Acme Shoe, Rubber & Plastic Corp. vs.

Court of Appeals

G.R. No. 103576, 260 SCRA 714, August 22, 1996

G.R. No. 103576 August 22, 1996

ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC, petitioners,
vs.
HON. COURT OF APPEALS, BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF CALOOCAN
CITY, respondents.

VITUG, J.:p

Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise
extend its coverage to obligations yet to be contracted or incurred? This question is the core issue in
the instant petition for review on certiorari.

Petitioner Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber &
Plastic Corporation," executed on 27 June 1978, for and in behalf of the company, a chattel
mortgage in favor of private respondent Producers Bank of the Philippines. The mortgage stood by
way of security for petitioner's corporate loan of three million pesos (P3,000,000.00). A provision in
the chattel mortgage agreement was to this effect —

(c) If the MORTGAGOR, his heirs, executors or administrators shall well and truly perform the full
obligation or obligations above-stated according to the terms thereof, then this mortgage shall be
null and void. . . .

In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the
former note, as an extension thereof, or as a new loan, or is given any other kind of
accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of
import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment
of the said promissory note or notes and/or accommodations without the necessity of executing a
new contract and this mortgage shall have the same force and effect as if the said promissory note
or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand
as security for said obligations and any and all other obligations of the MORTGAGOR to the
MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before,
during or after the constitution of this mortgage. 1

In due time, the loan of P3,000,000.00 was paid by petitioner corporation. Subsequently, in 1981, it
obtained from respondent bank additional financial accommodations totalling
P2,700,000.00. 2 These borrowings were on due date also fully paid.

On 10 and 11 January 1984, the bank yet again extended to petitioner corporation a loan of one
million pesos (P1,000,000.00) covered by four promissory notes for P250,000.00 each. Due to
financial constraints, the loan was not settled at maturity. 3 Respondent bank thereupon applied for
an extra judicial foreclosure of the chattel mortgage, herein before cited, with the Sheriff of
Caloocan City, prompting petitioner corporation to forthwith file an action for injunction, with
damages and a prayer for a writ of preliminary injunction, before the Regional Trial Court of
Caloocan City (Civil Case No. C-12081). Ultimately, the court dismissed the complaint and ordered
the foreclosure of the chattel mortgage. It held petitioner corporation bound by the stipulations,
aforequoted, of the chattel mortgage.

Petitioner corporation appealed to the Court of Appeals 4 which, on 14 August 1991, affirmed, "in all
respects," the decision of the court a quo. The motion for reconsideration was denied on 24 January
1992.

The instant petition interposed by petitioner corporation was initially dinied on 04 March 1992 by
this Court for having been insufficient in form and substance. Private respondent filed a motion to
dismiss the petition while petitioner corporation filed a compliance and an opposition to private
respondent's motion to dismiss. The Court denied petitioner's first motion for reconsideration but
granted a second motion for reconsideration, thereby reinstating the petition and requiring private
respondent to comment thereon. 5

Except in criminal cases where the penalty of reclusion perpetua or death is imposed 6which the
Court so reviews as a matter of course, an appeal from judgments of lower courts is not a matter of
right but of sound judicial discretion. The circulars of the Court prescribing technical and other
procedural requirements are meant to weed out unmeritorious petitions that can unnecessarily clog
the docket and needlessly consume the time of the Court. These technical and procedural rules,
however, are intended to help secure, not suppress, substantial justice. A deviation from the rigid
enforcement of the rules may thus be allowed to attain the prime objective for, after all, the
dispensation of justice is the core reason for the existence of courts. In this instance, once again, the
Court is constrained to relax the rules in order to give way to and uphold the paramount and
overriding interest of justice.

Contracts of security are either personal or real. In contracts of personal security, such as a guaranty
or a suretyship, the faithful performance of the obligation by the principal debt or is secured by
the personal commitment of another (the guarantor or surety). In contracts of real security, such as
a pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of property —
in pledge, the placing of movable property in the possession of the creditor; in chattel mortgage, by
the execution of the corresponding deed substantially in the form prescribed by law; in real estate
mortgage, by the execution of a public instrument encumbering the real property covered thereby;
and inantichresis, by a written instrument granting to the creditor the right to receive the fruits of an
immovable property with the obligation to apply such fruits to the payment of interest, if owing, and
thereafter to the principal of his credit — upon the essential condition that if the obligation becomes
due and the debtor defaults, then the property encumbered can be alienated for the payment of the
obligation, 7 but that should the obligation be duly paid, then the contract is automatically
extinguished proceeding from the accessory character 8 of the agreement. As the law so puts it, once
the obligation is complied with, then the contract of security becomes, ipso facto, null and void. 9

While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, 10 a chattel mortgage, however,
can only cover obligations existing at the time the mortgage is constituted. Although
a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a
binding commitment that can be compelled upon, the security itself, however, does not come into
existence or arise until after a chattel mortgage agreement covering the newly contracted debt is
executed either by concluding a fresh chattel mortgage or by amending the old contract
conformably with the form prescribed by the Chattel Mortgage Law. 11 Refusal on the part of the
borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act
of default on the part of the borrower of the financing agreement whereon the promise is written
but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution
and during the life of the chattel mortgage sought to be foreclosed.

A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form
prescribed by the Chattel Mortgage Law itself. One of the requisites, under Section 5 thereof, is an
affidavit of good faith. While it is not doubted that if such an affidavit is not appended to the
agreement, the chattel mortgage would still be valid between the parties (not against third persons
acting in good faith 12), the fact, however, that the statute has provided that the parties to the
contract must execute an oath that —

. . . (the) mortgage is made for the purpose of securing the obligation specified in the conditions
thereof, and for no other purpose, and that the same is a just and valid obligation, and one not
entered into for the purpose of fraud. 13

makes it obvious that the debt referred to in the law is a current, not an obligation that is yet merely
contemplated. In the chattel mortgage here involved, the only obligation specified in the chattel
mortgage contract was the P3,000,000.00 loan which petitioner corporation later fully paid. By
virtue of Section 3 of the Chattel Mortgage Law, the payment of the obligation automatically
rendered the chattel mortgage void or terminated. In Belgian Catholic Missionaries, Inc., vs.
Magallanes Press, Inc., et al., 14 the Court
said —

. . . A mortgage that contains a stipulation in regard to future advances in the credit will take effect
only from the date the same are made and not from the date of the mortgage. 15

The significance of the ruling to the instant problem would be that since the 1978 chattel mortgage
had ceased to exist coincidentally with the full payment of the P3,000,000.00 loan, 16 there no longer
was any chattel mortgage that could cover the new loans that were concluded thereafter.

We find no merit in petitioner corporation's other prayer that the case should be remanded to the
trial court for a specific finding on the amount of damages it has sustained "as a result of the
unlawful action taken by respondent bank against it." 17 This prayer is not reflected in its complaint
which has merely asked for the amount of P3,000,000.00 by way of moral damages. 18 In LBC
Express, Inc. vs. Court of Appeals, 19we have said:

Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. A corporation, being an artificial person and having existence only in legal contemplation, has
no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental
anguish. Mental suffering can be experienced only by one having a nervous system and it flows from
real ills, sorrows, and griefs of life — all of which cannot be suffered by respondent bank as an
artificial person.20

While Chua Pac is included in the case, the complaint, however, clearly states that he has merely
been so named as a party in representation of petitioner corporation.

Petitioner corporation's counsel could be commended for his zeal in pursuing his client's cause. It
instead turned out to be, however, a source of disappointment for this Court to read in petitioner's
reply to private respondent's comment on the petition his so-called "One Final Word;" viz:

In simply quoting in toto the patently erroneous decision of the trial court, respondent Court of
Appeals should be required to justify its decision which completely disregarded the basic laws on
obligations and contracts, as well as the clear provisions of the Chattel Mortgage Law and well-
settled jurisprudence of this Honorable Court; that in the event that its explanation is wholly
unacceptable, this Honorable Court should impose appropriate sanctions on the erring justices. This
is one positive step in ridding our courts of law of incompetent and dishonest magistrates especially
members of a superior court of appellate jurisdiction. 21 (Emphasis supplied.)

The statement is not called for. The Court invites counsel's attention to the admonition in Guerrero
vs. Villamor; 22 thus:

(L)awyers . . . should bear in mind their basic duty "to observe and maintain the respect due to the
courts of justice and judicial officers and . . . (to) insist on similar conduct by others." This respectful
attitude towards the court is to be observed, "not for the sake of the temporary incumbent of the
judicial office, but for the maintenance of its supreme importance." And it is through a scrupulous
preference for respectful language that a lawyer best demonstrates his observance of the respect
due to the courts and judicial officers . . . 23

The virtues of humility and of respect and concern for others must still live on even in an age of
materialism.

WHEREFORE, the questioned decisions of the appellate court and the lower court are set aside
without prejudice to the appropriate legal recourse by private respondent as may still be warranted
as an unsecured creditor. No costs.

Atty. Francisco R. Sotto, counsel for petitioners, is admonished to be circumspect in dealing with the
courts.

SO ORDERED.

Kapunan and Hermosisima, Jr., JJ., concur.

Padilla, J., took no part.

Bellosillo, J., ic on leave.

Herrera vs. Petrophil Corporation, No. L-48349, 146 SCRA 385 , December 29, 1986

G.R. No. L-48349 December 29, 1986

FRANCISCO HERRERA, plaintiff-appellant,

vs.
PETROPHIL CORPORATION, defendant-appellee.

Paterno R. Canlas Law Offices for plaintiff-appellant.

CRUZ, J.:

This is an appeal by the plaintiff-appellant from a decision rendered by the then Court of First
Instance of Rizal on a pure question of law. 1

The judgment appealed from was rendered on the pleadings, the parties having agreed during the
pretrial conference on the factual antecedents.

The facts are as follows: On December 5, 1969, the plaintiff-appellant and ESSO Standard Eastern.
Inc., (later substituted by Petrophil Corporation) entered into a "Lease Agreement" whereby the
former leased to the latter a portion of his property for a period of twenty (20) years from said date,
subject inter alia to the following conditions:

3. Rental: The LESSEE shall pay the LESSOR a rental of Pl.40 sqm. per month on 400 sqm. and are to
be expropriated later on (sic) or P560 per month and Fl.40 per sqm. per month on 1,693 sqm. or
P2,370.21 per month or a total of P2,930.20 per month 2,093 sqm. more or less, payable yearly in
advance within the 1st twenty days of each year; provided, a financial aid in the sum of P15,000 to
clear the leased premises of existing improvements thereon is paid in this manner; P10,000 upon
execution of this lease and P5,000 upon delivery of leased premises free and clear of improvements
thereon within 30 days from the date of execution of this agreement. The portion on the side of the
leased premises with an area of 365 sqrm. more or less, will be occupied by LESSEE without rental
during the lifetime of this lease. PROVIDED FINALLY, that the Lessor is paid 8 years advance rental
based on P2,930.70 per month discounted at 12% interest per annum or a total net amount of
P130,288.47 before registration of lease. Leased premises shall be delivered within 30 days after 1st
partial payment of financial aid. 2

On December 31, 1969, pursuant to the said contract, the defendant-appellee paid to the plaintfff-
appellant advance rentals for the first eight years, subtracting therefrom the amount of
P101,010.73, the amount it computed as constituting the interest or discount for the first eight
years, in the total sum P180,288.47. On August 20, 1970, the defendant-appellee, explaining that
there had been a mistake in computation, paid to the appellant the additional sum of P2,182.70,
thereby reducing the deducted amount to only P98,828.03. 3

On October 14, 1974, the plaintiff-appellant sued the defendant-appellee for the sum of P98,828.03,
with interest, claiming this had been illegally deducted from him in violation of the Usury Law. 4 He
also prayed for moral damages and attorney's fees. In its answer, the defendant-appellee admitted
the factual allegations of the complaint but argued that the amount deducted was not usurious
interest but a given to it for paying the rentals in advance for eight years. 5 Judgment on the
pleadings was rendered for the defendant. 6

Plaintiff-appellant now prays for a reversal of that judgment, insisting that the lower court erred in
the computation of the interest collected out of the rentals paid for the first eight years; that such
interest was excessive and violative of the Usury Law; and that he had neither agreed to nor
accepted the defendant-appellant's computation of the total amount to be deducted for the eight
years advance rentals. 7

The thrust of the plaintiff-appellant's position is set forth in paragraph 6 of his complaint, which
read:

6. The interest collected by defendant out of the rentals for the first eight years was excessive and
beyond that allowable by law, because the total interest on the said amount is only P33,755.90 at
P4,219.4880 per yearly rental; and considering that the interest should be computed excluding the
first year rental because at the time the amount of P281, 199.20 was paid it was already due under
the lease contract hence no interest should be collected from the rental for the first year, the
amount of P29,536.42 only as the total interest should have been deducted by defendant from the
sum of P281,299.20.

The defendant maintains that the correct amount of the discount is P98,828.03 and that the same is
not excessive and above that allowed by law.

As its title plainly indicates, the contract between the parties is one of lease and not of loan. It is
clearly denominated a "LEASE AGREEMENT." Nowhere in the contract is there any showing that the
parties intended a loan rather than a lease. The provision for the payment of rentals in advance
cannot be construed as a repayment of a loan because there was no grant or forbearance of money
as to constitute an indebtedness on the part of the lessor. On the contrary, the defendant-appellee
was discharging its obligation in advance by paying the eight years rentals, and it was for this
advance payment that it was getting a rebate or discount.

The provision for a discount is not unusual in lease contracts. As to its validity, it is settled that the
parties may establish such stipulations, clauses, terms and condition as they may want to include;
and as long as such agreements are not contrary to law, morals, good customs, public policy or
public order, they shall have the force of law between them. 8

There is no usury in this case because no money was given by the defendant-appellee to the
plaintiff-appellant, nor did it allow him to use its money already in his possession. 9There was neither
loan nor forbearance but a mere discount which the plaintiff-appellant allowed the defendant-
appellee to deduct from the total payments because they were being made in advance for eight
years. The discount was in effect a reduction of the rentals which the lessor had the right to
determine, and any reduction thereof, by any amount, would not contravene the Usury Law.

