REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, After hearing, on 30 July 1956 the trial court render judgment —
vs.
JOSE V. BAGTAS, defendant,
FELICIDAD M. BAGTAS, Administratrix of the Intestate Estate lft by the late Jose V.
Bagtas, petitioner-appellant.
G.R. No. L-17474 October 25, 1962
D. T. Reyes, Liaison and Associates for petitioner-appellant.
Office of the Solicitor General for plaintiff-appellee. e
PADILLA, J.:
The Court of Appeals certified this case to this Court because only questions of law are raised.
On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a
Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of one year from 8 May 1948
to 7 May 1949 for breeding purposes subject to a government charge of breeding fee of 10%
of the book value of the bulls. Upon the expiration on 7 May 1949 of the contract, the borrower
asked for a renewal for another period of one year. However, the Secretary of Agriculture and
Natural Resources approved a renewal thereof of only one bull for another year from 8 May
1949 to 7 May 1950 and requested the return of the other two. On 25 March 1950 Jose V.
Bagtas wrote to the Director of Animal Industry that he would pay the value of the three bulls.
On 17 October 1950 he reiterated his desire to buy them at a value with a deduction of yearly
depreciation to be approved by the Auditor General. On 19 October 1950 the Director of
Animal Industry advised him that the book value of the three bulls could not be reduced and
that they either be returned or their book value paid not later than 31 October 1950. Jose V.
Bagtas failed to pay the book value of the three bulls or to return them. So, on 20 December
1950 in the Court of First Instance of Manila the Republic of the Philippines commenced an
action against him praying that he be ordered to return the three bulls loaned to him or to pay
their book value in the total sum of P3,241.45 and the unpaid breeding fee in the sum of
P199.62, both with interests, and costs; and that other just and equitable relief be granted in
(civil No. 12818).
On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines from the refusal by the Director of Animal
Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8%
from the date of acquisition, to which depreciation the Auditor General did not object, he could
not return the animals nor pay their value and prayed for the dismissal of the complaint.
. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total value of the
three bulls plus the breeding fees in the amount of P626.17 with interest on both sums
of (at) the legal rate from the filing of this complaint and costs.
On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted
on 18 October and issued on 11 November 1958. On 2 December 1958 granted an ex-parte
motion filed by the plaintiff on November 1958 for the appointment of a special sheriff to serve
the writ outside Manila. Of this order appointing a special sheriff, on 6 December 1958,
Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who died on 23
October 1951 and as administratrix of his estate, was notified. On 7 January 1959 she file a
motion alleging that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the
Bureau Animal of Industry and that sometime in November 1958 the third bull, the Sahiniwal,
died from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal, and praying
that the writ of execution be quashed and that a writ of preliminary injunction be issued. On
31 January 1959 the plaintiff objected to her motion. On 6 February 1959 she filed a reply
thereto. On the same day, 6 February, the Court denied her motion. Hence, this appeal
certified by the Court of Appeals to this Court as stated at the beginning of this opinion.
It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late defendant,
returned the Sindhi and Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station,
Bureau of Animal Industry, Bayombong, Nueva Vizcaya, as evidenced by a memorandum
receipt signed by the latter (Exhibit 2). That is why in its objection of 31 January 1959 to the
appellant's motion to quash the writ of execution the appellee prays "that another writ of
execution in the sum of P859.53 be issued against the estate of defendant deceased Jose V.
Bagtas." She cannot be held liable for the two bulls which already had been returned to and
received by the appellee.
The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk
in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao,
Cagayan, where the animal was kept, and that as such death was due to force majeure she
is relieved from the duty of returning the bull or paying its value to the appellee. The contention
is without merit. The loan by the appellee to the late defendant Jose V. Bagtas of the three
bulls for breeding purposes for a period of one year from 8 May 1948 to 7 May 1949, later on
renewed for another year as regards one bull, was subject to the payment by the borrower of
breeding fee of 10% of the book value of the bulls. The appellant contends that the contract
was commodatum and that, for that reason, as the appellee retained ownership or title to the
bull it should suffer its loss due to force majeure. A contract of commodatum is essentially
gratuitous.1 If the breeding fee be considered a compensation, then the contract would be a
lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the
responsibilities of a possessor in bad faith, because she had continued possession of the bull
after the expiry of the contract. And even if the contract be commodatum, still the appellant is
liable, because article 1942 of the Civil Code provides that a bailee in a contract
of commodatum —
. . . is liable for loss of the things, even if it should be through a fortuitous event:
(2) If he keeps it longer than the period stipulated . . .
