notice, and that
all lands, buildings, and interests therein within the limits aforesaid not so presented within the time therein limited
will be conclusively adjudged to be public lands and all claims on the part of private individuals for such lands,
buildings, or an interest therein not so presented will be forever barred. The clerk of the Court of Land Registration
shall immediately upon the issuing of such notice by the judge cause the same to be published once a week for
three successive weeks in two newspapers, one of which newspapers shall be in the English Language, and one in
the Spanish language in the city or province where the land lies, if there be no such Spanish or English newspapers
having a general circulation in the city or province wherein the land lies, then it shall be a sufficient compliance with
this section if the notice be published as herein provided, in a daily newspaper in the Spanish language and one in
the English language, in the City of Manila, having a general circulation. The clerk shall also cause a duly attested
copy of the notice in the Spanish language to be posted in conspicuous place at each angle formed by the lines of
the limits of the land reserved. The clerk shall also issue and cause to be personally served the notice in the Spanish
language upon every person living upon or in visible possession of any part of the military reservation. If the person
in possession is the head of the family living upon the hand, it shall be sufficient to serve the notice upon him, and if
he is absent it shall be sufficient to leave a copy at his usual place of residence. The clerk shall certify the manner in
which the notices have been published, posted, and served, and his certificate shall be conclusive proof of such
publication, posting, and service, but the court shall have the power to cause such further notice to be given as in its
opinion may be necessary.

Clearly under said provisions, private land could be deemed to have become public land only by virtue of a judicial
declaration after due notice and hearing. It runs contrary therefore to the contention of petitioners that failure to
present claims set forth under Sec. 2 of Act 627 made the land ipso facto public without any deed of judicial
pronouncement. Petitioner in making such declaration relied on Sec. 4 of Act 627 alone. But in construing a statute
the entire provisions of the law must be considered in order to establish the correct interpretation as intended by
the law-making body. Act 627 by its terms is not self-executory and requires implementation by the Court of Land
Registration. Act 627, to the extent that it creates a forfeiture, is a penal statute in derogation of private rights, so it
must be strictly construed so as to safeguard private respondents' rights. Significantly, petitioner does not even
allege the existence of any judgment of the Land Registration court with respect to the land in question. Without a
judgment or order declaring the land to be public, its private character and the possessory information title over it
must be respected. Since no such order has been rendered by the Land Registration Court it necessarily follows that
it never became public land thru the operation of Act 627. To assume otherwise is to deprive private respondents of
their property without due process of law. In fact it can be presumed that the notice required by law to be given by
publication and by personal service did not include the name of Domingo Baloy and the subject land, and hence he
and his lane were never brought within the operation of Act 627 as amended. The procedure laid down in Sec. 3 is a
requirement of due process. "Due process requires that the statutes which under it is attempted to deprive a citizen
of private property without or against his consent must, as in expropriation cases, be strictly complied with, because
such statutes are in derogation of general rights." (Arriete vs. Director of Public Works, 58 Phil. 507, 508, 511).

We also find with favor private respondents' views that court judgments are not to be presumed. It would be absurd
to speak of a judgment by presumption. If it could be contended that such a judgment may be presumed, it could
equally be contended that applicants' predecessor Domingo Baloy presumably seasonably filed a claim, in
accordance with the legal presumption that a person takes ordinary care of his concerns, and that a judgment in his
favor was rendered.

The finding of respondent court that during the interim of 57 years from November 26, 1902 to December 17, 1959
(when the U.S. Navy possessed the area) the possessory rights of Baloy or heirs were merely suspended and not lost
by prescription, is supported by Exhibit "U," a communication or letter No. 1108-63, dated June 24, 1963, which
contains an official statement of the position of the Republic of the Philippines with regard to the status of the land
in question. Said letter recognizes the fact that Domingo Baloy and/or his heirs have been in continuous possession
of said land since 1894 as attested by an "Informacion Possessoria" Title, which was granted by the Spanish
Government. Hence, the disputed property is private land and this possession was interrupted only by the
occupation of the land by the U.S. Navy in 1945 for recreational purposes. The U.S. Navy eventually abandoned the
premises. The heirs of the late Domingo 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 being used by the U.S. Navy personnel and this place
is remote from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept of owner. It partakes of the character of
acommodatum. It cannot therefore militate against the title of Domingo Baloy and his successors-in-interest. One's
ownership of a thing may be lost by prescription by reason of another's possession if such possession be under claim
of ownership, not where the possession is only intended to be transient, as in the case of the U.S. Navy's occupation
of the land concerned, in which case the owner is not divested of his title, although it cannot be exercised in the
meantime.

WHEREFORE, premises considered, finding no merit in the petition the appealed decision is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-46240 November 3, 1939

MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants,

vs. BECK, defendant-appellee.