The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on
usury. 10
To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be
exacted for the use of the money in excess of and in addition to interest allowed by law." 11

It has been held that the elements of usury are (1) a loan, express or implied; (2) an understanding
between the parties that the money lent shall or may be returned; that for such loan a greater rate
or interest that is allowed by law shall be paid, or agreed to be paid, as the case may be; and (4) a
corrupt intent to take more than the legal rate for the use of money loaned. Unless these four things
concur in every transaction, it is safe to affirm that no case of usury can be declared. 12

Concerning the computation of the deductible discount, the trial court declared:

As above-quoted, the 'Lease Agreement' expressly provides that the lessee (defendant) shag pay the
lessor (plaintiff) eight (8) years in advance rentals based on P2,930.20 per month discounted at 12%
interest per annum. Thus, the total rental for one-year period is P35,162.40 (P2,930.20 multiplied by
12 months) and that the interest therefrom is P4,219.4880 (P35,162.40 multiplied by 12%). So,
therefore, the total interest for the first eight (8) years should be only P33,755.90 (P4,129.4880
multiplied by eight (8) years and not P98,828.03 as the defendant claimed it to be.

The afore-quoted manner of computation made by plaintiff is patently erroneous. It is most

seriously misleading. He just computed the annual discount to be at P4,129.4880 and then simply
multiplied it by eight (8) years. He did not take into consideration the naked fact that the rentals due
on the eight year were paid in advance by seven (7) years, the rentals due on the seventh year were
paid in advance by six (6) years, those due on the sixth year by five (5) years, those due on the fifth
year by four (4) years, those due on the fourth year by three (3) years, those due on the third year by
two (2) years, and those due on the second year by one (1) year, so much so that the total number
of years by which the annual rental of P4,129.4880 was paid in advance is twenty-eight (28),
resulting in a total amount of P118,145.44 (P4,129.48 multiplied by 28 years) as the discount.
However, defendant was most fair to plaintiff. It did not simply multiply the annual rental discount
by 28 years. It computed the total discount with the principal diminishing month to month as shown
by Annex 'A' of its memorandum. This is why the total discount amount to only P 8,828.03.

The allegation of plaintiff that defendant made the computation in a compounded manner is
erroneous. Also after making its own computations and after examining closely defendant's Annex
'A' of its memorandum, the court finds that defendant did not charge 12% discount on the rentals
due for the first year so much so that the computation conforms with the provision of the Lease
Agreement to the effect that the rentals shall be 'payable yearly in advance within the 1st 20 days of
each year. '

We do not agree. The above computation appears to be too much technical mumbo-jumbo and
could not have been the intention of the parties to the transaction. Had it been so, then it should
have been clearly stipulated in the contract. Contracts should be interpreted according to their
literal meaning and should not be interpreted beyond their obvious intendment. 13

The plaintfff-appellant simply understood that for every year of advance payment there would be a
deduction of 12% and this amount would be the same for each of the eight years. There is no
showing that the intricate computation applied by the trial court was explained to him by the
defendant-appellee or that he knowingly accepted it.

The lower court, following the defendant-appellee's formula, declared that the plaintiff-appellant
had actually agreed to a 12% reduction for advance rentals for all of twenty eight years. That is
absurd. It is not normal for a person to agree to a reduction corresponding to twenty eight years
advance rentals when all he is receiving in advance rentals is for only eight years.

The deduction shall be for only eight years because that was plainly what the parties intended at the
time they signed the lease agreement. "Simplistic" it may be, as the Solicitor General describes it,
but that is how the lessor understood the arrangement. In fact, the Court will reject his subsequent
modification that the interest should be limited to only seven years because the first year rental was
not being paid in advance. The agreement was for a uniform deduction for the advance rentals for
each of the eightyears, and neither of the parties can deviate from it now.

On the annual rental of P35,168.40, the deducted 12% discount was P4,220.21; and for eight years,
the total rental was P281,347.20 from which was deducted the total discount of P33,761.68, leaving
a difference of P247,585.52. Subtracting from this amount, the sum of P182,471.17 already paid will
leave a balance of P65,114.35 still due the plaintiff-appellant.

The above computation is based on the more reasonable interpretation of the contract as a
whole rather on the single stipulation invoked by the respondent for the flat reduction of
P130,288.47.

WHEREFORE, the decision of the trial court is hereby modified, and the defendant-appellee
Petrophil Corporation is ordered to pay plaintiff-appellant the amount of Sixty Five Thousand One
Hundred Fourteen pesos and Thirty-Five Centavos (P65,114.35), with interest at the legal rate until
fully paid, plus Ten Thousand Pesos (P10,000.00) as attorney's fees. Costs against the defendant-
appellee.

SO ORDERED.

Yap (Chairman), Narvasa, Melencio-Herrera and Feliciano, JJ., concur.

[G.R. No. 133632. February 15, 2002]

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

DECISION

QUISUMBING, J.:

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

The trial court had held that private respondents were not in default in the payment of their
monthly amortization, hence, the extrajudicial foreclosure conducted by BPIIC was premature and
made in bad faith. It awarded private respondents the amount ofP300,000 for moral
damages, P50,000 for exemplary damages, and P50,000 for attorney’s fees and expenses for
litigation. It likewise dismissed the foreclosure suit for being premature.

The facts are as follows:

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of petitioner BPIIC, for the construction of a
house on his lot in New Alabang Village, Muntinlupa. Said house and lot were mortgaged to AIDC to
secure the loan. Sometime in 1980, Roa sold the house and lot to private respondents ALS and
Antonio Litonjua for P850,000. They paid P350,000 in cash and assumed the P500,000 balance of
Roa’s indebtedness with AIDC. The latter, however, was not willing to extend the old interest rate to
private respondents and proposed to grant them a new loan of P500,000 to be applied to Roa’s debt
and secured by the same property, at an interest rate of 20% per annum and service fee of 1% per
annum on the outstanding principal balance payable within ten years in equal monthly amortization
of P9,996.58 and penalty interest at the rate of 21% per annum per day from the date the
amortization became due and payable.

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

On August 13, 1982, ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum
of P190,601.35. This reduced Roa’s principal balance to P457,204.90 which, in turn, was liquidated
when BPIIC applied thereto the proceeds of private respondents’ loan of P500,000.

On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what was
left of their loan after full payment of Roa’s loan.
In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground
that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984,
amounted to Four Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos
(P475,585.31). A notice of sheriff’s sale was published on August 13, 1984.

On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against BPIIC. They alleged, among
others, that they were not in arrears in their payment, but in fact made an overpayment as of June
30, 1984. They maintained that they should not be made to pay amortization before the actual
release of the P500,000 loan in August and September 1982. Further, out of the P500,000 loan, only
the total amount of P464,351.77 was released to private respondents. Hence, applying the effects of
legal compensation, the balance of P35,648.23 should be applied to the initial monthly amortization
for the loan.

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

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

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

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

a) P300,000.00 for and as moral damages;

b) P50,000.00 as and for exemplary damages;

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

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

Costs against BPI.

SO ORDERED.[2]

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

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

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

SO ORDERED.[3]

In its decision, the Court of Appeals reasoned that a simple loan is perfected only upon the delivery
of the object of the contract. The contract of loan between BPIIC and ALS & Litonjua was perfected
only on September 13, 1982, the date when BPIIC released the purported balance of the P500,000
loan after deducting therefrom the value of Roa’s indebtedness. Thus, payment of the monthly
amortization should commence only a month after the said date, as can be inferred from the
stipulations in the contract. This, despite the express agreement of the parties that payment shall
commence on May 1, 1981. From October 1982 to June 1984, the total amortization due was
only P194,960.43. Evidence showed that private respondents had an overpayment, because as of
June 1984, they already paid a total amount of P201,791.96. Therefore, there was no basis for BPIIC
to extrajudicially foreclose the mortgage and cause the publication in newspapers concerning
private respondents’ delinquency in the payment of their loan. This fact constituted sufficient
ground for moral damages in favor of private respondents.

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

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

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

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

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

Petitioner also argues that while the documents showed that the loan was released only on August
1982, the loan was actually released on March 31, 1981, when BPIIC issued a cancellation of
mortgage of Frank Roa’s loan. This finds support in the registration on March 31, 1981 of the Deed
of Absolute Sale executed by Roa in favor of ALS, transferring the title of the property to ALS, and
ALS executing the Mortgage Deed in favor of BPIIC. Moreover, petitioner claims, the delay in the
release of the loan should be attributed to private respondents. As BPIIC only agreed to extend
a P500,000 loan, private respondents were required to reduce Frank Roa’s loan below said
amount. According to petitioner, private respondents were only able to do so in August 1982.

In their comment, private respondents assert that based on Article 1934 of the Civil Code,[4] a simple
loan is perfected upon the delivery of the object of the contract, hence a real contract. In this case,
even though the loan contract was signed on March 31, 1981, it was perfected only on September
13, 1982, when the full loan was released to private respondents. They submit that petitioner
misread Bonnevie. To give meaning to Article 1934, according to private
respondents, Bonnevie must be construed to mean that the contract to extend the loan was
perfected on March 31, 1981 but the contract of loan itself was only perfected upon the delivery of
the full loan to private respondents on September 13, 1982.
Private respondents further maintain that even granting, arguendo, that the loan contract was
perfected on March 31, 1981, and their payment did not start a month thereafter, still no default
took place. According to private respondents, a perfected loan agreement imposes reciprocal
obligations, where the obligation or promise of each party is the consideration of the other party. In
this case, the consideration for BPIIC in entering into the loan contract is the promise of private
respondents to pay the monthly amortization. For the latter, it is the promise of BPIIC to deliver the
money. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. Therefore, private
respondents conclude, they did not incur in delay when they did not commence paying the monthly
amortization on May 1, 1981, as it was only on September 13, 1982 when petitioner fully complied
with its obligation under the loan contract.

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

In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines, 44 SCRA 445, petitioner
applied for a loan of P500,000 with respondent bank. The latter approved the application through a
board resolution. Thereafter, the corresponding mortgage was executed and registered. However,
because of acts attributable to petitioner, the loan was not released. Later, petitioner instituted an
action for damages. We recognized in this case, a perfected consensual contract which under normal
circumstances could have made the bank liable for not releasing the loan. However, since the fault
was attributable to petitioner therein, the court did not award it damages.

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

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

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

Other points raised by petitioner in connection with the first issue, such as the date of actual release
of the loan and whether private respondents were the cause of the delay in the release of the loan,
are factual. Since petitioner has not shown that the instant case is one of the exceptions to the basic
rule that only questions of law can be raised in a petition for review under Rule 45 of the Rules of
Court,[10] factual matters need not tarry us now. On these points we are bound by the findings of the
appellate and trial courts.

On the second issue, petitioner claims that it should not be held liable for moral and exemplary
damages for it did not act maliciously when it initiated the foreclosure proceedings. It merely
exercised its right under the mortgage contract because private respondents were irregular in their
monthly amortization. It invoked our ruling in Social Security System vs. Court of Appeals, 120 SCRA
707, where we said:

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

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

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

However, in our view, BPIIC was negligent in relying merely on the entries found in the deed of
mortgage, without checking and correspondingly adjusting its records on the amount actually
released to private respondents and the date when it was released. Such negligence resulted in
damage to private respondents, for which an award of nominal damages should be given in
recognition of their rights which were violated by BPIIC.[12] For this purpose, the amount of P25,000
is sufficient.

Lastly, as in SSS where we awarded attorney’s fees because private respondents were compelled to
litigate, we sustain the award of P50,000 in favor of private respondents as attorney’s fees.
WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals and its resolution
dated April 21, 1998, are AFFIRMED WITH MODIFICATION as to the award of damages. The award of
moral and exemplary damages in favor of private respondents is DELETED, but the award to them of
attorney’s fees in the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay
private respondents P25,000 as nominal damages. Costs against petitioner.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

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

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,

vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents.

Valdez, Ereso, Polido & Associates for petitioner.

Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner.

Jaime G. de Leon for the Heirs of Egmidio Octaviano.

Cotabato Law Office for the Heirs of Juan Valdez.

GANCAYCO, J.:

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

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

WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of the
Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan
Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano
(Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or damages is
hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo)

Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's
conclusions that the Decision of the Court of Appeals, dated May 4,1977 in 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. B—B-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. 2

The alleged errors committed by respondent Court of Appeals according to petitioner are as follows:

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

2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY
PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED;
3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM VALDEZ AND
OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS WERE VALDEZ AND
OCTAVIANO;

4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN

POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER;

5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE
PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906;

6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A
PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR
ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;

7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830 WAS
AFFIRMED BY THE SUPREME COURT;

8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF
LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN POSSESSION
OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;

9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS
BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE;

10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT
RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND
CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3

The petition is bereft of merit.

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

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

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

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.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

Republic vs. Bagtas, No. L-17474, 6 SCRA 262, October 25, 1962

G.R. No. L-17474 October 25, 1962

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

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

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

Office of the Solicitor General for plaintiff-appellee.

PADILLA, J.:

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

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

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

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

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

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

It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late defendant,
returned the Sindhi and Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station,
Bureau of Animal Industry, Bayombong, Nueva Vizcaya, as evidenced by a memorandum receipt
signed by the latter (Exhibit 2). That is why in its objection of 31 January 1959 to the appellant's
motion to quash the writ of execution the appellee prays "that another writ of execution in the sum
of P859.53 be issued against the estate of defendant deceased Jose V. Bagtas." She cannot be held
liable for the two bulls which already had been returned to and received by the appellee.

The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk in
November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan, where
the animal was kept, and that as such death was due to force majeureshe 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.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala and
Makalintal, JJ., concur.
Barrera, J., concurs in the result.
Republic vs. Court of Appeals, No. L-46145, 146 SCRA 15 , November 26, 1986

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

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

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

Pelaez, Jalondoni, Adriano and Associates for respondents.

PARAS, J.:p

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

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

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

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

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

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

Petitioner now comes to Us with the following:

ASSIGNMENT OF ERRORS:

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

Feria (Chairman), Alampay and Feliciano, * JJ., concur.

Gutierrez, Jr., J., concurs in the results.

Fernan J., took no part.

Mina vs. Pascual., No. 8321, 25 Phil. 540 , October 14, 1913

G.R. No. L-8321 October 14, 1913

ALEJANDRA MINA, ET AL., plaintiffs-appellants,

vs.
RUPERTA PASCUAL, ET AL., defendants-appellees.

N. Segundo for appellants.

Iñigo Bitanga for appellees.

ARELLANO, C.J.:

Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired during
his lifetime, on March 12, 1874, a lot in the center of the town of Laoag, the capital of the Province
of Ilocos Norte, the property having been awarded to him through its purchase at a public auction
held by the alcalde mayor of that province. The lot has a frontage of 120 meters and a depth of 15.

Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of
the said lot, embracing 14 meters of its frontage by 11 meters of its depth.

Francisco Fontanilla, the former owner of the lot, being dead, the herein plaintiffs, Alejandro
Mina, et al., were recognized without discussion as his heirs.

Andres Fontanilla, the former owner of the warehouse, also having died, the children of
Ruperta Pascual were recognized likes without discussion, though it is not said how, and
consequently are entitled to the said building, or rather, as Ruperta Pascual herself stated, to only
six-sevenths of one-half of it, the other half belonging, as it appears, to the plaintiffs themselves, and
the remaining one-seventh of the first one-half to the children of one of the plaintiffs, Elena de
Villanueva. The fact is that the plaintiffs and the defendants are virtually, to all appearance, the
owners of the warehouse; while the plaintiffs are undoubtedly, the owners of the part of the lot
occupied by that building, as well as of the remainder thereof.

This was the state of affairs, when, on May 6, 1909, Ruperta Pascual, as the guardian of her
minor children, the herein defendants, petitioned the Curt of First Instance of Ilocos Norte for
authorization to sell "the six-sevenths of the one-half of the warehouse, of 14 by 11 meters, together
with its lot." The plaintiffs — that is Alejandra Mina, et al. — opposed the petition of Ruperta Pascual
for the reason that the latter had included therein the lot occupied by the warehouse, which they
claimed was their exclusive property. All this action was taken in a special proceeding in
re guardianship.

The plaintiffs did more than oppose Pascual's petition; they requested the court, through
motion, to decide the question of the ownership of the lot before it pass upon the petition for the
sale of the warehouse. But the court before determining the matter of the ownership of the lot
occupied by the warehouse, ordered the sale of this building, saying:
 While the trial continues with respect to the ownership of the lot, the court orders the sale at
public auction of the said warehouse and of the lot on which it is built, with the present boundaries
of the land and condition of the building, at a price of not less than P2,890 Philippine currency . . . .

So, the warehouse, together with the lot on which it stands, was sold to Cu Joco, the other
defendant in this case, for the price mentioned.

The plaintiffs insisted upon a decision of the question of the ownership of the lot, and the court
decided it by holding that this land belonged to the owner of the warehouse which had been built
thereon thirty years before.

The plaintiffs appealed and this court reversed the judgment of the lower court and held that
the appellants were the owners of the lot in question. 1

When the judgment became final and executory, a writ of execution issued and the plaintiffs
were given possession of the lot; but soon thereafter the trial court annulled this possession for the
reason that it affected Cu Joco, who had not been a party to the suit in which that writ was served.

It was then that the plaintiffs commenced the present action for the purpose of having the sale
of the said lot declared null and void and of no force and effect.

An agreement was had ad to the facts, the ninth paragraph of which is as follows:

9. That the herein plaintiffs excepted to the judgment and appealed therefrom to the Supreme
Court which found for them by holding that they are the owners of the lot in question, although
there existed and still exists a commodatum by virtue of which the guardianship (meaning
the defendants) had and has the use, and the plaintiffs the ownership, of the property, with no
finding concerning the decree of the lower court that ordered the sale.

The obvious purport of the cause "although there existed and still exists a commodatum," etc.,
appears to be that it is a part of the decision of the Supreme Court and that, while finding the
plaintiffs to be the owners of the lot, we recognized in principle the existence of a commodatum
under which the defendants held the lot. Nothing could be more inexact. Possibly, also, the meaning
of that clause is that, notwithstanding the finding made by the Supreme Court that the plaintiffs
were the owners, these former and the defendants agree that there existed, and still exists, a
commodatum, etc. But such an agreement would not affect the truth of the contents of the decision
of this court, and the opinions held by the litigants in regard to this point could have no bearing
whatever on the present decision.

Nor did the decree of the lower court that ordered the sale have the least influence in our
previous decision to require our making any finding in regard thereto, for, with or without that
decree, the Supreme Court had to decide the ownership of the lot consistently with its titles and not
in accordance with the judicial acts or proceedings had prior to the setting up of the issue in respect
to the ownership of the property that was the subject of the judicial decree.

What is essentially pertinent to the case is the fact that the defendant agree that the plaintiffs
have the ownership, and they themselves only the use, of the said lot.
 On this premise, the nullity of the sale of the lot is in all respects quite evident, whatsoever be
the manner in which the sale was effected, whether judicially or extrajudicially.

He who has only the use of a thing cannot validly sell the thing itself. The effect of the sale
being a transfer of the ownership of the thing, it is evident that he who has only the mere use of the
thing cannot transfer its ownership. The sale of a thing effected by one who is not its owner is null
and void. The defendants never were the owners of the lot sold. The sale of it by them is necessarily
null and void. On cannot convey to another what he has never had himself.

The returns of the auction contain the following statements:

I, Ruperta Pascual, the guardian of the minors, etc., by virtue of the authorization conferred
upon me on the 31st of July, 1909, by the Court of First Instance of Ilocos Norte, proceeded with the
sale at public auction of the six-sevenths part of the one-half of the warehouse constructed of rubble
stone, etc.

Whereas I, Ruperta Pascual, the guardian of the minors, etc., sold at public auction all the land
and all the rights title, interest, and ownership in the said property to Cu Joco, who was the highest
bidder, etc.

Therefore, . . . I cede and deliver forever to the said purchaser, Cu Joco, his heirs and assigns,
all the interest, ownership and inheritance rights and others that, as the guardian of the said minors,
I have and may have in the said property, etc.

The purchaser could not acquire anything more than the interest that might be held by a
person to whom realty in possession of the vendor might be sold, for at a judicial auction nothing
else is disposed of. What the minor children of Ruperta Pascual had in their possession was the
ownership of the six-sevenths part of one-half of the warehouse and the use of the lot occupied by
his building. This, and nothing more, could the Chinaman Cu Joco acquire at that sale: not the
ownership of the lot; neither the other half, nor the remaining one-seventh of the said first half, of
the warehouse. Consequently, the sale made to him of this one-seventh of one-half and the entire
other half of the building was null and void, and likewise with still more reason the sale of the lot the
building occupies.

The purchaser could and should have known what it was that was offered for sale and what it
was that he purchased. There is nothing that can justify the acquisition by the purchaser of the
warehouse of the ownership of the lot that this building occupies, since the minors represented by
Ruperta Pascual never were the owners of the said lot, nor were they ever considered to be such.

The trial court, in the judgment rendered, held that there were no grounds for the requested
annulment of the sale, and that the plaintiffs were entitled to the P600 deposited with the clerk of
the court as the value of the lot in question. The defendants, Ruperta Pascual and the Chinaman Cu
Joco, were absolved from the complaint, without express finding as to costs.

The plaintiffs cannot be obliged to acquiesce in or allow the sale made and be compelled to
accept the price set on the lot by expert appraisers, not even though the plaintiffs be considered as
coowner of the warehouse. It would be much indeed that, on the ground of coownership, they
should have to abide by and tolerate the sale of the said building, which point this court does not
decide as it is not a question submitted to us for decision, but, as regards the sale of the lot, it is in
all respects impossible to hold that the plaintiffs must abide by it and tolerate, it, and this conclusion
is based on the fact that they did not give their consent (art. 1261, Civil Code), and only the
contracting parties who have given it are obliged to comply (art. 1091, idem).

The sole purpose of the action in the beginning was to obtain an annulment of the sale of the
lot; but subsequently the plaintiffs, through motion, asked for an amendment by their complaint in
the sense that the action should be deemed to be one for the recovery of possession of a lot and for
the annulment of its sale. The plaintiff's petition was opposed by the defendant's attorney, but was
allowed by the court; therefore the complaint seeks, after the judicial annulment of the sale of the
lot, to have the defendants sentenced immediately to deliver the same to the plaintiffs.

Such a finding appears to be in harmony with the decision rendered by the Supreme Court in
previous suit, wherein it was held that the ownership of the lot lay in the plaintiffs, and for this
reason steps were taken to give possession thereof to the defendants; but, as the purchaser Cu Joco
was not a party to that suit, the present action is strictly one for recover against Cu Joco to compel
him, once the sale has been annulled, to deliver the lot to its lawful owners, the plaintiffs.

As respects this action for recovery, this Supreme Court finds:

1. That it is a fact admitted by the litigating parties, both in this and in the previous suit, that Andres
Fontanilla, the defendants' predecessor in interest, erected the warehouse on the lot, some thirty
years ago, with the explicit consent of his brother Francisco Fontanilla, the plaintiff's predecessor in
interest.

2. That it also appears to be an admitted fact that the plaintiffs and the defendants are the coowners
of the warehouse.

3. That it is a fact explicitly admitted in the agreement, that neither Andres Fontanilla nor his
successors paid any consideration or price whatever for the use of the lot occupied by the said
building; whence it is, perhaps, that both parties have denominated that use a commodatum.

Upon the premise of these facts, or even merely upon that of the first of them, the sentencing
of the defendants to deliver the lot to the plaintiffs does not follow as a necessary corollary of the
judicial declaration of ownership made in the previous suit, nor of that of the nullity of the sale of
the lot, made in the present case.

The defendants do not hold lawful possession of the lot in question.1awphil.net

But, although both litigating parties may have agreed in their idea of the commodatum, on
account of its not being, as indeed it is not, a question of fact but of law, yet that denomination
given by them to the use of the lot granted by Francisco Fontanilla to his brother, Andres Fontanilla,
is not acceptable. Contracts are not to be interpreted in conformity with the name that the parties
thereto agree to give them, but must be construed, duly considering their constitutive elements, as
they are defined and denominated by law.
 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 the certain period and return it to the former, in which case
it is called commodatum . . . (art. 1740, Civil Code).

It is, therefore, an essential feature of the commodatum that the use of the thing belonging to
another shall for a certain period. Francisco Fontanilla did not fix any definite period or time during
which Andres Fontanilla could have the use of the lot whereon the latter was to erect a stone
warehouse of considerable value, and so it is that for the past thirty years of the lot has been used
by both Andres and his successors in interest. The present contention of the plaintiffs that Cu Joco,
now in possession of the lot, should pay rent for it at the rate of P5 a month, would destroy the
theory of the commodatum sustained by them, since, according to the second paragraph of the
aforecited article 1740, "commodatum is essentially gratuitous," and, if what the plaintiffs
themselves aver on page 7 of their brief is to be believed, it never entered Francisco's mind to limit
the period during which his brother Andres was to have the use of the lot, because he expected that
the warehouse would eventually fall into the hands of his son, Fructuoso Fontanilla, called the
adopted son of Andres, which did not come to pass for the reason that Fructuoso died before his
uncle Andres. With that expectation in view, it appears more likely that Francisco intended to allow
his brother Andres a surface right; but this right supposes the payment of an annual rent, and
Andres had the gratuitous use of the lot.

Hence, as the facts aforestated only show that a building was erected on another's ground, the
question should be decided in accordance with the statutes that, thirty years ago, governed
accessions to real estate, and which were Laws 41 and 42, title 28, of the third Partida, nearly
identical with the provisions of articles 361 and 362 of the Civil Code. So, then, pursuant to article
361, the owner of the land on which a building is erected in good faith has a right to appropriate
such edifice to himself, after payment of the indemnity prescribed in articles 453 and 454, or to
oblige the builder to pay him the value of the land. Such, and no other, is the right to which the
plaintiff are entitled.

For the foregoing reasons, it is only necessary to annul the sale of the said lot which was made
by Ruperta Pascual, in representation of her minor children, to Cu Joco, and to maintain the latter in
the use of the lot until the plaintiffs shall choose one or the other of the two rights granted them by
article 361 of the Civil Code.1awphil.net

The judgment appealed from is reversed and the sale of the lot in question is held to be null
and void and of no force or effect. No special finding is made as to the costs of both instances.

Torres, Johnson, Carson, Moreland and Trent, JJ., concur.

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

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

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

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

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

MAKALINTAL, J.:p

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

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

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

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

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

For construction of factory building P250,000.00

For payment of the balance of purchase

price of machinery and equipment 240,900.00

For working capital 9,100.00

T O T A L P500,000.00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

a) For the payment of the receipt for jute mill

machineries with the Prudential Bank &

Trust Company P250,000.00

(For immediate release)

b) For the purchase of materials and equip-

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

c) For raw materials and labor 67,586.09

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

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

2) P25,000.00 to be released upon arrival

of raw jute.

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

mill is ready to operate.

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

Dear Sirs:

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

With respect to our requirement that the Department of Agriculture and Natural Resources certify
that the raw materials needed are available in the immediate vicinity and that there is prospect of
increased production thereof to provide adequately the requirements of the factory, we wish to
reiterate that the basis of the original approval is to develop the manufacture of sacks on the basis
of the locally available raw materials. Your statement that you will have to rely on the importation of
jute and your request that we give you assurance that your company will be able to bring in
sufficient jute materials as may be necessary for the operation of your factory, would not be in line
with our principle in approving the loan.
With the foregoing letter the negotiations came to a standstill. Saura, Inc. did not pursue the matter
further. Instead, it requested RFC to cancel the mortgage, and so, on June 17, 1955 RFC executed the
corresponding deed of cancellation and delivered it to Ramon F. Saura himself as president of Saura,
Inc.

It appears that the cancellation was requested to make way for the registration of a mortgage
contract, executed on August 6, 1954, over the same property in favor of the Prudential Bank and
Trust Co., under which contract Saura, Inc. had up to December 31 of the same year within which to
pay its obligation on the trust receipt heretofore mentioned. It appears further that for failure to pay
the said obligation the Prudential Bank and Trust Co. sued Saura, Inc. on May 15, 1955.

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

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

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

ART. 1954. An accepted promise to deliver something, by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itself shall not be perferted until the
delivery of the object of the contract.

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

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

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

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

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

WHEREFORE, the judgment appealed from is reversed and the complaint dismissed, with costs
against the plaintiff-appellee.

Reyes, J.B.L., Actg. C.J., Zaldivar, Castro, Fernando, Teehankee, Barredo and Antonio, JJ., concur.

Makasiar, J., took no part.

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

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

vs.
BECK, defendant-appellee.

Mauricio Carlos for appellants.

Felipe Buencamino, Jr. for appellee.