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a
stipulation exempting the bailee from responsibility in case of a fortuitous event;
The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was
renewed for another period of one year to end on 8 May 1950. But the appellant kept and
used the bull until November 1953 when during a Huk raid it was killed by stray bullets.
Furthermore, when lent and delivered to the deceased husband of the appellant the bulls had
each an appraised book value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56
and the Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to
fortuitous event the late husband of the appellant would be exempt from liability.
The appellant's contention that the demand or prayer by the appellee for the return of the bull
or the payment of its value being a money claim should be presented or filed in the intestate
proceedings of the defendant who died on 23 October 1951, is not altogether without merit.
However, the claim that his civil personality having ceased to exist the trial court lost
jurisdiction over the case against him, is untenable, because section 17 of Rule 3 of the Rules
of Court provides that —
After a party dies and the claim is not thereby extinguished, the court shall order, upon
proper notice, the legal representative of the deceased to appear and to be substituted
for the deceased, within a period of thirty (30) days, or within such time as may be
granted. . . .
and after the defendant's death on 23 October 1951 his counsel failed to comply with section
16 of Rule 3 which provides that —
Whenever a party to a pending case dies . . . it shall be the duty of his attorney to
inform the court promptly of such death . . . and to give the name and residence of the
executory administrator, guardian, or other legal representative of the deceased . . . .
The notice by the probate court and its publication in the Voz de Manila that Felicidad M.
Bagtas had been issue letters of administration of the estate of the late Jose Bagtas and that
"all persons having claims for monopoly against the deceased Jose V. Bagtas, arising from
contract express or implied, whether the same be due, not due, or contingent, for funeral
expenses and expenses of the last sickness of the said decedent, and judgment for monopoly
against him, to file said claims with the Clerk of this Court at the City Hall Bldg., Highway 54,
Quezon City, within six (6) months from the date of the first publication of this order, serving
a copy thereof upon the aforementioned Felicidad M. Bagtas, the appointed administratrix of
the estate of the said deceased," is not a notice to the court and the appellee who were to be
notified of the defendant's death in accordance with the above-quoted rule, and there was no
reason for such failure to notify, because the attorney who appeared for the defendant was
the same who represented the administratrix in the special proceedings instituted for the
administration and settlement of his estate. The appellee or its attorney or representative
could not be expected to know of the death of the defendant or of the administration
proceedings of his estate instituted in another court that if the attorney for the deceased
defendant did not notify the plaintiff or its attorney of such death as required by the rule.
As the appellant already had returned the two bulls to the appellee, the estate of the late
defendant is only liable for the sum of P859.63, the value of the bull which has not been
returned to the appellee, because it was killed while in the custody of the administratrix of his
estate. This is the amount prayed for by the appellee in its objection on 31 January 1959 to
the motion filed on 7 January 1959 by the appellant for the quashing of the writ of execution.
Special proceedings for the administration and settlement of the estate of the deceased Jose
V. Bagtas having been instituted in the Court of First Instance of Rizal (Q-200), the money
judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution
but must be presented to the probate court for payment by the appellant, the administratrix
appointed by the court.
ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as
to costs.
Credit Transactions Case Digest: Republic V. Bagtas (1962)
FACTS:
 May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau
of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of
P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding purposes subject to a
breeding fee of 10% of the book value of the bulls
 May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one bull
was approved while the others are to be returned
 March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of the 3
bulls
 October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly
depreciation to be approved by the Auditor General.
 October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be
returned or their book value without deductions should be paid not later than October 31, 1950
which he was not able to do
 December 20, 1950: An action at the CFI was commenced against Jose praying that he be
ordered to return the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee
of P199.62, both with interests, and costs
 July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that
because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural
Resources and the President of the Philippines, he could not return the animals nor pay their
value and prayed for the dismissal of the complaint.
 RTC: granted the action
 December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve the
writ outside Manila
 December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October 23,
1951 and administratrix of his estate, was notified
 January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26, 1952
evidenced by recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid and
prayed that the writ of execution be quashed and that a writ of preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the
loss due to force majeure due to delay.
HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs
 If contract was commodatum then Bureau of Animal Industry retained ownership or title to the bull
it should suffer its loss due to force majeure. A contract of commodatum is essentially
gratuitous. If the breeding fee be considered a compensation, then the contract would be a lease
of the bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities
of a possessor in bad faith, because she had continued possession of the bull after the expiry of
the contract. And even if the contract be commodatum, still the appellant is liable if he keeps it
longer than the period stipulated
 the estate of the late defendant is only liable for the sum of P859.63, the value of the bull which
has not been returned because it was killed while in the custody of the administratrix of his estate
 Special proceedings for the administration and settlement of the estate of the deceased Jose V.
Bagtas having been instituted in the CFI, the money judgment rendered in favor of the appellee
cannot be enforced by means of a writ of execution but must be presented to the probate court
for payment by the appellant, the administratrix appointed by the court.
CAROLYN M. GARCIA, Petitioner,
vs.
RICA MARIE S. THIO, Respondent.
DECISION
G.R. No. 154878 March 16, 2007
CORONA, J.:
Assailed in this petition for review on certiorari1 are the June 19, 2002 decision2 and August 20, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 56577 which set aside the February 28,
1997 decision of the Regional Trial Court (RTC) of Makati City, Branch 58.
Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M.
Garcia a crossed check4 dated February 24, 1995 in the amount of US$100,000 payable to the order
of a certain Marilou Santiago.5Thereafter, petitioner received from respondent every month
(specifically, on March 24, April 26, June 26 and July 26, all in 1995) the amount of US$3,0006 and
₱76,5007 on July 26,8 August 26, September 26 and October 26, 1995.
In June 1995, respondent received from petitioner another crossed check 9 dated June 29, 1995 in the
amount of ₱500,000, also payable to the order of Marilou Santiago.10 Consequently, petitioner
received from respondent the amount of ₱20,000 every month on August 5, September 5, October 5
and November 5, 1995.11
According to petitioner, respondent failed to pay the principal amounts of the loans (US$100,000 and
₱500,000) when they fell due. Thus, on February 22, 1996, petitioner filed a complaint for sum of
money and damages in the RTC of Makati City, Branch 58 against respondent, seeking to collect the
sums of US$100,000, with interest thereon at 3% a month from October 26, 1995 and ₱500,000, with
interest thereon at 4% a month from November 5, 1995, plus attorney’s fees and actual damages. 12
Petitioner alleged that on February 24, 1995, respondent borrowed from her the amount of
US$100,000 with interest thereon at the rate of 3% per month, which loan would mature on October
26, 1995.13 The amount of this loan was covered by the first check. On June 29, 1995, respondent
again borrowed the amount of ₱500,000 at an agreed monthly interest of 4%, the maturity date of
which was on November 5, 1995.14 The amount of this loan was covered by the second check. For
both loans, no promissory note was executed since petitioner and respondent were close friends at
the time.15 Respondent paid the stipulated monthly interest for both loans but on their maturity dates,
she failed to pay the principal amounts despite repeated demands.161awphi1.nét
Respondent denied that she contracted the two loans with petitioner and countered that it was
Marilou Santiago to whom petitioner lent the money. She claimed she was merely asked by petitioner
to give the crossed checks to Santiago.17 She issued the checks for ₱76,000 and ₱20,000 not as
payment of interest but to accommodate petitioner’s request that respondent use her own checks
instead of Santiago’s.18
In a decision dated February 28, 1997, the RTC ruled in favor of petitioner. 19 It found that respondent
borrowed from petitioner the amounts of US$100,000 with monthly interest of 3% and ₱500,000 at a
monthly interest of 4%:20
WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is
hereby rendered in favor of [petitioner], sentencing [respondent] to pay the former the amount of:
1. [US$100,000.00] or its peso equivalent with interest thereon at 3% per month from October
26, 1995 until fully paid;
2. ₱500,000.00 with interest thereon at 4% per month from November 5, 1995 until fully paid.
3. ₱100,000.00 as and for attorney’s fees; and
4. ₱50,000.00 as and for actual damages.
For lack of merit, [respondent’s] counterclaim is perforce dismissed.
With costs against [respondent].
