FELIX DE LOS SANTOS, plaintiff-appelle,

vs.
AGUSTINA JARRA, administratrix of the estate of Magdaleno Jimenea, deceased,
defendant-appellant.
Matias Hilado, for appellant.
Jose Felix Martinez, for appellee.
TORRES, J.:
On the 1st of September, 1906, Felix de los Santos brought suit against Agustina Jarra, the
administratrix of the estate of Magdaleno Jimenea, alleging that in the latter part of 1901
Jimenea borrowed and obtained from the plaintiff ten first-class carabaos, to be used at the
animal-power mill of his hacienda during the season of 1901-2, without recompense or
remuneration whatever for the use thereof, under the sole condition that they should be returned
to the owner as soon as the work at the mill was terminated; that Magdaleno Jimenea, however,
did not return the carabaos, notwithstanding the fact that the plaintiff claimed their return after
the work at the mill was finished; that Magdaleno Jimenea died on the 28th of October, 1904,
and the defendant herein was appointed by the Court of First Instance of Occidental Negros
administratrix of his estate and she took over the administration of the same and is still
performing her duties as such administratrix; that the plaintiff presented his claim to the
commissioners of the estate of Jimenea, within the legal term, for the return of the said ten
carabaos, but the said commissioners rejected his claim as appears in their report; therefore,
the plaintiff prayed that judgment be entered against the defendant as administratrix of the
estate of the deceased, ordering her to return the ten first-class carabaos loaned to the late
Jimenea, or their present value, and to pay the costs.
The defendant was duly summoned, and on the 25th of September, 1906, she demurred in
writing to the complaint on the ground that it was vague; but on the 2d of October of the same
year, in answer to the complaint, she said that it was true that the late Magdaleno Jimenea
asked the plaintiff to loan him ten carabaos, but that he only obtained three second-class
animals, which were afterwards transferred by sale by the plaintiff to the said Jimenea; that she
denied the allegations contained in paragraph 3 of the complaint; for all of which she asked the
court to absolve her of the complaint with the cost against the plaintiff.

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

The case came up for trial, evidence was adduced by both parties, and either exhibits were
made of record. On the 10th of January, 1907, the court below entered judgment sentencing
Agustina Jarra, as administratrix of the estate of Magdaleno Jimenea, to return to the plaintiff,
Felix de los Santos, the remaining six second and third class carabaos, or the value thereof at
the rate of P120 each, or a total of P720 with the costs.
Counsel for the defendant excepted to the foregoing judgment, and, by a writing dated January
19, moved for anew trial on the ground that the findings of fact were openly and manifestly
contrary to the weight of the evidence. The motion was overruled, the defendant duly excepted,
and in due course submitted the corresponding bill of exceptions, which was approved and
submitted to this court.

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

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

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

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

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

The Civil Code, in dealing with loans in general, from which generic denomination the specific
one of commodatum is derived, establishes prescriptions in relation to the last-mentioned
contract by the following articles:
ART. 1740. By the contract of loan, one of the parties delivers to the other, either anything not
perishable, in order that the latter may use it during a certain period and return it to the former,
in which case it is called commodatum, or money or any other perishable thing, under the
condition to return an equal amount of the same kind and quality, in which case it is merely
called a loan.

Commodatum is essentially gratuitous.

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

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

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

The carabaos delivered to be used not being returned by the defendant upon demand, there is
no doubt that she is under obligation to indemnify the owner thereof by paying him their value.
Article 1101 of said code reads:

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

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

Although it is true that in a contract of commodatum the bailor retains the ownership of the thing
loaned, and at the expiration of the period, or after the use for which it was loaned has been
accomplished, it is the imperative duty of the bailee to return the thing itself to its owner, or to
pay him damages if through the fault of the bailee the thing should have been lost or injured, it is
clear that where public securities are involved, the trial court, in deferring to the claim of the
bailor that the amount loaned be returned him by the bailee in bonds of the same class as those
which constituted the contract, thereby properly applies law 9 of title 11 of partida 5.
With regard to the third assignment of error, based on the fact that the plaintiff Santos had not
appealed from the decision of the commissioners rejecting his claim for the recovery of his
carabaos, it is sufficient to estate that we are not dealing with a claim for the payment of a
certain sum, the collection of a debt from the estate, or payment for losses and damages (sec.
119, Code of Civil Procedure), but with the exclusion from the inventory of the property of the
late Jimenea, or from his capital, of six carabaos which did not belong to him, and which formed
no part of the inheritance.

The demand for the exclusion of the said carabaos belonging to a third party and which did not
form part of the property of the deceased, must be the subject of a direct decision of the court in
an ordinary action, wherein the right of the third party to the property which he seeks to have
excluded from the inheritance and the right of the deceased has been discussed, and rendered
in view of the result of the evidence adduced by the administrator of the estate and of the
claimant, since it is so provided by the second part of section 699 and by section 703 of the
Code of Civil Procedure; the refusal of the commissioners before whom the plaintiff
unnecessarily appeared can not affect nor reduce the unquestionable right of ownership of the
latter, inasmuch as there is no law nor principle of justice authorizing the successors of the late
Jimenea to enrich themselves at the cost and to the prejudice of Felix de los Santos.
For the reasons above set forth, by which the errors assigned to the judgment appealed from
have been refuted, and considering that the same is in accordance with the law and the merits
of the case, it is our opinion that it should be affirmed and we do hereby affirm it with the costs
against the appellant. So ordered.

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

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents.

GANCAYCO, J.:
The principal issue in this case is whether or not a decision of the Court of Appeals promulgated
a long time ago can properly be considered res judicata by respondent Court of Appeals in the
present two cases between petitioner and two private respondents.

Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth
Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)]
and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of Possession, which
affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of
Baguio and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the
dispositive portion as follows:

WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of
the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs
of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio
Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or
damages is hereby denied. Said defendant is ordered to pay costs.

Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's
conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-
R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in
question; that the two lots were possessed by the predecessors-in-interest of private
respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been
in possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated
the trust and when it applied for registration in 1962; that petitioner had just been in possession
as owner for eleven years, hence there is no possibility of acquisitive prescription which requires
10 years possession with just title and 30 years of possession without; that the principle of res
judicata on these findings by the Court of Appeals will bar a reopening of these questions of
facts; and that those facts may no longer be altered.

Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two
aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.

The facts and background of these cases as narrated by the trail court are as follows
... The documents and records presented reveal that the whole controversy started when the
defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the
Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration
of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad,
Benguet, docketed as LRC N-91, said Lots being the sites of the Catholic Church building,
convents, high school building, school gymnasium, school dormitories, social hall, stonewalls,
etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their
Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto.
After trial on the merits, the land registration court promulgated its Decision, dated November
17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.
The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio
Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land
registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of
Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land registration
court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two sets
of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar),
the first lot being presently occupied by the convent and the second by the women's dormitory
and the sister's convent.

On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of
Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and
on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for
reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs
of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion
for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient
merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs of
Egmidio Octaviano.

Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the
decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3,
docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs.
Court of Appeals and Heirs of Egmidio Octaviano.'

From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan
Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for
review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs.
Court of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez.

On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR
on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit.
Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872,
the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion
For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3.
The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion
on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs
of Octaviano any affirmative relief.

On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for
certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio
Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the
Court of Appeals dismissed the petition.

It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil
Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of
Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of
possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).

In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented
one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in
question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written
demand (Exh. BB-4 ) to defendant Vicar for the return of the land to them; and the reasonable
rentals for the use of the land at P10,000.00 per month. On the other hand, defendant Vicar
presented the Register of Deeds for the Province of Benguet, Atty. Nicanor Sison, who testified
that the land in question is not covered by any title in the name of Egmidio Octaviano or any of
the plaintiffs (Exh. 8). The defendant dispensed with the testimony of Mons.William Brasseur
when the plaintiffs admitted that the witness if called to the witness stand, would testify that
defendant Vicar has been in possession of Lot 3, for seventy-five (75) years continuously and
peacefully and has constructed permanent structures thereon.
In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted
the case on the sole issue of whether or not the decisions of the Court of Appeals and the
Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the
owners of the land constitute res judicata.

In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the
defense of ownership and/or long and continuous possession of the two lots in question since
this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the
principle of res judicata. Plaintiffs contend that the question of possession and ownership have
already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R)
and affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his
part, defendant Vicar maintains that the principle of res judicata would not prevent them from
litigating the issues of long possession and ownership because the dispositive portion of the
prior judgment in CA-G.R. No. 038830-R merely dismissed their application for registration and
titling of lots 2 and 3. Defendant Vicar contends that only the dispositive portion of the decision,
and not its body, is the controlling pronouncement of the Court of Appeals.

The alleged errors committed by respondent Court of Appeals according to petitioner are as
follows:
1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;
2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE
ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED;
3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM
VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS
WERE VALDEZ AND OCTAVIANO;
4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO
WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER;
5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT
APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD
FREE PATENT APPLICATIONS SINCE 1906;
6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND
JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129
OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;
7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO.
038830 WAS AFFIRMED BY THE SUPREME COURT;
8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON
OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR
PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF
OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3
MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE;
10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD
FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY
THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3
The petition is bereft of merit.

Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and
05149, when it clearly held that it was in agreement with the findings of the trial court that the
Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of
ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No.
38830-R) did not positively declare private respondents as owners of the land, neither was it
declared that they were not owners of the land, but it held that the predecessors of private
respondents were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906
to 1951. Petitioner was in possession as borrower in commodatum up to 1951, when it
repudiated the trust by declaring the properties in its name for taxation purposes. When
petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of
owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years,
but always with just title. Extraordinary acquisitive prescription requires 30 years.

On the above findings of facts supported by evidence and evaluated by the Court of Appeals in
CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's
ruling that said findings are res judicata between the parties. They can no longer be altered by
presentation of evidence because those issues were resolved with finality a long time ago. To
ignore the principle of res judicata would be to open the door to endless litigations by continuous
determination of issues without end.

An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in CA-G.R.
No. 38830-R, shows that it reversed the trial court's Decision 6 finding petitioner to be entitled to
register the lands in question under its ownership, on its evaluation of evidence and conclusion
of facts.

The Court of Appeals found that petitioner did not meet the requirement of 30 years possession
for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years
possession for ordinary acquisitive prescription because of the absence of just title. The
appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan
Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by
petitioner Vicar because there was absolutely no documentary evidence to support the same
and the alleged purchases were never mentioned in the application for registration.
By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano.
Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The
predecessors of private respondents, not petitioner Vicar, were in possession of the questioned
lots since 1906.

There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not
Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in
1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The
improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only
in 1947, the church was constructed only in 1951 and the new convent only 2 years before the
trial in 1963.

When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy the
lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in
1962.

Private respondents were able to prove that their predecessors' house was borrowed by
petitioner Vicar after the church and the convent were destroyed. They never asked for the
return of the house, but when they allowed its free use, they became bailors in commodatum
and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum to
the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust
the property subject matter of commodatum. The adverse claim of petitioner came only in 1951
when it declared the lots for taxation purposes. The action of petitioner Vicar by such adverse
claim could not ripen into title by way of ordinary acquisitive prescription because of the absence
of just title.

The Court of Appeals found that the predecessors-in-interest and private respondents were
possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a
bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951.
We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No.
38830-R. Its findings of fact have become incontestible. This Court declined to review said
decision, thereby in effect, affirming it. It has become final and executory a long time ago.
Respondent appellate court did not commit any reversible error, much less grave abuse of
discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is
governing, under the principle of res judicata, hence the rule, in the present cases CA-G.R. No.
05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision
may no longer be altered.

WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of
merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent
Court of Appeals is AFFIRMED, with costs against petitioner.

PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK),

petitioner,
vs.
HON. COURT OF APPEALS AND FRANKLIN VIVES, respondents.

This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated June 25,
1991 in CA-G.R. CV No. 11791 and of its Resolution2 dated May 5, 1994, denying the motion
for reconsideration of said decision filed by petitioner Producers Bank of the Philippines.
Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend
Angeles Sanchez to help her friend and townmate, Col. Arturo Doronilla, in incorporating his
business, the Sterela Marketing and Services ("Sterela" for brevity). Specifically, Sanchez asked
private respondent to deposit in a bank a certain amount of money in the bank account of
Sterela for purposes of its incorporation. She assured private respondent that he could withdraw
his money from said account within a months time. Private respondent asked Sanchez to bring
Doronilla to their house so that they could discuss Sanchezs request. 3

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

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

Private respondent tried to get in touch with Doronilla through Sanchez. On June 29, 1979, he
received a letter from Doronilla, assuring him that his money was intact and would be returned
to him. On August 13, 1979, Doronilla issued a postdated check for Two Hundred Twelve
Thousand Pesos (P212,000.00) in favor of private respondent. However, upon presentment
thereof by private respondent to the drawee bank, the check was dishonored. Doronilla
requested private respondent to present the same check on September 15, 1979 but when the
latter presented the check, it was again dishonored.6
Private respondent referred the matter to a lawyer, who made a written demand upon Doronilla
for the return of his clients money. Doronilla issued another check for P212,000.00 in private
respondents favor but the check was again dishonored for insufficiency of funds.7

Private respondent instituted an action for recovery of sum of money in the Regional Trial Court
(RTC) in Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case
was docketed as Civil Case No. 44485. He also filed criminal actions against Doronilla, Sanchez
and Dumagpi in the RTC. However, Sanchez passed away on March 16, 1985 while the case
was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157,
promulgated its Decision in Civil Case No. 44485, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J.

