G.R. No.

174269 May 8, 2009

POLO S. PANTALEON, Petitioner,

vs.
AMERICAN EXPRESS INTERNATIONAL, INC., Respondent.

DECISION

TINGA, J.:

The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and son Adrian
Roberto, joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in
October of 1991. The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the second
to the last day of the tour. As the group had arrived late in the city, they failed to engage in any sight-
seeing. Instead, it was agreed upon that they would start early the next day to see the entire city before
ending the tour.

The following day, the last day of the tour, the group arrived at the Coster Diamond House in
Amsterdam around 10 minutes before 9:00 a.m. The group had agreed that the visit to Coster should
end by 9:30 a.m. to allow enough time to take in a guided city tour of Amsterdam. The group was
ushered into Coster shortly before 9:00 a.m., and listened to a lecture on the art of diamond polishing
that lasted for around ten minutes.1 Afterwards, the group was led to the store’s showroom to allow
them to select items for purchase. Mrs. Pantaleon had already planned to purchase even before the
tour began a 2.5 karat diamond brilliant cut, and she found a diamond close enough in approximation
that she decided to buy.2 Mrs. Pantaleon also selected for purchase a pendant and a chain,3 all of
which totaled U.S. $13,826.00.

To pay for these purchases, Pantaleon presented his American Express credit card together with his
passport to the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the tour
group was slated to depart from the store. The sales clerk took the card’s imprint, and asked Pantaleon
to sign the charge slip. The charge purchase was then referred electronically to respondent’s
Amsterdam office at 9:20 a.m.

Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet been approved.
His son, who had already boarded the tour bus, soon returned to Coster and informed the other
members of the Pantaleon family that the entire tour group was waiting for them. As it was already
9:40 a.m., and he was already worried about further inconveniencing the tour group, Pantaleon asked
the store clerk to cancel the sale. The store manager though asked plaintiff to wait a few more minutes.
After 15 minutes, the store manager informed Pantaleon that respondent had demanded bank
references. Pantaleon supplied the names of his depositary banks, then instructed his daughter to
return to the bus and apologize to the tour group for the delay.

At around 10:00 a.m, or around 45 minutes after Pantaleon had presented his AmexCard, and 30
minutes after the tour group was supposed to have left the store, Coster decided to release the items
even without respondent’s approval of the purchase. The spouses Pantaleon returned to the bus. It is
alleged that their offers of apology were met by their tourmates with stony silence.4 The tour group’s
visible irritation was aggravated when the tour guide announced that the city tour of Amsterdam was
to be canceled due to lack of remaining time, as they had to catch a 3:00 p.m. ferry at Calais, Belgium
to London.5 Mrs. Pantaleon ended up weeping, while her husband had to take a tranquilizer to calm
his nerves.
It later emerged that Pantaleon’s purchase was first transmitted for approval to respondent’s
Amsterdam office at 9:20 a.m., Amsterdam time, then referred to respondent’s Manila office at 9:33
a.m, then finally approved at 10:19 a.m., Amsterdam time.6 The Approval Code was transmitted to
respondent’s Amsterdam office at 10:38 a.m., several minutes after petitioner had already left Coster,
and 78 minutes from the time the purchases were electronically transmitted by the jewelry store to
respondent’s Amsterdam office.

After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before
returning to Manila on 12 November 1992. While in the United States, Pantaleon continued to use his
AmEx card, several times without hassle or delay, but with two other incidents similar to the
Amsterdam brouhaha. On 30 October 1991, Pantaleon purchased golf equipment amounting to US
$1,475.00 using his AmEx card, but he cancelled his credit card purchase and borrowed money
instead from a friend, after more than 30 minutes had transpired without the purchase having been
approved. On 3 November 1991, Pantaleon used the card to purchase children’s shoes worth $87.00
at a store in Boston, and it took 20 minutes before this transaction was approved by respondent.

On 4 March 1992, after coming back to Manila, Pantaleon sent a letter7 through counsel to the
respondent, demanding an apology for the "inconvenience, humiliation and embarrassment he and
his family thereby suffered" for respondent’s refusal to provide credit authorization for the
aforementioned purchases.8 In response, respondent sent a letter dated 24 March 1992,9 stating
among others that the delay in authorizing the purchase from Coster was attributable to the
circumstance that the charged purchase of US $13,826.00 "was out of the usual charge purchase
pattern established."10 Since respondent refused to accede to Pantaleon’s demand for an apology, the
aggrieved cardholder instituted an action for damages with the Regional Trial Court (RTC) of Makati
City, Branch 145.11 Pantaleon prayed that he be awarded ₱2,000,000.00, as moral damages;
₱500,000.00, as exemplary damages; ₱100,000.00, as attorney’s fees; and ₱50,000.00 as litigation
expenses.12

On 5 August 1996, the Makati City RTC rendered a decision13 in favor of Pantaleon, awarding him
₱500,000.00 as moral damages, ₱300,000.00 as exemplary damages, ₱100,000.00 as attorney’s
fees, and ₱85,233.01 as expenses of litigation. Respondent filed a Notice of Appeal, while Pantaleon
moved for partial reconsideration, praying that the trial court award the increased amount of moral and
exemplary damages he had prayed for.14 The RTC denied Pantaleon’s motion for partial
reconsideration, and thereafter gave due course to respondent’s Notice of Appeal.15

On 18 August 2006, the Court of Appeals rendered a decision16 reversing the award of damages in
favor of Pantaleon, holding that respondent had not breached its obligations to petitioner. Hence, this
petition.

The key question is whether respondent, in connection with the aforementioned transactions, had
committed a breach of its obligations to Pantaleon. In addition, Pantaleon submits that even assuming
that respondent had not been in breach of its obligations, it still remained liable for damages under
Article 21 of the Civil Code.

The RTC had concluded, based on the testimonial representations of Pantaleon and respondent’s
credit authorizer, Edgardo Jaurigue, that the normal approval time for purchases was "a matter of
seconds." Based on that standard, respondent had been in clear delay with respect to the three subject
transactions. As it appears, the Court of Appeals conceded that there had been delay on the part of
respondent in approving the purchases. However, it made two critical conclusions in favor of
respondent. First, the appellate court ruled that the delay was not attended by bad faith, malice, or
gross negligence. Second, it ruled that respondent "had exercised diligent efforts to effect the
approval" of the purchases, which were "not in accordance with the charge pattern" petitioner had
established for himself, as exemplified by the fact that at Coster, he was "making his very first single
charge purchase of US$13,826," and "the record of [petitioner]’s past spending with [respondent] at
the time does not favorably support his ability to pay for such purchase."17

On the premise that there was an obligation on the part of respondent "to approve or disapprove with
dispatch the charge purchase," petitioner argues that the failure to timely approve or disapprove the
purchase constituted mora solvendi on the part of respondent in the performance of its obligation. For
its part, respondent characterizes the depiction by petitioner of its obligation to him as "to approve
purchases instantaneously or in a matter of seconds."

Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default are that
the obligation is demandable and liquidated; the debtor delays performance; and the creditor judicially
or extrajudicially requires the debtor’s performance.18 Petitioner asserts that the Court of Appeals had
wrongly applied the principle of mora accipiendi, which relates to delay on the part of the obligee in
accepting the performance of the obligation by the obligor. The requisites of mora accipiendi are: an
offer of performance by the debtor who has the required capacity; the offer must be to comply with the
prestation as it should be performed; and the creditor refuses the performance without just
cause.19 The error of the appellate court, argues petitioner, is in relying on the invocation by respondent
of "just cause" for the delay, since while just cause is determinative of mora accipiendi, it is not so with
the case of mora solvendi.

We can see the possible source of confusion as to which type of mora to appreciate. Generally, the
relationship between a credit card provider and its card holders is that of creditor-debtor,20 with the
card company as the creditor extending loans and credit to the card holder, who as debtor is obliged
to repay the creditor. This relationship already takes exception to the general rule that as between a
bank and its depositors, the bank is deemed as the debtor while the depositor is considered as the
creditor.21 Petitioner is asking us, not baselessly, to again shift perspectives and again see the credit
card company as the debtor/obligor, insofar as it has the obligation to the customer as creditor/obligee
to act promptly on its purchases on credit.

Ultimately, petitioner’s perspective appears more sensible than if we were to still regard respondent
as the creditor in the context of this cause of action. If there was delay on the part of respondent in its
normal role as creditor to the cardholder, such delay would not have been in the acceptance of the
performance of the debtor’s obligation (i.e., the repayment of the debt), but it would be delay in the
extension of the credit in the first place. Such delay would not fall under mora accipiendi, which
contemplates that the obligation of the debtor, such as the actual purchases on credit, has already
been constituted. Herein, the establishment of the debt itself (purchases on credit of the jewelry) had
not yet been perfected, as it remained pending the approval or consent of the respondent credit card
company.

Still, in order for us to appreciate that respondent was in mora solvendi, we will have to first recognize
that there was indeed an obligation on the part of respondent to act on petitioner’s purchases with
"timely dispatch," or for the purposes of this case, within a period significantly less than the one hour
it apparently took before the purchase at Coster was finally approved.

The findings of the trial court, to our mind, amply established that the tardiness on the part of
respondent in acting on petitioner’s purchase at Coster did constitute culpable delay on its part in
complying with its obligation to act promptly on its customer’s purchase request, whether such action
be favorable or unfavorable. We quote the trial court, thus:

As to the first issue, both parties have testified that normal approval time for purchases was a matter
of seconds.
Plaintiff testified that his personal experience with the use of the card was that except for the three
charge purchases subject of this case, approvals of his charge purchases were always obtained in a
matter of seconds.

Defendant’s credit authorizer Edgardo Jaurique likewise testified:

Q. – You also testified that on normal occasions, the normal approval time for charges would
be 3 to 4 seconds?

A. – Yes, Ma’am.

Both parties likewise presented evidence that the processing and approval of plaintiff’s charge
purchase at the Coster Diamond House was way beyond the normal approval time of a "matter of
seconds".

Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15 a.m. and by the
time he had to leave the store at 10:05 a.m., no approval had yet been received. In fact, the Credit
Authorization System (CAS) record of defendant at Phoenix Amex shows that defendant’s Amsterdam
office received the request to approve plaintiff’s charge purchase at 9:20 a.m., Amsterdam time or
01:20, Phoenix time, and that the defendant relayed its approval to Coster at 10:38 a.m., Amsterdam
time, or 2:38, Phoenix time, or a total time lapse of one hour and [18] minutes. And even then, the
approval was conditional as it directed in computerese [sic] "Positive Identification of Card holder
necessary further charges require bank information due to high exposure. By Jack Manila."

The delay in the processing is apparent to be undue as shown from the frantic successive queries of
Amexco Amsterdam which reads: "US$13,826. Cardmember buying jewels. ID seen. Advise how long
will this take?" They were sent at 01:33, 01:37, 01:40, 01:45, 01:52 and 02:08, all times Phoenix.
Manila Amexco could be unaware of the need for speed in resolving the charge purchase referred to
it, yet it sat on its hand, unconcerned.

xxx

To repeat, the Credit Authorization System (CAS) record on the Amsterdam transaction shows how
Amexco Netherlands viewed the delay as unusually frustrating. In sequence expressed in Phoenix
time from 01:20 when the charge purchased was referred for authorization, defendants own record
shows:

01:22 – the authorization is referred to Manila Amexco

01:32 – Netherlands gives information that the identification of the cardmember has been
presented and he is buying jewelries worth US $13,826.

01:33 – Netherlands asks "How long will this take?"

02:08 – Netherlands is still asking "How long will this take?"

The Court is convinced that defendants delay constitute[s] breach of its contractual obligation to act
on his use of the card abroad "with special handling."22 (Citations omitted)

xxx
Notwithstanding the popular notion that credit card purchases are approved "within seconds," there
really is no strict, legally determinative point of demarcation on how long must it take for a credit card
company to approve or disapprove a customer’s purchase, much less one specifically contracted upon
by the parties. Yet this is one of those instances when "you’d know it when you’d see it," and one hour
appears to be an awfully long, patently unreasonable length of time to approve or disapprove a credit
card purchase. It is long enough time for the customer to walk to a bank a kilometer away, withdraw
money over the counter, and return to the store.

Notably, petitioner frames the obligation of respondent as "to approve or disapprove" the purchase "in
timely dispatch," and not "to approve the purchase instantaneously or within seconds." Certainly, had
respondent disapproved petitioner’s purchase "within seconds" or within a timely manner, this
particular action would have never seen the light of day. Petitioner and his family would have returned
to the bus without delay – internally humiliated perhaps over the rejection of his card – yet spared the
shame of being held accountable by newly-made friends for making them miss the chance to tour the
city of Amsterdam.

We do not wish do dispute that respondent has the right, if not the obligation, to verify whether the
credit it is extending upon on a particular purchase was indeed contracted by the cardholder, and that
the cardholder is within his means to make such transaction. The culpable failure of respondent herein
is not the failure to timely approve petitioner’s purchase, but the more elemental failure to timely act
on the same, whether favorably or unfavorably. Even assuming that respondent’s credit authorizers
did not have sufficient basis on hand to make a judgment, we see no reason why respondent could
not have promptly informed petitioner the reason for the delay, and duly advised him that resolving the
same could take some time. In that way, petitioner would have had informed basis on whether or not
to pursue the transaction at Coster, given the attending circumstances. Instead, petitioner was left
uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced to confront the
wrath of foreign folk.

Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad
faith, and the court should find that under the circumstances, such damages are due. The findings of
the trial court are ample in establishing the bad faith and unjustified neglect of respondent, attributable
in particular to the "dilly-dallying" of respondent’s Manila credit authorizer, Edgardo Jaurique.23 Wrote
the trial court:

While it is true that the Cardmembership Agreement, which defendant prepared, is silent as to the
amount of time it should take defendant to grant authorization for a charge purchase, defendant
acknowledged that the normal time for approval should only be three to four seconds. Specially so
with cards used abroad which requires "special handling", meaning with priority. Otherwise, the object
of credit or charge cards would be lost; it would be so inconvenient to use that buyers and consumers
would be better off carrying bundles of currency or traveller’s checks, which can be delivered and
accepted quickly. Such right was not accorded to plaintiff in the instances complained off for reasons
known only to defendant at that time. This, to the Court’s mind, amounts to a wanton and deliberate
refusal to comply with its contractual obligations, or at least abuse of its rights, under the contract.24

xxx

The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it
alleges to have consumed more than one hour to simply go over plaintiff’s past credit history with
defendant, his payment record and his credit and bank references, when all such data are already
stored and readily available from its computer. This Court also takes note of the fact that there is
nothing in plaintiff’s billing history that would warrant the imprudent suspension of action by defendant
in processing the purchase. Defendant’s witness Jaurique admits:
 Q. – But did you discover that he did not have any outstanding account?