The plaintiff brought this action to compel the defendant to return her certain furniture which she lent him for his
use. She appealed from the judgment of the Court of First Instance of Manila which ordered that the defendant
return to her the three has heaters and the four electric lamps found in the possession of the Sheriff of said city,
that she call for the other furniture from the said sheriff of Manila at her own expense, and that the fees which the
Sheriff may charge for the deposit of the furniture be paid pro rata by both parties, without pronouncement as to
the costs.

The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar street, No.
1175.

On January 14, 1936, upon the novation of the contract of lease between the plaintiff and the defendant, the plaintiff
gratuitously granted to the defendant the use of the furniture described in the third paragraph of the stipulation of facts,
subject to the condition that the defendant would return them to the plaintiff upon the latter's demand.

The plaintiff sold the property to Maria Lopez and Rosario Lopez and on September 14, 1936, these 3 notified the
defendant of the conveyance, giving him 60 days to vacate the premises under one of the clauses of the contract of
lease. There after the plaintiff required the defendant to return all the furniture transferred to him for them in the
house where they were found.

On November 5, 1936, the defendant, through another person, wrote to the plaintiff reiterating that she may call
for the furniture in the ground floor of the house. On the 7th of the same month, the defendant wrote another
letter to the plaintiff informing her that he could not give up the three gas heaters and the four electric lamps
because he would use them until the 15th of the same month when the lease in due to expire. The plaintiff refused
to get the furniture in view of the fact that the defendant had declined to make delivery of all of them.
 On November 15th, before vacating the house, the defendant deposited with the Sheriff all the furniture belonging
to the plaintiff and they are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in the custody of
the said sheriff.

In their 7 assigned errors the plaintiffs contend that the trial court incorrectly applied the law: in holding that they
violated the contract by not calling for all the furniture on November 5, 1936, when the defendant placed them at
their disposal; in not ordering the defendant to pay them the value of the furniture in case they are not delivered;

in holding that they should get all the furniture from the Sheriff at their expenses;

in ordering them to pay-half of the expenses claimed by the Sheriff for the deposit of the furniture;

in ruling that both parties should pay their respective legal expenses or the costs;

and in denying pay their respective legal expenses or the costs; and in denying the motions for reconsideration and
new trial. To dispose of the case, it is only necessary to decide whether the defendant complied with his obligation to
return the furniture upon the plaintiff's demand; whether the latter is bound to bear the deposit fees thereof, and
whether she is entitled to the costs of litigation.lawphi1.net

The contract entered into between the parties is one of commadatum, because under it the plaintiff gratuitously
granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract the
defendant bound himself to return the furniture to the plaintiff, upon the latters demand (clause 7 of the contract,
Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code). The obligation voluntarily assumed by the
defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to the
plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely placed
them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four eletric lamps. The
provisions of article 1169 of the Civil Code cited by counsel for the parties are not squarely applicable. The trial
court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her obligation to
get the furniture when they were offered to her.

As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand,
the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the
defendant's behest. The latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff
under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas
heaters and the four electric lamps.

As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment thereof by the
defendant in case of his inability to return some of the furniture because under paragraph 6 of the stipulation of
facts, the defendant has neither agreed to nor admitted the correctness of the said value. Should the defendant fail
to deliver some of the furniture, the value thereof should be latter determined by the trial Court through evidence
which the parties may desire to present.

The costs in both instances should be borne by the defendant because the plaintiff is the prevailing party (section
487 of the Code of Civil Procedure). The defendant was the one who breached the contract of commodatum, and
without any reason he refused to return and deliver all the furniture upon the plaintiff's demand. In these
circumstances, it is just and equitable that he pay the legal expenses and other judicial costs which the plaintiff
would not have otherwise defrayed.

The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff, in the
residence to return and deliver to the plaintiff, in the residence or house of the latter, all the furniture described in
paragraph 3 of the stipulation of facts Exhibit A. The expenses which may be occasioned by the delivery to and
deposit of the furniture with the Sheriff shall be for the account of the defendant. the defendant shall pay the costs
in both instances. So ordered.
G.R. No. L-4150 February 10, 1910

FELIX DE LOS SANTOS, plaintiff-appelle,

vs.AGUSTINA JARRA, administratrix of the estate of Magdaleno Jimenea, deceased, defendant-appellant.