IMPERIAL, J.:

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

The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar
street, No. 1175. On January 14, 1936, upon the novation of the contract of lease between the
plaintiff and the defendant, the former gratuitously granted to the latter the use of the furniture
described in the third paragraph of the stipulation of facts, subject to the condition that the
defendant would return them to the plaintiff upon the latter's demand. The plaintiff sold the
property to Maria Lopez and Rosario Lopez and on September 14, 1936, these three notified the
defendant of the conveyance, giving him sixty days to vacate the premises under one of the clauses
of the contract of lease. There after the plaintiff required the defendant to return all the furniture
transferred to him for them in the house where they were found. On November 5, 1936, the
defendant, through another person, wrote to the plaintiff reiterating that she may call for the
furniture in the ground floor of the house. On the 7th of the same month, the defendant wrote
another letter to the plaintiff informing her that he could not give up the three gas heaters and the
four electric lamps because he would use them until the 15th of the same month when the lease in
due to expire. The plaintiff refused to get the furniture in view of the fact that the defendant had
declined to make delivery of all of them. On November 15th, before vacating the house, the
defendant deposited with the Sheriff all the furniture belonging to the plaintiff and they are now on
deposit in the warehouse situated at No. 1521, Rizal Avenue, in the custody of the said sheriff.

In their seven assigned errors the plaintiffs contend that the trial court incorrectly applied the law: in
holding that they violated the contract by not calling for all the furniture on November 5, 1936,
when the defendant placed them at their disposal; in not ordering the defendant to pay them the
value of the furniture in case they are not delivered; in holding that they should get all the furniture
from the Sheriff at their expenses; in ordering them to pay-half of the expenses claimed by the
Sheriff for the deposit of the furniture; in ruling that both parties should pay their respective legal
expenses or the costs; and in denying pay their respective legal expenses or the costs; and in denying
the motions for reconsideration and new trial. To dispose of the case, it is only necessary to decide
whether the defendant complied with his obligation to return the furniture upon the plaintiff's
demand; whether the latter is bound to bear the deposit fees thereof, and whether she is entitled to
the costs of litigation.lawphi1.net

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

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

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

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

The appealed judgment is modified and the defendant is ordered to return and deliver to the
plaintiff, in the residence to return and deliver to the plaintiff, in the residence or house of the latter,
all the furniture described in paragraph 3 of the stipulation of facts Exhibit A. The expenses which
may be occasioned by the delivery to and deposit of the furniture with the Sheriff shall be for the
account of the defendant. the defendant shall pay the costs in both instances. So ordered.

Avanceña, C.J., Villa-Real, Laurel, Concepcion and Moran, JJ., concur.

G.R. No. L-4150 February 10, 1910

FELIX DE LOS SANTOS, plaintiff-appelle,

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

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 ofpartida 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.

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

Carson, J., reserves his vote.
G.R. No. 126620 April 17, 2002

PRODUCERS BANK OF THE PHILIPPINES, petitioner,

vs.
HONORABLE COURT OF APPEALS, ASIA TRUST DEVELOPMENT BANK, RAINELDA A. ANDREWS,
SAMSON FLORES, ALFONSO LEONG, JR., RHODORA D. LANDRITO, JOSEPH CHUA, RAMON YU,
EDUARDO G. ESCOBAR, MILAGROS B. NAYVE, ELIZABETH C. GARCIA, ALBERTO LIMJOCO, SR.,
GLORIA E. MENPIN and ESPERANZA FLORENDO, respondents.

CARPIO, J.:

The Case

In this Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner
Producer’s Bank of the Philippines ("petitioner" for brevity) assails the September 19, 1996
Resolution1 of the Court of Appeals in CA-G.R. CV No. 50016 which dismissed petitioner’s appeal for
being filed out of time. The Court of Appeals decreed thus:

"WHEREFORE, finding the Motion to Dismiss Appeal to be meritorious, the same is granted. The
appeal is DISMISSED.

SO ORDERED."2

The Antecedent Facts

On March 29, 1988, petitioner through its former counsel, Atty. Antonio M. Pery, filed a Complaint
to recover the sum of P11,420,000.00 from Asia Trust Development Bank ("Asiatrust" for brevity)
and the Central Bank of the Philippines ("CBP" for brevity) before the Regional Trial Court of Makati,
Branch 147 ("RTC" for brevity). Thereafter, petitioner filed an amended complaint, impleading
additional defendants.3

Petitioner sought to recover the proceeds of several treasury bills amounting to P11,420,000.00.
According to petitioner, said proceeds were fraudulently credited to the demand deposit account of
Asiatrust with the CBP and withdrawn by Milagros B. Nayve, Elizabeth C. Garcia and Alberto Limjoco,
Sr.

It appears that petitioner owned several treasury bills. On the respective maturity dates of these
bills, petitioner caused these bills to be delivered to the CBP. The bills were initially received by
Manuel B. Ala, petitioner’s rediscounting clerk together with a letter of transmittal and a receipt for
the bills addressed to the CBP. Mr. Ala turned over the bills together with the accompanying
documents to Rogelio Carrera for delivery to the CBP. Alberto Limjoco, Sr., Elizabeth C. Garcia and
Milagros B. Nayve4 came into possession of these bills which they in turn delivered to Rainelda A.
Andrews and Rhodora B. Landrito5. Petitioner alleged that Andrews and Landrito failed to ascertain
the lawful ownership of the bills, and caused their transmittal and delivery to the CBP, through a
letter signed by Eduardo G. Escobar and Alfonso Leong, Jr..6 The proceeds of the bills were credited
to the account of Asiatrust which approved the manager’s check applications and facilitated
payment to the bearers of the bills. Petitioner discovered that the proceeds of the bills were not
credited to its demand deposit account with the CBP. Upon such discovery, petitioner informed the
CBP which furnished petitioner with a copy of the acknowledgment from Asiatrust of receipt of the
bills and that the proceeds were credited to the account of Asiatrust. Petitioner claimed that
Rainelda A. Andrews, Samson Flores, Alfonso Leong, Jr., Rhodora D. Landrito, Joseph Chua, Ramon
Yu and Eduardo G. Escobar were negligent in the performance of their duties and responsibilities as
officers of Asiatrust as they failed to exercise reasonable care and caution to determine the true
ownership of the bills before allowing the proceeds to be paid to Milagros B. Nayve, Elizabeth C.
Garcia and Alberto Limjoco, Sr. Petitioner sought to hold Asiatrust solidarily liable with the other
defendants for the payment of the value of the treasury bills and for damages. Subsequently, the
complaint was dismissed as against the CBP on motion of petitioner on the ground that the latter
had lifted petitioner’s conservatorship and allowed the return of the management and assets to
petitioner’s Board of Directors. The CBP’s lifting of the conservatorship was conditioned upon
petitioner’s dropping of all its cases pending against the CBP.

The defendants filed their respective Answers, after which the issues were joined and trial on the
merits ensued.

On August 30, 1993, the law firm of Quisumbing, Torres and Evangelista ("QTE" for brevity) entered
its appearance for petitioner in substitution of Atty. Antonio M. Pery.

Petitioner’s handling counsel, Atty. Alvin Agustin T. Ignacio ("Atty. Ignacio" for brevity) of QTE
arrived late during the hearing held on May 17, 1995. On motion of Asiatrust’s counsel, the RTC
issued an Order on the same day dismissing the case for lack of interest to prosecute.

On June 9, 1995, Atty. Ignacio filed a motion to reconsider the Order dated May 17, 1995, explaining
that his late arrival at the hearing was due to the unexpected heavy traffic at Roxas Boulevard in
front of Baclaran Church. He also offered his apologies to the RTC for his unintended tardiness. QTE
received a copy of the Order dated August 1, 1995 denying the motion for reconsideration on
August 11, 1995. At that time, Atty. Ignacio was indisposed for allegedly suffering from "fatigue and
stress". It was only on August 25, 1995 that Atty. Ignacio found out that the Order denying the
motion for reconsideration was received by the law firm on August 11, 1995. He filed a Notice of
Appeal on August 25, 1995.

On November 13, 1995, Asiatrust, et al. filed a Motion to Dismiss Appeal with the Court of Appeals.
On March 8, 1996, QTE filed its Comment to the Motion to Dismiss Appeal.

In the Resolution dated September 19, 1996, the Court of Appeals granted the motion to dismiss
petitioner’s appeal.

Ruling of the Court of Appeals

In granting the motion to dismiss appeal, the Court of Appeals held in part:

"xxx. We hold that the failure of plaintiff-appellant to file the Notice of Appeal on time was
inexcusable negligence. These are the reasons:

One. In paragraph 7.28 of the Comment (to the Motion to Dismiss), plaintiff-appellant states that –

"On 11 August 1995 at 3:00 pm., plaintiff-appellant received a copy of the Order dated 1 August
1995 denying its motion for reconsideration of the dismissed order."
Since, the last day for plaintiff-appellant to file the Notice of Appeal was August 12, 1995, why did it
not file the Notice of Appeal right away considering that its preparation and mailing could not take
two hours? If counsel for plaintiff-appellant did not take advantage of the two remaining office
hours on August 11, 1995, why did it not file the Notice of Appeal at anytime, the following day,
August 12? In failing to do that, the law firm counsel was guilty of gross and inexcusable negligence.

TWO. If the counsel for plaintiff-appellant did not know that the last day to file the Notice of Appeal
was on August 12, 1995, why did it not ask the handling lawyer about it? There was no impediment
to do that because the handling lawyer was not comatose. The counsel was inexcusably negligent for
failing to make that inquiry.

THREE. The handling lawyer knew that if the Motion for Reconsideration would be denied – as in fact
it was – he would have only a day after receipt of the order of denial to file a notice of appeal. Why
did he not forewarn his law firm about such fact so that even in his absence, the latter could file said
notice? Assuming that the handling lawyer was really sick, his ailment which was allegedly just
"fatigue and stress" was not at all serious much less incapacitating. In fact he was not even
hospitalized for he was just advised to rest for at least two weeks. With all the communication
facilities in Metro-Manila, there was no reason for said counsel – even if sick – not to have gotten in
touch with his law firm to check on the result of his Motion for Reconsideration. It was, therefore,
inexcusable negligence for him to have failed doing that which an ordinarily prudent lawyer would
have done.

The inexcusable negligence of plaintiff-appellant’s counsel is made more glaring by the fact that the
Notice of Appeal was late not only by 2 or 4 days but all of 13 days.1âwphi1.nêt

We are not unaware of the rule that technicality should not smother the right of a litigant to a day in
court. But the Supreme Court instructs us that strict adherence to reglementary periods fixed in the
Rules of Court is necessary to ensure the efficient and orderly disposition of cases (Panes v. Court of
Appeals, 120 SCRA 509). We cannot also close Our eyes to the rule that perfecting an appeal within
the period permitted by law is not only mandatory but jurisdictional and the failure to perfect the
appeal on time renders the judgment of the court final and executory. (Bank of America, Gerochi, Jr.
230 SCRA 9; Philippine Commercial International Bank v. Court of Appeals, 229 SCRA 560). Well
rooted is the principle that once a decision becomes final the appellate court is without jurisdiction
to entertain the appeal (Sumbillo v. IAC, 165 SCRA 232; Hensy Zoilo Llido v. Marquez, 166 SCRA 61)."

Hence, the instant petition.

The Issue

Petitioner now comes before us with the following assignment of error:

THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE ACTS OF PETITIONER’S
PREVIOUS COUNSEL, QUISUMBING, TORRES AND EVANGELISTA, SHOULD BIND THE PETITIONER,
DESPITE THE FINDINGS IN ITS RESOLUTION THAT THE LAW FIRM COUNSEL WAS GROSSLY AND
INEXCUSABLY NEGLIGENT.
The threshold issue in this petition for review on certiorari is whether the Court of Appeals erred in
dismissing an appeal that was filed 13 days late despite its own findings that petitioner’s counsel was
grossly negligent.

Petitioner argues that a client should not be bound by counsel’s gross and inexcusable negligence.
Petitioner admits that its handling counsel, Atty. Ignacio of QTE, committed two blunders: first, he
failed to arrive on time during one of the hearings allegedly due to the traffic at Roxas Boulevard in
front of Baclaran Church; second, he failed to file the notice of appeal within the reglementary
period due to "fatigue and stress". Petitioner further admits that Atty. Ignacio offered a "flimsy
excuse" for his tardiness and an "out of this world excuse" for his failure to file the notice of appeal
on time. Petitioner, however, submits that such gross negligence and mistake of counsel should not
bind the client in line with the case of Legarda vs. Court of Appeals.7 Petitioner enumerates the
similarities between the Legarda case and its own, as follows:

"First, like the petitioner in the Legarda case, petitioner herein was not negligent in choosing a
counsel to represent them in the case. The former engaged the services of former law school dean,
Dean Antonio Coronel, while the latter engaged the service of the well known and reputable law
firm, Quisumbing, Torres and Evangelista which is associated with Baker and McKenzie of the United
States, as counsels to their respective cases.

In fact, the diligence of petitioner can be shown by the fact that it even replaced it’s first counsel,
Atty. Antonio Pery in favor of Quisumbing, Torres and Evangelista, hoping that by hiring the services
of that law firm the case would be handled better and would have a better chance of winning.
Unfortunately, such hope was dampened by the gross negligence and blunders committed by the
law firm.

Second, just like in the case of Legarda, the previous counsel of the petitioner committed two
blunders. In the case of the former, counsel failed to file an answer in the trial court and failed to
timely appeal the case to the appellate courts, while in the latter case, counsel caused the dismissal
of the case by arriving late at the trial date and also by failing to timely perfect an appeal to the
Court of Appeals.

Third, in both cases the Court of Appeals has found that both counsels committed negligence. The
only difference would be that in the case of Legarda, the Court of Appeals only held that there was
only pure and simple negligence on the part of Dean Antonio Coronel, while in the case at bar, the
Court of Appeals found that there was gross and inexcusable negligence on the part of Quisumbing,
Torres and Evangelista Law Firm.

Thus, the Court of Appeals committed an error in stating that: "The plaintiff appellant has to bite the
bullet for it cannot shake itself of the inexcusable negligence of its counsel" (Alabanza. vs.
Intermediate Appellate Court, 204 SCRA 304), because of it’s own findings that there was a gross
and inexcusable negligence on the part of the previous counsel. The applicable decision of the
Supreme Court to the case at bar should be the case of Legarda vs. Court of Appeals. (195 SCRA
418)."

