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CASE DIGESTS

COMMODATUM CASE NO. 7 TITLE: PAJUYO vs. CA AND GUEVARRA G.R. No. 146364, Jun #ACTS: Pajuyo and Guevarra executed a Kasunduan or agreement whereby Pajuyo, as the owner of the house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised to vacate the premise on Pajuyos demand but Guevarra broke his promise and refused to heed Pajuyos demand to vacate. hus, 3, !""4

Pajuyo filed an ejectment case before the ! ". #n his $nswer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because the lot is

within the %&' hectares set aside by Proclamation (o. %)* for sociali+ed housing. ! " ruled in favour of Pajuyo whereby it held that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. hus,

Guevarras refusal to vacate the house on Pajuyos demand made Guevarras continued possession of the house illegal. $ggrieved, Guevarra appealed to the , ". he , " upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and Guevarra. he terms of the Kasunduan bound Guevarra to return possession of the house on demand. #t likewise declared that in an ejectment case, the only issue for resolution is material or physical possession, not ownership. -hen the case reached the "$, it reversed the ! " and , " rulings, which held that the Kasunduan between Pajuyo and Guevarra created a legal tie akin to that of a landlord and tenant relationship. The Court o Appeals ruled that the !asunduan is not a lease contract but a co""odatu" because the a#ree"ent is not or a price certain. #t declared that Pajuyo and Guevarra are s.uatters and the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo and Guevarra are in pari delicto or in e.ual fault. he court will leave them where they are. Pajuyo appealed to the /".

#//012 -3( the Kasunduan between Pajuyo and Guevarra is that of a "3!!34$ 0!. ,05#(G2 (3, in a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. $n essential feature of commodatum is that it is gratuitous. $nother feature of commodatum is that the use of the thing belonging to another is for a certain period. hus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. #f the bailor should have urgent need of the thing, he may demand its return for temporary use. #f the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium. 0nder the "ivil "ode, precarium is a kind of

commodatum. he Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. -hile the Kasunduan did not re.uire Guevarra to pay rent, it obligated him to maintain the property in good condition. he imposition of this obligation makes the Kasunduan a contract different from a commodatum. he effects of the Kasunduan are also different from that of a commodatum. "ase law on ejectment has treated relationship based on tolerance as one that is akin to a landlord6 tenant relationship where the withdrawal of permission would result in the termination of the lease. he tenants withholding of the property would then be unlawful. his is settled jurisprudence. -herefore, Pajuyos petition is granted, the "$s decision was set aside and the , "s decision affirming the decision of ! " is reinstated. * Courts must resolve the issue of possession even if the parties to the ejectment suit are squatters. The determination of priority and superiority of possession is a serious and urgent matter that cannot be left to the squatters to decide. To do so would make squatters receive better treatment under the law. The law restrains property owners from taking the law into their own hands. However the principle of pari delicto as applied by the Court of !ppeals would give squatters free rein to dispossess

fellow squatters or violently retake possession of properties usurped from them. Courts should not leave squatters to their own devices in cases involving recovery of possession.

SIMPLE LOAN CASE NO. $ TITLE: SAURA IMPORT $ E%PORT vs. D&P G.R. No. L'!4(6), A*+,- !., 1(.! #ACTS: #n 7uly %8&) /$0,$ #(". applied to the ,ehabilitation 9inance "orporation :,9";, before its conversion into 4<P, for an industrial loan of P&'','''.'', to be used as follows2 P=&','''.'' for the construction of a factory building :for the manufacture of jute sacks;> P=?',8''.'' to pay the balance of the purchase price of the jute mill machinery and e.uipment> and P8,%''.'' as

additional working capital. 3n 7anuary *, %8&? ,9" passed ,esolution (o. %?& approving the loan application for

P&'','''.'', to be secured by a first mortgage on the factory building to be constructed, the land site thereof, and the machinery and e.uipment to be installed. On A*+,- 13, 1(/4 01 -o2n 3o4u5 n0s 6 + 7 4u0 3: 01 *+o5,sso+8 no0 , 6,01 +s, L03., 2s on o;

#.R. 92--,n:, + *+ s n0,n: C1,n2 En:,n 01 4o's,:n +s< 2n3 01

4o++ s*on3,n: 3

3 o; 5o+0:2: ,

61,41 62s 3u-8 + :,s0 + 3 on 01

;o--o6,n: A*+,- 1..

#n lieu of the letter of /aura to ,9" re.uesting modifications of the terms it laid down, ,9" passed ,esolution no. *)@. #t likewise passed other resolutions namely ,esolution (o. )8A8 which reduced the loan from P&'','''.'' to P)'','''.'', and lastly is ,esolution (o. 8'A) restoring the loan to the original amount of P&'','''.'', provided that there be a certification that the 4epartment of $griculture and (atural ,esources that the raw materials needed are available in the immediate vicinity and that there is prospect of increased production thereof to provide ade.uately the re.uirements of the factory. /auna not being in the position to comply with the said re.uirement instead re.uested that the mortgaged be cancelled. 8 years after /aura commenced a suit for damages against ,9" for its failure 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. he 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. 3n appeal the defendant reiterated that there was no perfection of contract :simple loan; between them. ISSUE: -3( there is perfected consensual contract. RULING: B1/, there was indeed a perfected consensual contract, as recogni+ed in $rticle %8)? of the "ivil "ode, which provides2 ART. 1(/4. An 244 *0 3 *+o5,s 0o 3 -,v +

so5 01,n:, =8 628 o; 4o55o320u5 o+ s,5*-o2n ,s =,n3,n: u*on 01 4o55o320u5 o+ s,5** +; +0 3 un0,- 01 4on0+240. here was undoubtedly offer and acceptance in this case2 the application of /aura, #nc. for a loan of P&'','''.'' was approved *2+0, s, =u0 01 -o2n ,0s -; s12-- no0 = o=> 40 o; 01

3 -,v +8 o; 01

by resolution of the defendant, and the corresponding mortgage was executed and registered. <ut 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. he conditions imposed by ,9" were not meant to deviate with the terms of their agreement, but rather a step in its implementation. here was nothing in said conditions that contradicted the terms laid down in ,9" ,esolution (o. %?&, passed on 7anuary *, %8&?, namely C Dthat the proceeds of the loan shall be utili+ed e"clusively for the following purposes2 for construction of factory building C P=&','''.''> for payment of the balance of purchase price of machinery and e.uipment C P=?',8''.''> for working capital C P8,%''.''.D -hen ,9" turned down the re.uest in its letter of 7anuary =&, %8&& the negotiations which had been going on for the implementation of the agreement reached an impasse. /aura, #nc. obviously was in no position to comply with ,9"Es conditions. /o instead of doing so and insisting that the loan be released as agreed upon, /aura, #nc. asked that the mortgage be cancelled, which was done on 7une %&, %8&&. T1 240,on 01us 02? n =8 =o01 *2+0, s 62s ,n 01 n20u+ o; 5u0u2- 3 s,s02n4 @ 6120 M2n+ s2 0 +5s A5u0uo 3,s nsoA @ 61,41 ,s 2 5o3 o; 70,n:u,s1,n: o=-,:20,ons. I0 ,s 2 4on4 *0 0120 3 +,v s ;+o5 01 *+,n4,*0120 s,n4 5u0u2- 2:+ 5 n0 42n 4+ 20 2 4on0+240, 5u0u2- 3,s2:+ 5 n0 =8 01 *2+0, s 42n 42us ,0s 70,n:u,s15 n0. -F1,193,1, the judgment appealed from is reversed and the complaint dismissed. *Civil law# $bligations and contracts# %hen contract of simple loan perfected.&%here an application for a loan of money was approved by resolution of the defendant corporation and

corresponding mortgage was e"ecuted and registered there arises a perfected consensual contract of loan . G3n $pril %), %8&? the loan documents were executed2 the promissory note, with 9.,. Falling, representing "hina 1ngineers, 5td., as one of the co6 signers> and the corresponding deed of mortgage, which was duly registered on the following $pril %*.H

#ULL TE%T O# CASES


G.R. No. 146364 Jun 3, !""4

COLITO T. PAJUYO, petitioner, vs.