Doronila, Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin Vives
jointly and severally
(a) the amount of P200,000.00, representing the money deposited, with interest at the legal rate
from the filing of the complaint until the same is fully paid;
(b) the sum of P50,000.00 for moral damages and a similar amount for exemplary damages;
(c) the amount of P40,000.00 for attorneys fees; and
(d) the costs of the suit.
SO ORDERED.8
Petitioner appealed the trial courts decision to the Court of Appeals. In its Decision dated June
25, 1991, the appellate court affirmed in toto the decision of the RTC. 9 It likewise denied with
finality petitioners motion for reconsideration in its Resolution dated May 5, 1994. 10
On June 30, 1994, petitioner filed the present petition, arguing that
I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE
TRANSACTION BETWEEN THE DEFENDANT DORONILLA AND RESPONDENT VIVES WAS
ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONERS
BANK MANAGER, MR. RUFO ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN
DEFRAUDING PETITIONER (Sic. Should be PRIVATE RESPONDENT) AND AS A
CONSEQUENCE, THE PETITIONER SHOULD BE HELD LIABLE UNDER THE PRINCIPLE
OF NATURAL JUSTICE;
III.
THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS
OF THE REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT APPEALED FROM,
AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE BASED ON A
MISAPPREHENSION OF FACTS;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED
DECISION IN SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF
AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS APPLICABLE;
V.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE
LOWER COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE
WITH THE OTHER DEFENDANTS FOR THE AMOUNT OF P200,000.00 REPRESENTING
THE SAVINGS ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR
EXEMPLARY DAMAGES, P40,000.00 FOR ATTORNEYS FEES AND THE COSTS OF SUIT. 11
Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto
on September 25, 1995. The Court then required private respondent to submit a rejoinder to the
reply. However, said rejoinder was filed only on April 21, 1997, due to petitioners delay in
furnishing private respondent with copy of the reply12 and several substitutions of counsel on the
part of private respondent.13 On January 17, 2001, the Court resolved to give due course to the
petition and required the parties to submit their respective memoranda. 14 Petitioner filed its
memorandum on April 16, 2001 while private respondent submitted his memorandum on March
22, 2001.
Petitioner contends that the transaction between private respondent and Doronilla is a simple
loan (mutuum) since all the elements of a mutuum are present: first, what was delivered by
private respondent to Doronilla was money, a consumable thing; and second, the transaction
was onerous as Doronilla was obliged to pay interest, as evidenced by the check issued by
Doronilla in the amount of P212,000.00, or P12,000 more than what private respondent
deposited in Sterelas bank account.15 Moreover, the fact that private respondent sued his good
friend Sanchez for his failure to recover his money from Doronilla shows that the transaction
was not merely gratuitous but "had a business angle" to it. Hence, petitioner argues that it
cannot be held liable for the return of private respondents P200,000.00 because it is not privy to
the transaction between the latter and Doronilla.16

It argues further that petitioners Assistant Manager, Mr. Rufo Atienza, could not be faulted for
allowing Doronilla to withdraw from the savings account of Sterela since the latter was the sole
proprietor of said company. Petitioner asserts that Doronillas May 8, 1979 letter addressed to
the bank, authorizing Mrs. Vives and Sanchez to open a savings account for Sterela, did not
contain any authorization for these two to withdraw from said account. Hence, the authority to
withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of Sterela,
and who alone had legal title to the savings account. 17 Petitioner points out that no evidence
other than the testimonies of private respondent and Mrs. Vives was presented during trial to
prove that private respondent deposited his P200,000.00 in Sterelas account for purposes of its
incorporation.18 Hence, petitioner should not be held liable for allowing Doronilla to withdraw
from Sterelas savings account.
Petitioner also asserts that the Court of Appeals erred in affirming the trial courts decision since
the findings of fact therein were not accord with the evidence presented by petitioner during trial
to prove that the transaction between private respondent and Doronilla was a mutuum, and that
it committed no wrong in allowing Doronilla to withdraw from Sterelas savings account. 19
Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable
for the actual damages suffered by private respondent, and neither may it be held liable for
moral and exemplary damages as well as attorneys fees.20
Private respondent, on the other hand, argues that the transaction between him and Doronilla is
not a mutuum but an accommodation,21 since he did not actually part with the ownership of his
P200,000.00 and in fact asked his wife to deposit said amount in the account of Sterela so that
a certification can be issued to the effect that Sterela had sufficient funds for purposes of its
incorporation but at the same time, he retained some degree of control over his money through
his wife who was made a signatory to the savings account and in whose possession the savings
account passbook was given.22

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

There is no merit in the petition.

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

No error was committed by the Court of Appeals when it ruled that the transaction between
private respondent and Doronilla was a commodatum and not a mutuum. A circumspect
examination of the records reveals that the transaction between them was a commodatum.
Article 1933 of the Civil Code distinguishes between the two kinds of loans in this wise:
By the contract of loan, one of the parties delivers to another, either something not consumable
so that the latter may use the same for a certain time and return it, in which case the contract is
called a commodatum; or money or other consumable thing, upon the condition that the same
amount of the same kind and quality shall be paid, in which case the contract is simply called a
loan or mutuum.

Commodatum is essentially gratuitous.

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

In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan,
ownership passes to the borrower.
The foregoing provision seems to imply that if the subject of the contract is a consumable thing,
such as money, the contract would be a mutuum. However, there are some instances where a
commodatum may have for its object a consumable thing. Article 1936 of the Civil Code
provides:

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

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

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

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

Doronillas attempts to return to private respondent the amount of P200,000.00 which the latter
deposited in Sterelas account together with an additional P12,000.00, allegedly representing
interest on the mutuum, did not convert the transaction from a commodatum into a mutuum
because such was not the intent of the parties and because the additional P12,000.00
corresponds to the fruits of the lending of the P200,000.00. Article 1935 of the Civil Code
expressly states that "[t]he bailee in commodatum acquires the use of the thing loaned but not
its fruits." Hence, it was only proper for Doronilla to remit to private respondent the interest
accruing to the latters money deposited with petitioner.

Neither does the Court agree with petitioners contention that it is not solidarily liable for the
return of private respondents money because it was not privy to the transaction between
Doronilla and private respondent. The nature of said transaction, that is, whether it is a mutuum
or a commodatum, has no bearing on the question of petitioners liability for the return of private
respondents money because the factual circumstances of the case clearly show that petitioner,
through its employee Mr. Atienza, was partly responsible for the loss of private respondents
money and is liable for its restitution.
Petitioners rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of
Sterela for Savings Account No. 10-1567 expressly states that
"2. Deposits and withdrawals must be made by the depositor personally or upon his written
authority duly authenticated, and neither a deposit nor a withdrawal will be permitted except
upon the production of the depositor savings bank book in which will be entered by the Bank the
amount deposited or withdrawn."30

Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant
Branch Manager for the Buendia Branch of petitioner, to withdraw therefrom even without
presenting the passbook (which Atienza very well knew was in the possession of Mrs. Vives),
not just once, but several times. Both the Court of Appeals and the trial court found that Atienza
allowed said withdrawals because he was party to Doronillas "scheme" of defrauding private
respondent:
XXX
But the scheme could not have been executed successfully without the knowledge, help and
cooperation of Rufo Atienza, assistant manager and cashier of the Makati (Buendia) branch of
the defendant bank. Indeed, the evidence indicates that Atienza had not only facilitated the
commission of the fraud but he likewise helped in devising the means by which it can be done in
such manner as to make it appear that the transaction was in accordance with banking
procedure.

To begin with, the deposit was made in defendants Buendia branch precisely because Atienza
was a key officer therein. The records show that plaintiff had suggested that the P200,000.00 be
deposited in his bank, the Manila Banking Corporation, but Doronilla and Dumagpi insisted that
it must be in defendants branch in Makati for "it will be easier for them to get a certification". In
fact before he was introduced to plaintiff, Doronilla had already prepared a letter addressed to
the Buendia branch manager authorizing Angeles B. Sanchez and company to open a savings
account for Sterela in the amount of P200,000.00, as "per coordination with Mr. Rufo Atienza,
Assistant Manager of the Bank x x x" (Exh. 1). This is a clear manifestation that the other
defendants had been in consultation with Atienza from the inception of the scheme.
Significantly, there were testimonies and admission that Atienza is the brother-in-law of a certain
Romeo Mirasol, a friend and business associate of Doronilla.1awphi1.nt

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

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

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

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

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

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for
damages caused by their employees acting within the scope of their assigned tasks. To hold the
employer liable under this provision, it must be shown that an employer-employee relationship
exists, and that the employee was acting within the scope of his assigned task when the act
complained of was committed.32 Case law in the United States of America has it that a
corporation that entrusts a general duty to its employee is responsible to the injured party for
damages flowing from the employees wrongful act done in the course of his general authority,
even though in doing such act, the employee may have failed in its duty to the employer and
disobeyed the latters instructions.33

There is no dispute that Atienza was an employee of petitioner. Furthermore, petitioner did not
deny that Atienza was acting within the scope of his authority as Assistant Branch Manager
when he assisted Doronilla in withdrawing funds from Sterelas Savings Account No. 10-1567, in
which account private respondents money was deposited, and in transferring the money
withdrawn to Sterelas Current Account with petitioner. Atienzas acts of helping Doronilla, a
customer of the petitioner, were obviously done in furtherance of petitioners interests34 even
though in the process, Atienza violated some of petitioners rules such as those stipulated in its
savings account passbook.35 It was established that the transfer of funds from Sterelas savings
account to its current account could not have been accomplished by Doronilla without the
invaluable assistance of Atienza, and that it was their connivance which was the cause of
private respondents loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil
Code, petitioner is liable for private respondents loss and is solidarily liable with Doronilla and
Dumagpi for the return of the P200,000.00 since it is clear that petitioner failed to prove that it
exercised due diligence to prevent the unauthorized withdrawals from Sterelas savings account,
and that it was not negligent in the selection and supervision of Atienza. Accordingly, no error
was committed by the appellate court in the award of actual, moral and exemplary damages,
attorneys fees and costs of suit to private respondent.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the
Court of Appeals are AFFIRMED.

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

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

The Court of Appeals certified this case to this Court because only questions of law are raised.
On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari,
of P1,320.56 and a Sahiniwal, of P744.46, for a period of one year from 8 May 1948 to 7 May
1949 for breeding purposes subject to a government charge of breeding fee of 10% of the book
value of the bulls. Upon the expiration on 7 May 1949 of the contract, the borrower asked for a
renewal for another period of one year. However, the Secretary of Agriculture and Natural
Resources approved a renewal thereof of only one bull for another year from 8 May 1949 to 7
May 1950 and requested the return of the other two. On 25 March 1950 Jose V. Bagtas wrote to
the Director of Animal Industry that he would pay the value of the three bulls. On 17 October
1950 he reiterated his desire to buy them at a value with a deduction of yearly depreciation to be
approved by the Auditor General. On 19 October 1950 the Director of Animal Industry advised
him that the book value of the three bulls could not be reduced and that they either be returned
or their book value paid not later than 31 October 1950. Jose V. Bagtas failed to pay the book
value of the three bulls or to return them. So, on 20 December 1950 in the Court of First
Instance of Manila the Republic of the Philippines commenced an action against him praying
that he be ordered to return the three bulls loaned to him or to pay their book value in the total
sum of P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with interests, and
costs; and that other just and equitable relief be granted in (civil No. 12818).
On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines from the refusal by the Director of Animal
Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8% from
the date of acquisition, to which depreciation the Auditor General did not object, he could not
return the animals nor pay their value and prayed for the dismissal of the complaint.

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

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

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

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

. . . is liable for loss of the things, even if it should be through a fortuitous event:
(2) If he keeps it longer than the period stipulated . . .
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of a fortuitous event;

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

The appellant's contention that the demand or prayer by the appellee for the return of the bull or
the payment of its value being a money claim should be presented or filed in the intestate
proceedings of the defendant who died on 23 October 1951, is not altogether without merit.
However, the claim that his civil personality having ceased to exist the trial court lost jurisdiction
over the case against him, is untenable, because section 17 of Rule 3 of the Rules of Court
provides that
After a party dies and the claim is not thereby extinguished, the court shall order, upon proper
notice, the legal representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be granted. . . .
and after the defendant's death on 23 October 1951 his counsel failed to comply with section 16
of Rule 3 which provides that

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

As the appellant already had returned the two bulls to the appellee, the estate of the late
defendant is only liable for the sum of P859.63, the value of the bull which has not been
returned to the appellee, because it was killed while in the custody of the administratrix of his
estate. This is the amount prayed for by the appellee in its objection on 31 January 1959 to the
motion filed on 7 January 1959 by the appellant for the quashing of the writ of execution.