IT IS SO ORDERED.21
On appeal, the CA reversed the decision of the RTC and ruled that there was no contract of loan
between the parties:
A perusal of the record of the case shows that [petitioner] failed to substantiate her claim that
[respondent] indeed borrowed money from her. There is nothing in the record that shows that
[respondent] received money from [petitioner]. What is evident is the fact that [respondent]
received a MetroBank [crossed] check dated February 24, 1995 in the sum of US$100,000.00,
payable to the order of Marilou Santiago and a CityTrust [crossed] check dated June 29, 1995 in the
amount of ₱500,000.00, again payable to the order of Marilou Santiago, both of which were issued by
[petitioner]. The checks received by [respondent], being crossed, may not be encashed but
only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself.
It must be noted that crossing a check has the following effects: (a) the check may not be encashed
but only deposited in the bank; (b) the check may be negotiated only once—to one who has an
account with the bank; (c) and the act of crossing the check serves as warning to the holder that the
check has been issued for a definite purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a holder in due course.
Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and delivery to
the payee in contemplation of law since the latter is not the person who could take the checks as a
holder, i.e., as a payee or indorsee thereof, with intent to transfer title thereto. Neither could she be
deemed as an agent of Marilou Santiago with respect to the checks because she was merely
facilitating the transactions between the former and [petitioner].
With the foregoing circumstances, it may be fairly inferred that there were really no contracts of loan
that existed between the parties. x x x (emphasis supplied) 22
Hence this petition.23
As a rule, only questions of law may be raised in a petition for review on certiorari under Rule 45 of
the Rules of Court. However, this case falls under one of the exceptions, i.e., when the factual
findings of the CA (which held that there were no contracts of loan between petitioner and
respondent) and the RTC (which held that there werecontracts of loan) are contradictory.24
The petition is impressed with merit.
A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object
of the contract.25 This is evident in Art. 1934 of the Civil Code which provides:
An accepted promise to deliver something by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the
object of the contract. (Emphasis supplied)
Upon delivery of the object of the contract of loan (in this case the money received by the debtor
when the checks were encashed) the debtor acquires ownership of such money or loan proceeds and
is bound to pay the creditor an equal amount.26
It is undisputed that the checks were delivered to respondent. However, these checks were crossed
and payable not to the order of respondent but to the order of a certain Marilou Santiago. Thus the
main question to be answered is: who borrowed money from petitioner — respondent or Santiago?
Petitioner insists that it was upon respondent’s instruction that both checks were made payable to
Santiago.27 She maintains that it was also upon respondent’s instruction that both checks were
delivered to her (respondent) so that she could, in turn, deliver the same to Santiago. 28 Furthermore,
she argues that once respondent received the checks, the latter had possession and control of them
such that she had the choice to either forward them to Santiago (who was already her debtor), to
retain them or to return them to petitioner.29
We agree with petitioner. Delivery is the act by which the res or substance thereof is placed within the
actual or constructive possession or control of another.30 Although respondent did not physically
receive the proceeds of the checks, these instruments were placed in her control and possession
under an arrangement whereby she actually re-lent the amounts to Santiago.
Several factors support this conclusion.
First, respondent admitted that petitioner did not personally know Santiago. 31 It was highly improbable
that petitioner would grant two loans to a complete stranger without requiring as much as promissory
notes or any written acknowledgment of the debt considering that the amounts involved were quite
big. Respondent, on the other hand, already had transactions with Santiago at that time.32
Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both
parties’ list of witnesses) testified that respondent’s plan was for petitioner to lend her money at a
monthly interest rate of 3%, after which respondent would lend the same amount to Santiago at a
higher rate of 5% and realize a profit of 2%.33 This explained why respondent instructed petitioner to
make the checks payable to Santiago. Respondent has not shown any reason why Ruiz’ testimony
should not be believed.
Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of
₱76,000 each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the
₱500,000 loan, she also issued her own checks in the amount of ₱20,000 each for four
months.34 According to respondent, she merely accommodated petitioner’s request for her to issue
her own checks to cover the interest payments since petitioner was not personally acquainted with
Santiago.35 She claimed, however, that Santiago would replace the checks with cash. 36Her
explanation is simply incredible. It is difficult to believe that respondent would put herself in a position
where she would be compelled to pay interest, from her own funds, for loans she allegedly did not
contract. We declared in one case that:
In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to
be believed, it must not only proceed from the mouth of a credible witness, but must be credible in
itself such as the common experience of mankind can approve as probable under the circumstances.
