BPI Investment Corp v. CA and ALS MANAGEMENT & DEVELOPMENT CORPORATION, 377 SCRA 117, G.R. no.

133632, February 15, 2002

CLAIMS:
BPI-IC: instituted foreclosure proceedings against ALS and Litonjua on the ground that they failed to pay the mortgage indebtedness which from
May 1, 1981 to June 30, 1984 amounting to P475,585.31.
In their petition to the SC, they contended that:
1.
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.
2.
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.
3.
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 Roas 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 Roas loan below
said amount. According to petitioner, private respondents were only able to do so in August 1982.
ALS & LITONJUA:
1.
that they were not in arrears in their payment, but in fact made an overpayment as of June 30, 1984.
2.
that they should not be made to pay amortization before the actual release of the P500,000 loan in August and September 1982.
3.
Further, out of the P500,000 loan, only the total amount of P464,351.77 was released to private respondents.
4.
Hence, applying the effects of legal compensation, the balance of P35,648.23 should be applied to the initial monthly amortization
for the loan
In their comment to the petition of the BPI-IC, they:
1.
Asserted 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.
2.
maintained 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.
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the loan?
HELD:
The obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract.
The contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. 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. 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.
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 and the date when it was released. Such negligence resulted in damage for which an award of nominal damages
should be given.
SSS where we awarded attorneys fees because private respondents were compelled to litigate, we sustain the award of P50,000 in favor of private
respondents as attorneys fees.

CATHOLIC VICAR APOSTOLIC v. CA

G.R. No. L-80294-95 September 21, 1988
Gancayco, J.
Doctrine:
The bailees' failure to return the subject matter of commodatum to the bailor does not mean adverse possession on the
part of the borrower. The bailee held in trust the property subject matter of commodatum.
Claims of Vicar and heirs of valdez

- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with the court an application for the registration
of title over lots 1, 2, 3 and 4 situated in Poblacion Central, Benguet, said lots being used as sites of the Catholic Church, building,
convents, high school building, school gymnasium, dormitories, social hall and stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have ownership over lots 1, 2 and 3. (2 separate civil
cases)
- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3 and 4. Upon appeal by the private respondents
(heirs), the decision of the lower court was reversed. Title for lots 2 and 3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing
his application for registration of Lots 2 and 3.
- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the alleged ownership of the land in question (Lot 3)
by their predecessor-in-interest, Egmidio Octaviano; his written demand to Vicar for the return of the land to them; and the reasonable
rentals for the use of the land at P10,000 per month. On the other hand, Vicar presented the Register of Deeds for the Province of
Benguet, Atty. Sison, who testified that the land in question is not covered by any title in the name of Egmidio Octaviano or any of the
heirs. Vicar dispensed with the testimony of Mons. Brasseur when the heirs admitted that the witness if called to the witness stand,
would testify that Vicar has been in possession of Lot 3, for 75 years continuously and peacefully and has constructed permanent
structures thereon.
Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in commodatum, a gratuitous loan for use.
Held: YES.
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 petitioner Vicar 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.
Republic of the Philippines vs. Jose Bagtas, Felicidad Bagtas, administratrix of the intestateestate left by Jose Bagtas
Claims:

Bagtas borrowed three bulls from the Bureau of Animal Industry for a period of one year with breeding charge at 10% of book value.
After one year, the contract was renewed only for one bull but Bagtas did not return the two, one of which died because of gunshot
wound during the Huk raid.
Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for a period of one year for breeding
purposes subject to a government charge of breeding fee of 10% of the book value of the books.
Upon the expiration of the contract, Bagtas asked for a renewal for another one year, however, the Secretary of
Agriculture and Natural Resources approved only the renewal for one bull and other two bulls be returned.
Bagtas then wrote a letter to the Director of Animal Industry that he would pay the value of the three bulls with a
deduction of yearly depreciation. The Director advised him that the value cannot be depreciated and asked
Bagtas to either return the bulls or pay their book value.
Bagtas neither paid nor returned the bulls.
Claims REPUBLIC:
The Republic then commenced an action against Bagtas ordering him to return the bulls or pay their book value.