TORRES, J.:

On the 1st of September, 1906, Felix de los Santos brought suit against Agustina Jarra, the administratrix of the
estate of Magdaleno Jimenea, alleging that in the latter part of 1901 Jimenea borrowed and obtained from the
plaintiff ten first-class carabaos, to be used at the animal-power mill of his hacienda during the season of 1901-2,
without recompense or remuneration whatever for the use thereof, under the sole condition that they should be
returned to the owner as soon as the work at the mill was terminated; that Magdaleno Jimenea, however, did not
return the carabaos, notwithstanding the fact that the plaintiff claimed their return after the work at the mill was
finished; that Magdaleno Jimenea died on the 28th of October, 1904, and the defendant herein was appointed by
the Court of First Instance of Occidental Negros administratrix of his estate and she took over the administration of
the same and is still performing her duties as such administratrix; that the plaintiff presented his claim to the
commissioners of the estate of Jimenea, within the legal term, for the return of the said ten carabaos, but the said
commissioners rejected his claim as appears in their report; therefore, the plaintiff prayed that judgment be entered
against the defendant as administratrix of the estate of the deceased, ordering her to return the ten first-class
carabaos loaned to the late Jimenea, or their present value, and to pay the costs.

The defendant was duly summoned, and on the 25th of September, 1906, she demurred in writing to the complaint
on the ground that it was vague; but on the 2d of October of the same year, in answer to the complaint, she said
that it was true that the late Magdaleno Jimenea asked the plaintiff to loan him ten carabaos, but that he only
obtained three second-class animals, which were afterwards transferred by sale by the plaintiff to the said Jimenea;
that she denied the allegations contained in paragraph 3 of the complaint; for all of which she asked the court to
absolve her of the complaint with the cost against the plaintiff.

By a writing dated the 11th of December, 1906, Attorney Jose Felix Martinez notified the defendant and her
counsel, Matias Hilado, that he had made an agreement with the plaintiff to the effect that the latter would not
compromise the controversy without his consent, and that as fees for his professional services he was to receive
one half of the amount allowed in the judgment if the same were entered in favor of the plaintiff.

The case came up for trial, evidence was adduced by both parties, and either exhibits were made of record. On the
10th of January, 1907, the court below entered judgment sentencing Agustina Jarra, as administratrix of the estate
of Magdaleno Jimenea, to return to the plaintiff, Felix de los Santos, the remaining six second and third class
carabaos, or the value thereof at the rate of P120 each, or a total of P720 with the costs.

Counsel for the defendant excepted to the foregoing judgment, and, by a writing dated January 19, moved for anew
trial on the ground that the findings of fact were openly and manifestly contrary to the weight of the evidence. The
motion was overruled, the defendant duly excepted, and in due course submitted the corresponding bill of
exceptions, which was approved and submitted to this court.

The defendant has admitted that Magdaleno Jimenea asked the plaintiff for the loan of ten carabaos which are now
claimed by the latter, as shown by two letters addressed by the said Jimenea to Felix de los Santos; but in her
answer the said defendant alleged that the late Jimenea only obtained three second-class carabaos, which were
subsequently sold to him by the owner, Santos; therefore, in order to decide this litigation it is indispensable that
proof be forthcoming that Jimenea only received three carabaos from his son-in-law Santos, and that they were sold
by the latter to him.

The record discloses that it has been fully proven from the testimony of a sufficient number of witnesses that the
plaintiff, Santos, sent in charge of various persons the ten carabaos requested by his father-in-law, Magdaleno
Jimenea, in the two letters produced at the trial by the plaintiff, and that Jimenea received them in the presence of
some of said persons, one being a brother of said Jimenea, who saw the animals arrive at the hacienda where it was
proposed to employ them. Four died of rinderpest, and it is for this reason that the judgment appealed from only
deals with six surviving carabaos.

The alleged purchase of three carabaos by Jimenea from his son-in-law Santos is not evidenced by any trustworthy
documents such as those of transfer, nor were the declarations of the witnesses presented by the defendant
affirming it satisfactory; for said reason it can not be considered that Jimenea only received three carabaos on loan
from his son-in-law, and that he afterwards kept them definitely by virtue of the purchase.

By the laws in force the transfer of large cattle was and is still made by means of official documents issued by the
local authorities; these documents constitute the title of ownership of the carabao or horse so acquired.
Furthermore, not only should the purchaser be provided with a new certificate or credential, a document which has
not been produced in evidence by the defendant, nor has the loss of the same been shown in the case, but the old
documents ought to be on file in the municipality, or they should have been delivered to the new purchaser, and in
the case at bar neither did the defendant present the old credential on which should be stated the name of the
previous owner of each of the three carabaos said to have been sold by the plaintiff.

From the foregoing it may be logically inferred that the carabaos loaned or given on commodatum to the now
deceased Magdaleno Jimenea were ten in number; that they, or at any rate the six surviving ones, have not been
returned to the owner thereof, Felix de los Santos, and that it is not true that the latter sold to the former three
carabaos that the purchaser was already using; therefore, as the said six carabaos were not the property of the
deceased nor of any of his descendants, it is the duty of the administratrix of the estate to return them or indemnify
the owner for their value.

The Civil Code, in dealing with loans in general, from which generic denomination the specific one of commodatum
is derived, establishes prescriptions in relation to the last-mentioned contract by the following articles:

ART. 1740. By the contract of loan, one of the parties delivers to the other, either anything not perishable, in order
that the latter may use it during a certain period and return it to the former, in which case it is called commodatum,
or money or any other perishable thing, under the condition to return an equal amount of the same kind and
quality, in which case it is merely called a loan.