We have no test of the truth of human testimony except its conformity to our knowledge, observation,
and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of juridical
cognizance.37
Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner,
who was listed as one of her (Santiago’s) creditors.38
Last, respondent inexplicably never presented Santiago as a witness to corroborate her story.39 The
presumption is that "evidence willfully suppressed would be adverse if produced." 40 Respondent was
not able to overturn this presumption.
We hold that the CA committed reversible error when it ruled that respondent did not borrow the
amounts of US$100,000 and ₱500,000 from petitioner. We instead agree with the ruling of the RTC
making respondent liable for the principal amounts of the loans.
We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the
US$100,000 and ₱500,000 loans respectively. There was no written proof of the interest payable
except for the verbal agreement that the loans would earn 3% and 4% interest per month. Article
1956 of the Civil Code provides that "[n]o interest shall be due unless it has been expressly stipulated
in writing."
Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to
Article 2209 of the Civil Code. It is well-settled that:
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.41
Hence, respondent is liable for the payment of legal interest per annum to be computed from
November 21, 1995, the date when she received petitioner’s demand letter. 42 From the finality of the
decision until it is fully paid, the amount due shall earn interest at 12% per annum, the interim period
being deemed equivalent to a forbearance of credit.43
The award of actual damages in the amount of ₱50,000 and ₱100,000 attorney’s fees is deleted
since the RTC decision did not explain the factual bases for these damages.
WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20,
2002 resolution of the Court of Appeals in CA-G.R. CV No. 56577 are REVERSED and SET ASIDE.
The February 28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266
is AFFIRMED with the MODIFICATION that respondent is directed to pay petitioner the amounts of
US$100,000 and ₱500,000 at 12% per annum interest from November 21, 1995 until the finality of
the decision. The total amount due as of the date of finality will earn interest of 12% perannum until
fully paid. The award of actual damages and attorney’s fees is deleted.
SO ORDERED. 20 Id., pp. 79 and 89.
RENATO C. CORONA 21 Id., pp. 94-95.
Associate Justice 22 Id., pp. 100-101, citation omitted.

WE CONCUR:
REYNATO S. PUNO 23 The issues submitted for resolution are the following:
Chief Justice
Chairperson
(A) Is actual and physical delivery of the money loaned directly from the lender to the
ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA borrower the only way to perfect a contract of loan?
Associate Justice Asscociate Justice
CANCIO C. GARCIA (B) Does the respondent’s admission that she paid interests to the petitioner on the
Associate Justice amounts represented by the two checks given to her by said petitioner render said
CERTIFICATION respondent in estoppel to question that there was no loan transaction between her
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above and the petitioner?
decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.
(C) Is respondent’s written manifestation in the trial court, through counsel, that she
REYNATO S. PUNO
interposes no objection to the admission of petitioner’s documentary exhibits for the
Chief Justice
multiple purposes specified in the latter’s Formal Offer of Documentary Exhibits a
judicial admission governed by Rule 129, Section 4, Rules of Court?
Footnotes
1 Under Rule 45 of the Rules of Court.
2 Penned by former Associate Justice Eubulo G. Verzola (deceased) and concurred in by (D) Is this Honorable Court bound by the conclusions of fact relied upon by the [CA]
Associate Justices Bernardo P. Abesamis (retired) and Josefina Guevara-Salonga of the in issuing its disputed Decision?
Third Division of the Court of Appeals; rollo, pp. 98-102.
3 Id., pp. 104-105. (E) Have the [RTC’s] findings of fact on the lone issue on which respondent litigated
4 This was Metrobank check no. 26910; id., pp. 70, 224 and 368. in the [RTC], viz.existence of privity of contract between petitioner and respondent,
5 Id., pp. 60, 100-101, 224. been overturned or set aside by the [CA]?
6 Id., pp. 60-61. According to respondent, she originally issued four postdated checks each in

the amount of ₱76,000 on the same dates mentioned but these were not encashed and
instead each check was replaced by Santiago with US$3,000 in cash given by respondent to
petitioner; id., p. 224.
7 This was the peso equivalent of US$3,000 computed at the exchange rate of ₱25.50 to
$1.00; id., pp. 17 and 88. These postdated checks were deposited on their respective due
dates and honored by the drawee bank; id., p. 225.