COURT O# APPEALS 2n3 EDDIE GUEVARRA, respondents. 41"#/#3( CARPIO, %.: T1 C2s

<efore us is a petition for review % of the =% 7une =''' 4ecision = and %? 4ecember =''' ,esolution of the "ourt of $ppeals in "$6 G.,. /P (o. ?)%=8. he "ourt of $ppeals set aside the %%

(ovember %88@ decision) of the ,egional rial "ourt of Iue+on "ity, <ranch A%,? affirming the %& 4ecember %88& decision & of the !etropolitan rial "ourt of Iue+on "ity, <ranch )%.@ he $ntecedents #n 7une %8*8, petitioner "olito . Pajuyo :DPajuyoD; paid P?'' to a certain Pedro Pere+ for the rights over a =&'6s.uare meter lot in <arrio Payatas, Iue+on "ity. Pajuyo then constructed a house made of light materials on the lot. Pajuyo and his family lived in

the house from %8*8 to * 4ecember %8A&. 3n A 4ecember %8A&, Pajuyo and private respondent 1ddie Guevarra :DGuevarraD; executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyos demand. #n /eptember %88?, Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate the house. Guevarra refused. Pajuyo filed an ejectment case against Guevarra with the !etropolitan rial "ourt of Iue+on "ity, <ranch )% :D! "D;. #n his $nswer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because the lot is within the %&' hectares set aside by Proclamation (o.

%)* for sociali+ed housing. Guevarra pointed out that from 4ecember %8A& to /eptember %88?, Pajuyo did not show up or communicate with him. Guevarra insisted that neither he nor Pajuyo has valid title to the lot. 3n %& 4ecember %88&, the ! " rendered its decision in favor of Pajuyo. he dispositive portion of the ! " decision reads2 -F1,193,1, premises considered, judgment is hereby rendered for the plaintiff and against defendant, ordering the latter to2 $; vacate the house and lot occupied by the defendant or any other person or persons claiming any right under him> <; pay unto plaintiff the sum of P1/3/ :P)''.''; monthly F,11 F0(4,14 as reasonable

compensation for the use of the premises starting from the last demand> "; pay plaintiff the sum of P),'''.'' as and by way of

attorneys fees> and 4; pay the cost of suit. /3 3,41,14.* $ggrieved, Guevarra appealed to the ,egional Iue+on "ity, <ranch A% :D, "D;. 3n %% (ovember %88@, the , " affirmed the ! " decision. dispositive portion of the , " decision reads2 -F1,193,1, premises considered, the "ourt finds no reversible error in the decision appealed from, being in accord with the law and evidence presented, and the same is hereby affirmed en toto. /3 3,41,14.A Guevarra received the , " decision on =8 (ovember %88@. Guevarra had only until %? 4ecember %88@ to file his appeal with the "ourt of $ppeals. #nstead of filing his appeal with the "ourt of $ppeals, Guevarra filed with the /upreme "ourt a D!otion for 1xtension of ime to 9ile $ppeal by "ertiorari <ased on ,ule ?=D he rial "ourt of

:Dmotion for extensionD;. Guevarra theori+ed that his appeal

raised pure .uestions of law. he ,eceiving "lerk of the /upreme "ourt received the motion for extension on %) 4ecember %88@ or one day before the right to appeal expired. 3n ) 7anuary %88*, Guevarra filed his petition for review with the /upreme "ourt. 3n A 7anuary %88*, the 9irst 4ivision of the /upreme "ourt issued a ,esolution8 referring the motion for extension to the "ourt of $ppeals which has concurrent jurisdiction over the case. he case presented no special and important matter for the /upreme "ourt to take cogni+ance of at the first instance. 3n =A 7anuary %88*, the hirteenth 4ivision of the "ourt of

$ppeals issued a ,esolution%' granting the motion for extension conditioned on the timeliness of the filing of the motion. 3n =* 9ebruary %88*, the "ourt of $ppeals ordered Pajuyo to comment on Guevaras petition for review. 3n %% $pril %88*,

Pajuyo filed his "omment. 3n =% 7une =''', the "ourt of $ppeals issued its decision reversing the , " decision. he dispositive portion of the decision reads2 -F1,193,1, premises considered, the assailed 4ecision of the court a .uo in "ivil "ase (o. I68@6=@8?) is REVERSED and SET ASIDE> and it is hereby declared that the ejectment case filed against defendant6appellant is without factual and legal basis. /3 3,41,14.%% Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that the "ourt of $ppeals should have dismissed outright Guevarras petition for review because it was filed out of time. !oreover, it was Guevarras counsel and not Guevarra who signed the certification against forum6shopping. 3n %? 4ecember =''', the "ourt of $ppeals issued a resolution denying Pajuyos motion for reconsideration. portion of the resolution reads2 he dispositive

-F1,193,1, for lack of merit, the motion for reconsideration is hereby DENIED. (o costs. /3 3,41,14.%= T1 Ru-,n: o; 01 MTC

he ! " ruled that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. hus, Guevarras refusal to vacate the house on

Pajuyos demand made Guevarras continued possession of the house illegal. T1 Ru-,n: o; 01 RTC

he , " upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and Guevarra. he terms of the Kasunduan bound Guevarra to return possession of the house on demand. he , " rejected Guevarras claim of a better right under

Proclamation (o. %)*, the ,evised (ational Government "enter Fousing Project "ode of Policies and other pertinent laws. #n an ejectment suit, the , " has no power to decide Guevarras rights under these laws. he , " declared that in an ejectment case, the only issue for resolution is material or physical possession, not ownership. T1 Ru-,n: o; 01 Cou+0 o; A** 2-s

he "ourt of $ppeals declared that Pajuyo and Guevarra are s.uatters. Pajuyo and Guevarra illegally occupied the contested lot which the government owned. Pere+, the person from whom Pajuyo ac.uired his rights, was also a s.uatter. Pere+ had no right or title over the lot because it is public land. he assignment of rights between Pere+ and Pajuyo,

and the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo and Guevarra are in pari delicto or in e.ual fault. he court will leave them where they are.

he "ourt of $ppeals reversed the ! " and , " rulings, which held that the Kasunduan between Pajuyo and Guevarra created a legal tie akin to that of a landlord and tenant relationship. he

"ourt of $ppeals ruled that the Kasunduan is not a lease contract but a commodatum because the agreement is not for a price certain. /ince Pajuyo admitted that he resurfaced only in %88? to claim the property, the appellate court held that Guevarra has a better right over the property under Proclamation (o. %)*. President "ora+on ". $.uino :DPresident $.uinoD; issued Proclamation (o. %)* on * /eptember %8A*. $t that time, Guevarra was in physical possession of the property. 0nder $rticle J# of the "ode of Policies <eneficiary /election and 4isposition of Fomelots and /tructures in the (ational Fousing Project :Dthe "odeD;, the actual occupant or caretaker of the lot shall have first priority as beneficiary of the project. he "ourt of $ppeals concluded that Guevarra is first in

the hierarchy of priority. #n denying Pajuyos motion for reconsideration, the appellate court debunked Pajuyos claim that Guevarra filed his motion for extension beyond the period to appeal. he "ourt of $ppeals pointed out that Guevarras motion for extension filed before the /upreme "ourt was stamped D%) 4ecember %88@ at ?2'8 P!D by the /upreme "ourts ,eceiving "lerk. he "ourt of $ppeals concluded that the motion for

extension bore a date, contrary to Pajuyos claim that the motion for extension was undated. Guevarra filed the motion for extension on time on %) 4ecember %88@ since he filed the motion one day before the expiration of the reglementary period on %? 4ecember %88@. hus, the motion for extension properly

complied with the condition imposed by the "ourt of $ppeals in its =A 7anuary %88* ,esolution. he "ourt of $ppeals explained

that the thirty6day extension to file the petition for review was

deemed granted because of such compliance. he "ourt of $ppeals rejected Pajuyos argument that the appellate court should have dismissed the petition for review because it was Guevarras counsel and not Guevarra who signed the certification against forum6shopping. he "ourt of $ppeals

pointed out that Pajuyo did not raise this issue in his "omment. he "ourt of $ppeals held that Pajuyo could not now seek the dismissal of the case after he had extensively argued on the merits of the case. his technicality, the appellate court opined,

was clearly an afterthought. he #ssues Pajuyo raises the following issues for resolution2 -F1 F1, F1 "30, 39 $PP1$5/ 1,,14 3, $<0/14 # / $0 F3,# B $(4 4#/",1 #3( $( $!30( 3 5$"K 39 70,#/4#" #3(2 %; in G,$( #(G, instead of denying, Private