A. – Nothing in arrears at that time.

Q. – You were well aware of this fact on this very date?

A. – Yes, sir.

Mr. Jaurique further testified that there were no "delinquencies" in plaintiff’s account.25

It should be emphasized that the reason why petitioner is entitled to damages is not simply because
respondent incurred delay, but because the delay, for which culpability lies under Article 1170, led to
the particular injuries under Article 2217 of the Civil Code for which moral damages are
remunerative.26 Moral damages do not avail to soothe the plaints of the simply impatient, so this
decision should not be cause for relief for those who time the length of their credit card transactions
with a stopwatch. The somewhat unusual attending circumstances to the purchase at Coster – that
there was a deadline for the completion of that purchase by petitioner before any delay would redound
to the injury of his several traveling companions – gave rise to the moral shock, mental anguish,
serious anxiety, wounded feelings and social humiliation sustained by the petitioner, as concluded by
the RTC.27 Those circumstances are fairly unusual, and should not give rise to a general entitlement
for damages under a more mundane set of facts.

We sustain the amount of moral damages awarded to petitioner by the RTC. There is no hard-and-
fast rule in determining what would be a fair and reasonable amount of moral damages, since each
case must be governed by its own peculiar facts, however, it must be commensurate to the loss or
injury suffered.28 Petitioner’s original prayer for ₱5,000,000.00 for moral damages is excessive under
the circumstances, and the amount awarded by the trial court of ₱500,000.00 in moral damages more
seemly. 1avv phi 1

Likewise, we deem exemplary damages available under the circumstances, and the amount of
₱300,000.00 appropriate. There is similarly no cause though to disturb the determined award of
₱100,000.00 as attorney’s fees, and ₱85,233.01 as expenses of litigation.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is
REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati, Branch 145 in Civil
Case No. 92-1665 is hereby REINSTATED. Costs against respondent.

SO ORDERED.
G.R. No. 133632 February 15, 2002

BPI INVESTMENT CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS and ALS MANAGEMENT & DEVELOPMENT
CORPORATION, respondents.

DECISION

QUISUMBING, J.:

This petition for certiorari assails the decision dated February 28, 1997, of the Court of Appeals and
its resolution dated April 21, 1998, in CA-G.R. CV No. 38887. The appellate court affirmed the
judgment of the Regional Trial Court of Pasig City, Branch 151, in (a) Civil Case No. 11831, for
foreclosure of mortgage by petitioner BPI Investment Corporation (BPIIC for brevity) against private
respondents ALS Management and Development Corporation and Antonio K. Litonjua,1 consolidated
with (b) Civil Case No. 52093, for damages with prayer for the issuance of a writ of preliminary
injunction by the private respondents against said petitioner.

The trial court had held that private respondents were not in default in the payment of their monthly
amortization, hence, the extrajudicial foreclosure conducted by BPIIC was premature and made in bad
faith. It awarded private respondents the amount of ₱300,000 for moral damages, ₱50,000 for
exemplary damages, and ₱50,000 for attorney’s fees and expenses for litigation. It likewise dismissed
the foreclosure suit for being premature.

The facts are as follows:

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of petitioner BPIIC, for the construction of a house
on his lot in New Alabang Village, Muntinlupa. Said house and lot were mortgaged to AIDC to secure
the loan. Sometime in 1980, Roa sold the house and lot to private respondents ALS and Antonio
Litonjua for ₱850,000. They paid ₱350,000 in cash and assumed the ₱500,000 balance of Roa’s
indebtedness with AIDC. The latter, however, was not willing to extend the old interest rate to private
respondents and proposed to grant them a new loan of ₱500,000 to be applied to Roa’s debt and
secured by the same property, at an interest rate of 20% per annum and service fee of 1% per annum
on the outstanding principal balance payable within ten years in equal monthly amortization of
₱9,996.58 and penalty interest at the rate of 21% per annum per day from the date the amortization
became due and payable.

Consequently, in March 1981, private respondents executed a mortgage deed containing the above
stipulations with the provision that payment of the monthly amortization shall commence on May 1,
1981.

On August 13, 1982, ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum of
₱190,601.35. This reduced Roa’s principal balance to ₱457,204.90 which, in turn, was liquidated when
BPIIC applied thereto the proceeds of private respondents’ loan of ₱500,000.

On September 13, 1982, BPIIC released to private respondents ₱7,146.87, purporting to be what was
left of their loan after full payment of Roa’s loan.
In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground that
they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984, amounted to
Four Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos (₱475,585.31). A
notice of sheriff’s sale was published on August 13, 1984.

On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against BPIIC. They alleged,
among others, that they were not in arrears in their payment, but in fact made an overpayment as of
June 30, 1984. They maintained that they should not be made to pay amortization before the actual
release of the ₱500,000 loan in August and September 1982. Further, out of the ₱500,000 loan, only
the total amount of ₱464,351.77 was released to private respondents. Hence, applying the effects of
legal compensation, the balance of ₱35,648.23 should be applied to the initial monthly amortization
for the loan.

On August 31, 1988, the trial court rendered its judgment in Civil Case Nos. 11831 and 52093, thus:

WHEREFORE, judgment is hereby rendered in favor of ALS Management and Development

Corporation and Antonio K. Litonjua and against BPI Investment Corporation, holding that the amount
of loan granted by BPI to ALS and Litonjua was only in the principal sum of P464,351.77, with interest
at 20% plus service charge of 1% per annum, payable on equal monthly and successive amortizations
at P9,283.83 for ten (10) years or one hundred twenty (120) months. The amortization schedule
attached as Annex "A" to the "Deed of Mortgage" is correspondingly reformed as aforestated.

The Court further finds that ALS and Litonjua suffered compensable damages when BPI caused their
publication in a newspaper of general circulation as defaulting debtors, and therefore orders BPI to
pay ALS and Litonjua the following sums:

a) P300,000.00 for and as moral damages;

b) P50,000.00 as and for exemplary damages;

c) P50,000.00 as and for attorney’s fees and expenses of litigation.

The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for being premature.

Costs against BPI.

SO ORDERED.2

Both parties appealed to the Court of Appeals. However, private respondents’ appeal was dismissed
for non-payment of docket fees.

On February 28, 1997, the Court of Appeals promulgated its decision, the dispositive portion reads:

WHEREFORE, finding no error in the appealed decision the same is hereby AFFIRMED in toto.