Special proceedings for the administration and settlement of the estate of the deceased Jose V.
Bagtas having been instituted in the Court of First Instance of Rizal (Q-200), the money
judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution
but must be presented to the probate court for payment by the appellant, the administratrix
appointed by the court.
ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as to
costs.

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
TERESITA PUIG and ROMEO PORRAS, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review under Rule 45 of the Revised Rules of Court with petitioner People
of the Philippines, represented by the Office of the Solicitor General, praying for the reversal of
the Orders dated 30 January 2006 and 9 June 2006 of the Regional Trial Court (RTC) of the 6th
Judicial Region, Branch 68, Dumangas, Iloilo, dismissing the 112 cases of Qualified Theft filed
against respondents Teresita Puig and Romeo Porras, and denying petitioners Motion for
Reconsideration, in Criminal Cases No. 05-3054 to 05-3165.
The following are the factual antecedents:
On 7 November 2005, the Iloilo Provincial Prosecutors Office filed before Branch 68 of the RTC
in Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig (Puig) and
Romeo Porras (Porras) who were the Cashier and Bookkeeper, respectively, of private
complainant Rural Bank of Pototan, Inc. The cases were docketed as Criminal Cases No. 05-
3054 to 05-3165.

The allegations in the Informations1 filed before the RTC were uniform and pro-forma, except for
the amounts, date and time of commission, to wit:
INFORMATION
That on or about the 1st day of August, 2002, in the Municipality of Pototan, Province of Iloilo,
Philippines, and within the jurisdiction of this Honorable Court, above-named [respondents],
conspiring, confederating, and helping one another, with grave abuse of confidence, being
the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the
knowledge and/or consent of the management of the Bank and with intent of gain, did then and
there willfully, unlawfully and feloniously take, steal and carry away the sum of FIFTEEN
THOUSAND PESOS (P15,000.00), Philippine Currency, to the damage and prejudice of the
said bank in the aforesaid amount.

After perusing the Informations in these cases, the trial court did not find the existence of
probable cause that would have necessitated the issuance of a warrant of arrest based on the
following grounds:

(1) the element of taking without the consent of the owners was missing on the ground that
it is the depositors-clients, and not the Bank, which filed the complaint in these cases, who are
the owners of the money allegedly taken by respondents and hence, are the real parties-in-
interest; and

(2) the Informations are bereft of the phrase alleging "dependence, guardianship or vigilance
between the respondents and the offended party that would have created a high degree
of confidence between them which the respondents could have abused."
It added that allowing the 112 cases for Qualified Theft filed against the respondents to push
through would be violative of the right of the respondents under Section 14(2), Article III of the
1987 Constitution which states that in all criminal prosecutions, the accused shall enjoy the right
to be informed of the nature and cause of the accusation against him. Following Section 6, Rule
112 of the Revised Rules of Criminal Procedure, the RTC dismissed the cases on 30 January
2006 and refused to issue a warrant of arrest against Puig and Porras.

A Motion for Reconsideration2 was filed on 17 April 2006, by the petitioner.

On 9 June 2006, an Order3 denying petitioners Motion for Reconsideration was issued by the
RTC, finding as follows:

Accordingly, the prosecutions Motion for Reconsideration should be, as it hereby, DENIED. The
Order dated January 30, 2006 STANDS in all respects.
Petitioner went directly to this Court via Petition for Review on Certiorari under Rule 45, raising
the sole legal issue of:

WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED THEFT SUFFICIENTLY

ALLEGE THE ELEMENT OF TAKING WITHOUT THE CONSENT OF THE OWNER, AND THE
QUALIFYING CIRCUMSTANCE OF GRAVE ABUSE OF CONFIDENCE.
Petitioner prays that judgment be rendered annulling and setting aside the Orders dated 30
January 2006 and 9 June 2006 issued by the trial court, and that it be directed to proceed with
Criminal Cases No. 05-3054 to 05-3165.

Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and current
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loans." Corollary thereto, Article 1953 of the same Code provides that "a
person who receives a loan of money or any other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an equal amount of the same kind and quality."
Thus, it posits that the depositors who place their money with the bank are considered creditors
of the bank. The bank acquires ownership of the money deposited by its clients, making the
money taken by respondents as belonging to the bank.

Petitioner also insists that the Informations sufficiently allege all the elements of the crime of
qualified theft, citing that a perusal of the Informations will show that they specifically allege that
the respondents were the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc.,
respectively, and that they took various amounts of money with grave abuse of confidence, and
without the knowledge and consent of the bank, to the damage and prejudice of the bank.

Parenthetically, respondents raise procedural issues. They challenge the petition on the ground
that a Petition for Review on Certiorari via Rule 45 is the wrong mode of appeal because a
finding of probable cause for the issuance of a warrant of arrest presupposes evaluation of facts
and circumstances, which is not proper under said Rule.
Respondents further claim that the Department of Justice (DOJ), through the Secretary of
Justice, is the principal party to file a Petition for Review on Certiorari, considering that the
incident was indorsed by the DOJ.

We find merit in the petition.

The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the
Informations and, therefore, because of this defect, there is no basis for the existence of
probable cause which will justify the issuance of the warrant of arrest. Petitioner assails the
dismissal contending that the Informations for Qualified Theft sufficiently state facts which
constitute (a) the qualifying circumstance of grave abuse of confidence; and (b) the element of
taking, with intent to gain and without the consent of the owner, which is the Bank.

In determining the existence of probable cause to issue a warrant of arrest, the RTC judge
found the allegations in the Information inadequate. He ruled that the Information failed to state
facts constituting the qualifying circumstance of grave abuse of confidence and the element of
taking without the consent of the owner, since the owner of the money is not the Bank, but the
depositors therein. He also cites People v. Koc Song,4 in which this Court held:

There must be allegation in the information and proof of a relation, by reason of dependence,
guardianship or vigilance, between the respondents and the offended party that has created a
high degree of confidence between them, which the respondents abused.

At this point, it needs stressing that the RTC Judge based his conclusion that there was no
probable cause simply on the insufficiency of the allegations in the Informations concerning the
facts constitutive of the elements of the offense charged. This, therefore, makes the issue of
sufficiency of the allegations in the Informations the focal point of discussion.

Qualified Theft, as defined and punished under Article 310 of the Revised Penal Code, is
committed as follows, viz:

ART. 310. Qualified Theft. The crime of theft shall be punished by the penalties next higher by
two degrees than those respectively specified in the next preceding article, if committed by a
domestic servant, or with grave abuse of confidence, or if the property stolen is motor vehicle,
mail matter or large cattle or consists of coconuts taken from the premises of a plantation, fish
taken from a fishpond or fishery or if property is taken on the occasion of fire, earthquake,
typhoon, volcanic eruption, or any other calamity, vehicular accident or civil disturbance.
(Emphasis supplied.)

Theft, as defined in Article 308 of the Revised Penal Code, requires the physical taking of
anothers property without violence or intimidation against persons or force upon things. The
elements of the crime under this Article are:
1. Intent to gain;
2. Unlawful taking;
3. Personal property belonging to another;
4. Absence of violence or intimidation against persons or force upon things.
To fall under the crime of Qualified Theft, the following elements must concur:
1. Taking of personal property;
2. That the said property belongs to another;
3. That the said taking be done with intent to gain;
4. That it be done without the owners consent;
5. That it be accomplished without the use of violence or intimidation against persons, nor of
force upon things;
6. That it be done with grave abuse of confidence.

On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court requires, inter
alia, that the information must state the acts or omissions complained of as constitutive of the
offense.
On the manner of how the Information should be worded, Section 9, Rule 110 of the Rules of
Court, is enlightening:

Section 9. Cause of the accusation. The acts or omissions complained of as constituting the
offense and the qualifying and aggravating circumstances must be stated in ordinary and
concise language and not necessarily in the language used in the statute but in terms sufficient
to enable a person of common understanding to know what offense is being charged as well as
its qualifying and aggravating circumstances and for the court to pronounce judgment.
It is evident that the Information need not use the exact language of the statute in alleging the
acts or omissions complained of as constituting the offense. The test is whether it enables a
person of common understanding to know the charge against him, and the court to render
judgment properly.5

The portion of the Information relevant to this discussion reads:

A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being the Cashier and
Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank x x x.

It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank who
come into possession of the monies deposited therein enjoy the confidence reposed in them by
their employer. Banks, on the other hand, where monies are deposited, are considered the
owners thereof. This is very clear not only from the express provisions of the law, but from
established jurisprudence. The relationship between banks and depositors has been held to be
that of creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as appropriately
pointed out by petitioner, provide as follows:

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

Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions
shall be governed by the provisions concerning loan.

In a long line of cases involving Qualified Theft, this Court has firmly established the nature of
possession by the Bank of the money deposits therein, and the duties being performed by its
employees who have custody of the money or have come into possession of it. The Court has
consistently considered the allegations in the Information that such employees acted with grave
abuse of confidence, to the damage and prejudice of the Bank, without particularly referring to it
as owner of the money deposits, as sufficient to make out a case of Qualified Theft. For a
graphic illustration, we cite Roque v. People,6 where the accused teller was convicted for
Qualified Theft based on this Information:

That on or about the 16th day of November, 1989, in the municipality of Floridablanca, province
of Pampanga, Philippines and within the jurisdiction of his Honorable Court, the above-named
accused ASUNCION GALANG ROQUE, being then employed as teller of the Basa Air Base
Savings and Loan Association Inc. (BABSLA) with office address at Basa Air Base,
Floridablanca, Pampanga, and as such was authorized and reposed with the responsibility to
receive and collect capital contributions from its member/contributors of said corporation, and
having collected and received in her capacity as teller of the BABSLA the sum of TEN
THOUSAND PESOS (P10,000.00), said accused, with intent of gain, with grave abuse of
confidence and without the knowledge and consent of said corporation, did then and there
willfully, unlawfully and feloniously take, steal and carry away the amount of P10,000.00,
Philippine currency, by making it appear that a certain depositor by the name of Antonio Salazar
withdrew from his Savings Account No. 1359, when in truth and in fact said Antonio Salazar did
not withdr[a]w the said amount of P10,000.00 to the damage and prejudice of BABSLA in the
total amount of P10,000.00, Philippine currency.

In convicting the therein appellant, the Court held that:

[S]ince the teller occupies a position of confidence, and the bank places money in the tellers
possession due to the confidence reposed on the teller, the felony of qualified theft would be
committed.

Also in People v. Sison,8 the Branch Operations Officer was convicted of the crime of Qualified
Theft based on the Information as herein cited:

That in or about and during the period compressed between January 24, 1992 and February 13,
1992, both dates inclusive, in the City of Manila, Philippines, the said accused did then and
there wilfully, unlawfully and feloniously, with intent of gain and without the knowledge and
consent of the owner thereof, take, steal and carry away the following, to wit:

Cash money amounting to P6,000,000.00 in different denominations belonging to the

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIBank for brevity), Luneta Branch,
Manila represented by its Branch Manager, HELEN U. FARGAS, to the damage and prejudice
of the said owner in the aforesaid amount of P6,000,000.00, Philippine Currency.

That in the commission of the said offense, herein accused acted with grave abuse of
confidence and unfaithfulness, he being the Branch Operation Officer of the said complainant
and as such he had free access to the place where the said amount of money was kept.
The judgment of conviction elaborated thus:

The crime perpetuated by appellant against his employer, the Philippine Commercial and
Industrial Bank (PCIB), is Qualified Theft. Appellant could not have committed the crime had he
not been holding the position of Luneta Branch Operation Officer which gave him not only sole
access to the bank vault xxx. The management of the PCIB reposed its trust and confidence in
the appellant as its Luneta Branch Operation Officer, and it was this trust and confidence which
he exploited to enrich himself to the damage and prejudice of PCIB x x x. 9

From another end, People v. Locson,10 in addition to People v. Sison, described the nature of
possession by the Bank. The money in this case was in the possession of the defendant as
receiving teller of the bank, and the possession of the defendant was the possession of the
Bank. The Court held therein that when the defendant, with grave abuse of confidence, removed
the money and appropriated it to his own use without the consent of the Bank, there was taking
as contemplated in the crime of Qualified Theft.11

Conspicuously, in all of the foregoing cases, where the Informations merely alleged the
positions of the respondents; that the crime was committed with grave abuse of confidence, with
intent to gain and without the knowledge and consent of the Bank, without necessarily stating
the phrase being assiduously insisted upon by respondents, "of a relation by reason of
dependence, guardianship or vigilance, between the respondents and the offended party
that has created a high degree of confidence between them, which respondents
abused,"12 and without employing the word "owner" in lieu of the "Bank" were considered to
have satisfied the test of sufficiency of allegations.
As regards the respondents who were employed as Cashier and Bookkeeper of the Bank in this
case, there is even no reason to quibble on the allegation in the Informations that they acted
with grave abuse of confidence. In fact, the Information which alleged grave abuse of
confidence by accused herein is even more precise, as this is exactly the requirement of the law
in qualifying the crime of Theft.