After hearing, the trial Court ruled in favor of the Republic, as such, the Republic moved ex parte for a writ of
execution which the court granted.
Felicidad Bagtas, the surviving spouse and administrator of Bagtas estate, returned the two bulls and filed a
motion to quash the writ of execution since one bull cannot be returned for it was killed by gunshot during a Huk
raid. The Court denied her motion hence, this appeal certified by the Court of Appeals because only questions of
law are raised.

Issue: Is Bagtas liable for the loss of the bull?

Held: Supreme Court held that Bagtas was liable for the loss of the bull even though it was caused by a fortuitous event. If the contract
was one of lease, then the 10% breeding charge is compensation (rent) for the use of the bull and Bagtas, as lessee, is subject to the
responsibilities of a possessor. He is also in bad faith because he continued to possess the bull even though the term of the contract has
already expired. If the contract was one of commodatum, he is still liable because: (1) he kept the bull longer than the period
stipulated; and (2) the thing loaned has been delivered with appraisal of its value (10%).
A contract of commodatum is essentially gratuitous. Supreme Court held that Bagtas was liable for the loss of the
bull even though it was caused by a fortuitous event.
If the contract was one of lease, then the 10% breeding charge is compensation (rent) for the use of the bull and
Bagtas, as lessee, is subject to the responsibilities of a possessor. He is also in bad faith because he continued to
possess the bull even though the term of the contract has already expired.
If the contract was one of commodatum, he is still liable because: (1) he kept the bull longer than the period
stipulated; and (2) the thing loaned has been delivered with appraisal of its value (10%). No stipulation that in
case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.
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.
MINA V PASCUAL

Facts:
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. 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 11meters 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 oneseventh of the first one-half to the children of oneof 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 Court 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 reguardianship.
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 So, the warehouse, together with the lot on which it
stands, was sold to Cu Joco, the other defendant in this case.
MINa: 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 reguardianship. The plaintiffs did
more than oppose Pascual's petition; they requested the court, through motion, to decide the question of the ownership of the lotbefore
it pass upon the petition for the sale of the warehouse.
Pascual: Ruperta Pascual, as the guardian of her minor children, the herein defendants, petitioned the Court 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.
Issue:
Whether or not the sale was valid?
Held:
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,
nearlyidentical 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 abuilding 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 byarticle 361 of the Civil Code. Art.
448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his
own theworks, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built
or planted to pay theprice of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to

buy the land if its value isconsiderably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner
of the land does not choose toappropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the courtshall fix the terms thereof. (361a) Art. 449. He who builds, plants or sows in bad faith on
the land of another, loses what is built, planted or sown without right to indemnity.
G.R. No. L-46240
November 3, 1939
MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants,
vs.
BECK, defendant-appellee.
FACTS:
Quintos and Beck entered a contract of lease, whereby Beck will occupy Quintos house. Quintos granted Beck the use of the furniture
found on the leased house, among these were three gas heaters and 4four electric lamps, subject to the condition that the defendant
would return them to the plaintiff upon the latter's demand. Quintos sold the property to MariaLopez and Rosario Lopez and thereafter
notified Beck of the conveyance, giving him sixty days to vacate the premises under one of the clauses of the contract. Quintos also
required Beck return all the furniture transferred to him.
Defendants Claim:
Beck informed Quintos that the latter can get the furniture at the ground floor of the house. At a later date, Beck told Quintos that he
will return only the other furniture but not the gas heaters and the electric lamps as he is to return them only after the expiration of the
lease contract. When the lease contract expired, Beck deposited the furniture to the sheriffs warehouse.
Plaintiffs Claim:
Quintos refused to get the furniture because Beck declined to deliver all of them. Consequently, Quintos brought an action to compel
Beck to return her certain furniture. The trial court ruled in favour of Beck holding that Quintos failed to comply with her obligation to
get the furniture when they were offered to her. On appeal, the Court of First Instance of Manila affirmed the lower courts decision.
Hence, this petition.
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 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.
ISSUE: Whether or not the defendant is bound to return the furniture to the plaintiff upon demand.
RULING:
YES. The contract entered into between the parties is one of commadatum. 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. 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. (clause 7 of the
contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code) 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 electric 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.
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.
FACTS:
De los Santos owned 10 carabaos which he lent to Jimenea to be used in animal-power mill of his hacienda. The 10 carabaos were not
returned upon De los Santos demand. Jimenea died and Jarra was appointed to be the administratrix of his estate. De los Santos filed
for the exclusion of his carabaos with the commissioners of Jimeneas estate. The commissioners rejected her claim.
Defendants claim:
Jarra was contending that only 3 carabaos were given to Jimenea and afterwards these 3 were also sold to him (Jimenea). T
Plaintiffs claim:
The defendant has admitted that Jimenea asked the plaintiff for the loan of ten, as shown by two letters addressed by the said Jimenea
to Felix de los Santos; but 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 to prove that Jimenea
only received three carabaos from his son-in-law Santos, and that they were sold to him.
The record shows that it has been fully proven from the testimony of witnesses that Santos, sent in charge of various persons the ten
carabaos requested by Jimenea, in the two letters, and that Jimenea received them in the presence of said persons, one being a brother
of said Jimenea, who saw the animals arrive at the hacienda. Four died of rinderpest, leaving six surviving carabaos.