Commodatum is essentially gratuitous.

A simple loan may be gratuitous, or made under a stipulation to pay interest.

ART. 1741. The bailee acquires retains the ownership of the thing loaned. The bailee acquires the use thereof, but
not its fruits; if any compensation is involved, to be paid by the person requiring the use, the agreement ceases to
be a commodatum.

ART. 1742. The obligations and rights which arise from the commodatum pass to the heirs of both contracting
parties, unless the loan has been in consideration for the person of the bailee, in which case his heirs shall not have
the right to continue using the thing loaned.

The carabaos delivered to be used not being returned by the defendant upon demand, there is no doubt that she is
under obligation to indemnify the owner thereof by paying him their value.

Article 1101 of said code reads:

Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and those who in any manner
whatsoever act in contravention of the stipulations of the same, shall be subjected to indemnify for the losses and
damages caused thereby.

The obligation of the bailee or of his successors to return either the thing loaned or its value, is sustained by the
supreme tribunal of Sapin. In its decision of March 21, 1895, it sets out with precision the legal doctrine touching
commodatum as follows:

Although it is true that in a contract of commodatum the bailor retains the ownership of the thing loaned, and at
the expiration of the period, or after the use for which it was loaned has been accomplished, it is the imperative
duty of the bailee to return the 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, it is clear that where public securities are involved, the trial court, in
deferring to the claim of the bailor that the amount loaned be returned him by the bailee in bonds of the same class
as those which constituted the contract, thereby properly applies law 9 of title 11 of partida5.

With regard to the third assignment of error, based on the fact that the plaintiff Santos had not appealed from the
decision of the commissioners rejecting his claim for the recovery of his carabaos, it is sufficient to estate that we
are not dealing with a claim for the payment of a certain sum, the collection of a debt from the estate, or payment
for losses and damages (sec. 119, Code of Civil Procedure), but with the exclusion from the inventory of the
property of the late Jimenea, or from his capital, of six carabaos which did not belong to him, and which formed no
part of the inheritance.

The demand for the exclusion of the said carabaos belonging to a third party and which did not form part of the
property of the deceased, must be the subject of a direct decision of the court in an ordinary action, wherein the
right of the third party to the property which he seeks to have excluded from the inheritance and the right of the
deceased has been discussed, and rendered in view of the result of the evidence adduced by the administrator of
the estate and of the claimant, since it is so provided by the second part of section 699 and by section 703 of the
Code of Civil Procedure; the refusal of the commissioners before whom the plaintiff unnecessarily appeared can not
affect nor reduce the unquestionable right of ownership of the latter, inasmuch as there is no law nor principle of
justice authorizing the successors of the late Jimenea to enrich themselves at the cost and to the prejudice of Felix
de los Santos.

For the reasons above set forth, by which the errors assigned to the judgment appealed from have been refuted,
and considering that the same is in accordance with the law and the merits of the case, it is our opinion that it
should be affirmed and we do hereby affirm it with the costs against the appellant. So ordered.

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

G.R. No. L-50550-52 October 31, 1979

CHEE KIONG YAM, AMPANG MAH, ANITA YAM JOSE Y.C. YAM AND RICHARD YAM, petitioners,
vs.
HON. NABDAR J. MALIK, Municipal Judge of Jolo, Sulu (Branch I), THE PEOPLE OF THE PHILIPPINES, ROSALINDA AMIN,
TAN CHU KAO and LT. COL. AGOSTO SAJOR respondents.

Tomas P. Matic, Jr. for petitioners.

Jose E. Fernandez for private respondent.

Office of the Solicitor General for respondent the People of the Philippines.

ABAD SANTOS, J.:

This is a petition for certiorari, prohibition, and mandamus with preliminary injunction. Petitioners alleged that
respondent Municipal Judge Nabdar J. Malik of Jolo, Sulu, acted without jurisdiction, in excess of jurisdiction and
with grave abuse of discretion when:

(a) he held in the preliminary investigation of the charges of estafa filed by respondents Rosalinda Amin, Tan Chu
Kao and Augusto Sajor against petitioners that there was a prima facie case against the latter;

(b) he issued warrants of arrest against petitioners after making the above determination; and

(c) he undertook to conduct trial on the merits of the charges which were docketed in his court as Criminal Cases
No. M-111, M-183 and M-208.

Respondent judge is said to have acted without jurisdiction, in excess of jurisdiction and with grave abuse of
discretion because the facts recited in the complaints did not constitute the crime of estafa, and assuming they did,
they were not within the jurisdiction of the respondent judge.