In summary, the Bank acquires ownership of the money deposited by its clients; and the
employees of the Bank, who are entrusted with the possession of money of the Bank due to the
confidence reposed in them, occupy positions of confidence. The Informations, therefore,
sufficiently allege all the essential elements constituting the crime of Qualified Theft.

On the theory of the defense that the DOJ is the principal party who may file the instant petition,
the ruling in Mobilia Products, Inc. v. Hajime Umezawa13 is instructive. The Court thus
enunciated:

In a criminal case in which the offended party is the State, the interest of the private complainant
or the offended party is limited to the civil liability arising therefrom. Hence, if a criminal case is
dismissed by the trial court or if there is an acquittal, a reconsideration of the order of dismissal
or acquittal may be undertaken, whenever legally feasible, insofar as the criminal aspect thereof
is concerned and may be made only by the public prosecutor; or in the case of an appeal, by the
State only, through the OSG. x x x.

On the alleged wrong mode of appeal by petitioner, suffice it to state that the rule is well-settled
that in appeals by certiorari under Rule 45 of the Rules of Court, only errors of law may be
raised,14 and herein petitioner certainly raised a question of law.

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

Before closing, let it be stated that while it is truly imperative upon the fiscal or the judge, as the
case may be, to relieve the respondents from the pain of going through a trial once it is
ascertained that no probable cause exists to form a sufficient belief as to the guilt of the
respondents, conversely, it is also equally imperative upon the judge to proceed with the case
upon a showing that there is a prima facie case against the respondents.

WHEREFORE, premises considered, the Petition for Review on Certiorari is hereby GRANTED.
The Orders dated 30 January 2006 and 9 June 2006 of the RTC dismissing Criminal Cases No.
05-3054 to 05-3165 are REVERSED and SET ASIDE. Let the corresponding Warrants of Arrest
issue against herein respondents TERESITA PUIG and ROMEO PORRAS. The RTC Judge of
Branch 68, in Dumangas, Iloilo, is directed to proceed with the trial of Criminal Cases No. 05-
3054 to 05-3165, inclusive, with reasonable dispatch. No pronouncement as to costs.

COMMISSIONER OF PUBLIC HlGHWAYS, petitioner,

vs.
HON. FRANCISCO P. BURGOS, in his capacity as Judge of the Court of First Instance of
Cebu City, Branch 11, and Victoria Amigable, respondents.

DE CASTRO, J.:
Victoria Amigable is the owner of parcel of land situated in Cebu City with an area of 6,167
square meters. Sometime in 1924, the Government took this land for road-right-of-way purpose.
The land had since become streets known as Mango Avenue and Gorordo Avenue in Cebu
City.

On February 6, 1959, Victoria Amigable filed in the Court of First Instance of Cebu a complaint,
which was later amended on April 17, 1959 to recover ownership and possession of the land,
and for damages in the sum of P50,000.00 for the alleged illegal occupation of the land by the
Government, moral damages in the sum of P25,000.00, and attorney's fees in the sum of
P5,000.00, plus costs of suit. The complaint was docketed as Civil Case No. R-5977 of the
Court of First Instance of Cebu, entitled "Victoria Amigable vs. Nicolas Cuenca, in his capacity
as Commissioner of Public Highway and Republic of the Philippines. 1

In its answer, 2 the Republic alleged, among others, that the land was either donated or sold by
its owners to the province of Cebu to enhance its value, and that in any case, the right of the
owner, if any, to recover the value of said property was already barred by estoppel and the
statute of limitations, defendants also invoking the non-suability of the Government.
In a decision rendered on July 29, 1959 by Judge Amador E. Gomez, the plaintiff's complaint
was dismissed on the grounds relied upon by the defendants therein. 3 The plaintiff appealed
the decision to the Supreme Court where it was reversed, and the case was remanded to the
court of origin for the determination of the compensation to be paid the plaintiff-appellant as
owner of the land, including attorney's fees. 4 The Supreme Court decision also directed that to
determine just compensation for the land, the basis should be the price or value thereof at the
time of the taking. 5

In the hearing held pursuant to the decision of the Supreme Court, the Government proved the
value of the property at the time of the taking thereof in 1924 with certified copies, issued by the
Bureau of Records Management, of deeds of conveyance executed in 1924 or thereabouts, of
several parcels of land in the Banilad Friar Lands in which the property in question is located,
showing the price to be at P2.37 per square meter. For her part, Victoria Amigable presented
newspaper clippings of the Manila Times showing the value of the peso to the dollar obtaining
about the middle of 1972, which was P6.775 to a dollar.

Upon consideration of the evidence presented by both parties, the court which is now the public
respondent in the instant petition, rendered judgment on January 9, 1973 directing the Republic
of the Philippines to pay Victoria Amigable the sum of P49,459.34 as the value of the property
taken, plus P145,410.44 representing interest at 6% on the principal amount of P49,459.34 from
the year 1924 up to the date of the decision, plus attorney's fees of 10% of the total amount due
to Victoria Amigable, or a grand total of P214,356.75. 6

The aforesaid decision of the respondent court is now the subject of the present petition for
review by certiorari, filed by the Solicitor General as counsel of the petitioner, Republic of the
Philippines, against the landowner, Victoria Amigable, as private respondent. The petition was
given due course after respondents had filed their comment thereto, as required. The Solicitor
General, as counsel of petitioner, was then required to file petitioner's brief and to serve copies
thereof to the adverse parties. 7 Petitioner's brief was duly filed on January 29, 1974, 8 to which
respondents filed only a "comment." 9 instead of a brief, and the case was then considered
submitted for decision. 10

1. The issue of whether or not the provision of Article 1250 of the New Civil Code is applicable in
determining the amount of compensation to be paid to respondent Victoria Amigable for the
property taken is raised because the respondent court applied said Article by considering the
value of the peso to the dollar at the time of hearing, in determining due compensation to be
paid for the property taken. The Solicitor General contends that in so doing, the respondent
court violated the order of this Court, in its decision in G.R. No. L-26400, February 29, 1972, to
make as basis of the determination of just compensation the price or value of the land at the
time of the taking.

It is to be noted that respondent judge did consider the value of the property at the time of the
taking, which as proven by the petitioner was P2.37 per square meter in 1924. However,
applying Article 1250 of the New Civil Code, and considering that the value of the peso to the
dollar during the hearing in 1972 was P6.775 to a dollar, as proven by the evidence of the
private respondent Victoria Amigable the Court fixed the value of the property at the deflated
value of the peso in relation, to the dollar, and came up with the sum of P49,459.34 as the just
compensation to be paid by the Government. To this action of the respondent judge, the
Solicitor General has taken exception.

Article 1250 of the New Civil Code seems to be the only provision in our statutes which provides
for payment of an obligation in an amount different from what has been agreed upon by the
parties because of the supervention of extra-ordinary inflation or deflation. Thus, the Article
provides:

ART. 1250. In case extra-ordinary inflation or deflation of the currency stipulated should
supervene, the value of the currency at the time of the establishment of the obligation shall be
the basis of payment, unless there is an agreement to the contrary.

It is clear that the foregoing provision applies only to cases where a contract or agreement is
involved. It does not apply where the obligation to pay arises from law, independent of contract.
The taking of private property by the Government in the exercise of its power of eminent domain
does not give rise to a contractual obligation. We have expressed this view in the case of
Velasco vs. Manila Electric Co., et al., L-19390, December 29, 1971. 11

Moreover, the law as quoted, clearly provides that the value of the currency at the time of the
establishment of the obligation shall be the basis of payment which, in cases of expropriation,
would be the value of the peso at the time of the taking of the property when the obligation of
the Government to pay arises. 12 It is only when there is an "agreement to the contrary" that the
extraordinary inflation will make the value of the currency at the time of payment, not at the time
of the establishment of the obligation, the basis for payment. In other words, an agreement is
needed for the effects of an extraordinary inflation to be taken into account to alter the value of
the currency at the time of the establishment of the obligation which, as a rule, is always the
determinative element, to be varied by agreement that would find reason only in the
supervention of extraordinary inflation or deflation.

We hold, therefore, that under the law, in the absence of any agreement to the contrary, even
assuming that there has been an extraordinary inflation within the meaning of Article 1250 of the
New Civil Code, a fact We decline to declare categorically, the value of the peso at the time of
the establishment of the obligation, which in the instant case is when the property was taken
possession of by the Government, must be considered for the purpose of determining just
compensation. Obviously, there can be no "agreement to the contrary" to speak of because the
obligation of the Government sought to be enforced in the present action does not originate from
contract, but from law which, generally is not subject to the will of the parties. And there being
no other legal provision cited which would justify a departure from the rule that just
compensation is determined on the basis of the value of the property at the time of the taking
thereof in expropriation by the Government, the value of the property as it is when the
Government took possession of the land in question, not the increased value resulting from the
passage of time which invariably brings unearned increment to landed properties, represents
the true value to be paid as just compensation for the property taken. 13

In the present case, the unusually long delay of private respondent in bringing the present
action-period of almost 25 years which a stricter application of the law on estoppel and the
statute of limitations and prescription may have divested her of the rights she seeks on this
action over the property in question, is an added circumstance militating against payment to her
of an amount bigger-may three-fold more than the value of the property as should have been
paid at the time of the taking. For conformably to the rule that one should take good care of his
own concern, private respondent should have commenced proper action soon after she had
been deprived of her right of ownership and possession over the land, a deprivation she knew
was permanent in character, for the land was intended for, and had become, avenues in the City
of Cebu. A penalty is always visited upon one for his inaction, neglect or laches in the assertion
of his rights allegedly withheld from him, or otherwise transgressed upon by another.

From what has been said, the correct amount of compensation due private respondent for the
taking of her land for a public purpose would be not P49,459.34, as fixed by the respondent
court, but only P14,615.79 at P2.37 per square meter, the actual value of the land of 6,167
square meters when it was taken in 1924. The interest in the sum of P145,410.44 at the rate of
6% from 1924 up to the time respondent court rendered its decision, as was awarded by the
said court should accordingly be reduced.

In Our decision in G.R. No. L-26400, February 29, 1972, 14 We have said that Victoria Amigable
is entitled to the legal interest on the price of the land from the time of the taking. This holding is
however contested by the Solicitor General, citing the case of Raymunda S. Digsan vs. Auditor
General, et al., 15 alleged to have a similar factual environment and involving the same issues,
where this Court declared that the interest at the legal rate in favor of the landowner accrued not
from the taking of the property in 1924 but from April 20, 1961 when the claim for compensation
was filed with the Auditor General. Whether the ruling in the case cited is still the prevailing
doctrine, what was said in the decision of this Court in the abovecited case involving the same
on the instant matter, has become the "law of the case", no motion for its reconsideration having
been filed by the Solicitor General before the decision became final. Accordingly, the interest to
be paid private respondent, Victoria Amigable, shall commence from 1924, when the taking of
the property took place, computed on the basis of P14,615.79, the value of the land when taken
in said year 1924.

2. On the amount of attorney's fees to be paid private respondent, about which the Solicitor
General has next taken issue with the respondent court because the latter fixed the same at
P19,486.97, while in her complaint, respondent Amigable had asked for only P5,000.00, the
amount as awarded by the respondent court, would be too exhorbitant based as it is, on the
inflated value of the land. An attorney's fees of P5,000.00, which is the amount asked for by
private respondent herself in her complaint, would be reasonable.
WHEREFORE, the judgment appealed from is hereby reversed as to the basis in the
determination of the price of the land taken as just compensation for its expropriation, which
should be the value of the land at the time of the taking, in 1924. Accordingly, the same is
hereby fixed at P14,615.79 at P2.37 per square meter, with interest thereon at 6% per annum,
from the taking of the property in 1924, to be also paid by Government to private respondent,
Victoria Amigable, until the amount due is fully paid, plus attorney's fees of P5,000.00.

TELENGTAN BROTHERS & SONS, INC., Petitioner,

vs.
UNITED STATES LINES, INC. and the COURT OF APPEALS, Respondents.
DECISION
GARCIA, J.:
Thru this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner
Telengtan Brothers & Sons, Inc. (Telengtan) seeks the reversal and setting aside of the
decision1 dated January 8, 1998 of the Court of Appeals (CA) in CA-G.R. CV No. 18349 which
affirmed in toto the decision dated January 10, 19852 of the Regional Trial Court of Manila,
Branch 38, finding petitioner liable to respondent United States Lines, Inc. (U.S. Lines) for
demurrage and damages.

Petitioner Telengtan is a domestic corporation doing business under the name and style La
Suerte Cigar & Cigarette Factory, while respondent U.S. Lines is a foreign corporation engaged
in the business of overseas shipping. During the period material, the provisions of the Far East
Conference Tariff No. 12 were specifically made applicable to Philippine containerized cargo
from the U.S. and Gulf Ports, effective with vessels arriving at Philippine ports on and after
December 15, 1978. After that date, consignees who fail to take delivery of their containerized
cargo within the 10-day free period are liable to pay demurrage charges.