,espondents !otion for an 1xtension of thirty days to

file petition for review at the time when there was no more period to extend as the decision of the ,egional rial "ourt had already become final and executory. =; in giving due course, instead of dismissing, private respondents Petition for ,eview even though the certification against forum6shopping was signed only by counsel instead of by petitioner himself. ); in ruling that the Kasunduan voluntarily entered into by the parties was in fact a commodatum, instead of a "ontract of 5ease as found by the !etropolitan rial "ourt and in holding that Dthe

ejectment case filed against defendant6appellant is without legal and factual basisD. ?; in reversing and setting aside the 4ecision of the ,egional rial "ourt in "ivil "ase (o. I68@6=@8?) and in holding that the parties are in pari delicto being

both s.uatters, therefore, illegal occupants of the contested parcel of land. &; in deciding the unlawful detainer case based on the so6called "ode of Policies of the (ational Government "enter Fousing Project instead of deciding the same under the Kasunduan voluntarily executed by the parties, the terms and conditions of which are the laws between themselves.%) T1 Ru-,n: o; 01 Cou+0

he procedural issues Pajuyo is raising are baseless. Fowever, we find merit in the substantive issues Pajuyo is submitting for resolution. Procedural &ssues Pajuyo insists that the "ourt of $ppeals should have dismissed outright Guevarras petition for review because the , " decision

had already become final and executory when the appellate court acted on Guevarras motion for extension to file the petition. Pajuyo points out that Guevarra had only one day before the expiry of his period to appeal the , " decision. #nstead of filing the petition for review with the "ourt of $ppeals, Guevarra filed with this "ourt an undated motion for extension of )' days to file a petition for review. his "ourt merely referred the motion to the "ourt of $ppeals. Pajuyo believes that the filing of the motion for extension with this "ourt did not toll the running of the period to perfect the appeal. Fence, when the "ourt of $ppeals received the motion, the period to appeal had already expired. -e are not persuaded. 4ecisions of the regional trial courts in the exercise of their appellate jurisdiction are appealable to the "ourt of $ppeals by petition for review in cases involving .uestions of fact or mixed .uestions of fact and law.%? 4ecisions of the regional trial courts

involving pure .uestions of law are appealable directly to this "ourt by petition for review.%& hese modes of appeal are now

embodied in /ection =, ,ule ?% of the %88* ,ules of "ivil Procedure. Guevarra believed that his appeal of the , " decision involved only .uestions of law. Guevarra thus filed his motion for extension to file petition for review before this "ourt on %? 4ecember %88@. 3n ) 7anuary %88*, Guevarra then filed his petition for review with this "ourt. $ perusal of Guevarras petition for review gives the impression that the issues he raised were pure .uestions of law. here is a .uestion of law when the doubt or difference is on what the law is on a certain state of facts.%@ here is a .uestion of fact when the doubt or difference is on the truth or falsity of the facts alleged.%* #n his petition for review before this "ourt, Guevarra no longer disputed the facts. Guevarras petition for review raised these

.uestions2 :%; 4o ejectment cases pertain only to possession of a structure, and not the lot on which the structure standsK :=; 4oes a suit by a s.uatter against a fellow s.uatter constitute a valid case for ejectmentK :); /hould a Presidential Proclamation governing the lot on which a s.uatters structure stands be considered in an ejectment suit filed by the owner of the structureK hese .uestions call for the evaluation of the rights of the parties under the law on ejectment and the Presidential Proclamation. $t first glance, the .uestions Guevarra raised appeared purely legal. Fowever, some factual .uestions still have to be resolved because they have a bearing on the legal .uestions raised in the petition for review. hese factual matters refer to the metes and

bounds of the disputed property and the application of Guevarra as beneficiary of Proclamation (o. %)*. he "ourt of $ppeals has the power to grant an extension of time

to file a petition for review. #n 'acsa"ana v. Second Special Cases (ivision o the &nter"ediate Appellate Court ,%A we

declared that the "ourt of $ppeals could grant extension of time in appeals by petition for review. #n 'iboro v. Court o Appeals,%8 we clarified that the prohibition against granting an extension of time applies only in a case where ordinary appeal is perfected by a mere notice of appeal. he prohibition does not

apply in a petition for review where the pleading needs verification. $ petition for review, unlike an ordinary appeal, re.uires preparation and research to present a persuasive position.=' he drafting of the petition for review entails more

time and effort than filing a notice of appeal. =% Fence, the "ourt of $ppeals may allow an extension of time to file a petition for review. #n the more recent case of Co""issioner o &nternal )evenue v. Court o Appeals,== we held that 'iboro*s clarification of

'acsa"ana is consistent with the ,evised #nternal ,ules of the "ourt of $ppeals and /upreme "ourt "ircular (o. %68%. hey all

allow an extension of time for filing petitions for review with the "ourt of $ppeals. he extension, however, should be limited to

only fifteen days save in exceptionally meritorious cases where the "ourt of $ppeals may grant a longer period. $ judgment becomes Dfinal and executoryD by operation of law. 9inality of judgment becomes a fact on the lapse of the reglementary period to appeal if no appeal is perfected. =) he

, " decision could not have gained finality because the "ourt of $ppeals granted the )'6day extension to Guevarra. he "ourt of $ppeals did not commit grave abuse of discretion when it approved Guevarras motion for extension. he "ourt of

$ppeals gave due course to the motion for extension because it complied with the condition set by the appellate court in its resolution dated =A 7anuary %88*. he resolution stated that the

"ourt of $ppeals would only give due course to the motion for extension if filed on time. condition. he material dates to consider in determining the timeliness of the filing of the motion for extension are :%; the date of receipt of the judgment or final order or resolution subject of the petition, and :=; the date of filing of the motion for extension. =? #t is the date of the filing of the motion or pleading, and not the date of execution, that determines the timeliness of the filing of that motion or pleading. hus, even if the motion for extension bears he motion for extension met this

no date, the date of filing stamped on it is the reckoning point for determining the timeliness of its filing. Guevarra had until %? 4ecember %88@ to file an appeal from the , " decision. Guevarra filed his motion for extension before this "ourt on %) 4ecember %88@, the date stamped by this "ourts ,eceiving "lerk on the motion for extension. "learly, Guevarra

filed the motion for extension exactly one day before the lapse of the reglementary period to appeal. $ssuming that the "ourt of $ppeals should have dismissed Guevarras appeal on technical grounds, Pajuyo did not ask the appellate court to deny the motion for extension and dismiss the petition for review at the earliest opportunity. #nstead, Pajuyo vigorously discussed the merits of the case. #t was only when the "ourt of $ppeals ruled in Guevarras favor that Pajuyo raised the procedural issues against Guevarras petition for review. $ party who, after voluntarily submitting a dispute for resolution, receives an adverse decision on the merits, is estopped from attacking the jurisdiction of the court.=& 1stoppel sets in not because the judgment of the court is a valid and conclusive adjudication, but because the practice of attacking the courts jurisdiction after voluntarily submitting to it is against public policy.=@