The alleged purchase of three carabaos 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 cannot 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.
The court stated that Jarra had no basis in his claim and rendered judgment against to him to give 6 carabaos or its equivalent value .
Jarra appealed.
ISSUE: Whether or not the contract is one of commodatum.
YES. The carabaos were given on commodatum as these were delivered to be used by defendant. The Supreme Court held that there is
no evidence of the sale between Jimenea and de los Santos. The carabaos delivered to be used were not returned by Jiminea upon
demand. There is no doubt that Jarra is under the obligation to indemnify delos Santos. Since the 6 carabaos were not the property of
the deceased or of any of his descendants, it is the duty of the administratrix of the estate to either return them or indemnify the owner
thereof of their value.
The obligation of the bailee or of his successors to return either the thing loaned or its value is sustained by the tribunal of Spain which
said in its decision (mentioned jurisprudence): legal doctrine touching commodatum as follows: Although it is true that in a contract of
commodatum the bailor retains the ownership of thing loaned 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.
G.R. No. L-24968 April 27, 1972
SAURA IMPORT and EXPORT CO., INC., plaintiff-appellee,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.
FACTS:
In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an industrial loan of P500,000 to be used for the
following:

the construction of a factory building (P250,000.00),

to pay the balance of the jute mill machinery and equipment (240,900.00); and

as additional working capital (9,100.00).

In Resolution No.145, the loan application was approved to be secured first by mortgage on the factory buildings, the land site, and
machinery and equipment to be installed.
The mortgage was registered and documents for the promissory note were executed. But then, later on, was cancelled to make way for
the registration of a mortgage contract over the same property in favor of Prudential Bank and Trust Co., the latter having issued Saura
letter of credit for the release of the jute machinery. As security, Saura execute a trust receipt in favor of the Prudential. For failure of
Saura to pay said obligation, Prudential sued Saura.
After almost 9 years, Saura Inc, commenced an action against RFC.
Plaintiffs claim:
There was failure of RFC to comply with its obligations to release 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 ruled in favor of Saura, ruling that there was a perfected contract between the parties and that the RFC was guilty of
breach thereof.
Defendants Claims:
(1) 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.
ISSUE: Whether or not there was a perfected contract between the parties.
RULING:
YES. There was indeed a perfected consensual contract.
Article 1934 provides: An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties,
but the commodatum or simple loan itself shall not be perfected until delivery of the object of the contract.
There was undoubtedly offer and acceptance in the 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
When an application for a loan of money was approved by resolution of the respondent corporation and the responding mortgage was
executed and registered, there arises a perfected consensual contract.
However, it should be noted that RFC imposed two conditions (availability of raw materials and increased production) when it
restored the loan to the original amount of P500,000.00.
Saura, Inc. obviously was in no position to comply with RFCs conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage be cancelled. The action thus taken by both parties was in the nature of