As recited in the decision under review, the factual antecedents may be summarized as follows:
On June 22, 1981, respondent U.S. Lines filed a suit against petitioner Telengtan seeking
payment of demurrage charges plus interest and damages. Docketed as Civil Case No. R-81-
1196 of the Regional Trial Court of Manila and raffled to Branch 38 thereof, the complaint
alleged that between the years 1979 and 1980, goods belonging to petitioner loaded on
containers aboard its (respondents) vessels arrived in Manila from U.S. ports. After the 10-day
free period, petitioner still failed to withdraw its goods from the containers wherein the goods
had been shipped. Continuing, respondent U.S. Lines alleged that petitioner incurred on all
those shipments a demurrage in the total amount of P94,000.00 which the latter refused to pay
despite repeated demands.

In its amended answer with compulsory counterclaim, petitioner Telengtan, as defendant a quo,
disclaims liability for the demanded demurrage, alleging that it has never entered into a contract
nor signed an agreement to be bound by any rule on demurrage. It likewise maintains that,
absent an obligation to pay respondent who made no proper or legal demands in the first place,
there is justifiable reason to refuse payment of the latters unwarranted claims. By way of
counterclaim, petitioner states that, upon arrival of the conveying vessels, it presented the Bills
of Lading (B/Ls) and all other pertinent documents covering seven (7) shipments and demanded
from respondent delivery of all the goods covered by the aforesaid B/Ls, only to be informed that
respondent had already unloaded the goods from the container vans, stripped them of their
contents which contents were then stored in warehouses. Petitioner further states that
respondent had refused to deliver the goods covered by the B/Ls and required petitioner to pay
the amount of P123,738.04 before the goods can be released. It thus prays that respondent be
ordered to pay the aforestated amount with interest.

After due proceedings, the trial court found for respondent U.S. Lines, as plaintiff therein, and
accordingly rendered judgment, as follows:

WHEREFORE, in view of all the foregoing, the Court finds [petitioner] liable to [respondent] for
demurrage incurred in the amount of P99,408.00 which sum will bear interest at the legal rate
from the date of the filing of the complaint till full payment thereof plus attorneys fees in the
amount of 20% of the total sum due, all of which shall be recomputed as of the date of payment
in accordance with the provisions of Article 1250 of the Civil Code. Exemplary damages in the
amount of P80,000.00 are also granted. The counterclaim is dismissed. Costs against
[petitioner].

Party explains the trial court in its decision:

In other words, contrary to [petitioners] contentions, both the provisions of the contract between
the parties, in this case the bill of lading, and the interpretation given by the higher courts to
these provisions are to the effect that demurrage may be lawfully collected. As a matter of fact,
[respondent U.S. Lines] has submitted official receipts showing that on many other and previous
occasions, [petitioner] paid demurrage to [respondent] (Exhibits "F", "F-1" to "F-4", "G", "G-1" to
"G-4", "H", "H-1" to "H-4", and "I", "I-1" to "I-3"). [Petitioner] is, therefore, in estoppel to claim that
it did not know of demurrage being charged by [respondent] and that it had not agreed to it since
these exhibits show that [petitioner] knew of this demurrage and by paying for the same, it in
effect, agreed to the collection of demurrage.

xxxxxxxxx
On the other hand, [petitioner] claims that [respondent] company owes them the far larger sum
of P123,738.04 by way of damages allegedly suffered by their goods when [respondent]
company removed these goods from its cargo vans and deposited them in bonded warehouses
without its consent. It is not disputed that [respondent] company did not [sic] in fact remove
these goods belonging to [petitioner] from its vans and deposited them in warehouses.
However, this was done by authority of the Bureau of Customs and for that purpose,
[respondent] addressed a letter-request to the Collector of Customs, for permission to remove
the goods of defendant from its vans.

The Court finds that the charges for warehousing were necessary expenses covered by the
terms of the bill of lading which the consignee was responsible for. There is therefore now no
necessity of discussing whether or not the counterclaim of [petitioner] had prescribed or not.
Neither is there any question of bad faith on the part of [respondent]. When it requested for
authority to remove [petitioners] consigned goods from its vans and deposited them in
warehouses, [respondent] had already given consignee sufficient time to take delivery of the
shipment. This, [petitioner] chose not to do. Instead, it sat pat by the telephone calling without
making any positive effort to check up on the shipment or arrange for its delivery to its factory.
Once arrived at the port, the shipment was available to consignee for its proper delivery and
receipt and the carrier discharged of its responsibility therefor. Rather, by its inaction, [petitioner]
was guilty of bad faith. Once it had received the notice of arrival of the carrier in port, it was
incumbent on consignee to put wheels in motion in order that the shipment could be delivered to
it. The inaction of [petitioner] would only indicate that it had no intention of taking delivery except
at its own convenience thus preventing carrier from taking on other shipments and from leaving
port. Such unexplained and unbusiness-like delay smacks highly of bad faith on the part of
[petitioner] rather than of the [respondent]. (Words in bracket, added).

Appealing to the CA, whereat its recourse was docketed as CA-G.R. CV No. 18349, petitioner
contended that the trial court erred in (1) holding it liable for demurrage, (2) dismissing its
counterclaim, and (3) awarding exemplary damages and attorneys fees to respondent.

As stated at the outset, however, the CA, in its assailed Decision dated January 8, 1998,5
affirmed in toto the judgment of the trial court.

Undaunted, petitioner is now with this Court via the present recourse, imputing to the CA the
following errors:

A. xxx in concluding that it [petitioner] was the one at fault in not withdrawing its cargo from the
container vans in which the goods were originally shipped despite documentary evidence and
written admissions of private respondent to the contrary.
B. xxx in affirming the trial courts order for the recomputation of the judgment award in
accordance with Article 1250 of the Civil Code contrary to existing jurisprudence and without
any evidence at all to support it.6

The petition is partly meritorious.

It is undisputed that the goods subject of petitioners counterclaim and covered by seven (7)
B/Ls with Shippers Reference Nos. S-16844, S-16846, S-16848, S-17748, S-17750, S-17749
and S-177517 were loaded for shipment to Manila on respondents vessels in container vans on
a "House/House Containers-Shippers Load, Stowage and Count" basis. This shipping
arrangement means that the shipping companys container vans are to be brought to the
shipper for loading of its goods; that from the shippers warehouse, the goods in container vans
are brought to the shipping company for shipment; that the shipping company, upon arrival of its
ship at the port of destination, is to deliver the container vans to the consignees compound or
warehouse; and that the shipper (consignee) is supposed to load, stow and count the goods
from the container van.8 Likewise undisputed is the fact that the container vans containing the
goods covered by three (3) of the aforesaid B/Ls, particularly those with Shippers Reference
Nos. S-17748, S-17750 and S-17751,9 were delivered to a warehouse, stripped of their contents
and the contents deposited thereat.

On the argument that the respondent, upon the foregoing undisputed facts, violated its
contractual obligation to deliver when, instead of delivering the goods to the petitioner as
consignee thereof, it deposited the same in bonded warehouse/s, petitioner would now score
the CA for finding it at fault for non-withdrawal of its cargo from the container vans within the 10-
day free demurrage period. Pressing the point, petitioner argues that, since the CA drew an
erroneous conclusion from an undisputed set of facts, petitioner now asserts that the matter of
who is at fault - its first assigned error - could be treated as a legal issue and not a question of
fact.

After careful consideration, the Court sustain the CAs stance faulting the petitioner for not
taking delivery of its cargo from the container vans within the 10-day free period, an inaction
which led respondent to deposit the same in warehouse/s.

It may be that, when the relevant facts are undisputed, the question of whether or not the
conclusion deduced therefrom by the CA is correct is a question of law properly cognizable by
this Court. However, it has also been held that all doubts as to the correctness of such
conclusions will be resolved in favor of the disposing court.12 So it must be in this case.

At any rate, the Court finds that petitioners first contention raises a question of fact rather than
of law. And settled is the rule that factual findings of the CA, particularly those confirmatory of
that of the trial court, as here, are binding on this Court,13 save for the most compelling of
reasons, like when they are reached arbitrarily.14

As it were, however, the conclusion of the CA on who contextually is the erring party was not
exactly drawn from a vacuum, supported as such conclusion is by the records of the case. What
the CA wrote with some measure of logic commends itself for concurrence:

However, ... We find that [petitioner] was the one at fault in not withdrawing its cargo from the
containers wherein the goods were shipped within the ten (10)-day free period. Had it done so,
then there would not have been any need of depositing the cargo in a warehouse.

It is incumbent upon the carrier to immediately advise the consignee of the arrival of the goods
for if it does not, it continues to be liable for the same until the consignee has had reasonable
opportunity to remove them.

Sound business practice dictates that the consignee, upon notification of the arrival of the
goods, should immediately get the cargo from the carrier especially since it has need of it. xxx.
Appellant tries to shift the blame on the [respondent] by stating that it was not informed
beforehand of the latters intention to deliver the goods to a warehouse. It likewise alleges that it
does not know where to contact [respondent] for it argues that the person manning the latters
office would only hold office for a few hours, if not always out. But had it taken the necessary
steps of inquiring for the address of [respondent] from the proper government offices, then it
would have succeeded in finding the latters address.

Judging from the [petitioners] way of conducting business in the past, We come to the
conclusion that it is used to paying demurrage charges. Exhibits "H" and "I" are certainly proofs
of appellants practice of not getting its cargo from the carrier immediately upon notification of
the goods arrival.

It cannot be over-emphasized that the container vans were stripped of their cargo with the prior
authorization of the Bureau of Customs. The trial court said as much, thus:

It is not disputed that [respondent] company did not [sic] in fact remove these goods belonging
to [petitioner] from its vans and deposited them in warehouses. However, this was done by
authority of the Bureau of Customs and for that purpose, [respondent] addressed a letter-
request to the Collector of Customs, for permission to remove the goods of [petitioner] from its
vans (Exhibit "L"). The corresponding authority was granted by the Bureau of Customs to do so
as evidenced by a van permit (Exhibit "M"). In other words, while [respondent] admits that it
removed the goods of [petitioner] from its vans and deposited them in various warehouses,
there is no question that this was done by authority of the Bureau of Customs which is the
proper agency of the government charged with the supervision and regulation of maritime
commerce.

Verily, the authority secured from the Bureau of Customs is indicative of the bona fides of
respondents intention. And as held below, the authority thus acquired relieved respondent of its
obligations under the B/Ls when it caused the containers to be stripped and the goods stored in
bonded warehouses.

Not lost on this Court is the fact that the B/Ls under which petitioner anchors its counterclaim
allow the goods carried to be delivered to bonded warehouses for the shippers and/or
consignees account if it does not take possession or delivery thereof as soon as they are at its
disposal for removal. Section 17 of the Regular Long Form Inward B/L of the respondent 16 which
is incorporated by reference to the Short Form of B/L17 provides:

17. The carrier shall not be required to give any notification whatsoever of arrival, discharge or
any disposition of or action taken with respect to the goods, even though the goods are
consigned to order with provision for notice to a named person.

The carrier or master may appoint a stevedore or any other persons to unload and take delivery
of the goods and such delivery from ship's tackle shall be considered complete and all
responsibility of the carrier shall then terminate.

It is agreed that when possession of the goods is received or taken by the customs or other
authorities or by any operator of any lighter, craft, or other facilities whether selected by the
carrier or master, shipper of consignee, whether public or private, such authority or person shall
be considered as having received possession and delivery of the goods solely as agent of and
on behalf of the shipper and consignee, . Also if the consignee does not take possession
or delivery of the goods as soon as the goods are at the disposal of the consignee for
removal, the goods shall be at their own risk and expense, delivery shall be considered
complete and the carrier may, subject to carrier's liens, send the goods to store,
warehouse, put them on lighters or other craft, put them in possession of authorities,
dump, permit to lie where landed or otherwise dispose of them, always at the risk and
expense of the goods, and the shipper and consignee shall pay and indemnify the carrier for
any loss, damage, fine, charge or expense whatsoever suffered or incurred in so dealing with or
disposing of the goods, or by reason of the consignee's failure or delay in taking possession and
delivery as provided herein.

On the second issue raised, the Court finds as erroneous the trial courts decision, as affirmed
by the CA, for the recomputation of the judgment award as of the date of payment in
accordance with Article 1250 of the Civil Code.

In calling for the application of the aforementioned provision, respondent urged that judicial
notice be taken of the succeeding devaluations of the peso vis--vis the US dollar since the time
the proceedings began in 1981. According to respondent, the computation of the amount thus
due from the petitioner should factor in such peso devaluations.

Article 1250 of the Civil Code states:

In case an extraordinary inflation or deflation of the currency stipulated should supervene, the
value of the currency at the time of the establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.

Extraordinary inflation or deflation, as the case may be, exists when there is an unusual
increase or decrease in the purchasing power of the Philippine peso which is beyond the
common fluctuation in the value of said currency, and such increase or decrease could not have
been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time
of the establishment of the obligation.19 Extraordinary inflation can never be assumed; he who
alleges the existence of such phenomenon must prove the same.