#n his "omment before the "ourt of $ppeals, Pajuyo also failed to discuss Guevarras failure to sign the certification against forum shopping. #nstead, Pajuyo harped on Guevarras counsel signing the verification, claiming that the counsels verification is insufficient since it is based only on Dmere information.D $ partys failure to sign the certification against forum shopping is different from the partys failure to sign personally the

verification. he certificate of non6forum shopping must be signed by the party, and not by counsel. =* renders the petition defective.=A 3n the other hand, the re.uirement on verification of a pleading is a formal and not a jurisdictional re.uisite. =8 #t is intended simply to secure an assurance that what are alleged in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is he certification of counsel

filed in good faith.)'

he party need not sign the verification. $

partys representative, lawyer or any person who personally knows the truth of the facts alleged in the pleading may sign the verification.)% -e agree with the "ourt of $ppeals that the issue on the certificate against forum shopping was merely an afterthought. Pajuyo did not call the "ourt of $ppeals attention to this defect at the early stage of the proceedings. Pajuyo raised this procedural issue too late in the proceedings. Absence o Title over the (isputed Property will not (ivest the Courts o %urisdiction to )esolve the &ssue o

Possession /ettled is the rule that the defendants claim of ownership of the disputed property will not divest the inferior court of its jurisdiction over the ejectment case.)= 1ven if the pleadings raise

the issue of ownership, the court may pass on such issue to determine only the .uestion of possession, especially if the ownership is inseparably linked with the possession.)) he

adjudication on the issue of ownership is only provisional and will not bar an action between the same parties involving title to the land.)? his doctrine is a necessary conse.uence of the nature of the two summary actions of ejectment, forcible entry and unlawful detainer, where the only issue for adjudication is the physical or material possession over the real property.)& #n this case, what Guevarra raised before the courts was that he and Pajuyo are not the owners of the contested property and that they are mere s.uatters. -ill the defense that the parties to the ejectment case are not the owners of the disputed lot allow the courts to renounce their jurisdiction over the caseK he "ourt of

$ppeals believed so and held that it would just leave the parties where they are since they are in pari delicto.

-e do not agree with the "ourt of $ppeals. 3wnership or the right to possess arising from ownership is not at issue in an action for recovery of possession. he parties cannot

present evidence to prove ownership or right to legal possession except to prove the nature of the possession when necessary to resolve the issue of physical possession.)@ he same is true when the defendant asserts the absence of title over the property. he

absence of title over the contested lot is not a ground for the courts to withhold relief from the parties in an ejectment case. he only .uestion that the courts must resolve in ejectment proceedings is 6 who is entitled to the physical possession of the premises, that is, to the possession de facto and not to the possession de jure.)* #t does not even matter if a partys title to the property is .uestionable,)A or when both parties intruded into public land and their applications to own the land have yet to be approved by the proper government agency. )8 ,egardless of the

actual condition of the title to the property, the party in peaceable .uiet possession shall not be thrown out by a strong hand, violence or terror.?' (either is the unlawful withholding of property allowed. "ourts will always uphold respect for prior possession. hus, a party who can prove prior possession can recover such possession even against the owner himself. ?% -hatever may be the character of his possession, if he has in his favor prior possession in time, he has the security that entitles him to remain on the property until a person with a better right lawfully ejects him.?= o repeat, the only issue that the court has to settle in an ejectment suit is the right to physical possession. #n Pitar#ue v. Sorilla+?) the government owned the land in dispute. he government did not authori+e either the plaintiff or

the defendant in the case of forcible entry case to occupy the land. he plaintiff had prior possession and had already

introduced improvements on the public land.

he plaintiff had a

pending application for the land with the <ureau of 5ands when the defendant ousted him from possession. he plaintiff filed the he government

action of forcible entry against the defendant. was not a party in the case of forcible entry.

he defendant .uestioned the jurisdiction of the courts to settle the issue of possession because while the application of the plaintiff was still pending, title remained with the government, and the <ureau of Public 5ands had jurisdiction over the case. -e disagreed with the defendant. -e ruled that courts have jurisdiction to entertain ejectment suits even before the resolution of the application. he plaintiff, by priority of his application and

of his entry, ac.uired prior physical possession over the public land applied for as against other private claimants. hat prior

physical possession enjoys legal protection against other private claimants because only a court can take away such physical

possession in an ejectment case. -hile the "ourt did not brand the plaintiff and the defendant in Pitar#ue?? as s.uatters, strictly speaking, their entry into the disputed land was illegal. <oth the plaintiff and defendant entered the public land without the owners permission. itle to the land

remained with the government because it had not awarded to anyone ownership of the contested public land. <oth the plaintiff and the defendant were in effect s.uatting on government property. Bet, we upheld the courts jurisdiction to resolve the issue of possession even if the plaintiff and the defendant in the ejectment case did not have any title over the contested land. "ourts must not abdicate their jurisdiction to resolve the issue of physical possession because of the public need to preserve the basic policy behind the summary actions of forcible entry and unlawful detainer. he underlying philosophy behind ejectment

suits is to prevent breach of the peace and criminal disorder and

to compel the party out of possession to respect and resort to the law alone to obtain what he claims is his. ?& he party deprived of possession must not take the law into his own hands. ?@ 1jectment proceedings are summary in nature so the authorities can settle speedily actions to recover possession because of the overriding need to .uell social disturbances.?* -e further explained in Pitar#ue the greater interest that is at stake in actions for recovery of possession. -e made the following pronouncements in Pitar#ue2 he .uestion that is before this "ourt is2 $re courts without jurisdiction to take cogni+ance of possessory actions involving these public lands before final award is made by the 5ands 4epartment, and before title is given any of the conflicting claimantsK #t is one of utmost importance, as there are public lands everywhere and there are thousands of settlers, especially in newly opened regions. #t also involves a matter of policy, as it re.uires the determination of the respective authorities and functions of two coordinate branches of the Government in connection with public land conflicts. 3ur problem is made simple by the fact that under the "ivil "ode, either in the old, which was in force in this country before the

$merican occupation, or in the new, we have a possessory action, the aim and purpose of which is the recovery of the physical possession of real property, irrespective of the .uestion as to who has the title thereto. 0nder the /panish "ivil "ode we had the accion interdictal, a summary proceeding which could be brought within one year from dispossession :,oman "atholic <ishop of "ebu vs. !angaron, @ Phil. =A@, =8%;> and as early as 3ctober %, %8'%, upon the enactment of the "ode of "ivil Procedure :$ct (o. %8' of the Philippine "ommission; we implanted the common law action of forcible entry :section A' of $ct (o. %8';, the object of which has been stated by this "ourt to be ,to prevent breaches o the peace and cri"inal disorder which would ensue ro" the withdrawal o the re"edy+ and the reasonable hope such withdrawal would create that so"e advanta#e "ust accrue to those persons who+ believin# the"selves entitled to the possession o property+ resort to orce to #ain possession rather than to so"e appropriate action in the court to assert their clai"s., :/upia and <atioco vs. Iuintero and $yala, &8 Phil. )%=, )%?.; /o before the enactment of the first Public 5and $ct :$ct (o. 8=@; the action of forcible entry was already available in the courts of the country. /o the .uestion to be resolved is, 4id the 5egislature intend, when it vested the power and authority to alienate and dispose of the public lands in the 5ands 4epartment, to exclude the courts from entertaining the possessory action of forcible entry between rival claimants or occupants of any land before award thereof to any of the partiesK 4id "ongress intend that the lands applied for, or all public lands for that matter, be removed from the jurisdiction of the judicial <ranch of the Government, so that any troubles arising therefrom, or any breaches of the peace or disorders caused by rival claimants, could be in.uired into only by the 5ands 4epartment to the exclusion of the courtsK he answer to