8 According to respondent, this check was replaced by Santiago with cash in the amount of
US$3,000.
9 This was City Trust check no. 467257; rollo, pp. 90 and 327.
10 Id., pp. 60, 101 and 225.
11 Id., p. 109.
12 Docketed as Civil Case No. 96-266; rollo, pp. 15, 60 and 364.
13 Id., p. 109.
14 Id., p. 110.
15 Id., p. 16.
(F) May the respondent validly change the theory of her case from one of privity of
contract between her and the petitioner in the [RTC], to one of not being a holder in
due course of the crossed checks payable to a third party in the [CA] and before this
Honorable Court?
(G) Is the petitioner’s entitlement to interest, despite absence of a written stipulation
on the payment thereof, justified?
(H) Is the deletion by the [CA] of the [RTC’s] award of attorney’s fees and actual
damages in favor pf the petitioner justified? Id., pp. 401-402.
24 Philippine National Bank v. Andrada Electric & Engineering Co., G.R. No. 142936, 17 April
2002, 381 SCRA 244, 253, citing Fuentes v. CA, 335 Phil. 1163, 1167-1169 (1997).
25 Naguiat v. Court of Appeals, G.R. No. 118375, 3 October 2003, 412 SCRA 591, 597.

16 Id., p. 110. 26 Article 1953 of the Civil Code states:

17 Id., p. 224. A person who receives a loan of money or any other fungible thing acquires the
18 Id. ownership thereof, and is bound to pay to the creditor an equal amount of the same
19 Id., pp. 60-95. kind and quality.
 27 Rollo, p. 39. G.R. No. L-46145 November 26, 1986
28 Id. REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner,
29 Id., pp. 39-40.
vs.
30 Buenaflor v. Court of Appeals, G.R. No. 142021, 29 November 2000, 346 SCRA 563, 569,
THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY, represented by RICARDO
citing Black's Law Dictionary, 5th ed. BALOY, ET AL., respondents.
31 Rollo, p. 64.
Pelaez, Jalondoni, Adriano and Associates for respondents.
32 Id., p. 70.
33 Id., pp. 76 and 85.
PARAS, J.:p
34 Id., pp. 16-17, 224-225, 411.
35 Id., p. 224.
This case originally emanated from a decision of the then Court of First Instance of Zambales in LRC
36 Id., p. 70.
Case No. 11-0, LRC Record No. N-29355, denying respondents' application for registration. From
37 People v. Mala, G.R. No. 152351, 18 September 2003, 411 SCRA 327, 337, citing People
said order of denial the applicants, heirs of Domingo Baloy, represented by Ricardo P. Baloy, (herein
v. Dayag, 155 Phil. 421, 431 (1974). private respondents) interposed on appeal to the Court of Appeals which was docketed as CA-G.R.
38 Rollo, pp. 88 and 94.
No. 52039-R. The appellate court, thru its Fifth Division with the Hon. Justice Magno Gatmaitan as
39 Id., p. 93.
ponente, rendered a decision dated February 3, 1977 reversing the decision appealed from and thus
40 Sec. 3 (e), Rule 131, Rules of Court.
approving the application for registration. Oppositors (petitioners herein) filed their Motion for
41 Eusebio-Calderon v. People, G.R. No. 158495, 21 October 2004, 441 SCRA 137, 148-149,
Reconsideration alleging among other things that applicants' possessory information title can no
citing Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 longer be invoked and that they were not able to prove a registerable title over the land. Said Motion
SCRA 78, 95; Cabrera v. People, G.R. No. 150618, 24 July 2003, 407 SCRA 247, 261. for Reconsideration was denied, hence this petition for review on certiorari.