The Court holds that there has been no extraordinary inflation within the meaning of Article 1250
of the Civil Code. Accordingly, there is no plausible reason for ordering the payment of an
obligation in an amount different from what has been agreed upon because of the purported
supervention of extraordinary inflation.

As it were, respondent was unable to prove the occurrence of extraordinary inflation since it filed
its complaint in 1981. Indeed, the record is bereft of any evidence, documentary or testimonial,
that inflation, nay, an extraordinary one, existed. Even if the price index of goods and services
may have risen during the intervening period, 21 this increase, without more, cannot be
considered as resulting to "extraordinary inflation" as to justify the application of Article 1250.
The erosion of the value of the Philippine peso in the past three or four decades, starting in the
mid-sixties, is, as the Court observed in Singson vs. Caltex (Phil), Inc., 22 characteristics of most
currencies. And while the Court may take judicial notice of the decline in the purchasing power
of the Philippine currency in that span of time, such downward trend of the peso cannot be
considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code.
Furthermore, absent an official pronouncement or declaration by competent authorities of the
existence of extraordinary inflation during a given period, as here, the effects of extraordinary
inflation, if that be the case, are not to be applied.

Lest it be overlooked, Article 1250 of the Code, as couched, clearly provides that the value of
the peso at the time of the establishment of the obligation shall control and be the basis of
payment of the contractual obligation, unless there is "agreement to the contrary." It is only
when there is a contrary agreement that extraordinary inflation will make the value of the
currency at the time of payment, not at the time of the establishment of obligation, the basis for
payment.23 The Court, in Mobil Oil Philippines, Inc. vs. Court of Appeals and Fernando A.
Pedrosa,[24 formulated the same rule in the following wise:

In other words, an agreement is needed for the effects of an extraordinary inflation to be taken
into account to alter the value of the currency at the time of the establishment of the obligation
which, as a rule, is always the determinative element, to be varied by agreement that would find
reason only in the supervention of extraordinary inflation or deflation.

To be sure, neither the trial court, the CA nor respondent has pointed to any provision of the
covering B/Ls whence respondent sourced its contractual right under the premises where the
defining "agreement to the contrary" is set forth. Needless to stress, the Court sees no need to
speculate as to the existence of such agreement, the burden of proof on this regard being on
respondent.

WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with the
MODIFICATION that the order for recomputation as of the date of payment in accordance with
the provisions of Article 1250 of the Civil Code is deleted.

EQUITABLE PCI BANK,* AIMEE YU and BEJAN LIONEL APAS, Petitioners,

vs.
NG SHEUNG NGOR** doing business under the name and style "KEN MARKETING," KEN
APPLIANCE DIVISION, INC. and BENJAMIN E. GO, Respondents.
DECISION
CORONA, J.:
This petition for review on certiorari1 seeks to set aside the decision2 of the Court of Appeals
(CA) in CA-G.R. SP No. 83112 and its resolution3 denying reconsideration.
On October 7, 2001, respondents Ng Sheung Ngor,4 Ken Appliance Division, Inc. and Benjamin
E. Go filed an action for annulment and/or reformation of documents and contracts5 against
petitioner Equitable PCI Bank (Equitable) and its employees, Aimee Yu and Bejan Lionel Apas,
in the Regional Trial Court (RTC), Branch 16 of Cebu City.6 They claimed that Equitable induced
them to avail of its peso and dollar credit facilities by offering low interest rates7 so they
accepted Equitable's proposal and signed the bank's pre-printed promissory notes on various
dates beginning 1996. They, however, were unaware that the documents contained identical
escalation clauses granting Equitable authority to increase interest rates without their consent. 8
Equitable, in its answer, asserted that respondents knowingly accepted all the terms and
conditions contained in the promissory notes.9 In fact, they continuously availed of and benefited
from Equitable's credit facilities for five years.10

After trial, the RTC upheld the validity of the promissory notes. It found that, in 2001 alone,
Equitable restructured respondents' loans amounting to US$228,200 and P1,000,000.11 The trial
court, however, invalidated the escalation clause contained therein because it violated the
principle of mutuality of contracts.12 Nevertheless, it took judicial notice of the steep depreciation
of the peso during the intervening period13 and declared the existence of extraordinary
deflation.14 Consequently, the RTC ordered the use of the 1996 dollar exchange rate in
computing respondents' dollar-denominated loans.15 Lastly, because the business reputation of
respondents was (allegedly) severely damaged when Equitable froze their accounts, 16 the trial
court awarded moral and exemplary damages to them.17

The dispositive portion of the February 5, 2004 RTC decision 18 provided:

WHEREFORE, premises considered, judgment is hereby rendered:
A) Ordering [Equitable] to reinstate and return the amount of [respondents'] deposit placed on
hold status;
B) Ordering [Equitable] to pay [respondents] the sum of P12 [m]illion [p]esos as moral damages;
C) Ordering [Equitable] to pay [respondents] the sum of P10 [m]illion [p]esos as exemplary
damages;
D) Ordering defendants Aimee Yu and Bejan [Lionel] Apas to pay [respondents], jointly and
severally, the sum of [t]wo [m]illion [p]esos as moral and exemplary damages;
E) Ordering [Equitable, Aimee Yu and Bejan Lionel Apas], jointly and severally, to pay
[respondents'] attorney's fees in the sum of P300,000; litigation expenses in the sum of P50,000
and the cost of suit;
F) Directing plaintiffs Ng Sheung Ngor and Ken Marketing to pay [Equitable] the unpaid principal
obligation for the peso loan as well as the unpaid obligation for the dollar denominated loan;
G) Directing plaintiff Ng Sheung Ngor and Ken Marketing to pay [Equitable] interest as follows:
1) 12% per annum for the peso loans;
2) 8% per annum for the dollar loans. The basis for the payment of the dollar obligation is the
conversion rate of P26.50 per dollar availed of at the time of incurring of the obligation in
accordance with Article 1250 of the Civil Code of the Philippines;
H) Dismissing [Equitable's] counterclaim except the payment of the aforestated unpaid principal
loan obligations and interest.
SO ORDERED.19

Equitable and respondents filed their respective notices of appeal. 20

In the March 1, 2004 order of the RTC, both notices were denied due course because Equitable
and respondents "failed to submit proof that they paid their respective appeal fees." 21
WHEREFORE, premises considered, the appeal interposed by defendants from the Decision in
the above-entitled case is DENIED due course. As of February 27, 2004, the Decision dated
February 5, 2004, is considered final and executory in so far as [Equitable, Aimee Yu and
Bejan Lionel Apas] are concerned.22

Equitable moved for the reconsideration of the March 1, 2004 order of the RTC 23 on the ground
that it did in fact pay the appeal fees. Respondents, on the other hand, prayed for the issuance
of a writ of execution.24

On March 24, 2004, the RTC issued an omnibus order denying Equitable's motion for
reconsideration for lack of merit25 and ordered the issuance of a writ of execution in favor of
respondents.26 According to the RTC, because respondents did not move for the
reconsideration of the previous order (denying due course to the parties notices of appeal), 27
the February 5, 2004 decision became final and executory as to both parties and a writ of
execution against Equitable was in order.28

A writ of execution was thereafter issued29 and three real properties of Equitable were levied
upon.30

On March 26, 2004, Equitable filed a petition for relief in the RTC from the March 1, 2004
order.31 It, however, withdrew that petition on March 30, 2004 32 and instead filed a petition for
certiorari with an application for an injunction in the CA to enjoin the implementation and
execution of the March 24, 2004 omnibus order.33

On June 16, 2004, the CA granted Equitable's application for injunction. A writ of preliminary
injunction was correspondingly issued.34
Notwithstanding the writ of injunction, the properties of Equitable previously levied upon were
sold in a public auction on July 1, 2004. Respondents were the highest bidders and certificates
of sale were issued to them.35
On August 10, 2004, Equitable moved to annul the July 1, 2004 auction sale and to cite the
sheriffs who conducted the sale in contempt for proceeding with the auction despite the
injunction order of the CA.36
On October 28, 2005, the CA dismissed the petition for certiorari. 37 It found Equitable guilty of
forum shopping because the bank filed its petition for certiorari in the CA several hours before
withdrawing its petition for relief in the RTC.38 Moreover, Equitable failed to disclose, both in the
statement of material dates and certificate of non-forum shopping (attached to its petition for
certiorari in the CA), that it had a pending petition for relief in the RTC. 39
Equitable moved for reconsideration40 but it was denied.41 Thus, this petition.
Equitable asserts that it was not guilty of forum shopping because the petition for relief was
withdrawn on the same day the petition for certiorari was filed.42 It likewise avers that its petition
for certiorari was meritorious because the RTC committed grave abuse of discretion in issuing
the March 24, 2004 omnibus order which was based on an erroneous assumption. The March 1,
2004 order denying its notice of appeal for non payment of appeal fees was erroneous because
it had in fact paid the required fees.43 Thus, the RTC, by issuing its March 24, 2004 omnibus
order, effectively prevented Equitable from appealing the patently wrong February 5, 2004
decision.44

This petition is meritorious.

Equitable Was Not Guilty Of Forum shopping

Forum shopping exists when two or more actions involving the same transactions, essential
facts and circumstances are filed and those actions raise identical issues, subject matter and
causes of action.45 The test is whether, in two or more pending cases, there is identity of parties,
rights or causes of actions and reliefs.46

Equitable's petition for relief in the RTC and its petition for certiorari in the CA did not have
identical causes of action. The petition for relief from the denial of its notice of appeal was based
on the RTCs judgment or final order preventing it from taking an appeal by "fraud, accident,
mistake or excusable negligence."47 On the other hand, its petition for certiorari in the CA, a
special civil action, sought to correct the grave abuse of discretion amounting to lack of
jurisdiction committed by the RTC.48

In a petition for relief, the judgment or final order is rendered by a court with competent
jurisdiction. In a petition for certiorari, the order is rendered by a court without or in excess of its
jurisdiction.

Moreover, Equitable substantially complied with the rule on non-forum shopping when it moved
to withdraw its petition for relief in the RTC on the same day (in fact just four hours and forty
minutes after) it filed the petition for certiorari in the CA. Even if Equitable failed to disclose that
it had a pending petition for relief in the RTC, it rectified what was doubtlessly a careless
oversight by withdrawing the petition for relief just a few hours after it filed its petition for
certiorari in the CA a clear indication that it had no intention of maintaining the two actions at
the same time.

The Trial Court Committed Grave Abuse of Discretion In Issuing Its March 1, 2004 and
March 24, 2004 Orders
Section 1, Rule 65 of the Rules of Court provides:
Section 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or
quasi-judicial function has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, nor any plain, speedy or adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the proceedings of such tribunal,
board or officer, and granting such incidental reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment, order or resolution
subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a
sworn certificate of non-forum shopping as provided in the third paragraph of Section 3, Rule 46.
There are two substantial requirements in a petition for certiorari. These are:

1. that the tribunal, board or officer exercising judicial or quasi-judicial functions acted without or
in excess of his or its jurisdiction or with grave abuse of discretion amounting to lack or excess
of jurisdiction; and
2. that there is no appeal or any plain, speedy and adequate remedy in the ordinary course of
law.
For a petition for certiorari premised on grave abuse of discretion to prosper, petitioner must
show that the public respondent patently and grossly abused his discretion and that abuse
amounted to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law or
to act at all in contemplation of law, as where the power was exercised in an arbitrary and
despotic manner by reason of passion or hostility.49
The March 1, 2004 order denied due course to the notices of appeal of both Equitable and
respondents. However, it declared that the February 5, 2004 decision was final and executory
only with respect to Equitable.50 As expected, the March 24, 2004 omnibus order denied
Equitable's motion for reconsideration and granted respondents' motion for the issuance of a
writ of execution.51
The March 1, 2004 and March 24, 2004 orders of the RTC were obviously intended to prevent
Equitable, et al. from appealing the February 5, 2004 decision. Not only that. The execution of
the decision was undertaken with indecent haste, effectively obviating or defeating Equitable's
right to avail of possible legal remedies. No matter how we look at it, the RTC committed grave
abuse of discretion in rendering those orders.
With regard to whether Equitable had a plain, speedy and adequate remedy in the ordinary
course of law, we hold that there was none. The RTC denied due course to its notice of appeal
in the March 1, 2004 order. It affirmed that denial in the March 24, 2004 omnibus order. Hence,
there was no way Equitable could have possibly appealed the February 5, 2004 decision. 52
Although Equitable filed a petition for relief from the March 24, 2004 order, that petition was not
a plain, speedy and adequate remedy in the ordinary course of law. 53 A petition for relief under
Rule 38 is an equitable remedy allowed only in exceptional circumstances or where there is no
other available or adequate remedy.54

Thus, we grant Equitable's petition for certiorari and consequently give due course to its appeal.
Equitable Raised Pure Questions of Law in Its Petition For Review
The jurisdiction of this Court in Rule 45 petitions is limited to questions of law. 55 There is a
question of law "when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not call for the probative value of
the evidence presented, the truth or falsehood of facts being admitted." 56
Equitable does not assail the factual findings of the trial court. Its arguments essentially focus on
the nullity of the RTCs February 5, 2004 decision. Equitable points out that that decision was
patently erroneous, specially the exorbitant award of damages, as it was inconsistent with
existing law and jurisprudence.57

The Promissory Notes Were Valid

The RTC upheld the validity of the promissory notes despite respondents assertion that those
documents were contracts of adhesion.
A contract of adhesion is a contract whereby almost all of its provisions are drafted by one
party.58 The participation of the other party is limited to affixing his signature or his "adhesion" to
the contract.59 For this reason, contracts of adhesion are strictly construed against the party who
drafted it.60

It is erroneous, however, to conclude that contracts of adhesion are invalid per se. They are, on
the contrary, as binding as ordinary contracts. A party is in reality free to accept or reject it. A
contract of adhesion becomes void only when the dominant party takes advantage of the
weakness of the other party, completely depriving the latter of the opportunity to bargain on
equal footing.61

That was not the case here. As the trial court noted, if the terms and conditions offered by
Equitable had been truly prejudicial to respondents, they would have walked out and negotiated
with another bank at the first available instance. But they did not. Instead, they continuously
availed of Equitable's credit facilities for five long years.