this .uestion seems to us evident. he 5ands 4epartment does not have the means to police public lands> neither does it have the means to prevent disorders arising therefrom, or contain breaches of the peace among settlers> or to pass promptly upon conflicts of possession. Then its power is clearly li"ited to disposition and alienation+ and while it "ay decide con licts o possession in order to "a-e proper award+ the settle"ent o con licts o possession which is reco#ni.ed in the court herein has another ulti"ate purpose+ i.e.+ the protection o actual possessors and occupants with a view to the prevention o breaches o the peace. The power to dispose and alienate could not have been intended to include the power to prevent or settle disorders or breaches o the peace a"on# rival settlers or clai"ants prior to the inal award. $s to this, therefore, the corresponding branches of the Government must continue to exercise power and jurisdiction within the limits of their respective functions. The vestin# o the 'ands (epart"ent with authority to ad"inister+ dispose+ and alienate public lands+ there ore+ "ust not be understood as deprivin# the other branches o the Govern"ent o the e/ercise o the respective unctions or powers thereon+ such as the authority to stop disorders and 0uell breaches o the peace by the police+ the authority on the part o the courts to ta-e jurisdiction over possessory actions arisin# there ro" not involvin#+ directly or indirectly+ alienation and disposition. 3ur attention has been called to a principle enunciated in $merican courts to the effect that courts have no jurisdiction to determine the rights of claimants to public lands, and that until the disposition of the land has passed from the control of the 9ederal Government, the courts will not interfere with the

administration of matters concerning the same. :&' ". 7. %'8)6 %'8?.; -e have no .uarrel with this principle. he determination of the respective rights of rival claimants to public lands is different from the determination of who has the actual physical possession or occupation with a view to protecting the same and preventing disorder and breaches of the peace. $ judgment of the court ordering restitution of the possession of a parcel of land to the actual occupant, who has been deprived thereof by another through the use of force or in any other illegal manner, can never be Dprejudicial interferenceD with the disposition or alienation of public lands. On the other hand+ i courts were deprived o jurisdiction o cases involvin# con licts o possession+ that threat o judicial action a#ainst breaches o the peace co""itted on public lands would be eli"inated+ and a state o lawlessness would probably be produced between applicants+ occupants or s0uatters+ where orce or "i#ht+ not ri#ht or justice+ would rule. #t must be borne in mind that the action that would be used to solve conflicts of possession between rivals or conflicting applicants or claimants would be no other than that of forcible entry. his action, both in 1ngland and the 0nited /tates and in our jurisdiction, is a summary and expeditious remedy whereby one in peaceful and .uiet possession may recover the possession of which he has been deprived by a stronger hand, by violence or terror> its ultimate object being to prevent breach of the peace and criminal disorder. :/upia and <atioco vs. Iuintero and $yala, &8 Phil. )%=, )%?.; he basis of the remedy is mere possession as a fact, of physical possession, not a legal possession. :!ediran vs. Jillanueva, )* Phil. *&=.; he title or right to possession is never in issue in an action of forcible entry> as a matter of fact, evidence thereof is expressly banned, except to prove the nature of the possession. :/econd ?, ,ule *=, ,ules of "ourt.; -ith this nature

of the action in mind, by no stretch of the imagination can conclusion be arrived at that the use of the remedy in the courts of justice would constitute an interference with the alienation, disposition, and control of public lands. o limit ourselves to the case at bar can it be pretended at all that its result would in any way interfere with the manner of the alienation or disposition of the land contestedK 3n the contrary, it would facilitate adjudication, for the .uestion of priority of possession having been decided in a final manner by the courts, said .uestion need no longer waste the time of the land officers making the adjudication or award. :1mphasis ours; The 'rinciple of 'ari (elicto is not !pplicable to )jectment Cases he "ourt of $ppeals erroneously applied the principle of pari delicto to this case. $rticles %?%% and %?%= of the "ivil "ode ?A embody the principle of pari delicto. -e explained the principle of pari delicto in these words2 he rule of pari delicto is expressed in the maxims Le" dolo malo non eritur actio and Lin pari delicto potior est conditio defedentis. he law will not aid either party to an illegal agreement. #t leaves the parties where it finds them.?8 he application of the pari delicto principle is not absolute, as there are exceptions to its application. 3ne of these exceptions is

where the application of the pari delicto rule would violate well6 established public policy.&' #n (rilon v. Gaurana+&% we reiterated the basic policy behind the summary actions of forcible entry and unlawful detainer. -e held that2 #t 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 .uiet possession shall not be turned out by strong hand, violence or terror. #n 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. his 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.&= "learly, the application of the principle of pari delicto to a case of ejectment between s.uatters is fraught with danger. o shut out relief to s.uatters on the ground of pari delicto would openly

invite mayhem and lawlessness. $ s.uatter would oust another s.uatter from possession of the lot that the latter had illegally occupied, emboldened by the knowledge that the courts would leave them where they are. (othing would then stand in the way of the ousted s.uatter from re6claiming his prior possession at all cost. Petty warfare over possession of properties is precisely what ejectment cases or actions for recovery of possession seek to prevent.&) 1ven the owner who has title over the disputed property cannot take the law into his own hands to regain possession of his property. he owner must go to court. "ourts must resolve the issue of possession even if the parties to the ejectment suit are s.uatters. he determination of priority

and superiority of possession is a serious and urgent matter that cannot be left to the s.uatters to decide. o do so would make s.uatters receive better treatment under the law. he law

restrains property owners from taking the law into their own hands. Fowever, the principle of pari delicto as applied by the "ourt of $ppeals would give s.uatters free rein to dispossess fellow s.uatters or violently retake possession of properties usurped from them. "ourts should not leave s.uatters to their own devices in cases involving recovery of possession. Possession is the only &ssue or )esolution in an Eject"ent Case he case for review before the "ourt of $ppeals was a simple case of ejectment. he "ourt of $ppeals refused to rule on the issue of physical possession. (evertheless, the appellate court held that the pivotal issue in this case is who between Pajuyo and Guevarra has the Dpriority right as beneficiary of the contested land under Proclamation (o. %)*.D&? $ccording to the "ourt of $ppeals, Guevarra enjoys preferential right under Proclamation (o. %)* because $rticle J# of the "ode declares that the actual occupant

or caretaker is the one .ualified to apply for sociali+ed housing. he ruling of the "ourt of $ppeals has no factual and legal basis. 1irst. Guevarra did not present evidence to show that the contested lot is part of a relocation site under Proclamation (o. %)*. Proclamation (o. %)* laid down the metes and bounds of the land that it declared open for disposition to bona fide residents. he records do not show that the contested lot is within the land specified by Proclamation (o. %)*. Guevarra had the burden to prove that the disputed lot is within the coverage of Proclamation (o. %)*. Fe failed to do so. Second. he "ourt of $ppeals should not have given credence to Guevarras unsubstantiated claim that he is the beneficiary of Proclamation (o. %)*. Guevarra merely alleged that in the survey the project administrator conducted, he and not Pajuyo appeared as the actual occupant of the lot.

here is no proof that Guevarra actually availed of the benefits of Proclamation (o. %)*. Pajuyo allowed Guevarra to occupy the disputed property in %8A&. President $.uino signed Proclamation (o. %)* into law on %% !arch %8A@. Pajuyo made his earliest demand for Guevarra to vacate the property in /eptember %88?. 4uring the time that Guevarra temporarily held the property up to the time that Proclamation (o. %)* allegedly segregated the disputed lot, Guevarra never applied as beneficiary of

Proclamation (o. %)*. 1ven when Guevarra already knew that Pajuyo was reclaiming possession of the property, Guevarra did not take any step to comply with the re.uirements of