mutual desistance 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.
WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.
Pajuyo v. CA
GR No. 146364 June 3, 2004
Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he should return the same upon
demand and with the condition that Guevara should be responsible of the maintenance of the property. Upon
demand Guevara refused to return the property to Pajuyo. The petitioner then filed an ejectment case against
Guevara with the MTC who ruled in favor of the petitioner. On appeal with the CA, the appellate court reversed
the judgment of the lower court on the ground that both parties are illegal settlers on the property thus have no
legal right so that the Court should leave the present situation with respect to possession of the property as it
is, and ruling further that the contractual relationship of Pajuyo and Guevara was that of a commodatum.

CLAIMS:
Pajuyo raises the following issues for resolution:
WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND DISCRETION TANTAMOUNT TO
LACK OF JURISDICTION:
1. In ruling that the Kasunduan voluntarily entered into by the parties was in fact a commodatum,
instead of a Contract of Lease as found by the Metropolitan Trial Court and in holding that the ejectment case
filed against defendant-appellant is without legal and factual basis.
2. In reversing and setting aside the Decision of the Regional Trial Court in Civil Case No. Q-96-26943
and in holding that the parties are in pari delicto being both squatters, therefore, illegal occupants of the
contested parcel of land.
3. In deciding the unlawful detainer case based on the so-called Code of Policies of the National
Government Center Housing 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.
CA:
1. Pajuyo and Guevarra are squatters. Pajuyo and Guevarra illegally occupied the contested lot which the

government owned.
2. Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no right or
title over the lot because it is public land. The assignment of rights between Perez and Pajuyo, and
the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo and Guevarra are
in pari delicto or in equal fault. The court will leave them where they are.
3. Reversed the MTC and RTC 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 of Appeals ruled that
the Kasunduan is not a lease contract but a commodatum because the agreement is not for a price
certain.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a commodatum?

Held: No. The Court of Appeals theory that the Kasunduan is one of commodatum is devoid of merit. 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. An essential feature of commodatum is that it is gratuitous.
Another feature of commodatum is that the use of the thing belonging to another is for a certain period. Thus,
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. If the bailor should have urgent need of
the thing, he may demand its return for temporary use. If 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. Under
the Civil Code, precarium is a kind of commodatum. The Kasunduan reveals that the accommodation accorded
by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay
rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes the
Kasunduan a contract different from a commodatum. The effects of the Kasunduan are also different from that
of a commodatum. Case law on ejectment has treated relationship based on tolerance as one that is akin to a
landlord-tenant relationship where the withdrawal of permission would result in the termination of the lease.
The tenants withholding of the property would then be unlawful.

Producers Bank of the Philippines vs CA (2003)

Facts:
Doronilla is in the process of incorporating his business and to comply with one of the requirements of incorporation, he caused
Vives to issue a check which was then deposited in Doronillas savings account. It was agreed that Vives can withdraw his money in
a months time. However, what Doronilla did was to open a current account and instructed the bank to debit from the savings account
and deposit it in his current account. So when Vives checked the savings account, the money was gone.
Claims:
Petitioner:
1.
The transaction between private respondent and Doronilla is a simple loan (mutuum) since all the elements of amutuum are
present: first, what was delivered by private respondent to Doronilla was money, a consumable thing; and second, the transaction was
onerous as Doronilla was obliged to pay interest, as evidenced by the check issued by Doronilla in the amount of P212,000.00, or
P12,000 more than what private respondent deposited in Sterelas bank account.
2.
Petitioners Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing Doronilla to withdraw from the savings
account of Sterela since the latter was the sole proprietor of said company. Petitioner asserts that Doronillas May 8, 1979 letter
addressed to the bank, authorizing Mrs. Vives and Sanchez to open a savings account for Sterela, did not contain any authorization for
these two to withdraw from said account. Hence, the authority to withdraw therefrom remained exclusively with Doronilla, who was
the sole proprietor of Sterela, and who alone had legal title to the savings account. Petitioner points out that no evidence other than the
testimonies of private respondent and Mrs. Vives was presented during trial to prove that private respondent deposited his
P200,000.00 in Sterelas account for purposes of its incorporation. Hence, petitioner should not be held liable for allowing Doronilla
to withdraw from Sterelas savings account.
3.
The Court of Appeals erred in affirming the trial courts decision since the findings of fact therein were not accord with the
evidence presented by petitioner during trial to prove that the transaction between private respondent and Doronilla was a mutuum,
and that it committed no wrong in allowing Doronilla to withdraw from Sterelas savings account.
4.
Petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the actual damages suffered by
private respondent, and neither may it be held liable for moral and exemplary damages as well as attorneys fees.