The Court’s Ruling

The petition is bereft of merit. We uphold the dismissal of the appeal by the Court of Appeals.
The general rule is that a client is bound by the acts, even mistakes, of his counsel in the realm of
procedural technique. The exception to this rule is when the negligence of counsel is so gross,
reckless and inexcusable that the client is deprived of his day in court. In which case, the remedy
then is to reopen the case and allow the party who was denied his day in court to adduce his
evidence.8 However, a thorough review of the instant case reveals that petitioner cannot seek refuge
or obtain reprieve under these principles.

Legarda case is not applicable

Petitioner’s reliance on the Legarda case which was promulgated on March 18, 1991 is clearly
misplaced. In said case, the Court declared that petitioner’s counsel, Atty. Antonio Coronel, a well-
known practicing lawyer and dean of a law school, committed not just ordinary or simple negligence,
but reckless and gross negligence which deprived his client of her property without due process of
law. According to the Legarda decision-

"xxx, the negligence of the then counsel for petitioner when he failed to file the proper motion to
dismiss or to draw a compromise agreement if it was true that they agreed on a settlement of the
case; or in simply filing an answer; and that after having been furnished a copy of the decision by the
court he failed to appeal therefrom or to file a petition for relief from the order declaring petitioner
in default."9

was so gross and inexcusable that it should not bind his client. The Court declared that the counsel’s
acts or omissions "consigned (the client) to penury" because "her lawyer appeared to have
abandoned her case not once but repeatedly." The Court noted that counsel’s "lack of devotion to
duty is so gross and palpable that this Court must come to the aid of his distraught client." Thus, the
Court held as null and void the decisions of the trial and appellate courts against Atty. Coronel’s
client and ordered, among other things, the reconveyance of the property in her favor.

However, the decision in said case was not yet final in 1991. The private respondent therein filed a
timely motion for reconsideration. In granting the motion for reconsideration, the Court en
banc held:

"Under the Gancayco ruling, the order of reconveyance was premised on the alleged gross
negligence of Legarda’s counsel which should not be allowed to bind her as she was deprived of her
property `without due process of law.’

It is, however, basic that as long as a party was given the opportunity to defend her interests in due
course, she cannot be said to have been denied due process of law, for this opportunity to be heard
is the very essence of due process. The chronology of events shows that the case took its regular
course in the trial and appellate courts but Legarda’s counsel failed to act as any ordinary counsel
should have acted, his negligence every step of the way amounting to "abandonment, " in the words
of the Gancayco decision. Yet, it cannot be denied that the proceedings which led to the filing of this
case were not attended by any irregularity. The judgment by default was valid, so was the ensuing
sale at public auction. If Cabrera was adjudged highest bidder in said auction sale, it was not through
any machination on his part. All of his actuations that led to the final registration of the title in his
name were aboveboard, untainted by any irregularity."

xxx
Neither Cathay nor Cabrera10 should be made to suffer for the gross negligence of Legarda’s counsel.
If she may be said to be "innocent" because she was ignorant of the acts of negligence of her
counsel, with more reason are respondents truly "innocent." As between two parties who may lose
due to the negligence or incompetence of the counsel of one, the party who was responsible for
making it happen should suffer the consequences. This reflects the basic common law maxim, so
succinctly stated by Justice J.B.L. Reyes, that ". . . (B)etween two innocent parties, the one who made
it possible for the wrong to be done should be the one to bear the resulting loss." In this case, it was
not respondents, but Legarda, who misjudged and hired the services of the lawyer who practically
abandoned her case and who continued to retain him even after his proven apathy and negligence.

The Gancayco decision makes much of the fact that Legarda is now "consigned to penury" and,
therefore, this Court "must come to the aid of the distraught client." It must be remembered that
this Court renders decisions, not on the basis of emotions but on its sound judgment, applying the
relevant, appropriate law. Much as it may pity Legarda, or any losing litigant for that matter, it
cannot play the role of a "knight in shining armor" coming to the aid of someone, who through her
weakness, ignorance or misjudgment may have been bested in a legal joust which complied with all
the rules of legal proceedings."

In sum, the court did not relieve the client from the consequences of her counsel’s negligence and
mistakes considering that she was given an opportunity to defend her interests in due course.
Certainly, it cannot be said that she was denied due process. Consequently, the Legarda case does
not support petitioner’s cause.

No Denial of Due Process

Contrary to petitioner’s stance, the Legarda case supports the view that petitioner was not denied
its day in court. The Constitution mandates that "(n)o person shall be deprived of life, liberty, or
property without due process of law x x x ."11 The right to due process of law has been interpreted to
mean as follows:

"The essence of due process is to be found in the reasonable opportunity to be heard and submit
any evidence one may have in support of one’s defense. `To be heard' does not mean only verbal
arguments in court; one may be heard also through pleadings. Where opportunity to be heard,
either through oral arguments or pleadings, is accorded, there is no denial of due
process."12 (Emphasis supplied)

Verily, so long as a party is given the opportunity to advocate her cause or defend her interest in due
course, it cannot be said that there was denial of due process. In petitioner’s case as in
the Legarda case, the chronology of events shows that the case took its regular course in the trial
court.

On December 8, 1992, petitioner presented its first witness, Mr. Manuel B. Ala, the Accounting Clerk
of its Accounting Department. He was cross-examined by CBP, Nayve and Garcia on February 10,
1993. On March 1, 1993, petitioner presented its second witness, Ms. Josie Fernandez, the Security
Custodian of its Treasury Bills. On July 5, 1993, petitioner presented its third witness, Atty. Leopoldo
Cotaco, head of its Department of Security and Internal Affairs. At this hearing, only counsels of
Nayve and Garcia were present. The counsels of CBP and Asiatrust were absent. On August 25, 1993,
the direct testimony of Atty. Leopoldo Cotaco was terminated. On August 30, 1993, QTE entered its
appearance in substitution of Atty. Antonio M. Pery. On September 8, 1993, QTE moved for the
postponement of the cross-examination of Atty. Cotaco since it had only recently entered its
appearance. On September 16, 1993, petitioner moved to dismiss the complaint against CBP on the
ground that the latter had lifted the conservatorship and allowed the return of the management and
assets to petitioner’s Board of Directors. The motion was granted in an Order dated September 28,
1993. The hearings on November 17 and 24, 1993 were postponed upon petitioner’s motion since
former counsel, Atty. Antonio M. Pery, refused to turn over the records and files of the case due to a
dispute over legal fees. The hearings were reset to February 21 and March 9 and 16, 1994. On
February 18, 1994, petitioner again moved that the hearing scheduled on February 21, 1994 be reset
for the same reason. The hearings on March 9 and 16, 1994 were likewise postponed due to former
counsel’s adamant refusal to turn over the files. The hearings were reset to May 18 and 25, 1994. By
May 18, 1994, petitioner’s former counsel still refused to turn over the files of the case, prompting
petitioner to request for another postponement. The hearings were reset to July 6, 20 and August
15, 1994. The hearing scheduled on July 6, 1994 was postponed on the ground that there was no
proof of service of the notice of hearing to counsels for the defendants. The hearing scheduled on
July 20, 1994 was postponed by Asiatrust on the ground that its counsel was not available for said
hearing. The hearings were reset to August 31 and September 19, 1994. The hearing scheduled on
August 15, 1994 was cancelled. The hearing on August 31, 1994 was reset to September 19, 1995
because there was no proof of service of the notice of hearing on counsels. The hearing on
September 19, 1994 was also reset to November 21, 1994 for lack of proof that the contending
counsels received the notice of hearing for said date. On November 16, 1994, Asiatrust filed an
urgent motion to postpone the hearing on November 21, 1994, due to unavailability of its counsel.
Consequently, the hearings were reset to January 30 and February 15, 1995. However, the hearing
on said dates were cancelled since the presiding judge was indisposed, and reset to May 17, 1995. As
mentioned earlier, petitioner’s handling lawyer, Atty. Ignacio of QTE arrived late during the hearing
on May 17, 1995 allegedly due to the unexpectedly heavy traffic on Roxas Boulevard in front of
Baclaran Church. On motion of Asiatrust’s counsel, the trial court issued the Order dismissing the
case for lack of interest to prosecute.

Upon said dismissal, petitioner’s counsel filed a timely motion for reconsideration. The same was
denied by the trial court. However, it must be emphasized that petitioner was not left without any
relief. Upon the denial thereof, the situation could have been easily remedied by filling a notice of
appeal within the reglementary period13considering that a dismissal for failure to prosecute is an
adjudication on the merits.14 As correctly pointed out by Asiatrust, all that is required is a singled-
paged, pro forma notice of appeal, the accomplishment of which does not require a high degree of
legal skill. Despite this, counsel failed to file its notice of appeal on time and the proffered excuse
that he was suffering from "stress and fatigue" while highly unacceptable, does not amount to gross,
palpable, pervasive and reckless negligence so as to deprive counsel’s client its day in court. As the
proceedings in the trial court all the way up to the appellate court would show, petitioner was not
deprived of due process.

Indeed, by failing to file its appeal within the reglementary period, it could not be successfully
argued that petitioner was deprived of its day in court.
Time and again it has been held that the right to appeal is not a natural right or a part of due
process, it is merely a statutory privilege, and may be exercised only in the manner and in
accordance with the provisions of the law.15The party who seeks to avail of the same must comply
with the requirements of the rules.16 Failing to do so, the right to appeal is lost.17

The Court has had several occasions to hold that "rules of procedure, especially those prescribing
the time within which certain acts must be done, have oft been held as absolutely indispensable to
the prevention of needless delays and to the orderly and speedy discharge of business. The reason
for rules of this nature is because the dispatch of business by courts would be impossible, and
intolerable delays would result, without rules governing practice. Such rules are a necessary incident
to the proper, efficient and orderly discharge of judicial functions. Thus, we have held that the
failure to perfect an appeal within the prescribed reglementary period is not a mere technicality, but
jurisdictional.18

Neither could petitioner plead leniency in the application of the rules considering that the period to
appeal is prescribed not only by the Rules of Court but also by statute, particularly Sec. 39 of Batas
Pambansa Blg. 129 which provides –

Sec. 39. Appeals. – The period for appeal from final orders, resolutions, awards, judgments, or
decisions of any court in all cases shall be fifteen (15) days counted from the notice of the final
order, resolution, award, judgment, or decision appealed from: Provided, however, That habeas
corpus, the period for appeal shall be forty-eight (48) hours from the notice of the judgment
appealed from x x x x

Clearly, the perfection of an appeal in the manner and within the period prescribed by law is not
only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering the
judgment final and executory. Public policy and sound practice demand that judgments of courts
should become final and irrevocable at some definite date fixed by law."19

Counsel for petitioner committed simple negligence

We also find that the negligence of the law firm engaged by the petitioner to litigate its cause
was not gross butsimple negligence. Petitioner capitalizes on the following "blunders" of the law firm
to establish gross negligence: (1) arriving late during the hearing on May 17, 1995 and (2) filing the
notice of appeal thirteen (13) days late. Tardiness is plain and simple negligence. On the other hand,
counsel’s failure to file the notice of appeal within the reglementary period did not deprive
petitioner of due process of law.1âwphi1.nêt

We also do not miss the fact that petitioners were represented by a law firm which meant that any
of its members could lawfully act as their counsel during the trial."20 As such, "[w]hen a client
employs the services of a law firm, he does not employ the services of the lawyer who is assigned to
personally handle the case. Rather, he employs the entire law firm. In the event that the counsel
appearing for the client resigns, the firm is bound to provide a replacement."21 Petitioner cannot
now complain of counsel’s errors. It has been held that "[l]itigants, represented by counsel, should
not expect that all they need to do is sit back, relax and await the outcome of their case. x x x22."
Especially in this case, where petitioner has a legal department to monitor its pending cases and to
liaise with its retained counsel. To agree with petitioner’s stance would enable every party to render
inutile any adverse order or decision through the simple expedient of alleging gross negligence on
the part of its counsel. The Court will not countenance such a farce which contradicts long-settled
doctrines of trial and procedure.23

Hence, there is no justifiable reason to exempt petitioner from the general rule that clients should
suffer the consequences of the negligence, mistake or lack of competence of the counsel whom they
themselves hired and had the full authority to fire at any time and replace with another even
without any justifiable reason.24

In sum, this is not a case where the negligence of counsel is one that is so gross, palpable, pervasive
and reckless which is the type of negligence that deprives a party of his or her day in court. For this
reason, the Court need no longer concern itself with the merits of petitioner’s causes of action nor
consider the propriety of the dismissal of the case by the trial court for lack of interest to prosecute.
The Court is bound by the trial court’s judgment which had become final and executory due to the
simple negligence of the petitioner’s counsel in allowing the reglementary period to lapse without
perfecting the appeal.

WHEREFORE, there being no reversible error committed by the Court of Appeals, the petition for
review on certiorari is DENIED and the assailed Resolution dated September 19, 1996 dismissing the
appeal is AFFIRMED.

SO ORDERED.

Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

Melo, J., Abroad, on official leave.
[G.R. No. 112485. August 9, 2001]

EMILIA MANZANO, petitioner, vs. MIGUEL PEREZ SR., LEONCIO PEREZ, MACARIO PEREZ,
FLORENCIO PEREZ, NESTOR PEREZ, MIGUEL PEREZ JR. and GLORIA PEREZ, respondents.

DECISION

PANGANIBAN, J.:

Courts decide cases on the basis of the evidence presented by the parties. In the assessment of the
facts, reason and logic are used. In civil cases, the party that presents a preponderance of
convincing evidence wins.

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
March 31, 1993 Decision[1] of the Court of Appeals (CA)[2] in CA-GR CV No. 32594. The dispositive
part of the Decision reads:

“WHEREFORE, the judgment appealed from is hereby REVERSED and another one is entered
dismissing plaintiff’s complaint.”