Proclamation (o. %)*. Third. 1ven assuming that the disputed lot is within the coverage of Proclamation (o. %)* and Guevarra has a pending application over the lot, courts should still assume jurisdiction and resolve the issue of possession. Fowever, the jurisdiction of the courts would

be limited to the issue of physical possession only. #n Pitar#ue+&& we ruled that courts have jurisdiction over possessory actions involving public land to determine the issue of physical possession. he determination of the respective rights of rival claimants to public land is, however, distinct from the determination of who has the actual physical possession or who has a better right of physical possession. &@ he administrative

disposition and alienation of public lands should be threshed out in the proper government agency.&* he "ourt of $ppeals determination of Pajuyo and Guevarras rights under Proclamation (o. %)* was premature. Pajuyo and Guevarra were at most merely potential beneficiaries of the law. "ourts should not preempt the decision of the administrative agency mandated by law to determine the .ualifications of applicants for the ac.uisition of public lands. #nstead, courts should expeditiously resolve the issue of physical possession in

ejectment cases to prevent disorder and breaches of peace.&A Pajuyo is Entitled to Physical Possession o the (isputed Property Guevarra does not dispute Pajuyos prior possession of the lot and ownership of the house built on it. Guevarra expressly admitted the existence and due execution of the Kasunduan. he

Kasunduan reads2 $ko, si "35G#H 3 P$70B3, may6ari ng bahay at lote sa <o. Payatas, Iue+on "ity, ay nagbibigay pahintulot kay G. 1ddie Guevarra, na pansamantalang manirahan sa nasabing bahay at lote ng Dwalang bayad.D Kaugnay nito, kailangang panatilihin nila ang kalinisan at kaayusan ng bahay at lote. /a sandaling kailangan na namin ang bahay at lote, silay kusang aalis ng walang reklamo. <ased on the Kasunduan, Pajuyo permitted Guevarra to reside in

the house and lot free of rent, but Guevarra was under obligation to maintain the premises in good condition. Guevarra promised to vacate the premises on Pajuyos demand but Guevarra broke his promise and refused to heed Pajuyos demand to vacate. hese facts make out a case for unlawful detainer. 0nlawful detainer involves the withholding by a person from another of the possession of real property to which the latter is entitled after the expiration or termination of the formers right to hold possession under a contract+ e/press or i"plied.&8 -here the plaintiff allows the defendant to use his property by tolerance without any contract, the defendant is necessarily bound by an implied promise that he will vacate on demand, failing which, an action for unlawful detainer will lie. @' he

defendants refusal to comply with the demand makes his continued possession of the property unlawful. @% he status of the defendant in such a case is similar to that of a lessee or tenant

whose term of lease has expired but whose occupancy continues by tolerance of the owner.@= his principle should apply with greater force in cases where a contract embodies the permission or tolerance to use the property. he Kasunduan expressly articulated Pajuyos

forbearance. Pajuyo did not re.uire Guevarra to pay any rent but only to maintain the house and lot in good condition. Guevarra expressly vowed in the Kasunduan that he would vacate the property on demand. Guevarras refusal to comply with Pajuyos demand to vacate made Guevarras continued possession of the property unlawful. -e do not subscribe to the "ourt of $ppeals theory that the Kasunduan is one of commodatum. #n a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the

same for a certain time and return it.@) $n essential feature of commodatum is that it is gratuitous. $nother feature of

commodatum is that the use of the thing belonging to another is for a certain period.@? hus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted.@& #f the bailor should have urgent need of the thing, he may demand its return for temporary use. @@ #f the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium.@* 0nder the "ivil "ode, precarium is a kind of commodatum.@A he Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. -hile the Kasunduan did not re.uire Guevarra to pay rent, it obligated him to maintain the property in good condition. he imposition of this

obligation makes the Kasunduan a contract different from a commodatum. he effects of the Kasunduan are also different

from that of a commodatum. "ase law on ejectment has treated relationship based on tolerance as one that is akin to a landlord6 tenant relationship where the withdrawal of permission would result in the termination of the lease.@8 of the property would then be he tenants withholding his is settled

unlawful.

jurisprudence. 1ven assuming that the relationship between Pajuyo and

Guevarra is one of commodatum, Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. he obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and commodatum.*' hese contracts certainly

involve the obligation to deliver or return the thing received.*% Guevarra turned his back on the Kasunduan on the sole ground

that like him, Pajuyo is also a s.uatter. /.uatters, Guevarra pointed out, cannot enter into a contract involving the land they illegally occupy. Guevarra insists that the contract is void. Guevarra should know that there must be honor even between s.uatters. Guevarra freely entered into the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it. he Kasunduan binds Guevarra. he Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to physical possession of the contested property. he Kasunduan is the undeniable

evidence of Guevarras recognition of Pajuyos better right of physical possession. Guevarra is clearly a possessor in bad faith. he absence of a contract would not yield a different result, as there would still be an implied promise to vacate. Guevarra contends that there is Da pernicious evil that is sought to be avoided, and that is allowing an absentee s.uatter who :sic;

makes :sic; a profit out of his illegal act.D*= Guevarra bases his argument on the preferential right given to the actual occupant or caretaker under Proclamation (o. %)* on sociali+ed housing. -e are not convinced. Pajuyo did not profit from his arrangement with Guevarra because Guevarra stayed in the property without paying any rent. here is also no proof that Pajuyo is a professional s.uatter who rents out usurped properties to other s.uatters. !oreover, it is for the proper government agency to decide who between Pajuyo and Guevarra .ualifies for sociali+ed housing. are addressing is physical possession. Prior possession is not always a condition sine qua non in ejectment.*) his is one of the distinctions between forcible entry and unlawful detainer.*? #n forcible entry, the plaintiff is deprived of physical possession of his land or building by means of force, he only issue that we

intimidation, threat, strategy or stealth. hus, he must allege and prove prior possession.*& <ut in unlawful detainer, the defendant unlawfully withholds possession after the expiration or

termination of his right to possess under any contract, express or implied. #n such a case, prior physical possession is not re.uired.*@ Pajuyos withdrawal of his permission to Guevarra terminated the Kasunduan. Guevarras transient right to possess the property ended as well. !oreover, it was Pajuyo who was in actual possession of the property because Guevarra had to seek Pajuyos permission to temporarily hold the property and

Guevarra had to follow the conditions set by Pajuyo in the Kasunduan. "ontrol over the property still rested with Pajuyo and this is evidence of actual possession. Pajuyos absence did not affect his actual possession of the disputed property. Possession in the eyes of the law does not

mean that a man has to have his feet on every s.uare meter of the ground before he is deemed in possession. ** 3ne may ac.uire possession not only by physical occupation, but also by the fact that a thing is subject to the action of ones will. *A $ctual or physical occupation is not always necessary.*8 *uling on 'ossession (oes not +ind Title to the ,and in (ispute -e are aware of our pronouncement in cases where we declared that Ds.uatters and intruders who clandestinely enter into titled government property cannot, by such act, ac.uire any legal right to said property.DA' -e made this declaration because the person who had title or who had the right to legal possession over the disputed property was a party in the ejectment suit and that party instituted the case against s.uatters or usurpers. #n this case, the owner of the land, which is the government, is not a party to the ejectment case. his case is between s.uatters.

Fad the government participated in this case, the courts could have evicted the contending s.uatters, Pajuyo and Guevarra. /ince the party that has title or a better right over the property is not impleaded in this case, we cannot evict on our own the parties. /uch a ruling would discourage s.uatters from seeking the aid of the courts in settling the issue of physical possession. /tripping both the plaintiff and the defendant of possession just because they are s.uatters would have the same dangerous implications as the application of the principle of pari delicto. /.uatters would then rather settle the issue of physical

possession among themselves than seek relief from the courts if the plaintiff and defendant in the ejectment case would both stand to lose possession of the disputed property. his would

subvert the policy underlying actions for recovery of possession. /ince Pajuyo has in his favor priority in time in holding the property, he is entitled to remain on the property until a person

who has title or a better right lawfully ejects him. Guevarra is certainly not that person. he ruling in this case, however, does

not preclude Pajuyo and Guevarra from introducing evidence and presenting arguments before the proper administrative agency to establish any right to which they may be entitled under the law.A% #n no way should our ruling in this case be interpreted to condone s.uatting. he ruling on the issue of physical possession does not affect title to the property nor constitute a binding and conclusive adjudication on the merits on the issue of ownership. A= he owner can still go to court to recover lawfully the property from the person who holds the property without legal title. 3ur ruling here does not diminish the power of government agencies, including local governments, to condemn, abate, remove or demolish illegal or unauthori+ed structures in accordance with existing laws. Attorney*s 1ees and )entals

he ! " and , " failed to justify the award of P),''' attorneys fees to Pajuyo. $ttorneys fees as part of damages are awarded only in the instances enumerated in $rticle =='A of the "ivil "ode.A) hus, the award of attorneys fees is the exception rather than the rule.A? $ttorneys fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. A& -e therefore delete the attorneys fees awarded to Pajuyo. -e sustain the P)'' monthly rentals the ! " and , " assessed against Guevarra. Guevarra did not dispute this factual finding of the two courts. -e find the amount reasonable compensation to Pajuyo. he P)'' monthly rental is counted from the last demand to vacate, which was on %@ 9ebruary %88&. B9ERE#ORE, we GRANT the petition. he 4ecision dated =%