42 Rollo, p. 65.
43 Cabrera v. People, supra.
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
GARCIA vs. THIO in question. An examination of the possessory information title shows that the description and the
(Obligation to Deliver) area of the land stated therein substantially coincides with the land applied for and that said
· A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object possessory information title had been regularly issued having been acquired by applicants'
of the contract. predecessor, Domingo Baloy, under the provisions of the Spanish Mortgage Law. Applicants
· Art. 1934. An accepted promise to deliver something by way of commodatum or simple loan is binding presented their tax declaration on said lands on April 8, 1965.
upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of
the object of the contract. The Director of Lands opposed the registration alleging that this land had become public land thru the
· Upon delivery of the object of the contract of loan (in this case the money received by the debtor when operation of Act 627 of the Philippine Commission. On November 26, 1902 pursuant to the executive
the checks were encashed) the debtor acquires ownership of such money or loan proceeds and is order of the President of the U.S., the area was declared within the U.S. Naval Reservation. Under
bound to pay the creditor an equal amount. Act 627 as amended by Act 1138, a period was fixed within which persons affected thereby could file
· Delivery is the act by which the res or substance thereof is placed within the actual or constructive their application, (that is within 6 months from July 8, 1905) otherwise "the said lands or interest
possession or control of another. Although respondent did not physically receive the proceeds of the therein will be conclusively adjudged to be public lands and all claims on the part of private individuals
checks, these instruments were placed in her control and possession under an arrangement whereby for such lands or interests therein not to presented will be forever barred." Petitioner argues that since
she actually re-lent the amounts to Santiago. Domingo Baloy failed to file his claim within the prescribed period, the land had become irrevocably
public and could not be the subject of a valid registration for private ownership.

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

... perhaps, the consequence was that upon failure of Domingo Baloy to have filed his application
within that period the land had become irrevocably public; but perhaps also, for the reason that
warning was from the Clerk of the Court of Land Registration, named J.R. Wilson and there has not
been presented a formal order or decision of the said Court of Land Registration so declaring the land
public because of that failure, it can with plausibility be said that after all, there was no judicial
declaration to that effect, it is true that the U.S. Navy did occupy it apparently for some time, as a
recreation area, as this Court understands from the communication of the Department of Foreign
Affairs to the U.S. Embassy exhibited in the record, but the very tenor of the communication
apparently seeks to justify the title of herein applicants, in other words, what this Court has taken from
the occupation by the U.S. Navy is that during the interim, the title of applicants was in a state of
suspended animation so to speak but it had not died either; and the fact being that this land was
really originally private from and after the issuance and inscription of the possessory information Exh.
F during the Spanish times, it would be most difficult to sustain position of Director of Lands that it
was land of no private owner; open to public disposition, and over which he has control; and since
immediately after U.S. Navy had abandoned the area, applicant came in and asserted title once
again, only to be troubled by first Crispiniano Blanco who however in due time, quitclaimed in favor of
applicants, and then by private oppositors now, apparently originally tenants of Blanco, but that entry
of private oppositors sought to be given color of ownership when they sought to and did file tax
declaration in 1965, should not prejudice the original rights of applicants thru their possessory
information secured regularly so long ago, the conclusion must have to be that after all, applicants
had succeeded in bringing themselves within the provisions of Sec. 19 of Act 496, the land should be
registered in their favor;
IN VIEW WHEREOF, this Court is constrained to reverse, as it now reverses, judgment appealed
from the application is approved, and once this decision shall have become final, if ever it would be,
let decree issue in favor of applicants with the personal circumstances outlined in the application,
costs against private oppositors.
Petitioner now comes to Us with the following:
ASSIGNMENT OF ERRORS:
1. Respondent court erred in holding that to bar private respondents from asserting any right under
their possessory information title there is need for a court order to that effect.
2. Respondent court erred in not holding that private respondents' rights by virtue of their possessory
information title was lost by prescription.