On the other hand, the Judgment[3] reversed by the CA ruled in this wise:

“WHEREFORE, premises considered, judgment is hereby rendered:

1) Declaring the two ‘Kasulatan ng Bilihang Tuluyan’ (Exh. ‘J’ & ‘K’) over the properties in question
void or simulated;

2) Declaring the two ‘Kasulatan ng Bilihang Tuluyan’ (Exh. ‘J’ & ‘K’) over the properties in question
rescinded;

3) Ordering the defendants Miguel Perez, Sr., Macario Perez, Leoncio Perez, Florencio Perez, Miguel
Perez, Jr., Nestor Perez and Gloria Perez to execute an Extra Judicial Partition with transfer over the
said residential lot and house, now covered and described in Tax Declaration Nos. 1993 and 1994,
respectively in the name of Nieves Manzano (Exh. ‘Q’ & ‘P’), subject matter of this case, in favor of
plaintiff Emilia Manzano;

4) Ordering the defendants to pay plaintiff:

a) P25,000.00 as moral damages;

b) P10,000.00 as exemplary damages;

c) P15,000.00 as and for [a]ttorney’s fees; and

d) To pay the cost of suit.”[4]

The Motion for Reconsideration filed by petitioner before the CA was denied in a Resolution dated
October 28, 1993.[5]

The Facts
The facts of the case are summarized by the Court of Appeals as follows:

“[Petitioner] Emilia Manzano in her Complaint alleged that she is the owner of a residential house
and lot, more particularly described hereunder:

‘A parcel of residential lot (Lots 1725 and 1726 of the Cadastral Survey of Siniloan), together with all
the improvements thereon, situated at General Luna Street, Siniloan, Laguna. Bounded on the
North by Callejon; on the East, by [a] town river; on the South by Constancia Adofina; and on the
West by Gen. Luna Street. Containing an area of 130 square meters more or less, covered by Tax
Dec. No. 9583 and assessed at P1,330.00.

‘A residential house of strong mixed materials and G.I. iron roofing, with a floor area of 40 square
meters, more or less. Also covered by Tax No. 9583.’

“In 1979, Nieves Manzano, sister of the [petitioner] and predecessor-in-interest of the herein
[private respondents], allegedly borrowed the aforementioned property as collateral for a projected
loan. The [petitioner] acceded to the request of her sister upon the latter’s promise that she [would]
return the property immediately upon payment of her loan.

“Pursuant to their understanding, the [petitioner] executed two deeds of conveyance for the sale of
the residential lot on 22 January 1979 (Exhibit ‘J’) and the sale of the house erected thereon on 2
February 1979 (Exhibit ‘K’), both for a consideration of P1.00 plus other valuables allegedly received
by her from Nieves Manzano.

“On 2 April 1979, Nieves Manzano together with her husband, [respondent] Miguel Perez, Sr., and
her son, [respondent] Macario Perez, obtained a loan from the Rural Bank of Infanta, Inc. in the sum
of P30,000.00. To secure payment of their indebtedness, they executed a Real Estate Mortgage
(Exhibit ‘A’) over the subject property in favor of the bank.

“Nieves Manzano died on 18 December 1979 leaving her husband and children as heirs. These heirs,
[respondents] herein allegedly refused to return the subject property to the [petitioner] even after
the payment of their loan with the Rural Bank (Exhibit ‘B’).

“The [petitioner] alleged that sincere efforts to settle the dispute amicably failed and that the
unwarranted refusal of the [respondents] to return the property caused her sleepless nights, mental
shock and social humiliation. She was, likewise, allegedly constrained to engage the services of a
counsel to protect her proprietary rights.

“The [petitioner] sought the annulment of the deeds of sale and execution of a deed of transfer or
reconveyance of the subject property in her favor, the award of moral damages of not less than
P50,000.00, exemplary damages of P10,000.00 attorney’s fees of P10,000.00 plus P500.00 per court
appearance, and costs of suit.

“In seeking the dismissal of the complaint, the [respondents] countered that they are the owners of
the property in question being the legal heirs of Nieves Manzano

Who purchased the same from the [petitioner] for value and in good faith, as shown by the deeds of
sale which contain the true agreements between the parties therein; that except for the
[petitioner’s] bare allegations, she failed to show any proof that the transaction she entered into
with her sister was a loan and not a sale.

“By way of special and affirmative defense, the [respondents] argued that what the parties to the
[sale] agreed upon was to resell the property to the [petitioner] after the payment of the loan with
the Rural Bank. But since the [respondents] felt that the property is the only memory left by their
predecessor-in-interest, they politely informed the [petitioner] of their refusal to sell the same. The
[respondents] also argued that the [petitioner] is now estopped from questioning their ownership
after seven (7) years from the consummation of the sale.

“As a proximate result of the filing of this alleged baseless and malicious suit, the [respondents]
prayed as counterclaim the award of moral damages in the amount of P10,000.00 each, exemplary
damages in an amount as may be warranted by the evidence on record, attorney’s fees of
P10,000.00 plus P500.00 per appearance in court and costs of suit.

“In ruling for the [petitioner], the court a quo considered the following:

‘First, the properties in question after [they have] been transferred to Nieves Manzano, the same
were mortgaged in favor of the Rural Bank of Infante, Inc. (Exh. ‘A’) to secure payment of the loan
extended to Macario Perez.’

‘Second, the documents covering said properties which were given to the bank as collateral of said
loan, upon payment and [release] to the [private respondents], were returned to [petitioner] by
Florencio Perez, one of the [private respondents].’

‘[These] uncontroverted facts [are] clear recognition [by private respondents] that [petitioner] is the
owner of the properties in question.’

xxx xxx xxx

‘Third, [respondents’] pretense of ownership of the properties in question is belied by their failure to
present payment of real estate taxes [for] said properties, and it is on [record] that [petitioner] has
been paying the real estate taxes [on] the same (Exh. ‘T’, ‘V’, ‘V-1’, ‘V-2’ & ‘V-3’).”

xxx xxx xxx

‘Fourth, [respondents] confirmed the fact that [petitioner] went to the house in question and hacked
the stairs. According to [petitioner] she did it for failure of the [respondents] to return and vacate
the premises. [Respondents] did not file any action against her.’

‘This is a clear indication also that they (respondents) recognized [petitioner] as owner of said
properties.’

xxx xxx xxx

‘Fifth, the Cadastral Notice of said properties were in the name of [petitioner] and the same was
sent to her (Exh. ‘F’ & ‘G’).

xxx xxx xxx

‘Sixth, upon request of the [petitioner] to return said properties to her, [respondents] did promise
and prepare an Extra Judicial Partition with Sale over said properties in question, however the same
did not materialize. The other heirs of Nieves Manzano did not sign.”

xxx xxx xxx

‘Seventh, uncontroverted is the fact that the consideration [for] the alleged sale of the properties in
question is P1.00 and other things of value. [Petitioner] denies she has received any consideration
for the transfer of said properties, and the [respondents] have not presented evidence to belie her
testimony.”[6]

Ruling of the Court of Appeals

The Court of Appeals was not convinced by petitioner’s claim that there was a supposed oral
agreement of commodatum over the disputed house and lot. Neither was it persuaded by her
allegation that respondents’ predecessor-in-interest had given no consideration for the sale of the
property in the latter’s favor. It explained as follows:

“To begin with, if the plaintiff-appellee remained as the rightful owner of the subject property, she
would not have agreed to reacquire one-half thereof for a consideration of P10,000.00 (Exhibit ‘U-
1’). This is especially true if we are to accept her assertion that Nieves Manzano did not purchase
the property for value. More importantly, if the agreement was to merely use plaintiff’s property as
collateral in a mortgage loan, it was not explained why physical possession of the house and lot had
to be with the supposed vendee and her family who even built a pigpen on the lot (p. 6, TSN, June
11, 1990). A mere execution of the document transferring title in the latter’s name would suffice for
the purpose.

“The alleged failure of the defendants-appellants to present evidence of payment of real estate
taxes cannot prejudice their cause. Realty tax payment of property is not conclusive evidence of
ownership (Director of Lands vs. Intermediate Appellate Court, 195 SCRA 38). Tax receipts only
become strong evidence of ownership when accompanied by proof of actual possession of the
property (Tabuena vs. Court of Appeals, 196 SCRA 650).

“In this case, plaintiff-appell[ee] was not in possession of the subject property. The defendant-
appellants were the ones in actual occupation of the house and lot which as aforestated was
unnecessary if the real agreement was merely to lend the property to be used as
collateral. Moreover, the plaintiff-appellee began paying her taxes only in 1986 after the instant
complaint ha[d] been instituted (Exhibits ‘V’, ‘V-1’, ‘V-3’ and ‘T’), and are, therefore, self-serving.

“Significantly, while plaintiff-appellee was still the owner of the subject property in 1979 (Exhibit ’I’),
the Certificate of Tax Declaration issued by the Office of the Municipal Treasurer on 8 August 1990
upon the request of the plaintiff-appellee herself (Exhibit ‘W’) named Nieves Manzano as the owner
and possessor of the property in question. Moreover, Tax Declaration No. 9589 in the name of
Nieves Manzano (Exhibits ‘D’ and ‘D-1’) indicates that the transfer of the subject property was based
on the Absolute Sale executed before Notary Public Alfonso Sanvictores, duly recorded in his notarial
book as Document No. 3157, Page 157, Book No. II. Tax Declaration No[s]. 9633 (Exhibit ‘H’), 1994
(Exhibit ‘P’), 1993 (Exhibit ‘Q’) are all in the name of Nieves Manzano.
“There is always the presumption that a written contract [is] for a valuable consideration (Section 5
(r), Rule 131 of the Rules of Court; Gamaitan vs. Court of Appeals, 200 SCRA 37). The execution of a
deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a
valuable consideration and x x x the party alleging lack of consideration has the burden of proving
such allegation (Caballero, et al. vs. Caballero, et al., C.A. 45 O.G. 2536).

“The consideration [for] the questioned [sale] is not the One (P1.00) Peso alone but also the other
valuable considerations. Assuming that such consideration is suspiciously insufficient, this
circumstance alone, is not sufficient to invalidate the sale. The inadequacy of the monetary
consideration does not render a conveyance null and void, for the vendor’s liberality may be a
sufficient cause for a valid contract (Ong vs. Ong, 139 SCRA 133).”[7]

Hence, this Petition.[8]

Issues

Petitioner submits the following grounds in support of her cause:[9]

“1. The Court of Appeals erred in failing to consider that:

A) The introduction of petitioner’s evidence is proper under the parol evidence rule.

B) The rules on admission by silence apply in the case at bar.

C) Petitioner is entitled to the reliefs prayed for.

“2. The Court of Appeals erred in reversing the decision of the trial court whose factual findings are
entitled to great respect since it was able to observe and evaluate the demeanor of the
witnesses.”[10]

In sum, the main issue is whether the agreement between the parties was a commodatum or an
absolute sale.

The Court’s Ruling

The Petition has no merit.

Main Issue: Sale or Commodatum

Obviously, the issue in this case is enveloped by conflict in factual perception, which is ordinarily not
reviewable in a petition under Rule 45. But the Court is constrained to resolve it, because the factual
findings of the Court of Appeals are contrary to those of the trial court.[11]

Preliminarily, petitioner contends that the CA erred in rejecting the introduction of her parol
evidence. A reading of the assailed Decision shows, however, that an elaborate discussion of the
parol evidence rule and its exceptions was merely given as a preface by the appellate
court. Nowhere therein did it consider petitioner’s evidence as improper under the said rule. On the
contrary, it considered and weighed each and every piece thereof. Nonetheless, it was not
persuaded, as explained in the multitude of reasons explicitly stated in its Decision.
This Court finds no cogent reason to disturb the findings and conclusions of the Court of
Appeals. Upon close examination of the records, we find that petitioner has failed to discharge her
burden of proving her case by preponderance of evidence. This concept refers to evidence that has
greater weight or is more convincing than that which is offered in opposition; at bottom, it means
probability of truth.[12]

In the case at bar, petitioner has presented no convincing proof of her continued ownership of the
subject property. In addition to her own oral testimony, she submitted proof of payment of real
property taxes. But that payment, which was made only after her Complaint had already been
lodged before the trial court, cannot be considered in her favor for being self-serving, as aptly
explained by the CA. Neither can we give weight to her allegation that respondents’ possession of
the subject property was merely by virtue of her tolerance. Bare allegations, unsubstantiated by
evidence, are not equivalent to proof under our Rules.[13]

On the other hand, respondents presented two Deeds of Sale, which petitioner executed in favor of
the former’s predecessor-in-interest. Both Deeds – for the residential lot and for the house erected
thereon – were each in consideration of P1.00 “plus other valuable.” Having been notarized, they
are presumed to have been duly executed. Also, issued in favor of respondents’ predecessor-in-
interest the day after the sale was Tax Declaration No. 9589, which covered the property.

The facts alleged by petitioner in her favor are the following:

(1) she inherited the subject house and lot from her parents, with her siblings waiving in her favor
their claim over the same; (2) the property was mortgaged to secure a loan of P30,000 taken in the
names of Nieves Manzano Perez and Respondent Miguel Perez; (3) upon full payment of the loan,
the documents pertaining to the house and lot were returned by Respondent Florencio Perez to
petitioner; (4) three of the respondents were signatories to a document transferring one half of the
property to Emilia Manzano in consideration of the sum of ten thousand pesos, although the
transfer did not materialize because of the refusal of the other respondents to sign the document;
and (5) petitioner hacked the stairs of the subject house, yet no case was filed against her.

These matters are not, however, convincing indicators of petitioner’s ownership of the house and
lot. On the contrary, they even support the claim of respondents. Indeed, how could one of them
obtained a mortgage over the property, without having dominion over it? Why would they execute
a reconveyance of one half of it in favor of petitioner? Why would the latter have to pay P10,000 for
that portion if, as she claims, she owns the whole?

Pitted against respondents’ evidence, that of petitioner awfully pales. Oral testimony cannot, as a
rule, prevail over a written agreement of the parties.[14] In order to contradict the facts contained in
a notarial document, such as the two “Kasulatan ng Bilihang Tuluyan” in this case, as well as the
presumption of regularity in the execution thereof, there must be clear and convincing evidence that
is more than merely preponderant.[15] Here petitioner has failed to come up with even a
preponderance of evidence to prove her claim.

Courts are not blessed with the ability to read what goes on in the minds of people. That is why
parties to a case are given all the opportunity to present evidence to help the courts decide on who
are telling the truth and who are lying, who are entitled to their claim and who are not. The
Supreme Court cannot depart from these guidelines and decide on the basis of compassion alone
because, aside from being contrary to the rule of law and our judicial system, this course of action
would ultimately lead to anarchy.

We reiterate, the evidence offered by petitioner to prove her claim is sadly lacking. Jurisprudence
on the subject matter, when applied thereto, points to the existence of a sale, not
a commodatum over the subject house and lot.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

Melo, (Chairman), Vitug, and Gonzaga-Reyes, JJ., concur.

Sandoval-Gutierrez, J., on leave.