7une =''' and ,esolution dated %? 4ecember =''' of the "ourt of $ppeals in "$6G.,. /P (o. ?)%=8 are SET ASIDE. he 4ecision

dated %% (ovember %88@ of the ,egional rial "ourt of Iue+on "ity, <ranch A% in "ivil "ase (o. I68@6=@8?), affirming the 4ecision dated %& 4ecember %88& of the !etropolitan rial "ourt of Iue+on "ity, <ranch )% in "ivil "ase (o. %=?)=, is

REINSTATED with MODI#ICATION. he award of attorneys fees is deleted. (o costs. SO ORDERED. G.R. No. L'!4(6) A*+,- !., 1(.! SAURA IMPORT 2n3 E%PORT CO., INC., plaintiff6appellee, vs. DEVELOPMENT appellant. -abanag )liger and !ssociates and .aura -agno and !ssociates for plaintiff/appellee. 0esus !. !vance1a and Hilario 2. $rsolino for defendant/ &ANC O# T9E P9ILIPPINES, defendant6

appellant.

MACALINTAL, %.2p #n "ivil "ase (o. &&8'A of the "ourt of 9irst #nstance of !anila, judgment was rendered on 7une =A, %8@& sentencing defendant 4evelopment <ank of the Philippines :4<P; to pay actual and conse.uential damages to plaintiff /aura #mport and 1xport "o., #nc. in the amount of P)A),)?).@A, plus interest at the legal rate from the date the complaint was filed and attorneyEs fees in the amount of P&,'''.''. he present appeal is from that judgment. #n 7uly %8&) the plaintiff :hereinafter referred to as /aura, #nc.; applied to the ,ehabilitation 9inance "orporation :,9";, before its conversion into 4<P, for an industrial loan of P&'','''.'', to be used as follows2 P=&','''.'' for the construction of a factory building :for the manufacture of jute sacks;> P=?',8''.'' to pay

the balance of the purchase price of the jute mill machinery and e.uipment> and P8,%''.'' as additional working capital. Parenthetically, it may be mentioned that the jute mill machinery had already been purchased by /aura on the strength of a letter of credit extended by the Prudential <ank and rust "o., and

arrived in 4avao "ity in 7uly %8&)> and that to secure its release without first paying the draft, /aura, #nc. executed a trust receipt in favor of the said bank. 3n 7anuary *, %8&? ,9" passed ,esolution (o. %?& approving the loan application for P&'','''.'', to be secured by a first mortgage on the factory building to be constructed, the land site thereof, and the machinery and e.uipment to be installed. $mong the other terms spelled out in the resolution were the following2 %. hat the proceeds of the loan shall be utili+ed

exclusively for the following purposes2

9or construction of factory building P=&','''.'' 9or payment of the balance of purchase price of machinery and e.uipment =?',8''.'' 9or working capital 8,%''.'' 3 ?. $ 5 P&'','''.''

hat !r. M !rs. ,amon 1. /aura, #nocencia $rellano, $niceto

"aolboy and Gregoria 1stabillo and "hina 1ngineers, 5td. shall sign the promissory notes jointly with the borrower6corporation> &. hat release shall be made at the discretion of the

,ehabilitation 9inance "orporation, subject to availability of funds, and as the construction of the factory buildings progresses, to be certified to by an appraiser of this "orporation>D /aura, #nc. was officially notified of the resolution on 7anuary 8, %8&?. he day before, however, evidently having otherwise been

informed of its approval, /aura, #nc. wrote a letter to ,9",

re.uesting a modification of the terms laid down by it, namely2 that in lieu of having "hina 1ngineers, 5td. :which was willing to assume liability only to the extent of its stock subscription with /aura, #nc.; sign as co6maker on the corresponding promissory notes, /aura, #nc. would put up a bond for P%=),&''.'', an amount e.uivalent to such subscription> and that !aria /. ,oca would be substituted for #nocencia $rellano as one of the other co6makers, having ac.uired the latterEs shares in /aura, #nc. #n view of such re.uest ,9" approved ,esolution (o. *)@ on 9ebruary ?, %8&?, designating of the members of its <oard of Governors, for certain reasons stated in the resolution, Dto 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 <oard.D

3n !arch =?, %8&? /aura, #nc. wrote ,9" that "hina 1ngineers, 5td. had again agreed to act as co6signer for the loan, and asked that the necessary documents be prepared in accordance with the terms and conditions specified in ,esolution (o. %?&. #n connection with the reexamination of the project to be financed with the loan applied for, as stated in ,esolution (o. *)@, 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 /aura, #nc. made the observation that the same Dshould not be taken as an ac.uiescence on :its; part to novate, or accept new conditions to, the agreement already; entered into,D referring to its acceptance of the terms and conditions mentioned in ,esolution (o. %?&. 3n $pril %), %8&? the loan documents were executed2 the promissory note, with 9.,. Falling, representing "hina 1ngineers,

5td., as one of the co6signers> and the corresponding deed of mortgage, which was duly registered on the following $pril %*. #t appears, however, that despite the formal execution of the loan agreement the reexamination contemplated in ,esolution (o. *)@ proceeded. #n a meeting of the ,9" <oard of Governors on 7une %', %8&?, at which ,amon /aura, President of /aura, #nc., was present, it was decided to reduce the loan from P&'','''.'' to P)'','''.''. ,esolution (o. )8A8 was approved as follows2 ,1/350 #3( (o. )8A8. ,educing the 5oan Granted /aura #mport M 1xport "o., #nc. under ,esolution (o. %?&, "./., from P&'','''.'' to P)'','''.''. Pursuant to <d. ,es. (o. *)@, c.s., authori+ing the re6examination of all the various aspects of the loan granted the /aura #mport M 1xport "o. under ,esolution (o. %?&, c.s., for the purpose of financing the manufacture of jute sacks in 4avao, 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 ,amon 1. /aura and after extensive discussion on the subject the <oard, upon recommendation of the "hairman, ,1/35J14 that the loan granted the /aura #mport M 1xport "o. be ,140"14 from P&'',''' to P)'',''' and that releases up to P%'',''' may be authori+ed as may be necessary from time to time to place the factory in actual operation2 P,3J#414 that all terms and conditions of ,esolution (o. %?&, c.s., not inconsistent herewith, shall remain in full force and effect.D 3n 7une %8, %8&? another hitch developed. 9.,. Falling, who had signed the promissory note for "hina 1ngineers 5td. jointly and severally with the other ,9" that his company no longer to of the loan and therefore considered the same as cancelled as far as it was concerned. $ follow6up letter dated 7uly = re.uested ,9" that the registration of the mortgage be withdrawn. #n the meantime /aura, #nc. had written ,9" re.uesting that the

loan of P&'','''.'' be granted. he re.uest was denied by ,9", which added in its letter6reply that it was Dconstrained to consider as cancelled the loan of P)'','''.'' ... in view of a notification ... from the "hina 1ngineers 5td., expressing their desire to consider the loan insofar as they are concerned.D 3n 7uly =?, %8&? /aura, #nc. took exception to the cancellation of the loan and informed ,9" that "hina 1ngineers, 5td. Dwill at any time reinstate their signature as co6signer of the note if ,9" releases to us the P&'','''.'' originally approved by you.D. 3n 4ecember %*, %8&? ,9" passed ,esolution (o. 8'A), restoring the loan to the original amount of P&'','''.'', Dit appearing that "hina 1ngineers, 5td. is now willing to sign the promissory notes jointly with the borrower6corporation,D but with the following proviso2 hat in view of observations made of the shortage and high cost of imported raw materials, the