SO ORDERED.3

In its decision, the Court of Appeals reasoned that a simple loan is perfected only upon the delivery of
the object of the contract. The contract of loan between BPIIC and ALS & Litonjua was perfected only
on September 13, 1982, the date when BPIIC released the purported balance of the ₱500,000 loan
after deducting therefrom the value of Roa’s indebtedness. Thus, payment of the monthly amortization
should commence only a month after the said date, as can be inferred from the stipulations in the
contract. This, despite the express agreement of the parties that payment shall commence on May 1,
1981. From October 1982 to June 1984, the total amortization due was only ₱194,960.43. Evidence
showed that private respondents had an overpayment, because as of June 1984, they already paid a
total amount of ₱201,791.96. Therefore, there was no basis for BPIIC to extrajudicially foreclose the
mortgage and cause the publication in newspapers concerning private respondents’ delinquency in
the payment of their loan. This fact constituted sufficient ground for moral damages in favor of private
respondents.

The motion for reconsideration filed by petitioner BPIIC was likewise denied, hence this petition, where
BPIIC submits for resolution the following issues:

I. WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL CONTRACT IN THE

LIGHT OF THE RULE LAID DOWN IN BONNEVIE VS. COURT OF APPEALS, 125 SCRA
122.

II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY’S FEES IN THE FACE OF IRREGULAR PAYMENTS MADE
BY ALS AND OPPOSED TO THE RULE LAID DOWN IN SOCIAL SECURITY SYSTEM VS.
COURT OF APPEALS, 120 SCRA 707.

On the first issue, petitioner contends that the Court of Appeals erred in ruling that because a simple
loan is perfected upon the delivery of the object of the contract, the loan contract in this case was
perfected only on September 13, 1982. Petitioner claims that a contract of loan is a consensual
contract, and a loan contract is perfected at the time the contract of mortgage is executed conformably
with our ruling in Bonnevie v. Court of Appeals, 125 SCRA 122. In the present case, the loan contract
was perfected on March 31, 1981, the date when the mortgage deed was executed, hence, the
amortization and interests on the loan should be computed from said date.

Petitioner also argues that while the documents showed that the loan was released only on August
1982, the loan was actually released on March 31, 1981, when BPIIC issued a cancellation of
mortgage of Frank Roa’s loan. This finds support in the registration on March 31, 1981 of the Deed of
Absolute Sale executed by Roa in favor of ALS, transferring the title of the property to ALS, and ALS
executing the Mortgage Deed in favor of BPIIC. Moreover, petitioner claims, the delay in the release
of the loan should be attributed to private respondents. As BPIIC only agreed to extend a ₱500,000
loan, private respondents were required to reduce Frank Roa’s loan below said amount. According to
petitioner, private respondents were only able to do so in August 1982.

In their comment, private respondents assert that based on Article 1934 of the Civil Code,4 a simple
loan is perfected upon the delivery of the object of the contract, hence a real contract. In this case,
even though the loan contract was signed on March 31, 1981, it was perfected only on September 13,
1982, when the full loan was released to private respondents. They submit that petitioner
misread Bonnevie. To give meaning to Article 1934, according to private respondents, Bonnevie must
be construed to mean that the contract to extend the loan was perfected on March 31, 1981 but the
contract of loan itself was only perfected upon the delivery of the full loan to private respondents on
September 13, 1982.

Private respondents further maintain that even granting, arguendo, that the loan contract was
perfected on March 31, 1981, and their payment did not start a month thereafter, still no default took
place. According to private respondents, a perfected loan agreement imposes reciprocal obligations,
where the obligation or promise of each party is the consideration of the other party. In this case, the
consideration for BPIIC in entering into the loan contract is the promise of private respondents to pay
the monthly amortization. For the latter, it is the promise of BPIIC to deliver the money. In reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. Therefore, private respondents conclude, they did
not incur in delay when they did not commence paying the monthly amortization on May 1, 1981, as it
was only on September 13, 1982 when petitioner fully complied with its obligation under the loan
contract.

We agree with private respondents. A loan contract is not a consensual contract but a real contract. It
is perfected only upon the delivery of the object of the contract.5 Petitioner misapplied Bonnevie. The
contract in Bonnevie declared by this Court as a perfected consensual contract falls under the first
clause of Article 1934, Civil Code. It is an accepted promise to deliver something by way of simple
loan.

In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines, 44 SCRA 445, petitioner
applied for a loan of ₱500,000 with respondent bank. The latter approved the application through a
board resolution. Thereafter, the corresponding mortgage was executed and registered. However,
because of acts attributable to petitioner, the loan was not released. Later, petitioner instituted an
action for damages. We recognized in this case, a perfected consensual contract which under normal
circumstances could have made the bank liable for not releasing the loan. However, since the fault
was attributable to petitioner therein, the court did not award it damages.

A perfected consensual contract, as shown above, can give rise to an action for damages. However,
said contract does not constitute the real contract of loan which requires the delivery of the object of
the contract for its perfection and which gives rise to obligations only on the part of the borrower.6

In the present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on the
other, was perfected only on September 13, 1982, the date of the second release of the loan. Following
the intentions of the parties on the commencement of the monthly amortization, as found by the Court
of Appeals, private respondents’ obligation to pay commenced only on October 13, 1982, a month
after the perfection of the contract.7

We also agree with private respondents that a contract of loan involves a reciprocal obligation, wherein
the obligation or promise of each party is the consideration for that of the other.8 As averred by private
respondents, the promise of BPIIC to extend and deliver the loan is upon the consideration that ALS
and Litonjua shall pay the monthly amortization commencing on May 1, 1981, one month after the
supposed release of the loan. It is a basic principle in reciprocal obligations that neither party incurs in
delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent
upon him.9 Only when a party has performed his part of the contract can he demand that the other
party also fulfills his own obligation and if the latter fails, default sets in. Consequently, petitioner could
only demand for the payment of the monthly amortization after September 13, 1982 for it was only
then when it complied with its obligation under the loan contract. Therefore, in computing the amount
due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting date
is October 13, 1982 and not May 1, 1981.

Other points raised by petitioner in connection with the first issue, such as the date of actual release
of the loan and whether private respondents were the cause of the delay in the release of the loan,
are factual. Since petitioner has not shown that the instant case is one of the exceptions to the basic
rule that only questions of law can be raised in a petition for review under Rule 45 of the Rules of
Court,10 factual matters need not tarry us now. On these points we are bound by the findings of the
appellate and trial courts.
On the second issue, petitioner claims that it should not be held liable for moral and exemplary
damages for it did not act maliciously when it initiated the foreclosure proceedings. It merely exercised
its right under the mortgage contract because private respondents were irregular in their monthly
amortization. It invoked our ruling in Social Security System vs. Court of Appeals, 120 SCRA 707,
1âwphi1

where we said:

Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of
Appeals "the negligence of the appellant is not so gross as to warrant moral and temperate damages,"
except that, said Court reduced those damages by only P5,000.00 instead of eliminating them. Neither
can we agree with the findings of both the Trial Court and respondent Court that the SSS had acted
maliciously or in bad faith. The SSS was of the belief that it was acting in the legitimate exercise of its
right under the mortgage contract in the face of irregular payments made by private respondents and
placed reliance on the automatic acceleration clause in the contract. The filing alone of the foreclosure
application should not be a ground for an award of moral damages in the same way that a clearly
unfounded civil action is not among the grounds for moral damages.