While the RTC categorically found that respondents had outstanding dollar- and peso-
denominated loans with Equitable, it, however, failed to ascertain the total amount due
(principal, interest and penalties, if any) as of July 9, 2001. The trial court did not explain how it
arrived at the amounts of US$228,200 and P1,000,000.62 In Metro Manila Transit Corporation v.
D.M. Consunji,63 we reiterated that this Court is not a trier of facts and it shall pass upon them
only for compelling reasons which unfortunately are not present in this case. 64 Hence, we
ordered the partial remand of the case for the sole purpose of determining the amount of actual
damages.65

Escalation Clause Violated The Principle Of Mutuality Of Contracts

Escalation clauses are not void per se. However, one "which grants the creditor an unbridled
right to adjust the interest independently and upwardly, completely depriving the debtor of the
right to assent to an important modification in the agreement" is void. Clauses of that nature
violate the principle of mutuality of contracts.66 Article 130867 of the Civil Code holds that a
contract must bind both contracting parties; its validity or compliance cannot be left to the will of
one of them.68

For this reason, we have consistently held that a valid escalation clause provides:
1. that the rate of interest will only be increased if the applicable maximum rate of interest is
increased by law or by the Monetary Board; and
2. that the stipulated rate of interest will be reduced if the applicable maximum rate of interest is
reduced by law or by the Monetary Board (de-escalation clause).69

The RTC found that Equitable's promissory notes uniformly stated:

If subject promissory note is extended, the interest for subsequent extensions shall be at such
rate as shall be determined by the bank.70

Equitable dictated the interest rates if the term (or period for repayment) of the loan was
extended. Respondents had no choice but to accept them. This was a violation of Article 1308
of the Civil Code. Furthermore, the assailed escalation clause did not contain the necessary
provisions for validity, that is, it neither provided that the rate of interest would be increased only
if allowed by law or the Monetary Board, nor allowed de-escalation. For these reasons, the
escalation clause was void.

With regard to the proper rate of interest, in New Sampaguita Builders v. Philippine National
Bank71 we held that, because the escalation clause was annulled, the principal amount of the
loan was subject to the original or stipulated rate of interest. Upon maturity, the amount due was
subject to legal interest at the rate of 12% per annum.72

Consequently, respondents should pay Equitable the interest rates of 12.66% p.a. for their
dollar-denominated loans and 20% p.a. for their peso-denominated loans from January 10, 2001
to July 9, 2001. Thereafter, Equitable was entitled to legal interest of 12% p.a. on all amounts
due.

There Was No Extraordinary Deflation

Extraordinary inflation exists when there is an unusual decrease in the purchasing power of
currency (that is, beyond the common fluctuation in the value of currency) and such decrease
could not be reasonably foreseen or was manifestly beyond the contemplation of the parties at
the time of the obligation. Extraordinary deflation, on the other hand, involves an inverse
situation.73

Article 1250 of the Civil Code provides:

Article 1250. In case an extraordinary inflation or deflation of the currency stipulated should
intervene, the value of the currency at the time of the establishment of the obligation shall be the
basis of payment, unless there is an agreement to the contrary.

For extraordinary inflation (or deflation) to affect an obligation, the following requisites must be
proven:

1. that there was an official declaration of extraordinary inflation or deflation from the Bangko
Sentral ng Pilipinas (BSP);74
2. that the obligation was contractual in nature;75 and
3. that the parties expressly agreed to consider the effects of the extraordinary inflation or
deflation.76
Despite the devaluation of the peso, the BSP never declared a situation of extraordinary
inflation. Moreover, although the obligation in this instance arose out of a contract, the parties
did not agree to recognize the effects of extraordinary inflation (or deflation). 77 The RTC never
mentioned that there was a such stipulation either in the promissory note or loan agreement.
Therefore, respondents should pay their dollar-denominated loans at the exchange rate fixed by
the BSP on the date of maturity.78
The Award Of Moral And Exemplary Damages Lacked Basis
Moral damages are in the category of an award designed to compensate the claimant for actual
injury suffered, not to impose a penalty to the wrongdoer. 79 To be entitled to moral damages, a
claimant must prove:
1. That he or she suffered besmirched reputation, or physical, mental or psychological suffering
sustained by the claimant;
2. That the defendant committed a wrongful act or omission;
3. That the wrongful act or omission was the proximate cause of the damages the claimant
sustained;
4. The case is predicated on any of the instances expressed or envisioned by Article 221980 and
222081 . 82
In culpa contractual or breach of contract, moral damages are recoverable only if the defendant
acted fraudulently or in bad faith or in wanton disregard of his contractual obligations. 83 The
breach must be wanton, reckless, malicious or in bad faith, and oppressive or abusive.84
The RTC found that respondents did not pay Equitable the interest due on February 9, 2001 (or
any month thereafter prior to the maturity of the loan) 85 or the amount due (principal plus
interest) due on July 9, 2001.86 Consequently, Equitable applied respondents' deposits to their
loans upon maturity.
The relationship between a bank and its depositor is that of creditor and debtor. 87 For this
reason, a bank has the right to set-off the deposits in its hands for the payment of a depositor's
indebtedness.88
Respondents indeed defaulted on their obligation. For this reason, Equitable had the option to
exercise its legal right to set-off or compensation. However, the RTC mistakenly (or, as it now
appears, deliberately) concluded that Equitable acted "fraudulently or in bad faith or in wanton
disregard" of its contractual obligations despite the absence of proof. The undeniable fact was
that, whatever damage respondents sustained was purely the consequence of their failure to
pay their loans. There was therefore absolutely no basis for the award of moral damages to
them.
Neither was there reason to award exemplary damages. Since respondents were not entitled to
moral damages, neither should they be awarded exemplary damages.89 And if respondents
were not entitled to moral and exemplary damages, neither could they be awarded attorney's
fees and litigation expenses.90
ACCORDINGLY, the petition is hereby GRANTED.
The October 28, 2005 decision and February 3, 2006 resolution of the Court of Appeals in CA-
G.R. SP No. 83112 are hereby REVERSED and SET ASIDE.
The March 24, 2004 omnibus order of the Regional Trial Court, Branch 16, Cebu City in Civil
Case No. CEB-26983 is hereby ANNULLED for being rendered with grave abuse of discretion
amounting to lack or excess of jurisdiction. All proceedings undertaken pursuant thereto are
likewise declared null and void.
The March 1, 2004 order of the Regional Trial Court, Branch 16 of Cebu City in Civil Case No.
CEB-26983 is hereby SET ASIDE. The appeal of petitioners Equitable PCI Bank, Aimee Yu and
Bejan Lionel Apas is therefore given due course.1avvphi1
The February 5, 2004 decision of the Regional Trial Court, Branch 16 of Cebu City in Civil Case
No. CEB-26983 is accordingly SET ASIDE. New judgment is hereby entered:
1. ordering respondents Ng Sheung Ngor, doing business under the name and style of "Ken
Marketing," Ken Appliance Division, Inc. and Benjamin E. Go to pay petitioner Equitable PCI
Bank the principal amount of their dollar- and peso-denominated loans;
2. ordering respondents Ng Sheung Ngor, doing business under the name and style of "Ken
Marketing," Ken Appliance Division, Inc. and Benjamin E. Go to pay petitioner Equitable PCI
Bank interest at:
a) 12.66% p.a. with respect to their dollar-denominated loans from January 10, 2001 to July 9,
2001;
b) 20% p.a. with respect to their peso-denominated loans from January 10, 2001 to July 9,
2001;91
c) pursuant to our ruling in Eastern Shipping Lines v. Court of Appeals,92 the total amount due
on July 9, 2001 shall earn legal interest at 12% p.a. from the time petitioner Equitable PCI Bank
demanded payment, whether judicially or extra-judicially; and
d) after this Decision becomes final and executory, the applicable rate shall be 12% p.a. until full
satisfaction;
3. all other claims and counterclaims are dismissed.
As a starting point, the Regional Trial Court, Branch 16 of Cebu City shall compute the exact
amounts due on the respective dollar-denominated and peso-denominated loans, as of July 9,
2001, of respondents Ng Sheung Ngor, doing business under the name and style of "Ken
Marketing," Ken Appliance Division and Benjamin E. Go.