In a resolution dated May 23, 1979, we required respondents to comment in the petition and issued a temporary
restraining order against the respondent judge from further proceeding with Criminal Cases Nos. M-111, M-183 and
M-208 or from enforcing the warrants of arrest he had issued in connection with said cases.

Comments by the respondent judge and the private respondents pray for the dismissal of the petition but the
Solicitor General has manifested that the People of the Philippines have no objection to the grant of the reliefs
prayed for, except the damages. We considered the comments as answers and gave due course to the petition.

The position of the Solicitor General is well taken. We have to grant the petition in order to prevent manifest
injustice and the exercise of palpable excess of authority.

In Criminal Case No. M-111, respondent Rosalinda M. Amin charges petitioners Yam Chee Kiong and Yam Yap Kieng
with estafa through misappropriation of the amount of P50,000.00. But the complaint states on its face that said
petitioners received the amount from respondent Rosalinda M. Amin "as a loan." Moreover, the complaint in Civil
Case No. N-5, an independent action for the collection of the same amount filed by respondent Rosalinda M. Amin
with the Court of First Instance of Sulu on September 11, 1975, likewise states that the P50,000.00 was a "simple
business loan" which earned interest and was originally demandable six (6) months from July 12, 1973. (Annex E of
the petition.)

In Criminal Case No. M-183, respondent Tan Chu Kao charges petitioners Yam Chee Kiong, Jose Y.C. Yam, Ampang
Mah and Anita Yam, alias Yong Tay, with estafa through misappropriation of the amount of P30,000.00. Likewise,
the complaint states on its face that the P30,000.00 was "a simple loan." So does the complaint in Civil Case No. N-8
filed by respondent Tan Chu Kao on April 6, 1976 with the Court of First Instance of Sulu for the collection of the
same amount. (Annex D of the petition.).

In Criminal Case No. M-208, respondent Augusto Sajor charges petitioners Jose Y.C. Yam, Anita Yam alias Yong Tai
Mah, Chee Kiong Yam and Richard Yam, with estafa through misappropriation of the amount of P20,000.00. Unlike
the complaints in the other two cases, the complaint in Criminal Case No. M-208 does not state that the amount
was received as loan. However, in a sworn statement dated September 29, 1976, submitted to respondent judge to
support the complaint, respondent Augusto Sajor states that the amount was a "loan." (Annex G of the petition.).
We agree with the petitioners that the facts alleged in the three criminal complaints do not constitute estafa
through misappropriation.

Estafa through misappropriation is committed according to Article 315, paragraph 1, subparagraph (b), of the
Revised Penal Code as follows:

Art. 315. Swindling (Estafa). Any person who shall defraud another by any of the means mentioned herein below
shall be punished by:

xxx xxx xxx

1. With unfaithfulness or abuse of confidence namely:

xxx xxx xxx

b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property
received by the offender in trust or on commission, or for administration, or under any other obligation involving
the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by
a bond; or by denying having received such money, goods, or other property.

In order that a person can be convicted under the abovequoted provision, it must be proven that he has the
obligation to deliver or return the same money, goods or personal property that he received. Petitioners had no
such obligation to return the same money, i.e., the bills or coins, which they received from private respondents. This
is so because as clearly stated in criminal complaints, the related civil complaints and the supporting sworn
statements, the sums of money that petitioners received were loans.

The nature of simple loan is defined in Articles 1933 and 1953 of the Civil Code.

Art. 1933. By the contract of loan, one of the parties delivers to another, either something not consumable so
that the latter may use the same for a certain time and return it, in which case the contract is called a
commodatum; or money or other consumable thing upon the condition that the same amount of the same kind and
quality shall be paid, in which case the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum the bailor retains the ownership of the thing loaned, while in simple loam ownership passes to the
borrower.

Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the same kind and quality.

It can be readily noted from the above-quoted provisions that in simple loan (mutuum), as contrasted to
commodatum, the borrower acquires ownership of the money, goods or personal property borrowed. Being the
owner, the borrower can dispose of the thing borrowed (Article 248, Civil Code) and his act will not be considered
misappropriation thereof.

In U.S. vs. Ibaez, 19 Phil. 559, 560 (1911), this Court held that it is not estafa for a person to refuse to nay his debt
or to deny its existence.

We are of the opinion and so decide that when the relation is purely that of debtor and creditor, the debtor can not
be held liable for the crime of estafa, under said article, by merely refusing to pay or by denying the indebtedness.

It appears that respondent judge failed to appreciate the distinction between the two types of loan, mutuum and
commodatum, when he performed the questioned acts, He mistook the transaction between petitioners and
respondents Rosalinda Amin, Tan Chu Kao and Augusto Sajor to be commodatum wherein the borrower does not
acquire ownership over the thing borrowed and has the duty to return the same thing to the lender.