Private respondents counter that BPIIC was guilty of bad faith and should be liable for said damages
because it insisted on the payment of amortization on the loan even before it was released. Further, it
did not make the corresponding deduction in the monthly amortization to conform to the actual amount
of loan released, and it immediately initiated foreclosure proceedings when private respondents failed
to make timely payment.

But as admitted by private respondents themselves, they were irregular in their payment of monthly
amortization. Conformably with our ruling in SSS, we can not properly declare BPIIC in bad faith.
Consequently, we should rule out the award of moral and exemplary damages.11

However, in our view, BPIIC was negligent in relying merely on the entries found in the deed of
mortgage, without checking and correspondingly adjusting its records on the amount actually released
to private respondents and the date when it was released. Such negligence resulted in damage to
private respondents, for which an award of nominal damages should be given in recognition of their
rights which were violated by BPIIC.12 For this purpose, the amount of ₱25,000 is sufficient.

Lastly, as in SSS where we awarded attorney’s fees because private respondents were compelled to
litigate, we sustain the award of ₱50,000 in favor of private respondents as attorney’s fees.

WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals and its resolution dated
April 21, 1998, are AFFIRMED WITH MODIFICATION as to the award of damages. The award of
moral and exemplary damages in favor of private respondents is DELETED, but the award to them of
attorney’s fees in the amount of ₱50,000 is UPHELD. Additionally, petitioner is ORDERED to pay
private respondents ₱25,000 as nominal damages. Costs against petitioner.

SO ORDERED.
G.R. No. L-24968 April 27, 1972

SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee,

vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.

Mabanag, Eliger and Associates and Saura, Magno and Associates for plaintiff-appellee.

Jesus A. Avanceña and Hilario G. Orsolino for defendant-appellant.

MAKALINTAL, J.:p

In Civil Case No. 55908 of the Court of First Instance of Manila, judgment was rendered on June 28, 1965 sentencing defendant Development
Bank of the Philippines (DBP) to pay actual and consequential damages to plaintiff Saura Import and Export Co., Inc. in the amount of
P383,343.68, plus interest at the legal rate from the date the complaint was filed and attorney's fees in the amount of P5,000.00. The present
appeal is from that judgment.

In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to the Rehabilitation Finance
Corporation (RFC), before its conversion into DBP, for an industrial loan of P500,000.00, to be used
as follows: P250,000.00 for the construction of a factory building (for the manufacture of jute sacks);
P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and
P9,100.00 as additional working capital.

Parenthetically, it may be mentioned that the jute mill machinery had already been purchased by Saura
on the strength of a letter of credit extended by the Prudential Bank and Trust Co., and arrived in
Davao City in July 1953; and that to secure its release without first paying the draft, Saura, Inc.
executed a trust receipt in favor of the said bank.

On January 7, 1954 RFC passed Resolution No. 145 approving the loan application for P500,000.00,
to be secured by a first mortgage on the factory building to be constructed, the land site thereof, and
the machinery and equipment to be installed. Among the other terms spelled out in the resolution were
the following:

1. That the proceeds of the loan shall be utilized exclusively for the following purposes:

For construction of factory building P250,000.00

For payment of the balance of purchase

price of machinery and equipment 240,900.00

For working capital 9,100.00

T O T A L P500,000.00

4. That Mr. & Mrs. Ramon E. Saura, Inocencia Arellano, Aniceto Caolboy and Gregoria Estabillo and
China Engineers, Ltd. shall sign the promissory notes jointly with the borrower-corporation;
5. That release shall be made at the discretion of the Rehabilitation Finance Corporation, subject to
availability of funds, and as the construction of the factory buildings progresses, to be certified to by
an appraiser of this Corporation;"

Saura, Inc. was officially notified of the resolution on January 9, 1954. The day before, however,
evidently having otherwise been informed of its approval, Saura, Inc. wrote a letter to RFC, requesting
a modification of the terms laid down by it, namely: that in lieu of having China Engineers, Ltd. (which
was willing to assume liability only to the extent of its stock subscription with Saura, Inc.) sign as co-
maker on the corresponding promissory notes, Saura, Inc. would put up a bond for P123,500.00, an
amount equivalent to such subscription; and that Maria S. Roca would be substituted for Inocencia
Arellano as one of the other co-makers, having acquired the latter's shares in Saura, Inc.

In view of such request RFC approved Resolution No. 736 on February 4, 1954, designating of the
members of its Board of Governors, for certain reasons stated in the resolution, "to reexamine all the
aspects of this approved loan ... with special reference as to the advisability of financing this particular
project based on present conditions obtaining in the operations of jute mills, and to submit his findings
thereon at the next meeting of the Board."

On March 24, 1954 Saura, Inc. wrote RFC that China Engineers, Ltd. had again agreed to act as co-
signer for the loan, and asked that the necessary documents be prepared in accordance with the terms
and conditions specified in Resolution No. 145. In connection with the reexamination of the project to
be financed with the loan applied for, as stated in Resolution No. 736, the parties named their
respective committees of engineers and technical men to meet with each other and undertake the
necessary studies, although in appointing its own committee Saura, Inc. made the observation that
the same "should not be taken as an acquiescence on (its) part to novate, or accept new conditions
to, the agreement already) entered into," referring to its acceptance of the terms and conditions
mentioned in Resolution No. 145.

On April 13, 1954 the loan documents were executed: the promissory note, with F.R. Halling,
representing China Engineers, Ltd., as one of the co-signers; and the corresponding deed of
mortgage, which was duly registered on the following April 17.

It appears, however, that despite the formal execution of the loan agreement the reexamination
contemplated in Resolution No. 736 proceeded. In a meeting of the RFC Board of Governors on June
10, 1954, at which Ramon Saura, President of Saura, Inc., was present, it was decided to reduce the
loan from P500,000.00 to P300,000.00. Resolution No. 3989 was approved as follows:

RESOLUTION No. 3989. Reducing the Loan Granted Saura Import & Export Co., Inc. under
Resolution No. 145, C.S., from P500,000.00 to P300,000.00. Pursuant to Bd. Res. No. 736, c.s.,
authorizing the re-examination of all the various aspects of the loan granted the Saura Import & Export
Co. under Resolution No. 145, c.s., for the purpose of financing the manufacture of jute sacks in
Davao, with special reference as to the advisability of financing this particular project based on present
conditions obtaining in the operation of jute mills, and after having heard Ramon E. Saura and after
extensive discussion on the subject the Board, upon recommendation of the Chairman, RESOLVED
that the loan granted the Saura Import & Export Co. be REDUCED from P500,000 to P300,000 and
that releases up to P100,000 may be authorized as may be necessary from time to time to place the
factory in actual operation: PROVIDED that all terms and conditions of Resolution No. 145, c.s., not
inconsistent herewith, shall remain in full force and effect."

On June 19, 1954 another hitch developed. F.R. Halling, who had signed the promissory note for
China Engineers Ltd. jointly and severally with the other RFC that his company no longer to of the loan
and therefore considered the same as cancelled as far as it was concerned. A follow-up letter dated
July 2 requested RFC that the registration of the mortgage be withdrawn.

In the meantime Saura, Inc. had written RFC requesting that the loan of P500,000.00 be granted. The
request was denied by RFC, which added in its letter-reply that it was "constrained to consider as
cancelled the loan of P300,000.00 ... in view of a notification ... from the China Engineers Ltd.,
expressing their desire to consider the loan insofar as they are concerned."