EUFEMIA ALMEDA and ROMEL ALMEDA, petitioners,

vs.
BATHALA MARKETING INDUSTRIES, INC., respondent.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the Decision 1
of the Court of Appeals (CA), dated September 3, 2001, in CA-G.R. CV No. 67784, and its
Resolution2 dated November 19, 2001. The assailed Decision affirmed with modification the
Decision3 of the Regional Trial Court (RTC), Makati City, Branch 136, dated May 9, 2000 in Civil
Case No. 98-411.
Sometime in May 1997, respondent Bathala Marketing Industries, Inc., as lessee, represented
by its president Ramon H. Garcia, renewed its Contract of Lease4 with Ponciano L. Almeda
(Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel Almeda.
Under the said contract, Ponciano agreed to lease a portion of the Almeda Compound, located
at 2208 Pasong Tamo Street, Makati City, consisting of 7,348.25 square meters, for a monthly
rental of P1,107,348.69, for a term of four (4) years from May 1, 1997 unless sooner terminated
as provided in the contract.5 The contract of lease contained the following pertinent provisions
which gave rise to the instant case:
SIXTH - It is expressly understood by the parties hereto that the rental rate stipulated is based
on the present rate of assessment on the property, and that in case the assessment should
hereafter be increased or any new tax, charge or burden be imposed by authorities on the lot
and building where the leased premises are located, LESSEE shall pay, when the rental herein
provided becomes due, the additional rental or charge corresponding to the portion hereby
leased; provided, however, that in the event that the present assessment or tax on said property
should be reduced, LESSEE shall be entitled to reduction in the stipulated rental, likewise in
proportion to the portion leased by him;
SEVENTH - In case an extraordinary inflation or devaluation of Philippine Currency should
supervene, the value of Philippine peso at the time of the establishment of the obligation shall
be the basis of payment;6
During the effectivity of the contract, Ponciano died. Thereafter, respondent dealt with
petitioners. In a letter7 dated December 29, 1997, petitioners advised respondent that the former
shall assess and collect Value Added Tax (VAT) on its monthly rentals. In response, respondent
contended that VAT may not be imposed as the rentals fixed in the contract of lease were
supposed to include the VAT therein, considering that their contract was executed on May 1,
1997 when the VAT law had long been in effect.8
On January 26, 1998, respondent received another letter from petitioners informing the former
that its monthly rental should be increased by 73% pursuant to condition No. 7 of the contract
and Article 1250 of the Civil Code. Respondent opposed petitioners' demand and insisted that
there was no extraordinary inflation to warrant the application of Article 1250 in light of the
pronouncement of this Court in various cases.9
Respondent refused to pay the VAT and adjusted rentals as demanded by petitioners but
continued to pay the stipulated amount set forth in their contract.
On February 18, 1998, respondent instituted an action for declaratory relief for purposes of
determining the correct interpretation of condition Nos. 6 and 7 of the lease contract to prevent
damage and prejudice.10 The case was docketed as Civil Case No. 98-411 before the RTC of
Makati.
On March 10, 1998, petitioners in turn filed an action for ejectment, rescission and damages
against respondent for failure of the latter to vacate the premises after the demand made by the
former.11 Before respondent could file an answer, petitioners filed a Notice of Dismissal. 12 They
subsequently refiled the complaint before the Metropolitan Trial Court of Makati; the case was
raffled to Branch 139 and was docketed as Civil Case No. 53596.
Petitioners later moved for the dismissal of the declaratory relief case for being an improper
remedy considering that respondent was already in breach of the obligation and that the case
would not end the litigation and settle the rights of the parties. The trial court, however, was not
persuaded, and consequently, denied the motion.
After trial on the merits, on May 9, 2000, the RTC ruled in favor of respondent and against
petitioners. The pertinent portion of the decision reads:
WHEREFORE, premises considered, this Court renders judgment on the case as follows:
1) declaring that plaintiff is not liable for the payment of Value-Added Tax (VAT) of 10% of the
rent for [the] use of the leased premises;
2) declaring that plaintiff is not liable for the payment of any rental adjustment, there being no
[extraordinary] inflation or devaluation, as provided in the Seventh Condition of the lease
contract, to justify the same;
3) holding defendants liable to plaintiff for the total amount of P1,119,102.19, said amount
representing payments erroneously made by plaintiff as VAT charges and rental adjustment for
the months of January, February and March, 1999; and
4) holding defendants liable to plaintiff for the amount of P1,107,348.69, said amount
representing the balance of plaintiff's rental deposit still with defendants.
SO ORDERED.13
The trial court denied petitioners their right to pass on to respondent the burden of paying the
VAT since it was not a new tax that would call for the application of the sixth clause of the
contract. The court, likewise, denied their right to collect the demanded increase in rental, there
being no extraordinary inflation or devaluation as provided for in the seventh clause of the
contract. Because of the payment made by respondent of the rental adjustment demanded by
petitioners, the court ordered the restitution by the latter to the former of the amounts paid,
notwithstanding the well-established rule that in an action for declaratory relief, other than a
declaration of rights and obligations, affirmative reliefs are not sought by or awarded to the
parties.
Petitioners elevated the aforesaid case to the Court of Appeals which affirmed with modification
the RTC decision. The fallo reads:
WHEREFORE, premises considered, the present appeal is DISMISSED and the appealed
decision in Civil Case No. 98-411 is hereby AFFIRMED with MODIFICATION in that the order
for the return of the balance of the rental deposits and of the amounts representing the 10%
VAT and rental adjustment, is hereby DELETED.
No pronouncement as to costs.
SO ORDERED.14
The appellate court agreed with the conclusions of law and the application of the decisional
rules on the matter made by the RTC. However, it found that the trial court exceeded its
jurisdiction in granting affirmative relief to the respondent, particularly the restitution of its excess
payment.
Petitioners now come before this Court raising the following issues:
I.
WHETHER OR NOT ARTICLE 1250 OF THE NEW CIVIL CODE IS APPLICABLE TO THE
CASE AT BAR.
II.
WHETHER OR NOT THE DOCTRINE ENUNCIATED IN FILIPINO PIPE AND FOUNDRY
CORP. VS. NAWASA CASE, 161 SCRA 32 AND COMPANION CASES ARE (sic)
APPLICABLE IN THE CASE AT BAR.
III.
WHETHER OR NOT IN NOT APPLYING THE DOCTRINE IN THE CASE OF DEL ROSARIO
VS. THE SHELL COMPANY OF THE PHILIPPINES, 164 SCRA 562, THE HONORABLE
COURT OF APPEALS SERIOUSLY ERRED ON A QUESTION OF LAW.
IV.
WHETHER OR NOT THE FINDING OF THE HONORABLE COURT OF APPEALS THAT
RESPONDENT IS NOT LIABLE TO PAY THE 10% VALUE ADDED TAX IS IN ACCORDANCE
WITH THE MANDATE OF RA 7716.
V.
WHETHER OR NOT DECLARATORY RELIEF IS PROPER SINCE PLAINTIFF-APPELLEE
WAS IN BREACH WHEN THE PETITION FOR DECLARATORY RELIEF WAS FILED BEFORE
THE TRIAL COURT.
In fine, the issues for our resolution are as follows: 1) whether the action for declaratory relief is
proper; 2) whether respondent is liable to pay 10% VAT pursuant to Republic Act (RA) 7716;
and 3) whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation.
Declaratory relief is defined as an action by any person interested in a deed, will, contract or
other written instrument, executive order or resolution, to determine any question of construction
or validity arising from the instrument, executive order or regulation, or statute, and for a
declaration of his rights and duties thereunder. The only issue that may be raised in such a
petition is the question of construction or validity of provisions in an instrument or statute.
Corollary is the general rule that such an action must be justified, as no other adequate relief or
remedy is available under the circumstances. 15
Decisional law enumerates the requisites of an action for declaratory relief, as follows: 1) the
subject matter of the controversy must be a deed, will, contract or other written instrument,
statute, executive order or regulation, or ordinance; 2) the terms of said documents and the
validity thereof are doubtful and require judicial construction; 3) there must have been no breach
of the documents in question; 4) there must be an actual justiciable controversy or the "ripening
seeds" of one between persons whose interests are adverse; 5) the issue must be ripe for
judicial determination; and 6) adequate relief is not available through other means or other forms
of action or proceeding.16
It is beyond cavil that the foregoing requisites are present in the instant case, except that
petitioners insist that respondent was already in breach of the contract when the petition was
filed.
We do not agree.
After petitioners demanded payment of adjusted rentals and in the months that followed,
respondent complied with the terms and conditions set forth in their contract of lease by paying
the rentals stipulated therein. Respondent religiously fulfilled its obligations to petitioners even
during the pendency of the present suit. There is no showing that respondent committed an act
constituting a breach of the subject contract of lease. Thus, respondent is not barred from
instituting before the trial court the petition for declaratory relief.
Petitioners claim that the instant petition is not proper because a separate action for rescission,
ejectment and damages had been commenced before another court; thus, the construction of
the subject contractual provisions should be ventilated in the same forum.
We are not convinced.
It is true that in Panganiban v. Pilipinas Shell Petroleum Corporation17 we held that the petition
for declaratory relief should be dismissed in view of the pendency of a separate action for
unlawful detainer. However, we cannot apply the same ruling to the instant case. In
Panganiban, the unlawful detainer case had already been resolved by the trial court before the
dismissal of the declaratory relief case; and it was petitioner in that case who insisted that the
action for declaratory relief be preferred over the action for unlawful detainer. Conversely, in the
case at bench, the trial court had not yet resolved the rescission/ejectment case during the
pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was
on appeal, itself initiated the suspension of the proceedings pending the resolution of the action
for declaratory relief.
We are not unmindful of the doctrine enunciated in Teodoro, Jr. v. Mirasol18 where the
declaratory relief action was dismissed because the issue therein could be threshed out in the
unlawful detainer suit. Yet, again, in that case, there was already a breach of contract at the
time of the filing of the declaratory relief petition. This dissimilar factual milieu proscribes the
Court from applying Teodoro to the instant case.
Given all these attendant circumstances, the Court is disposed to entertain the instant
declaratory relief action instead of dismissing it, notwithstanding the pendency of the
ejectment/rescission case before the trial court. The resolution of the present petition would
write finis to the parties' dispute, as it would settle once and for all the question of the proper
interpretation of the two contractual stipulations subject of this controversy.
Now, on the substantive law issues.
Petitioners repeatedly made a demand on respondent for the payment of VAT and for rental
adjustment allegedly brought about by extraordinary inflation or devaluation. Both the trial court
and the appellate court found no merit in petitioners' claim. We see no reason to depart from
such findings.
As to the liability of respondent for the payment of VAT, we cite with approval the ratiocination of
the appellate court, viz.:
Clearly, the person primarily liable for the payment of VAT is the lessor who may choose to pass
it on to the lessee or absorb the same. Beginning January 1, 1996, the lease of real property in
the ordinary course of business, whether for commercial or residential use, when the gross
annual receipts exceed P500,000.00, is subject to 10% VAT. Notwithstanding the mandatory
payment of the 10% VAT by the lessor, the actual shifting of the said tax burden upon the
lessee is clearly optional on the part of the lessor, under the terms of the statute. The word
"may" in the statute, generally speaking, denotes that it is directory in nature. It is generally
permissive only and operates to confer discretion. In this case, despite the applicability of the
rule under Sec. 99 of the NIRC, as amended by R.A. 7716, granting the lessor the option to
pass on to the lessee the 10% VAT, to existing contracts of lease as of January 1, 1996, the
original lessor, Ponciano L. Almeda did not charge the lessee-appellee the 10% VAT nor
provided for its additional imposition when they renewed the contract of lease in May 1997.
More significantly, said lessor did not actually collect a 10% VAT on the monthly rental due from
the lessee-appellee after the execution of the May 1997 contract of lease. The inevitable
implication is that the lessor intended not to avail of the option granted him by law to shift the
10% VAT upon the lessee-appellee. x x x.19
In short, petitioners are estopped from shifting to respondent the burden of paying the VAT.
Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing. This provision
clearly states that respondent can only be held liable for new taxes imposed after the effectivity
of the contract of lease, that is, after May 1997, and only if they pertain to the lot and the
building where the leased premises are located. Considering that RA 7716 took effect in 1994,
the VAT cannot be considered as a "new tax" in May 1997, as to fall within the coverage of the
sixth stipulation.
Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation
or devaluation.
Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the
contract stipulation speaks of extraordinary inflation or devaluation while the Code speaks of
extraordinary inflation or deflation. They insist that the doctrine pronounced in Del Rosario v.
The Shell Company, Phils. Limited20 should apply.
Essential to contract construction is the ascertainment of the intention of the contracting parties,
and such determination must take into account the contemporaneous and subsequent acts of
the parties. This intention, once ascertained, is deemed an integral part of the contract. 21
While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation or devaluation"
as compared to Article 1250's "extraordinary inflation or deflation," we find that when the parties
used the term "devaluation," they really did not intend to depart from Article 1250 of the Civil
Code. Condition No. 7 of the contract should, thus, be read in harmony with the Civil Code
provision.
That this is the intention of the parties is evident from petitioners' letter 22 dated January 26,
1998, where, in demanding rental adjustment ostensibly based on condition No. 7, petitioners
made explicit reference to Article 1250 of the Civil Code, even quoting the law verbatim. Thus,
the application of Del Rosario is not warranted. Rather, jurisprudential rules on the application of
Article 1250 should be considered.
Article 1250 of the Civil Code states:
In case an extraordinary inflation or deflation of the currency stipulated should supervene, the
value of the currency at the time of the establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.
Inflation has been defined as the sharp increase of money or credit, or both, without a
corresponding increase in business transaction. There is inflation when there is an increase in
the volume of money and credit relative to available goods, resulting in a substantial and
continuing rise in the general price level.23 In a number of cases, this Court had provided a
discourse on what constitutes extraordinary inflation, thus:
[E]xtraordinary inflation exists when there is a decrease or increase in the purchasing power of
the Philippine currency which is unusual or beyond the common fluctuation in the value of said
currency, and such increase or decrease could not have been reasonably foreseen or was
manifestly beyond the contemplation of the parties at the time of the establishment of the
obligation.24
The factual circumstances obtaining in the present case do not make out a case of extraordinary
inflation or devaluation as would justify the application of Article 1250 of the Civil Code. We
would like to stress that the erosion of the value of the Philippine peso in the past three or four
decades, starting in the mid-sixties, is characteristic of most currencies. And while the Court
may take judicial notice of the decline in the purchasing power of the Philippine currency in that
span of time, such downward trend of the peso cannot be considered as the extraordinary
phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official
pronouncement or declaration by competent authorities of the existence of extraordinary
inflation during a given period, the effects of extraordinary inflation are not to be applied. 25
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 67784, dated September 3, 2001, and its Resolution dated
November 19, 2001, are AFFIRMED.

BPI vs Court of Appeals, 538 SCRA 184, GR No. 123498, November 23, 2007

Facts: Franco opened 3 accounts with BPI with the total amount of P2,000,000.00. The said
amount used to open these accounts is traceable to a check issued by Tevesteco. The funding
for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI from FMICs
account (with a deposit of P100,000,000.00) and credited to Tevestecos account pursuant to an
Authority to Debit which was allegedly forged as claimed by FMIC.
Tevesteco effected several withdrawals already from its account amounting to P37,455,410.54
including the P2,000,000.00 paid to Franco.
Franco issued two checks which were dishonoured upon presentment for payment due to
garnishment of his account filed by BPI.
BPI claimed that it had a better right to the amounts which consisted of part of the money
allegedly fraudulently withdrawn from it by Tevesteco and ending up in Francos account. BPI
urges us that the legal consequence of FMICs forgery claim is that the money transferred by
BPI to Tevesteco is its own, and considering that it was able to recover possession of the same
when the money was redeposited by Franco, it had the right to set up its ownership thereon and
freeze Francos accounts.
Issue: WON the bank has a better right to the deposits in Francos account.
Held: No. Significantly, while Article 559 permits an owner who has lost or has been unlawfully
deprived of a movable to recover the exact same thing from the current possessor, BPI simply
claims ownership of the equivalent amount of money, i.e., the value thereof, which it had
mistakenly debited from FMICs account and credited to Tevestecos, and subsequently traced
to Francos account.
Money bears no earmarks of peculiar ownership, and this characteristic is all the more manifest
in the instant case which involves money in a banking transaction gone awry. Its primary
function is to pass from hand to hand as a medium of exchange, without other evidence of its
title. Money, which had been passed through various transactions in the general course of
banking business, even if of traceable origin, is no exception.