Respondent:
1.
the transaction between him and Doronilla is not a mutuum but an accommodation,[21]since he did not actually part with the
ownership of his P200,000.00 and in fact asked his wife to deposit said amount in the account of Sterela so that a certification can be
issued to the effect that Sterela had sufficient funds for purposes of its incorporation but at the same time, he retained some degree of
control over his money through his wife who was made a signatory to the savings account and in whose possession the savings
account passbook was given.
2.
The trial court did not err in finding that petitioner, Atienzas employer, is liable for the return of his money. He insists that
Atienza, petitioners assistant manager, connived with Doronilla in defrauding private respondent since it was Atienza who facilitated
the opening of Sterelas current account three days after Mrs. Vives and Sanchez opened a savings account with petitioner for said
company, as well as the approval of the authority to debit Sterelas savings account to cover any overdrawings in its current account.
Issue/s:
(1)WON the transaction is a commodatum or a mutuum. COMMODATUM.
(2) WON the fact that there is an additional P 12,000 (allegedly representing interest) inthe amount to be returned to Vives converts
the transaction from commodatum tomutuum. NO.
(3)WON Producers Bank is solidarily liable to Vives, considering that it was not privy tothe transaction between Vives and
Doronilla. YES.
Held/Ratio:

Supreme Court held that the contract is a commodatum. Although in a commodatum, the object is a non-consumable thing, there are
instances where a consumable thing may be the object of a commodatum, such as when the purpose is not for consumption of the
object but merely for exhibition (Art. 1936). Thus, if consumable goods are loaned only for purposes of exhibition, or when the
intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the
loan is a commodatum and not a mutuum.

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

Commodatum (The Bailor)Facts:

Petitioner Emilia Manzano alleged that she is the owner of a residential house and lot situated at General Luna St.
Laguna. In 1979, Nieves Manzano, sister of the petitioner borrowed the aforementioned property as collateral for a
projected loan. Pursuant to their understanding, the petitioner executed two deeds of conveyance for the sale of the
residential lot and the house erected, both for a consideration of P1.00 plus other valuables allegedly received by her
from Nieves Manzano. Nieves Manzano, together with her husband, respondent Miguel Perez, Sr. obtained a loan
fromthe Rural Bank of Infanta, Inc. in the sum of P30,000.00. To secure payment of their indebtedness, they executed a
Real Estate Mortgage 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 refused to return the subject property to the petitioner even after
the payment of their loan with the Rural Bank. 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, and award of damages. The Court of Appeals
ruled that it was not convinced by petitioner's claim that there was a supposed oral agreement of commodatum over
the disputed house and lot. Hence, this petition.
Contention of petitioner
The petitioner alleged that properties in question after they have been transferred to Nieves Manzano, were mortgaged
in favor of the Rural Bank of Infanta, Inc to secure payment of the loan. 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. These are a clear recognition by respondents that petitioner is the owner of the
properties in question
Contention of respondents
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.

Resolution:
The court ruled that 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 such payment was made
only after her Complaint had already been lodged before the trial court. Neither can the court give weight to her

allegation that respondent's possession of the subject property was merely by virtue of her tolerance. Oral testimony
cannot, as a rule, prevail over a written agreement of the parties. 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. 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.

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 lawmaking 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.