3. Respondent court erred in concluding that applicants have registerable title.
A cursory reading of Sec. 3, Act 627 reveals that several steps are to be followed before any affected
land can "be conclusively adjudged to be public land." Sec. 3, Act 627 reads as follows:
SEC. 3. Immediately upon receipt of the notice from the civil Governor in the preceeding section
mentioned it shall be the duty of the judge of the Court of Land Registration to issue a notice, stating
that the lands within the limits aforesaid have been reserved for military purposes, and announced
and declared to be military reservations, and that claims for all private lands, buildings, and interests
therein, within the limits aforesaid, must be presented for registration under the Land Registration Act
within six calendar months from the date of issuing the notice, and that all lands, buildings, and
interests therein within the limits aforesaid not so presented within the time therein limited will be
conclusively adjudged to be public lands and all claims on the part of private individuals for such
lands, buildings, or an interest therein not so presented will be forever barred. The clerk of the Court
of Land Registration shall immediately upon the issuing of such notice by the judge cause the same
to be published once a week for three successive weeks in two newspapers, one of which
newspapers shall be in the English Language, and one in the Spanish language in the city or
province where the land lies, if there be no such Spanish or English newspapers having a general
circulation in the city or province wherein the land lies, then it shall be a sufficient compliance with this
section if the notice be published as herein provided, in a daily newspaper in the Spanish language
and one in the English language, in the City of Manila, having a general circulation. The clerk shall
also cause a duly attested copy of the notice in the Spanish language to be posted in conspicuous
place at each angle formed by the lines of the limits of the land reserved. The clerk shall also issue
and cause to be personally served the notice in the Spanish language upon every person living upon
or in visible possession of any part of the military reservation. If the person in possession is the head
of the family living upon the hand, it shall be sufficient to serve the notice upon him, and if he is
absent it shall be sufficient to leave a copy at his usual place of residence. The clerk shall certify the
manner in which the notices have been published, posted, and served, and his certificate shall be
conclusive proof of such publication, posting, and service, but the court shall have the power to cause
such further notice to be given as in its opinion may be necessary.
Clearly under said provisions, private land could be deemed to have become public land only by
virtue of a judicial declaration after due notice and hearing. It runs contrary therefore to the contention
of petitioners that failure to present claims set forth under Sec. 2 of Act 627 made the land ipso
facto public without any deed of judicial pronouncement. Petitioner in making such declaration relied
on Sec. 4 of Act 627 alone. But in construing a statute the entire provisions of the law must be
considered in order to establish the correct interpretation as intended by the law-making body. Act
627 by its terms is not self-executory and requires implementation by the Court of Land Registration.
Act 627, to the extent that it creates a forfeiture, is a penal statute in derogation of private rights, so it
must be strictly construed so as to safeguard private respondents' rights. Significantly, petitioner does
not even allege the existence of any judgment of the Land Registration court with respect to the land
in question. Without a judgment or order declaring the land to be public, its private character and the
possessory information title over it must be respected. Since no such order has been rendered by the
Land Registration Court it necessarily follows that it never became public land thru the operation of
Act 627. To assume otherwise is to deprive private respondents of their property without due process
of law. In fact it can be presumed that the notice required by law to be given by publication and by
personal service did not include the name of Domingo Baloy and the subject land, and hence he and
his lane were never brought within the operation of Act 627 as amended. The procedure laid down in
Sec. 3 is a requirement of due process. "Due process requires that the statutes which under it is
attempted to deprive a citizen of private property without or against his consent must, as in
expropriation cases, be strictly complied with, because such statutes are in derogation of general
rights." (Arriete vs. Director of Public Works, 58 Phil. 507, 508, 511).
We also find with favor private respondents' views that court judgments are not to be presumed. It
would be absurd to speak of a judgment by presumption. If it could be contended that such a
judgment may be presumed, it could equally be contended that applicants' predecessor Domingo
Baloy presumably seasonably filed a claim, in accordance with the legal presumption that a person
takes ordinary care of his concerns, and that a judgment in his favor was rendered.
The finding of respondent court that during the interim of 57 years from November 26, 1902 to
December 17, 1959 (when the U.S. Navy possessed the area) the possessory rights of Baloy or heirs
were merely suspended and not lost by prescription, is supported by Exhibit "U," a communication or
letter No. 1108-63, dated June 24, 1963, which contains an official statement of the position of the
Republic of the Philippines with regard to the status of the land in question. Said letter recognizes the
fact that Domingo Baloy and/or his heirs have been in continuous possession of said land since 1894
as attested by an "Informacion Possessoria" Title, which was granted by the Spanish Government.
Hence, the disputed property is private land and this possession was interrupted only by the
occupation of the land by the U.S. Navy in 1945 for recreational purposes. The U.S. Navy eventually
abandoned the premises. The heirs of the late Domingo P. Baloy, are now in actual possession, and
this has been so since the abandonment by the U.S. Navy. A new recreation area is now being used
by the U.S. Navy personnel and this place is remote from the land in question.

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

WHEREFORE, premises considered, finding no merit in the petition the appealed decision is hereby
AFFIRMED.
SO ORDERED.
Feria (Chairman), Alampay and Feliciano, * JJ., concur.
Gutierrez, Jr., J., concurs in the results.
Fernan J., took no part.

Credit Transaction:

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.