On July 24, 1954 Saura, Inc. took exception to the cancellation of the loan and informed RFC that
China Engineers, Ltd. "will at any time reinstate their signature as co-signer of the note if RFC releases
to us the P500,000.00 originally approved by you.".

On December 17, 1954 RFC passed Resolution No. 9083, restoring the loan to the original amount of
P500,000.00, "it appearing that China Engineers, Ltd. is now willing to sign the promissory notes jointly
with the borrower-corporation," but with the following proviso:

That in view of observations made of the shortage and high cost of imported raw
materials, the Department of Agriculture and Natural Resources shall certify to the
following:

1. That the raw materials needed by the borrower-corporation to carry out its operation
are available in the immediate vicinity; and

2. That there is prospect of increased production thereof to provide adequately for the
requirements of the factory."

The action thus taken was communicated to Saura, Inc. in a letter of RFC dated December 22, 1954,
wherein it was explained that the certification by the Department of Agriculture and Natural Resources
was required "as the intention of the original approval (of the loan) is to develop the manufacture of
sacks on the basis of locally available raw materials." This point is important, and sheds light on the
subsequent actuations of the parties. Saura, Inc. does not deny that the factory he was building in
Davao was for the manufacture of bags from local raw materials. The cover page of its brochure (Exh.
M) describes the project as a "Joint venture by and between the Mindanao Industry Corporation and
the Saura Import and Export Co., Inc. to finance, manage and operate a Kenaf mill plant, to
manufacture copra and corn bags, runners, floor mattings, carpets, draperies; out of 100% local raw
materials, principal kenaf." The explanatory note on page 1 of the same brochure states that, the
venture "is the first serious attempt in this country to use 100% locally grown raw materials
notably kenaf which is presently grown commercially in theIsland of Mindanao where the proposed
jutemill is located ..."

This fact, according to defendant DBP, is what moved RFC to approve the loan application in the first
place, and to require, in its Resolution No. 9083, a certification from the Department of Agriculture and
Natural Resources as to the availability of local raw materials to provide adequately for the
requirements of the factory. Saura, Inc. itself confirmed the defendant's stand impliedly in its letter of
January 21, 1955: (1) stating that according to a special study made by the Bureau of Forestry
"kenaf will not be available in sufficient quantity this year or probably even next year;" (2) requesting
"assurances (from RFC) that my company and associates will be able to bring in sufficient jute
materials as may be necessary for the full operation of the jute mill;" and (3) asking that releases of
the loan be made as follows:

a) For the payment of the receipt for jute mill

machineries with the Prudential Bank &
 Trust Company P250,000.00

(For immediate release)

b) For the purchase of materials and equip-

ment per attached list to enable the jute
mill to operate 182,413.91

c) For raw materials and labor 67,586.09

1) P25,000.00 to be released on the open-

ing of the letter of credit for raw jute
for $25,000.00.

2) P25,000.00 to be released upon arrival

of raw jute.

3) P17,586.09 to be released as soon as the

mill is ready to operate.

On January 25, 1955 RFC sent to Saura, Inc. the following reply:

Dear Sirs:

This is with reference to your letter of January 21, 1955, regarding the
release of your loan under consideration of P500,000. As stated in our
letter of December 22, 1954, the releases of the loan, if revived, are
proposed to be made from time to time, subject to availability of funds
towards the end that the sack factory shall be placed in actual
operating status. We shall be able to act on your request for revised
purpose and manner of releases upon re-appraisal of the securities
offered for the loan.

With respect to our requirement that the Department of Agriculture and

Natural Resources certify that the raw materials needed are available
in the immediate vicinity and that there is prospect of increased
production thereof to provide adequately the requirements of the
factory, we wish to reiterate that the basis of the original approval is to
develop the manufacture of sacks on the basis of the locally available
raw materials. Your statement that you will have to rely on the
importation of jute and your request that we give you assurance that
your company will be able to bring in sufficient jute materials as may
be necessary for the operation of your factory, would not be in line with
our principle in approving the loan.

With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursue the matter
further. Instead, it requested RFC to cancel the mortgage, and so, on June 17, 1955 RFC executed
the corresponding deed of cancellation and delivered it to Ramon F. Saura himself as president of
Saura, Inc.
It appears that the cancellation was requested to make way for the registration of a mortgage contract,
executed on August 6, 1954, over the same property in favor of the Prudential Bank and Trust Co.,
under which contract Saura, Inc. had up to December 31 of the same year within which to pay its
obligation on the trust receipt heretofore mentioned. It appears further that for failure to pay the said
obligation the Prudential Bank and Trust Co. sued Saura, Inc. on May 15, 1955.

On January 9, 1964, ahnost 9 years after the mortgage in favor of RFC was cancelled at the request
of Saura, Inc., the latter commenced the present suit for damages, alleging failure of RFC (as
predecessor of the defendant DBP) to comply with its obligation to release the proceeds of the loan
applied for and approved, thereby preventing the plaintiff from completing or paying contractual
commitments it had entered into, in connection with its jute mill project.

The trial court rendered judgment for the plaintiff, ruling that there was a perfected contract between
the parties and that the defendant was guilty of breach thereof. The defendant pleaded below, and
reiterates in this appeal: (1) that the plaintiff's cause of action had prescribed, or that its claim had
been waived or abandoned; (2) that there was no perfected contract; and (3) that assuming there was,
the plaintiff itself did not comply with the terms thereof.

We hold that there was indeed a perfected consensual contract, as recognized in Article 1934 of the
Civil Code, which provides:

ART. 1954. An accepted promise to deliver something, by way of commodatum or

simple loan is binding upon the parties, but the commodatum or simple loan itself shall
not be perferted until the delivery of the object of the contract.

There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of
P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. But this fact alone falls short of resolving the basic claim that the defendant
failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.

It should be noted that RFC entertained the loan application of Saura, Inc. on the assumption that the
factory to be constructed would utilize locally grown raw materials, principally kenaf. There is no
serious dispute about this. It was in line with such assumption that when RFC, by Resolution No. 9083
approved on December 17, 1954, restored the loan to the original amount of P500,000.00. it imposed
two conditions, to wit: "(1) that the raw materials needed by the borrower-corporation to carry out its
operation are available in the immediate vicinity; and (2) that there is prospect of increased production
thereof to provide adequately for the requirements of the factory." The imposition of those conditions
was by no means a deviation from the terms of the agreement, but rather a step in its implementation.
There was nothing in said conditions that contradicted the terms laid down in RFC Resolution No. 145,
passed on January 7, 1954, namely — "that the proceeds of the loan shall be utilized exclusively for
the following purposes: for construction of factory building — P250,000.00; for payment of the balance
of purchase price of machinery and equipment — P240,900.00; for working capital — P9,100.00."
Evidently Saura, Inc. realized that it could not meet the conditions required by RFC, and so wrote its
letter of January 21, 1955, stating that local jute "will not be able in sufficient quantity this year or
probably next year," and asking that out of the loan agreed upon the sum of P67,586.09 be released
"for raw materials and labor." This was a deviation from the terms laid down in Resolution No. 145 and
embodied in the mortgage contract, implying as it did a diversion of part of the proceeds of the loan to
purposes other than those agreed upon.