Under Sec. 87 of the Judiciary Act, the municipal court of a provincial capital, which the Municipal Court of Jolo is,
has jurisdiction over criminal cases where the penalty provided by law does not exceed prision correccional or
imprisonment for not more than six (6) years, or fine not exceeding P6,000.00 or both, The amounts allegedly
misappropriated by petitioners range from P20,000.00 to P50,000.00. The penalty for misappropriation of this
magnitude exceeds prision correccional or 6 year imprisonment. (Article 315, Revised Penal Code), Assuming then
that the acts recited in the complaints constitute the crime of estafa, the Municipal Court of Jolo has no jurisdiction
to try them on the merits. The alleged offenses are under the jurisdiction of the Court of First Instance.

Respondents People of the Philippines being the sovereign authority can not be sued for damages. They are immune
from such type of suit.

With respect to the other respondents, this Court is not the proper forum for the consideration of the claim for
damages against them.

WHEREFORE, the petition is hereby granted; the temporary restraining order previously issued is hereby made
permanent; the criminal complaints against petitioners are hereby declared null and void; respondent judge is
hereby ordered to dismiss said criminal cases and to recall the warrants of arrest he had issued in connection
therewith. Moreover, respondent judge is hereby rebuked for manifest ignorance of elementary law. Let a copy of
this decision be included in his personal life. Costs against private respondents.

SO ORDERED.
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.

This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated June 25, 1991 in CA-G.R. CV
No. 11791 and of its Resolution2 dated May 5, 1994, denying the motion for reconsideration of said decision filed by
petitioner Producers Bank of the Philippines.

Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend Angeles Sanchez to help
her friend and townmate, Col. Arturo Doronilla, in incorporating his business, the Sterela Marketing and Services
("Sterela" for brevity). Specifically, Sanchez asked private respondent to deposit in a bank a certain amount of
money in the bank account of Sterela for purposes of its incorporation. She assured private respondent that he
could withdraw his money from said account within a months time. Private respondent asked Sanchez to bring
Doronilla to their house so that they could discuss Sanchezs request.3

On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi, Doronillas private
secretary, met and discussed the matter. Thereafter, relying on the assurances and representations of Sanchez and
Doronilla, private respondent issued a check in the amount of Two Hundred Thousand Pesos (P200,000.00) in favor
of Sterela. Private respondent instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in
opening a savings account in the name of Sterela in the Buendia, Makati branch of Producers Bank of the
Philippines. However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to deposit the check. They had with
them an authorization letter from Doronilla authorizing Sanchez and her companions, "in coordination with Mr.
Rufo Atienza," to open an account for Sterela Marketing Services in the amount of P200,000.00. In opening the
account, the authorized signatories were Inocencia Vives and/or Angeles Sanchez. A passbook for Savings Account
No. 10-1567 was thereafter issued to Mrs. Vives.4

Subsequently, private respondent learned that Sterela was no longer holding office in the address previously given
to him. Alarmed, he and his wife went to the Bank to verify if their money was still intact. The bank manager
referred them to Mr. Rufo Atienza, the assistant manager, who informed them that part of the money in Savings
Account No. 10-1567 had been withdrawn by Doronilla, and that only P90,000.00 remained therein. He likewise told
them that Mrs. Vives could not withdraw said remaining amount because it had to answer for some postdated
checks issued by Doronilla. According to Atienza, after Mrs. Vives and Sanchez opened Savings Account No. 10-1567,
Doronilla opened Current Account No. 10-0320 for Sterela and authorized the Bank to debit Savings Account No. 10-
1567 for the amounts necessary to cover overdrawings in Current Account No. 10-0320. In opening said current
account, Sterela, through Doronilla, obtained a loan of P175,000.00 from the Bank. To cover payment thereof,
Doronilla issued three postdated checks, all of which were dishonored. Atienza also said that Doronilla could assign
or withdraw the money in Savings Account No. 10-1567 because he was the sole proprietor of Sterela.5

Private respondent tried to get in touch with Doronilla through Sanchez. On June 29, 1979, he received a letter from
Doronilla, assuring him that his money was intact and would be returned to him. On August 13, 1979, Doronilla
issued a postdated check for Two Hundred Twelve Thousand Pesos (P212,000.00) in favor of private respondent.
However, upon presentment thereof by private respondent to the drawee bank, the check was dishonored.
Doronilla requested private respondent to present the same check on September 15, 1979 but when the latter
presented the check, it was again dishonored.6

Private respondent referred the matter to a lawyer, who made a written demand upon Doronilla for the return of
his clients money. Doronilla issued another check for P212,000.00 in private respondents favor but the check was
again dishonored for insufficiency of funds.7
Private respondent instituted an action for recovery of sum of money in the Regional Trial Court (RTC) in Pasig,
Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was docketed as Civil Case No. 44485.
He also filed criminal actions against Doronilla, Sanchez and Dumagpi in the RTC. However, Sanchez passed away on
March 16, 1985 while the case was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157,
promulgated its Decision in Civil Case No. 44485, the dispositive portion of which reads:

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

(a) the amount of P200,000.00, representing the money deposited, with interest at the legal rate from the filing of
the complaint until the same is fully paid;

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

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

(d) the costs of the suit.