G.R. No. 184079 April 17, 2013

SPS. ARMANDO SILVERIO, SR. AND REMEDIOS SILVERIO, Petitioners,

vs.
SPS. RICARDO AND EVELYN MARCELO, Respondents.

x-----------------------x

G.R. No. 184490

SPS. EVELYN AND RICARDO MARCELO, Petitioners,

vs.
SPS. ARMANDO SILVERIO, SR. AND REMEDIOS SILVERIO, Respondents.

DECISION

VILLARAMA, JR., J.:

Before the Court are twin petitions for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended.

The petition1 in G.R. No. 184079 was filed by petitioners spouses Armando Silverio, Sr. and Remedios
Silverio to assail the Decision2 dated March 18, 2008 and Resolution3 dated August 12, 2008 of the
Court of Appeals (CA) in CA-G.R. SP No. 98105. The CA had affirmed the Decision4 dated November
7, 2006 of the Regional Trial Court (RTC) of Parañaque City, Branch 258, in Civil Case No. 06-0099,
which in turn, affirmed the Decision5dated September 6, 2005 of the Metropolitan Trial Court
(MeTC), Branch 78 in Civil Case No. 2004-271. The Parañaque MeTC, Branch 78, had ordered
petitioners to demolish the improvements they have introduced in Lot No. 3976, Parañaque Cad.
299 (Lot 3976), to peacefully surrender possession of the same to respondents spouses Ricardo and
Evelyn Marcelo and to pay P1,000 per month from May 20, 2004 until they have done so. The court
a quo likewise directed petitioners to pay respondents P20,000 as attorney’s fees plus P3,000 per
appearance of the latter’s counsel and costs.

Meanwhile, the petition6 in G.R. No. 184490 was filed by petitioners spouses Evelyn and Ricardo
Marcelo to contest the Decision7 dated March 27, 2008 and Resolution8 dated September 1, 2008 of
the CA in CA-G.R. SP No. 98713. The CA had reversed and set aside the Decision9 dated December
29, 2006 of the RTC of Parañaque City, Branch 257, in Civil Case

No. 06-0237, which in turn, affirmed in toto the Decision10 dated April 25, 2006 of the MeTC of
Parañaque City, Branch 77, in Civil Case No. 2004-269. The Parañaque MeTC, Branch 77, had ordered
respondents Armando Silverio, Sr. and Remedios Silverio to vacate the Marcelo Compound in Lot
3976 and to surrender possession thereof to petitioners. The court a quo likewise directed
respondents to pay petitioners P1,000 per month from May 20, 2004 until they have completely
moved out of said property, P10,000 as attorney’s fees and costs.

The factual antecedents of these consolidated petitions are culled from the records.

G.R. No. 184079

On July 12, 2004, respondents spouses Ricardo and Evelyn Marcelo filed a Complaint11 for unlawful
detainer against petitioners spouses Armando Silverio, Sr., and his mother, Remedios Silverio. The
case was docketed as Civil Case No. 2004-271 before the MeTC of Parañaque City, Branch 78.

Respondents represented themselves as the lawful owners and possessors of Lot 3976, a residential
land with an area of 5,004 square meters located in Marcelo Compound, Philip St. Ext., Multinational
Village, Parañaque City. They claimed ownership over said lot by virtue of a Decision12 dated
December 12, 1996 of the Department of Environment and Natural Resources (DENR) in DENR-NCR
Case No. 95-253 and Tax Declaration No. E-008-19942.13

Respondents alleged that sometime in May 1987, petitioners sought permission to construct a
house within Lot 3976. Respondents agreed on the condition that petitioners will vacate the
moment they need the land. Subsequently, respondents made an oral demand on petitioners to
leave the house and return possession of the lot within 15 days from notice. In a Letter14 dated May
18, 2004, respondents reiterated their demand for petitioners to demolish the house, vacate the
120-square-meter lot on which the house stands and to pay P1,000 as rent until they have done so.

As respondents’ demands remained unheeded, they filed a complaint for unlawful detainer against
petitioners before Barangay Moonwalk in Parañaque City. The case was docketed as Barangay Case
No. 05/04-051. On July 24, 2004, Atty. Wendell E. Coronel, Lupon/Pangkat Secretary of Barangay
Moonwalk issued a Certification to File Action15 in said case upon the reasons "Failed or refused to
accept/obey summons to appear for hearing" and "Settlement has been repudiated."

In their Answer,16 petitioners sought the dismissal of the complaint on the ground that respondents
had filed a similar case against them before the MeTC of Parañaque City, Branch 77, docketed as
Civil Case No. 2004-269. The latter case is the subject of the petition in G.R. No. 184490.

On September 6, 2005, the MeTC of Parañaque City, Branch 78, rendered judgment in favor of
respondents Marcelo. The court a quo ruled out forum shopping upon finding that the house subject
of the present case is different from that in Civil Case No. 2004-269. The structure involved in the
latter case was "originally occupied by petitioners’ relative and later taken over by them"17 while the
house subject of the present case was constructed by petitioners themselves. The MeTC held that
petitioners failed to refute the character of their possession as merely tolerated by respondents and
they became deforciants upon the latter’s demand for them to vacate the subject premises. The
court ordered petitioners to pay respondents P1,000 as reasonable compensation for the use and
occupation of the premises, attorney’s fees of P20,000 and P3,000 per appearance of counsel for
respondents.

On appeal, the Parañaque RTC, Branch 258, affirmed the ruling of the MeTC. In a Decision dated
November 7, 2006, the RTC sustained respondents’ right to bring action to evict petitioners from the
contested property. It found petitioners’ claim of ownership unsubstantiated and their defense of
forum shopping without merit since the properties involved in Civil Case Nos. 2004-269 and 2004-
271 are different from each other.

Petitioners moved for reconsideration but their motion was denied in an Order18 dated February 5,
2007. Thereafter, petitioners filed a Petition for Review19 under Rule 42 of the Rules with the CA.
In the assailed Decision dated March 18, 2008, the appellate court affirmed in toto the RTC
judgment. It found no basis to dismiss respondents’ complaint based on either forum shopping or
splitting a cause of action. The CA disregarded petitioners’ argument that the subject property is
public land in view of their admission in their Answer20 that respondents are the owners and
possessors thereof.

Petitioners filed a Motion for Reconsideration21 which the CA denied in a Resolution22 dated August
12, 2008.

G.R. No. 184490

On July 12, 2004, petitioners spouses Ricardo and Evelyn Marcelo filed a Complaint23 for unlawful
detainer against respondents Armando Silverio, Sr., and Remedios Silverio. The case was docketed as
Civil Case No. 2004-269 before the MeTC of Parañaque City, Branch 77.

Petitioners’ Complaint bore essentially the same allegations as their Complaint in Civil Case No.
2004-271 save for two allegations: (1) respondents requested petitioners’ permission to construct a
house in Lot 3976 in May 1986; and (2) respondents "improved the house and even operated a sari-
sari store"24 in Marcelo Compound.

In their Answer25 dated August 3, 2004, respondents belied petitioners’ claim of exclusive ownership
and possession of the subject property. According to respondents, the land in dispute was first
occupied by Graciano Marcelo along with his sons Armando Marcelo, petitioner Ricardo Marcelo and
Florante Marcelo. Respondents anchor their right of possession on Florante Marcelo, in his capacity
as an ostensible co-owner of the contested property. Florante Marcelo is the husband of Marilou
Silverio, the daughter of respondents spouses Silverio.

Subsequently, petitioners submitted an Amended Complaint26 dated August 14, 2004, in which they
clarified that it was the spouses Florante Marcelo and Marilou Silverio, and not the respondents,
who sought their consent to build a house and live in Marcelo Compound. Petitioners recounted
that it was after Florante Marcelo and Marilou Silverio separated in 1998 and abandoned said house
that respondents asked for permission to stay therein. Petitioners agreed upon an understanding
that respondents shall "dismantle said house the moment petitioners need the
premises."27 However, respondents refused to move out and surrender possession of the subject
property upon demand.

In a Demand Letter28 dated May 18, 2004, petitioners insisted on their demand for respondents to
demolish the house they built, vacate the 80-square-meter lot on which it stands, to surrender
peaceful possession of the same and to pay P1,000 as rent until they have done so.

As respondents ignored petitioners’ demands, the latter brought a complaint for unlawful detainer
against respondents before Barangay Moonwalk in Parañaque City. The case was docketed as
Barangay Case No. 05/04-070. On July 24, 2004, Atty. Wendell E. Coronel, Lupon/Pangkat Secretary
of Barangay Moonwalk issued a Certification to File Action29 in said case upon the reasons "Failed or
refused to accept/obey summons to appear for hearing" and "Settlement has been repudiated."

In an Answer30 dated September 8, 2004, respondents assailed the DENR Decision dated December
12, 1996 for supposedly awarding ownership of the subject property to petitioners. According to
respondents, Graciano Marcelo, Sr., petitioner Ricardo Marcelo’s father, was a tenant of Fabian
Lumbos before the latter sold his land to Mike Velarde. Subsequently, Velarde fenced the subject
property, which respondents insist is not part of the parcels that Lumbos sold to Velarde. Upon the
belief that Lot 3976 is still government property, the sons of Graciano Marcelo, Sr., including
petitioner Ricardo Marcelo and Florante Marcelo, divided the land among themselves and occupied
the same. On the tract allotted to Florante, he took in respondent Remedios Silverio to live with him
and his wife, Marilou.

Respondents averred that it was in 1997 when the Marcelos conceived the idea of applying for a
sales patent over Lot 3976 with the DENR. The Marcelo siblings appointed petitioner Ricardo
Marcelo to file the Miscellaneous Sales Application (MSA) in their behalf, sharing the expenses
among themselves. However, it was not until later that the Marcelo siblings learned that Ricardo had
filed the application in his name alone. Respondents revealed that Ricardo had sold several portions
of Lot 3976 even before he could apply for a sales patent thereon.

On February 3, 2005, respondents filed a Supplemental Answer31 in which they charged petitioners
with forum shopping for filing another ejectment case against them, docketed as Civil Case No.
2004-271 before Branch 78 of the Parañaque MeTC.

In a Decision dated April 25, 2006, the MeTC of Parañaque City, Branch 77, ruled for petitioners
Marcelo. The court a quo ordered respondents to vacate the subject property, to surrender peaceful
possession thereof to petitioners, to give reasonable rent from May 20, 2004 until they have moved
out and to pay attorney’s fees and costs.

On the basis of the Decision dated December 12, 1996 of the DENR, the MeTC declared petitioners
the owners of the subject property, with concomitant right to possess it. The court found no
evidence to support respondents’ possessory claim and considered their occupation of the subject
land as merely tolerated by petitioners. The court a quo discounted forum shopping upon finding
that the house concerned in Civil Case No. 2004-271 was built by petitioners whereas the house in
this case was only taken over by them.

In a Decision dated December 29, 2006, the Parañaque RTC, Branch 257, affirmed in toto the MeTC
ruling. The RTC declared petitioners as the lawful possessors of the subject property by virtue of Tax
Declaration No. E-008-19942 in the name of petitioner Ricardo Marcelo.1âwphi1 It explained that
Florante Marcelo’s affinity with petitioner Ricardo, alone, did not automatically make him a co-
owner of the contested property.

Dissatisfied, respondents elevated the case to the CA through a Petition32 for review under Rule 42.

In the assailed Decision dated March 27, 2008, the CA reversed and set aside the RTC judgment. It
brushed aside the alleged procedural infirmities that attended the filing of respondents’ petition for
being trivial and insufficient to warrant its dismissal. The appellate court found petitioners guilty of
forum shopping and splitting of a cause of action. It observed that the two cases for unlawful
detainer filed by petitioners are based on a single claim of ownership over Lot 3976 which embraces
the subject properties. The CA explains that an adjudication in either suit that petitioners are
entitled to the possession of Lot No. 3976 would necessarily mean res judicata in the other case. The
appellate court noted that the demand letter in both cases was served on respondents on the same
day.

Issues/Assignment of Errors

On September 29, 2008, spouses Armando Silverio, Sr. and Remedios Silverio filed a petition for
review on certiorari which was docketed as G.R. No. 184079. Said petition, which seeks to reverse
and set aside the Decision dated March 18, 2008 and Resolution dated August 12, 2008 of the CA in
CA-G.R. SP No. 98105, assigns a lone error:

THE COURT OF APPEALS, WITH ALL DUE RESPECT, SERIOUSLY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN DISMISSING THE APPEAL INTERPOSED BY PETITIONERS IN THE ABOVE-ENTITLED CASE
ON TECHNICALITIES AND HAS DECIDED A QUESTION OF SUBSTANCE, NOT THERETOFORE
DETERMINED BY THE SUPREME COURT, AND/OR HAS DECIDED IT IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE HONORABLE SUPREME COURT.33

A few days later, on October 2, 2008, spouses Evelyn and Ricardo Marcelo filed a Petition for Review
on Certiorari which was docketed as G.R. No. 184490. Said petition, in turn, contests the Decision
dated March 27, 2008 and the Resolution dated September 1, 2008 of the CA in CA-G.R. SP No.
98713. Condensed, the issues presented by petitioners are as follows: (1) Whether the filing of
separate complaints for unlawful detainer against the same lessees who refuse to vacate, on
demand, two different houses constitutes forum shopping and splitting of a cause of action; (2)
Whether the CA erred in dismissing Civil Case No. 2004-269; and (3) Whether the instant petition
was filed seasonably.

Essentially, the questions that must be addressed in the consolidated petitions before us are
common: (1) Are the spouses Ricardo and Evelyn Marcelo guilty of forum shopping? and (2) Who
between the spouses Marcelo and the Silverios have better right to the physical possession of Lot
3976?

The Parties’ Arguments

Armando Silverio, Sr. and Remedios Silverio allege mainly that spouses Ricardo and Evelyn Marcelo
engaged in forum shopping and split a common cause of action when they filed separate complaints
for unlawful detainer based on a single claim of ownership over Lot No. 3976. The Silverios maintain
that the spouses Marcelo are simply applicants for the issuance of a sales patent over Lot No. 3976
and are actually occupying only 50 square meters of the 5,020-square-meter property. In support
thereof, the Silverios invoke the Decision34 dated July 11, 2007 of the DENR which annulled and
canceled the MSA filed by the spouses Marcelo over Lot No. 3976. Ultimately, the Silverios insist that
the subject property remains a public land.