When RFC turned down the request in its letter of January 25, 1955 the negotiations which had been
going on for the implementation of the agreement reached an impasse. Saura, Inc. obviously was in
no position to comply with RFC's conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage be cancelled, which was done on June
15, 1955. The action thus taken by both parties was in the nature cf mutual desistance — what
Manresa terms "mutuo disenso"1 — which is a mode of extinguishing obligations. It is a concept that
derives from the principle that since mutual agreement can create a contract, mutual disagreement by
the parties can cause its extinguishment.2

The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged
breach of contract by RFC, or even point out that the latter's stand was legally unjustified. Its request
for cancellation of the mortgage carried no reservation of whatever rights it believed it might have
against RFC for the latter's non-compliance. In 1962 it even applied with DBP for another loan to
finance a rice and corn project, which application was disapproved. It was only in 1964, nine years
after the loan agreement had been cancelled at its own request, that Saura, Inc. brought this action
for damages.All these circumstances demonstrate beyond doubt that the said agreement had been
extinguished by mutual desistance — and that on the initiative of the plaintiff-appellee itself.

With this view we take of the case, we find it unnecessary to consider and resolve the other issues
raised in the respective briefs of the parties.

WHEREFORE, the judgment appealed from is reversed and the complaint dismissed, with costs
against the plaintiff-appellee.
G.R. No. 154878 March 16, 2007

CAROLYN M. GARCIA, Petitioner,

vs.
RICA MARIE S. THIO, Respondent.

DECISION

CORONA, J.:

Assailed in this petition for review on certiorari1 are the June 19, 2002 decision2 and August 20, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 56577 which set aside the February 28,
1997 decision of the Regional Trial Court (RTC) of Makati City, Branch 58.

Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garcia
a crossed check4 dated February 24, 1995 in the amount of US$100,000 payable to the order of a
certain Marilou Santiago.5Thereafter, petitioner received from respondent every month (specifically,
on March 24, April 26, June 26 and July 26, all in 1995) the amount of US$3,000 6 and ₱76,5007 on
July 26,8 August 26, September 26 and October 26, 1995.

In June 1995, respondent received from petitioner another crossed check9 dated June 29, 1995 in the
amount of ₱500,000, also payable to the order of Marilou Santiago.10 Consequently, petitioner
received from respondent the amount of ₱20,000 every month on August 5, September 5, October 5
and November 5, 1995.11

According to petitioner, respondent failed to pay the principal amounts of the loans (US$100,000 and
₱500,000) when they fell due. Thus, on February 22, 1996, petitioner filed a complaint for sum of
money and damages in the RTC of Makati City, Branch 58 against respondent, seeking to collect the
sums of US$100,000, with interest thereon at 3% a month from October 26, 1995 and ₱500,000, with
interest thereon at 4% a month from November 5, 1995, plus attorney’s fees and actual damages.12

Petitioner alleged that on February 24, 1995, respondent borrowed from her the amount of
US$100,000 with interest thereon at the rate of 3% per month, which loan would mature on October
26, 1995.13 The amount of this loan was covered by the first check. On June 29, 1995, respondent
again borrowed the amount of ₱500,000 at an agreed monthly interest of 4%, the maturity date of
which was on November 5, 1995.14 The amount of this loan was covered by the second check. For
both loans, no promissory note was executed since petitioner and respondent were close friends at
the time.15 Respondent paid the stipulated monthly interest for both loans but on their maturity dates,
she failed to pay the principal amounts despite repeated demands.16 1awphi 1.nét

Respondent denied that she contracted the two loans with petitioner and countered that it was Marilou
Santiago to whom petitioner lent the money. She claimed she was merely asked by petitioner to give
the crossed checks to Santiago.17 She issued the checks for ₱76,000 and ₱20,000 not as payment of
interest but to accommodate petitioner’s request that respondent use her own checks instead of
Santiago’s.18

In a decision dated February 28, 1997, the RTC ruled in favor of petitioner.19 It found that respondent
borrowed from petitioner the amounts of US$100,000 with monthly interest of 3% and ₱500,000 at a
monthly interest of 4%:20
WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is
hereby rendered in favor of [petitioner], sentencing [respondent] to pay the former the amount of:

1. [US$100,000.00] or its peso equivalent with interest thereon at 3% per month from October
26, 1995 until fully paid;

2. ₱500,000.00 with interest thereon at 4% per month from November 5, 1995 until fully paid.

3. ₱100,000.00 as and for attorney’s fees; and

4. ₱50,000.00 as and for actual damages.

For lack of merit, [respondent’s] counterclaim is perforce dismissed.

With costs against [respondent].

IT IS SO ORDERED.21

On appeal, the CA reversed the decision of the RTC and ruled that there was no contract of loan
between the parties:

A perusal of the record of the case shows that [petitioner] failed to substantiate her claim that
[respondent] indeed borrowed money from her. There is nothing in the record that shows that
[respondent] received money from [petitioner]. What is evident is the fact that [respondent]
received a MetroBank [crossed] check dated February 24, 1995 in the sum of US$100,000.00, payable
to the order of Marilou Santiago and a CityTrust [crossed] check dated June 29, 1995 in the amount
of ₱500,000.00, again payable to the order of Marilou Santiago, both of which were issued by
[petitioner]. The checks received by [respondent], being crossed, may not be encashed but only
deposited in the bank by the payee thereof, that is, by Marilou Santiago herself.

It must be noted that crossing a check has the following effects: (a) the check may not be encashed
but only deposited in the bank; (b) the check may be negotiated only once—to one who has an account
with the bank; (c) and the act of crossing the check serves as warning to the holder that the check has
been issued for a definite purpose so that he must inquire if he has received the check pursuant to
that purpose, otherwise, he is not a holder in due course.

Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and delivery to
the payee in contemplation of law since the latter is not the person who could take the checks as a
holder, i.e., as a payee or indorsee thereof, with intent to transfer title thereto. Neither could she be
deemed as an agent of Marilou Santiago with respect to the checks because she was merely
facilitating the transactions between the former and [petitioner].

With the foregoing circumstances, it may be fairly inferred that there were really no contracts of loan
that existed between the parties. x x x (emphasis supplied)22

Hence this petition.23

As a rule, only questions of law may be raised in a petition for review on certiorari under Rule 45 of
the Rules of Court. However, this case falls under one of the exceptions, i.e., when the factual findings
of the CA (which held that there were no contracts of loan between petitioner and respondent) and the
RTC (which held that there werecontracts of loan) are contradictory.24
The petition is impressed with merit.

A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object
of the contract.25 This is evident in Art. 1934 of the Civil Code which provides:

An accepted promise to deliver something by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the
object of the contract. (Emphasis supplied)

Upon delivery of the object of the contract of loan (in this case the money received by the debtor when
the checks were encashed) the debtor acquires ownership of such money or loan proceeds and is
bound to pay the creditor an equal amount.26

It is undisputed that the checks were delivered to respondent. However, these checks were crossed
and payable not to the order of respondent but to the order of a certain Marilou Santiago. Thus the
main question to be answered is: who borrowed money from petitioner — respondent or Santiago?