SO ORDERED.8

Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision dated June 25, 1991, the
appellate court affirmed in toto the decision of the RTC.9 It likewise denied with finality petitioners motion for
reconsideration in its Resolution dated May 5, 1994.10

On June 30, 1994, petitioner filed the present petition, arguing that

I.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTION BETWEEN THE DEFENDANT
DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;

II.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONERS BANK MANAGER, MR. RUFO
ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be PRIVATE
RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF
NATURAL JUSTICE;
III.

THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE REGIONAL TRIAL COURT
AND AFFIRMING THE JUDGMENT APPEALED FROM, AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE BASED
ON A MISAPPREHENSION OF FACTS;

IV.

THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN SALUDARES VS.
MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS
APPLICABLE;

V.

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE LOWER COURT THAT HEREIN
PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER DEFENDANTS FOR THE AMOUNT OF
P200,000.00 REPRESENTING THE SAVINGS ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR
EXEMPLARY DAMAGES, P40,000.00 FOR ATTORNEYS FEES AND THE COSTS OF SUIT.11

Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto on September 25,
1995. The Court then required private respondent to submit a rejoinder to the reply. However, said rejoinder was
filed only on April 21, 1997, due to petitioners delay in furnishing private respondent with copy of the reply12 and
several substitutions of counsel on the part of private respondent.13 On January 17, 2001, the Court resolved to
give due course to the petition and required the parties to submit their respective memoranda.14 Petitioner filed its
memorandum on April 16, 2001 while private respondent submitted his memorandum on March 22, 2001.

Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum) since
all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla was money,
a consumable thing; and second, the transaction was onerous as Doronilla was obliged to pay interest, as evidenced
by the check issued by Doronilla in the amount of P212,000.00, or P12,000 more than what private respondent
deposited in Sterelas bank account.15 Moreover, the fact that private respondent sued his good friend Sanchez for
his failure to recover his money from Doronilla shows that the transaction was not merely gratuitous but "had a
business angle" to it. Hence, petitioner argues that it cannot be held liable for the return of private respondents
P200,000.00 because it is not privy to the transaction between the latter and Doronilla.16

It argues further that petitioners Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing Doronilla to
withdraw from the savings account of Sterela since the latter was the sole proprietor of said company. Petitioner
asserts that Doronillas May 8, 1979 letter addressed to the bank, authorizing Mrs. Vives and Sanchez to open a
savings account for Sterela, did not contain any authorization for these two to withdraw from said account. Hence,
the authority to withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of Sterela,
and who alone had legal title to the savings account.17 Petitioner points out that no evidence other than the
testimonies of private respondent and Mrs. Vives was presented during trial to prove that private respondent
deposited his P200,000.00 in Sterelas account for purposes of its incorporation.18 Hence, petitioner should not be
held liable for allowing Doronilla to withdraw from Sterelas savings account.1a\^/phi1.net

Petitioner also asserts that the Court of Appeals erred in affirming the trial courts decision since the findings of fact
therein were not accord with the evidence presented by petitioner during trial to prove that the transaction
between private respondent and Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla to
withdraw from Sterelas savings account.19

Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the actual
damages suffered by private respondent, and neither may it be held liable for moral and exemplary damages as well
as attorneys fees.20

Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a mutuum but
an accommodation,21 since he did not actually part with the ownership of his P200,000.00 and in fact asked his wife
to deposit said amount in the account of Sterela so that a certification can be issued to the effect that Sterela had
sufficient funds for purposes of its incorporation but at the same time, he retained some degree of control over his
money through his wife who was made a signatory to the savings account and in whose possession the savings
account passbook was given.22

He likewise asserts that the trial court did not err in finding that petitioner, Atienzas employer, is liable for the
return of his money. He insists that Atienza, petitioners assistant manager, connived with Doronilla in defrauding
private respondent since it was Atienza who facilitated the opening of Sterelas current account three days after
Mrs. Vives and Sanchez opened a savings account with petitioner for said company, as well as the approval of the
authority to debit Sterelas savings account to cover any overdrawings in its current account.23

There is no merit in the petition.

At the outset, it must be emphasized that only questions of law may be raised in a petition for review filed with this
Court. The Court has repeatedly held that it is not its function to analyze and weigh all over again the evidence
presented by the parties during trial.24 The Courts jurisdiction is in principle limited to reviewing errors of law that
might have been committed by the Court of Appeals.25 Moreover, factual findings of courts, when adopted and
confirmed by the Court of Appeals, are final and conclusive on this Court unless these findings are not supported by
the evidence on record.26 There is no showing of any misapprehension of facts on the part of the Court of Appeals
in the case at bar that would require this Court to review and overturn the factual findings of that court, especially
since the conclusions of fact of the Court of Appeals and the trial court are not only consistent but are also amply
supported by the evidence on record.