4epartment of $griculture and (atural ,esources shall certify to the following2 %. hat the raw materials needed by the borrower6

corporation to carry out its operation are available in the immediate vicinity> and =. hat there is prospect of increased production

thereof to provide ade.uately for the re.uirements of the factory.D he action thus taken was communicated to /aura, #nc. in a letter of ,9" dated 4ecember ==, %8&?, wherein it was explained that the certification by the 4epartment of $griculture and (atural ,esources was re.uired Das the intention of the original approval :of the loan; is to develop the manufacture of sacks on the basis of locally available raw materials.D his point is important, and

sheds light on the subse.uent actuations of the parties. /aura, #nc. does not deny that the factory he was building in 4avao was

for the manufacture of bags from local raw materials.

he cover

page of its brochure :1xh. !; describes the project as a D7oint venture by and between the !indanao #ndustry "orporation and the /aura #mport and 1xport "o., #nc. to finance, manage and operate a Kenaf mill plant, to manufacture copra and corn bags, runners, floor mattings, carpets, draperies> out of %''N local raw materials, principal kenaf.D he explanatory note on page % of the same brochure states that, the venture Dis the first serious attempt in this country to use %''N locally grown raw materials notably kenaf which is presently grown commercially in the#sland of !indanao where the proposed jutemill is located ...D his fact, according to defendant 4<P, is what moved ,9" to approve the loan application in the first place, and to re.uire, in its ,esolution (o. 8'A), a certification from the 4epartment of $griculture and (atural ,esources as to the availability of local raw materials to provide ade.uately for the re.uirements of the

factory. /aura, #nc. itself confirmed the defendantEs stand impliedly in its letter of 7anuary =%, %8&&2 :%; stating that according to a special study made by the <ureau of 9orestry Dkenaf will not be available in sufficient .uantity this year or probably even next year>D :=; re.uesting Dassurances :from ,9"; 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>D and :); asking that releases of the loan be made as follows2 a; 9or the payment of the receipt for jute mill machineries with the Prudential <ank M rust "ompany P=&','''.'' :9or immediate release; b; 9or the per purchase attached of list materials to enable and the e.uip6 jute

ment

mill to operate %A=,?%).8% c; 9or raw materials and labor @*,&A@.'8 %; P=&,'''.'' to be released on the open6 ing of the letter of credit for raw jute for O=&,'''.''. =; P=&,'''.'' to be released upon arrival of raw jute. ); P%*,&A@.'8 to be released as soon as the mill is ready to operate. 3n 7anuary =&, %8&& ,9" sent to /aura, #nc. the following reply2 4ear /irs2 his is with reference to your letter of 7anuary =%, %8&&, regarding the release of your loan under consideration of

P&'','''. $s stated in our letter of 4ecember ==, %8&?, 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. -e shall be able to act on your re.uest for revised purpose and manner of releases upon re6appraisal of the

securities offered for the loan. -ith respect to our re.uirement that the 4epartment of $griculture and (atural ,esources certify that the raw materials needed are available in the immediate vicinity and that there is prospect of increased production thereof to provide

ade.uately

the

re.uirements

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. Bour

statement that you will have to rely on the importation of jute and your re.uest 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. -ith the foregoing letter the negotiations came to a standstill. /aura, #nc. did not pursue the matter further. #nstead, it re.uested ,9" to cancel the mortgage, and so, on 7une %*, %8&& ,9"

executed the corresponding deed of cancellation and delivered it to ,amon 9. /aura himself as president of /aura, #nc. #t appears that the cancellation was re.uested to make way for the registration of a mortgage contract, executed on $ugust @, %8&?, over the same property in favor of the Prudential <ank and rust "o., under which contract /aura, #nc. had up to 4ecember )% of the same year within which to pay its obligation on the trust receipt heretofore mentioned. #t appears further that for failure to pay the said obligation the Prudential <ank and rust "o. sued /aura, #nc. on !ay %&, %8&&. 3n 7anuary 8, %8@?, ahnost 8 years after the mortgage in favor of ,9" was cancelled at the re.uest of /aura, #nc., the latter commenced the present suit for damages, alleging failure of ,9" :as predecessor of the defendant 4<P; 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. he 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. he defendant pleaded

below, and reiterates in this appeal2 :%; that the plaintiffEs cause of action had prescribed, or that its claim had been waived or abandoned> :=; that there was no perfected contract> and :); that assuming there was, the plaintiff itself did not comply with the terms thereof. -e hold that there was indeed a perfected consensual contract, as recogni+ed in $rticle %8)? of the "ivil "ode, which provides2 $, . %8&?. $n 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. here was undoubtedly offer and acceptance in this case2 the application of /aura, #nc. for a loan of P&'','''.'' was approved by resolution of the defendant, and the corresponding mortgage was executed and registered. <ut 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. #t should be noted that ,9" entertained the loan application of /aura, #nc. on the assumption that the factory to be constructed would utili+e locally grown raw materials, principally kenaf. here is no serious dispute about this. #t was in line with such assumption that when ,9", by ,esolution (o. 8'A) approved on 4ecember %*, %8&?, restored the loan to the original amount of P&'','''.''. it imposed two conditions, to wit2 D:%; that the raw materials needed by the borrower6corporation to carry out its

operation are available in the immediate vicinity> and :=; that there is prospect of increased production thereof to provide ade.uately for the re.uirements of the factory.D he imposition of those conditions was by no means a deviation from the terms of the agreement, but rather a step in its implementation. here was nothing in said conditions that contradicted the terms laid down in ,9" ,esolution (o. %?&, passed on 7anuary *, %8&?, namely C Dthat the proceeds of the loan shall be utili+ed e"clusively for the following purposes2 for construction of factory building C P=&','''.''> for payment of the balance of purchase price of machinery and e.uipment C P=?',8''.''> for working capital C P8,%''.''.D 1vidently /aura, #nc. reali+ed that it could not meet the conditions re.uired by ,9", and so wrote its letter of 7anuary =%, %8&&, stating that local jute Dwill not be able in sufficient .uantity this year or probably next year,D and asking that out of the loan agreed upon the sum of P@*,&A@.'8 be released Dfor raw

materials and labor.D

his was a deviation from the terms laid

down in ,esolution (o. %?& 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. -hen ,9" turned down the re.uest in its letter of 7anuary =&, %8&& the negotiations which had been going on for the implementation of the agreement reached an impasse. /aura, #nc. obviously was in no position to comply with ,9"Es conditions. /o instead of doing so and insisting that the loan be released as agreed upon, /aura, #nc. asked that the mortgage be cancelled, which was done on 7une %&, %8&&. he action thus taken by both

parties was in the nature cf mutual desistance C what !anresa terms Dmutuo disensoD
1

C which is a mode of extinguishing

obligations. #t 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. !

he subse.uent conduct of /aura, #nc. confirms this desistance. #t did not protest against any alleged breach of contract by ,9", or even point out that the latterEs stand was legally unjustified. #ts re.uest for cancellation of the mortgage carried no reservation of whatever rights it believed it might have against ,9" for the latterEs non6compliance. #n %8@= it even applied with 4<P for another loan to finance a rice and corn project, which application was disapproved. #t was only in %8@?, nine years after the loan agreement had been cancelled at its own re.uest, that /aura, #nc. brought this action for damages.$ll these circumstances

demonstrate beyond doubt that the said agreement had been extinguished by mutual desistance C and that on the initiative of the plaintiff6appellee itself. -ith 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.

-F1,193,1, the judgment appealed from is reversed and the complaint dismissed, with costs against the plaintiff6appellee.