Petitioner insists that it was upon respondent’s instruction that both checks were made payable to
Santiago.27 She maintains that it was also upon respondent’s instruction that both checks were
delivered to her (respondent) so that she could, in turn, deliver the same to Santiago.28 Furthermore,
she argues that once respondent received the checks, the latter had possession and control of them
such that she had the choice to either forward them to Santiago (who was already her debtor), to retain
them or to return them to petitioner.29

We agree with petitioner. Delivery is the act by which the res or substance thereof is placed within the
actual or constructive possession or control of another.30 Although respondent did not physically
receive the proceeds of the checks, these instruments were placed in her control and possession
under an arrangement whereby she actually re-lent the amounts to Santiago.

Several factors support this conclusion.

First, respondent admitted that petitioner did not personally know Santiago.31 It was highly improbable
that petitioner would grant two loans to a complete stranger without requiring as much as promissory
notes or any written acknowledgment of the debt considering that the amounts involved were quite
big. Respondent, on the other hand, already had transactions with Santiago at that time.32

Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both
parties’ list of witnesses) testified that respondent’s plan was for petitioner to lend her money at a
monthly interest rate of 3%, after which respondent would lend the same amount to Santiago at a
higher rate of 5% and realize a profit of 2%.33 This explained why respondent instructed petitioner to
make the checks payable to Santiago. Respondent has not shown any reason why Ruiz’ testimony
should not be believed.

Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of ₱76,000
each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the ₱500,000
loan, she also issued her own checks in the amount of ₱20,000 each for four months.34 According to
respondent, she merely accommodated petitioner’s request for her to issue her own checks to cover
the interest payments since petitioner was not personally acquainted with Santiago.35 She claimed,
however, that Santiago would replace the checks with cash.36Her explanation is simply incredible. It is
difficult to believe that respondent would put herself in a position where she would be compelled to
pay interest, from her own funds, for loans she allegedly did not contract. We declared in one case
that:
In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to
be believed, it must not only proceed from the mouth of a credible witness, but must be credible in
itself such as the common experience of mankind can approve as probable under the circumstances.
We have no test of the truth of human testimony except its conformity to our knowledge, observation,
and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of juridical
cognizance.37

Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner,
who was listed as one of her (Santiago’s) creditors.38

Last, respondent inexplicably never presented Santiago as a witness to corroborate her story.39 The
presumption is that "evidence willfully suppressed would be adverse if produced."40 Respondent was
not able to overturn this presumption.

We hold that the CA committed reversible error when it ruled that respondent did not borrow the
amounts of US$100,000 and ₱500,000 from petitioner. We instead agree with the ruling of the RTC
making respondent liable for the principal amounts of the loans.

We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the
US$100,000 and ₱500,000 loans respectively. There was no written proof of the interest payable
except for the verbal agreement that the loans would earn 3% and 4% interest per month. Article 1956
of the Civil Code provides that "[n]o interest shall be due unless it has been expressly stipulated in
writing."

Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to
Article 2209 of the Civil Code. It is well-settled that:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.41

Hence, respondent is liable for the payment of legal interest per annum to be computed from
November 21, 1995, the date when she received petitioner’s demand letter.42 From the finality of the
decision until it is fully paid, the amount due shall earn interest at 12% per annum, the interim period
being deemed equivalent to a forbearance of credit.43

The award of actual damages in the amount of ₱50,000 and ₱100,000 attorney’s fees is deleted since
the RTC decision did not explain the factual bases for these damages.

WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20, 2002
resolution of the Court of Appeals in CA-G.R. CV No. 56577 are REVERSED and SET ASIDE. The
February 28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with
the MODIFICATION that respondent is directed to pay petitioner the amounts of US$100,000 and
₱500,000 at 12% per annum interest from November 21, 1995 until the finality of the decision. The
total amount due as of the date of finality will earn interest of 12% perannum until fully paid. The award
of actual damages and attorney’s fees is deleted.

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.

DECISION

CALLEJO, SR., J.:

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 month’s time. Private respondent asked Sanchez to bring Doronilla to their house so that they
could discuss Sanchez’s request.3

On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi, Doronilla’s
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 (₱200,000.00) 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 ₱200,000.00. 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 ₱90,000.00 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 ₱175,000.00 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
(₱212,000.00) 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 client’s money. Doronilla issued another check for ₱212,000.00 in private respondent’s
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 ₱200,000.00, 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 ₱50,000.00 for moral damages and a similar amount for exemplary damages;

(c) the amount of ₱40,000.00 for attorney’s fees; and

(d) the costs of the suit.

SO ORDERED.8

Petitioner appealed the trial court’s 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
petitioner’s 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 PETITIONER’S 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 ATTORNEY’S 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 petitioner’s 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
₱212,000.00, or ₱12,000 more than what private respondent deposited in Sterela’s 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
respondent’s ₱200,000.00 because it is not privy to the transaction between the latter and Doronilla.16

It argues further that petitioner’s 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 Doronilla’s 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
₱200,000.00 in Sterela’s account for purposes of its incorporation.18 Hence, petitioner should not be
held liable for allowing Doronilla to withdraw from Sterela’s savings account. 1a\^ /phi1.net

Petitioner also asserts that the Court of Appeals erred in affirming the trial court’s 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 Sterela’s 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 attorney’s 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 ₱200,000.00
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, Atienza’s employer, is liable
for the return of his money. He insists that Atienza, petitioner’s assistant manager, connived with
Doronilla in defrauding private respondent since it was Atienza who facilitated the opening of Sterela’s
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 Sterela’s 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 Court’s 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 Sterela’s savings account and would be returned to private respondent after thirty (30) days.

Doronilla’s attempts to return to private respondent the amount of ₱200,000.00 which the latter
deposited in Sterela’s account together with an additional ₱12,000.00, 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 ₱12,000.00 corresponds to the fruits of the
lending of the ₱200,000.00. 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 latter’s money deposited with
petitioner.

Neither does the Court agree with petitioner’s contention that it is not solidarily liable for the return of
private respondent’s 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 petitioner’s liability for the return of private respondent’s 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 respondent’s money and is liable for its restitution.

Petitioner’s 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 Doronilla’s "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 defendant’s Buendia branch precisely because Atienza was a
key officer therein. The records show that plaintiff had suggested that the ₱200,000.00 be deposited
in his bank, the Manila Banking Corporation, but Doronilla and Dumagpi insisted that it must be in
defendant’s 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 ₱200,000.00, 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.nét

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 Atienza’s
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 ₱200,000.00 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 employee’s
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 latter’s 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 Sterela’s Savings Account No. 10-1567, in which account
private respondent’s money was deposited, and in transferring the money withdrawn to Sterela’s
Current Account with petitioner. Atienza’s acts of helping Doronilla, a customer of the petitioner, were
obviously done in furtherance of petitioner’s interests34 even though in the process, Atienza violated
some of petitioner’s rules such as those stipulated in its savings account passbook.35 It was established
that the transfer of funds from Sterela’s 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 respondent’s loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil Code,
petitioner is liable for private respondent’s loss and is solidarily liable with Doronilla and Dumagpi for
the return of the ₱200,000.00 since it is clear that petitioner failed to prove that it exercised due
diligence to prevent the unauthorized withdrawals from Sterela’s 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, attorney’s 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.