No error was committed by the Court of Appeals when it ruled that the transaction between private respondent and
Doronilla was a commodatum and not a mutuum. A circumspect examination of the records reveals that the
transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds
of loans in this wise:

By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter
may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or
other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in
which case the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the
borrower.

The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as money, the
contract would be a mutuum. However, there are some instances where a commodatum may have for its object a
consumable thing. Article 1936 of the Civil Code provides:

Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the
object, as when it is merely for exhibition.

Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend
consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a
commodatum and not a mutuum.

The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the
actual character of a contract.27 In case of doubt, the contemporaneous and subsequent acts of the parties shall be
considered in such determination.28

As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private
respondent agreed to deposit his money in the savings account of Sterela specifically for the purpose of making it
appear "that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be
returned within thirty (30) days."29 Private respondent merely "accommodated" Doronilla by lending his money
without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction
that the money would not be removed from Sterelas savings account and would be returned to private respondent
after thirty (30) days.

Doronillas attempts to return to private respondent the amount of P200,000.00 which the latter deposited in
Sterelas account together with an additional P12,000.00, allegedly representing interest on the mutuum, did not
convert the transaction from a commodatum into a mutuum because such was not the intent of the parties and
because the 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.

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.1awphi1.nt

Then there is the matter of the ownership of the fund. Because of the "coordination" between Doronilla and
Atienza, the latter knew before hand that the money deposited did not belong to Doronilla nor to Sterela. Aside
from such foreknowledge, he was explicitly told by Inocencia Vives that the money belonged to her and her husband
and the deposit was merely to accommodate Doronilla. Atienza even declared that the money came from Mrs.
Vives.

Although the savings account was in the name of Sterela, the bank records disclose that the only ones empowered
to withdraw the same were Inocencia Vives and Angeles B. Sanchez. In the signature card pertaining to this account
(Exh. J), the authorized signatories were Inocencia Vives &/or Angeles B. Sanchez. Atienza stated that it is the usual
banking procedure that withdrawals of savings deposits could only be made by persons whose authorized signatures
are in the signature cards on file with the bank. He, however, said that this procedure was not followed here
because Sterela was owned by Doronilla. He explained that Doronilla had the full authority to withdraw by virtue of
such ownership. The Court is not inclined to agree with Atienza. In the first place, he was all the time aware that the
money came from Vives and did not belong to Sterela. He was also told by Mrs. Vives that they were only
accommodating Doronilla so that a certification can be issued to the effect that Sterela had a deposit of so much
amount to be sued in the incorporation of the firm. In the second place, the signature of Doronilla was not
authorized in so far as that account is concerned inasmuch as he had not signed the signature card provided by the
bank whenever a deposit is opened. In the third place, neither Mrs. Vives nor Sanchez had given Doronilla the
authority to withdraw.

Moreover, the transfer of fund was done without the passbook having been presented. It is an accepted practice
that whenever a withdrawal is made in a savings deposit, the bank requires the presentation of the passbook. In this
case, such recognized practice was dispensed with. The transfer from the savings account to the current account
was without the submission of the passbook which Atienza had given to Mrs. Vives. Instead, it was made to appear
in a certification signed by Estrella Dumagpi that a duplicate passbook was issued to Sterela because the original
passbook had been surrendered to the Makati branch in view of a loan accommodation assigning the savings
account (Exh. C). Atienza, who undoubtedly had a hand in the execution of this certification, was aware that the
contents of the same are not true. He knew that the passbook was in the hands of Mrs. Vives for he was the one
who gave it to her. Besides, as assistant manager of the branch and the bank official servicing the savings and
current accounts in question, he also was aware that the original passbook was never surrendered. He was also
cognizant that Estrella Dumagpi was not among those authorized to withdraw so her certification had no effect
whatsoever.

The circumstance surrounding the opening of the current account also demonstrate that Atienzas active
participation in the perpetration of the fraud and deception that caused the loss. The records indicate that this
account was opened three days later after the P200,000.00 was deposited. In spite of his disclaimer, the Court
believes that Atienza was mindful and posted regarding the opening of the current account considering that
Doronilla was all the while in "coordination" with him. That it was he who facilitated the approval of the authority to
debit the savings account to cover any overdrawings in the current account (Exh. 2) is not hard to comprehend.

Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. x x x.31

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for damages caused by
their employees acting within the scope of their assigned tasks. To hold the employer liable under this provision, it
must be shown that an employer-employee relationship exists, and that the employee was acting within the scope
of his assigned task when the act complained of was committed.32 Case law in the United States of America has it
that a corporation that entrusts a general duty to its employee is responsible to the injured party for damages
flowing from the 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 interests34 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.