In their consolidated Memorandum35 for G.R. Nos. 184079 and 184490, spouses Ricardo and Evelyn
Marcelo denied the allegations of forum shopping and splitting a single cause of action. They assert
the following distinctions between the houses involved in Civil Case Nos. 2004-269 and 2004-271: (1)
the house in Civil Case No. 2004-271 was built by the Silverios in May 1987 while the house subject
of Civil Case No. 2004-269 was constructed by Florante Marcelo and Marilou Silverio in May 1986;
and (2) the house in Civil Case No. 2004-271 has been occupied by the Silverios from the beginning
while they merely took over the house referred to in Civil Case No. 2004-269 and put up a sari-sari
store therein. The spouses Marcelo contend that while they claim ownership of Lot No. 3976 as a
whole, the portions thereof on which the two houses stand are distinct -- one has an area of 80
square meters while the other measures 120 square meters. In view of this, the spouses Marcelo
believe that the refusal by the Silverios to vacate said houses violated at least two rights and gave
rise to separate causes of action.

The Court's Ruling

Unlawful detainer is an action to recover possession of real property from one who illegally
withholds possession after the expiration or termination of his right to hold possession under any
contract, express or implied. The possession of the defendant in unlawful detainer is originally legal
but became illegal due to the expiration or termination of the right to possess.36 In an unlawful
detainer case, the sole issue for resolution is physical or material possession of the property
involved, independent of any claim of ownership by any of the parties. Where the issue of
ownership is raised by any of the parties, the courts may pass upon the same in order to determine
who has the right to possess the property. The adjudication is, however, merely provisional and
would not bar or prejudice an action between the same parties involving title to the property.37

Here, the spouses Ricardo and Evelyn Marcelo brought separate complaints for unlawful detainer
against Armando Silverio, Sr. and Remedios Silverio based on their refusal to vacate two houses
inside the Marcelo Compound. In both Civil Case Nos. 2004-26938 and 2004-271, the spouses
Marcelo anchor their right of possession over the subject properties on Tax Declaration No. E-008-
19942 and on the Decision dated December 12, 1996 of the DENR in DENR-NCR Case No. 95-253.
The DENR gave due course to the MSA filed by the spouses Marcelo over Lot 3976, where the
Marcelo Compound is situated.

For their part, the Silverios seek the dismissal of both complaints on the grounds of forum shopping
and splitting a single cause of action.

Forum shopping is a deplorable practice of litigants consisting of resort to two different fora for the
purpose of obtaining the same relief, to increase the chances of obtaining a favorable
judgment.39 The grave evil sought to be avoided by the rule against forum shopping is the rendition
by two competent tribunals of two separate and contradictory decisions.40

In Chua v. Metropolitan Bank & Trust Company,41 the Court enumerated the ways by which forum
shopping may be committed:

Forum shopping can be committed in three ways: (1) filing multiple cases based on the same cause
of action and with the same prayer, the previous case not having been resolved yet (where the
ground for dismissal is litis pendentia); (2) filing multiple cases based on the same cause of action
and the same prayer, the previous case having been finally resolved (where the ground for dismissal
is res judicata); and (3) filing multiple cases based on the same cause of action, but with different
prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or
res judicata).42

Common to these types of forum shopping is the identity of the cause of action in the different cases
filed. Cause of action is defined as "the act or omission by which a party violates the right of
another."43
In this case, the spouses Marcelo filed two cases for unlawful detainer against Armando Silverio, Sr.
and Remedios Silverio on July 12, 2004. In Civil Case No. 2004-269, the cause of action is the alleged
unlawful withholding of possession by the Silverios of the house which Florante Marcelo and
Marilou Silverio constructed in Lot 3976. On the other hand, the cause of action in Civil Case No.
2004-271 for unlawful detainer is the supposed unlawful withholding of possession by the Silverios
of the house which they, themselves, built in Lot 3976. While the main relief sought in Civil Case No.
2004-269 appears to be different from that in Civil Case No. 2004-271, the right on which both
claims are hinged is the same – the purported ownership by the spouses Marcelo of Lot 3976.
Indeed, paragraph 3 of the spouses Marcelo’s Complaint in both cases similarly read:

3. Plaintiffs are the lawful owners and possessors of a residential lot containing an area of 5,004 sq.
m. known as Lot 3976 Parañaque Cad. 299 by virtue of a final and executory decision of the Land
Management Bureau (DENR) promulgated on Dec. 12, 1996 and Tax Dec. No. E-008083-77 issued in
their name by the City Assessor of Parañaque City. Certified true copy of Tax Dec. No. E-008-19942 is
hereto attached as "Annex "A". 44

Basically, the cause of action in both cases is the unlawful withholding by the Silverios of Lot 3976.

We find no merit in the contention of the spouses Marcelo that Civil Case Nos. 2004-269 and 2004-
271 present distinct causes of action since they pertain to separate portions of the Marcelo
Compound. The analogy drawn by the spouses Marcelo between the ejectment of a tenant leasing
several units of a condominium project and the unlawful detainer cases they brought against the
Silverios is misplaced. In the former, there exists a lessor-lessee relationship between the owner of
the condominium and the tenant, respectively. Hence, the rights and duties of the condominium
owner and the tenant are defined by the terms of the contract. In contrast, the parties in this case
present adverse possessory claims over those portions of Lot 3976 in which the houses concerned
are situated.

In particular, the spouses Marcelo assert better right of possession based on their alleged right as
"lawful owners and possessors of a residential lot containing an area of 5,004 sq. m. known as Lot
3976 Parañaque Cad. 299 by virtue of a final and executory decision of the Land Management
Bureau (DENR) promulgated on Dec. 12, 1996 and Tax Dec. No. E-008-083-77 issued in their name by
the City Assessor of Parañaque."45 For their part, the Silverios claim better right of possession on
account of their actual occupation of the subject properties. In either case, a finding that the
spouses Marcelo have better right to possess the subject property could only be premised on their
lawful possession of the entire Lot No. 3976, Parañaque Cad. 299. It follows, therefore, that a final
adjudication in favor of the spouses Marcelo in one case would constitute res judicata in the other.

In Agustin v. Delos Santos,46 the Court cited three tests to verify whether there is identity of causes
of action for purposes of applying the principle of res judicata. The first test is the "absence of
inconsistency test" where it is determined whether the judgment sought will be inconsistent with
the prior judgment. If no inconsistency is shown, the prior judgment shall not constitute a bar to
subsequent actions.47 The more common approach in ascertaining identity of causes of action is the
"same evidence test," whereby the following question serves as a sufficient criterion: "would the
same evidence support and establish both the present and former causes of action?" If the answer is
in the affirmative, then the prior judgment is a bar to the subsequent action; conversely, it is
not.48 Aside from the "absence of inconsistency test" and "same evidence test," we have also ruled
that a previous judgment operates as a bar to a subsequent one when it had touched on a matter
already decided, or if the parties are in effect "litigating for the same thing."49

The "absence of inconsistency test" finds no application in this case since it presupposes that a final
judgment has been rendered in the first case. By applying the "same evidence test," however, it
becomes apparent that the proof necessary to obtain affirmative relief in Civil Case No. 2004-269 is
the same as that in Civil Case No. 2004-271. Since the spouses Marcelo are claiming sole ownership
of Lot 3976 in their MSA, the evidence needed to establish better right of possession over the house
constructed by Florante Marcelo and Marilou Silverio, and the one built by the Silverios is the same,
regardless of the fact that they were built on separate portions of said lot. We have ruled time and
again that "a party cannot, by varying the form of action, or adopting a different method of
presenting his case, escape the operation of the principle that one and the same cause of action
shall not be twice litigated."50

Evidently, the spouses Marcelo engaged in forum shopping by filing separate cases for unlawful
detainer based on a single claim of ownership over Lot 3976. Said act is likewise tantamount to
splitting a cause of action which, in this case, is a cause for dismissal on the ground of litis pendentia.
On this score alone, the petition for review on certiorari filed by the spouses Marcelo in G.R. Nos.
184490 must fail, alongside their averments in G.R. No. 184079.

In any case, even if we confront the issue as to who between the spouses Marcelo and the Silverios
have better right of possession over the subject properties, the former would still not prevail.

As earlier stated, the DENR-NCR had canceled the MSA filed by the spouses Marcelo in its
Decision51 dated July 11, 2007. The Department found that the spouses Marcelo failed to satisfy the
requirements for the acquisition of Lot 3976 under the Public Land Act. The DENR-NCR clarified that
the Decision dated December 12, 1996 gave due course to the application, not only of the spouses
Marcelo, but also those of other applicants. It gave weight to the findings in the ocular inspection
that the spouses Marcelo are actually occupying only 50 square meters of Lot 3976 while the
remaining portions are inhabited by 111 families. The DENR-NCR adds that the spouses Marcelo
cannot claim the entire Lot No. 3976 since Republic Act No. 73052 limits the area of land that may be
applied for to 1,000 square meters.53 In conclusion, the DENR-NCR held that Lot 3976 remains a
public land and its dwellers may apply for the purchase of those portions that they are actually
occupying.

Factual considerations relating to lands of the public domain properly rest within the administrative
competence of the Director of Lands and the DENR. Findings of administrative agencies, which have
acquired expertise because of their jurisdiction, are confined to specific matters and are accorded
respect, if not finality, by the courts. Even if they are not binding to civil courts exercising jurisdiction
over ejectment cases, such factual findings deserve great consideration and are accorded much
weight.54

Nonetheless, the declaration by the DENR-NCR that Lot 3976 is still part of the public domain does
not mean that neither of the parties is entitled to the possession of the subject properties. In Pajuyo
v. Court of Appeals,55 we reiterated the policy behind the summary action of forcible entry and
unlawful detainer, thus:
It must be stated that the purpose of an action of forcible entry and detainer is that, regardless of
the actual condition of the title to the property, the party in peaceable quiet possession shall not be
turned out by strong hand, violence or terror. In affording this remedy of restitution the object of
the statute is to prevent breaches of the peace and criminal disorder which would ensue from the
withdrawal of the remedy, and the reasonable hope such withdrawal would create that some
advantage must accrue to those persons who, believing themselves entitled to the possession of
property, resort to force to gain possession rather than to some appropriate action in the courts to
assert their claims. This is the philosophy at the foundation of all these actions of forcible entry and
detainer which are designed to compel the party out of possession to respect and resort to the law
alone to obtain what he claims is his.56

The parties in Pajuyo were informal settlers on the public land which was the subject of said case.
We ruled that since the government, which has title or better right over the property was not
impleaded in the case, the Court cannot, on its own, evict the parties. We recognized better right of
possession in favor of the petitioner therein who began occupying the disputed property ahead of
the respondents in said case.

A case with parallel factual milieu is Modesto v. Urbina.57 Like the spouses Marcelo, the respondents
in said case relied on a MSA and tax declarations to substantiate their claim of possession over the
contested land therein. In ruling for the petitioners in said case, the Court stressed that the mere
declaration of land for taxation purposes does not constitute possession thereof nor is it proof of
ownership in the absence of the claimant’s actual possession.58 We explained that unless a public
land is shown to have been reclassified as alienable or actually alienated by the State to a private
person, that piece of land remains part of the public domain, and its occupation, in the concept of
owner, no matter how long, cannot confer ownership or possessory rights.59 This finds support in
Section 88 of the Public Land Act, which provides:

Section 88. The tract or tracts of land reserved under the provisions of section eighty-three shall be
non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until
again declared alienable under the provisions of this Act or by proclamation of the President.

In a Certification60 dated June 8, 2006, Samson G. de Leon, the Regional Technical Director for Lands
of the DENR-NCR stated that:

This is to certify that Lot 3976 Cad 299, Parañaque Cadastre situated at San Dionisio, Parañaque,
Metro Manila, containing an area of 5,027.00 square meters has been verified based on available
records of this Office to be under Project No. 25, classified as Alienable or Disposable Public Land,
certified as such on 3 January 1968 per BFD L.C. Map No. 2323.

xxxx

This is to further certify that as per Certification dated 15 December 2005 issued by Records Officer II
Anita B. Ibardolasa which is hereto attached, no land patent has been issued over the same or any
portion thereof.

x x x x. (Emphasis supplied.)
It is undisputed by the spouses Marcelo that the Silverios presently occupy those portions of Lot
3976 which are the subjects of the consolidated petitions before us. In particular, the Silverios tie
their possession of the parcel at issue in G.R. No. 184490 to Florante Marcelo who appropriated a
portion of Lot 3976 for himself, and with his wife, constructed a house thereon in 1986. As regards
the portion of Lot 3976 subject of G.R. No. 184079, the Silverios have established their dwelling
thereon in 1987 - long after Lot 3976 was classified as alienable and disposable public land on
January 3, 1968.

Meanwhile, the spouses Marcelo insist on their better right to possess the contested parcels as
holders of Tax Declaration No. E-008-19942 in the name of Ricardo Marcelo. Said tax declaration,
which covers Lot 3976, was issued for the year 2005 and canceled Tax Declaration No. E-008-18821,
also under the name of Ricardo Marcelo. Other than said tax declaration, however, we found
nothing in the records of these cases to show that the spouses Marcelo have been consistently
paying taxes on Lot 3976. We note that Tax Declaration No. E-008-19942 was issued fairly recently,
and by itself, is inadequate to convince the Court that the spouses Marcelo have been in open,
continuous and exclusive possession of the subject portions of Lot 3976, by themselves or through a
successor-in-interest, since January 3, 1968. More importantly, it is ingrained in our jurisprudence
that the mere declaration of a land for taxation purposes does not constitute possession thereof nor
is it proof of ownership in the absence of the claimant's actual possession.61

Considering that the Silverios are in actual possession of the subject portions of Lot 3976, they are
entitled to remain on the property until a person who has a title or a better right lawfully ejects
them. The ruling in this case, however, does not preclude the Silverios and the spouses Marcelo
from introducing evidence and presenting arguments before the proper administrative agency to
establish any right to which they may be entitled under the law.62

WHEREFORE, the Court RESOLVES:

(1) To GRANT the petition in G.R. No. 184079. The Decision dated March 18, 2008 and Resolution
dated August 12, 2008 of the Court of Appeals in CA-G.R. SP No. 98105 are REVERSED and SET ASIDE;

(2) To DENY the petition in G.R. No. 184490. Consequently, the Decision dated March 27, 2008 and
Resolution dated September 1, 2008 of the Court of Appeals in CA-G.R SP No. 98713 are AFFIRMED;
and

(3) To DISMISS the complaints for unlawful detainer filed by the spouses Ricardo and Evelyn Marcelo
against Armando Silverio, Sr. and Remedios Silverio for lack of merit.

No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice