[G.R. No. L-48349. December 29, 1986.
] agreed to be paid, as the case may be; and (4) a
FRANCISCO HERRERA, plaintiff appellant
vs. PETROPHIL CORPORATION,defendant-appellee.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; LEASE;
ADVANCE PAYMENT OF RENTALS; CANNOT BE
CONSTRUED AS REPAYMENT OF A LOAN. — As its
title plainly indicates, the contract between the
parties is one of lease and not of loan. It is clearly
denominated a "LEASE AGREEMENT". Nowhere in
the contract is there any showing that the parties
intended a loan rather than a lease. The provision for
the payment of rentals in advance cannot be
construed as a repayment of a loan because there
was no grant or forbearance of money as to
constitute an indebtedness on the part of the lessor.
On the contrary, the defendant-appellee was
discharging its obligation in advance by paying the
eight years rentals, and it was for this advance
payment that it was getting a rebate or discount.
2. ID.; ID.; ID.; DISCOUNT PROVISION;
VALIDITY THEREOF. — The provision for a discount
is not unusual in lease contracts. As to its validity, it is
settled that the parties may establish such
stipulations, clauses, terms and conditions as they
may want to include; and as long as such agreements
are not contrary to law, morals, good customs, public
policy or public order, they shall have the force of law
between them.
3. ID.; ID.; USURY LAW; NO APPLICATION IN
THE CASE AT BAR. — There is no usury in this case
because no money was given by the defendant-
appellee to the plaintiff-appellant, nor did it allow
him to use its money already in his possession. There
was neither loan nor forbearance but a mere
discount which the plaintiff-appellant allowed the
defendant-appellee to deduct from the total
payments because they were being made in advance
for eight years. The discount was in effect a reduction
of the rentals which the lessor had the right to
determine, and any reduction thereof, by any
amount, could not contravene the Usury Law.
4. ID.; ID.; DISCOUNT AND LOAN,
DIFFERENTIATED. — The difference between a
discount and a loan or forbearance is that the former
does not have to be repaid. The loan or forbearance is
subject to repayment and is therefore governed by
the laws on usury. To constitute usury, "there must
be loan or forbearance; the loan must be money or
something circulating as money; it must be repayable
absolutely and in all events; and something must be
exacted for the use of the money in excess of and in
addition to interest allowed by law."
5. ID.; ID.; ELEMENTS OF USURY. — It has
been held that the elements of usury are (1) a loan
express or implied; (2) an understanding between
the parties that the money lent shall or may be
returned; (3) that for such loan a greater rate or
interest that is allowed by law shall be paid, or
corrupt intent to take more than the legal rate for the
use of money loaned. Unless these four things concur
in every transaction, it is safe to affirm that no case of
usury can be declared.
6. ID.; CONTRACTS; INTERPRETED
ACCORDING TO THEIR LITERAL MEANING, NOT
BEYOND INTENTION OF PARTIES. — Computation of
the deductible discount appears to be too technical
mumbo jumbo and could not have been the intention
of the parties to the transaction. Had it been so, then
lit should have been clearly stipulated in the contract.
Contracts should be interpreted according to their
literal meaning and should not be interpreter beyond
their obvious intendment.
DECISION
CRUZ, J p:
This is an appeal by the plaintiff-appellant from a
decision rendered by the then Court of First Instance
of Rizal on a pure question of law.
The judgment appealed from was rendered on the
pleadings, the parties having agreed during the
pretrial conference on the factual antecedents.
The facts are as follows:
On December 5, 1969, the plaintiff-appellant and
ESSO Standard Eastern, Inc., (later substituted by
Petrophil Corporation) entered into a "Lease
Agreement" whereby the former leased to the latter a
portion of his property for a period of twenty (20)
years from said date, subject inter alia to the
following conditions:
"3. Rental: The LESSEE shall pay the LESSOR a rental
of P1.40 sqm. per month on 400 sqm. and are to be
expropriated later on (sic) or P560 per month and
P1.40 per sqm. per month on 1,693 sqm. or
P2,370.21 per month or a total of P2,930.20 per
month 2,093 sqm. more or less, payable yearly in
advance within the 1st twenty days of each year;
provided, a financial aid in the sum of P15,000 to
clear the leased premises of existing improvements
thereon is paid in this manner; P10,000 upon
execution of this lease and P5,000 upon delivery of
leased premises free and clear of improvements
thereon within 30 days from the date of execution of
this agreement. The portion on the side of the leased
premises with an area of 365 sqm. more or less, will
be occupied by LESSEE without rental during the
lifetime of this lease. PROVIDED FINALLY, that the
Lessor is paid 8 years advance rental based on
P2,930.70 per month discounted at 12% interest per
annum or a total net amount of P130,288.47 before
registration of lease. Leased premises shall be
delivered within 30 days after 1st partial payment of
financial aid."
On December 31, 1969, pursuant to the said contract,
the defendant-appellee paid to the plaintiff-appellant
advance rentals for the first eight years, subtracting
therefrom the amount of P101,010.73, the amount it
computed as constituting the interest or discount for
the first eight years, in the total sum P180,288.47. On
August 20, 1970, the defendant-appellee, explaining
that there had been a mistake in computation, paid to
the plaintiff-appellant the additional sum of
P2,182.70, thereby reducing the deducted amount to
only P98,828.03.
On October 14, 1974, the plaintiff-appellant sued the
defendant-appellee for the sum of P98,828.03, with
interest, claiming this had been illegally deducted
from him in violation of the Usury Law. He also
prayed for moral damages and attorney's fees. In its
answer, the defendant-appellee admitted the factual
allegations of the complaint but argued that the
amount deducted was not usurious interest but a
discount given to it for paying the rentals in advance
for eight years. Judgment on the pleadings was
rendered for the defendant.
Plaintiff-appellant now prays for a reversal of that
Judgment, insisting that the lower court erred in the
computation of the interest collected out of the
rentals paid for the first eight years; that such
interest was excessive and violative of the Usury
Law; and that he had neither agreed to nor accepted
the defendant-appellant's computation of the total
amount to be deducted for the eight years advance
rentals.
The thrust of the plaintiff-appellant's position is set
forth in paragraph 6 of his complaint, which read:
"6. The interest collected by defendant out of the
rentals for the first eight years was excessive and
beyond that allowable by law, because the total
interest on the said amount is only P33,755.90 at
P4,219.4880 per yearly rental; and considering that
the interest should be computed excluding the first
year rental because at the time the amount of
P281,199.20 was paid it was already due under the
lease contract hence no interest should be collected
from the rental for the first year, the amount of
P29,536.42 only as the total interest should have
been deducted by defendant from the sum of
P281,299.20."
The defendant maintains that the correct amount of
the discount is P98,828.03 and that the same is not
excessive and above that allowed by law.
As its title plainly indicates, the contract between the
parties is one of lease and not of loan. It is clearly
denominated a "LEASE AGREEMENT." Nowhere in
the contract is there any showing that the parties
intended a loan rather than a lease. The provision for
the payment of rentals in advance cannot be
construed as a repayment of a loan because there
was no grant or forbearance of money as to
constitute an indebtedness on the part of the lessor.
On the contrary, the defendant-appellee was
discharging its obligation in advance by paying the
eight years rentals, and it was for this advance
payment that it was getting a rebate or discount.
The provision for a discount is not unusual in lease
contracts. As to its validity, it is settled that the
parties may establish such stipulations, clauses,
terms and condition as they may want to include; and
as long as such agreements are not contrary to law,
morals, good customs, public policy or public order,
they shall have the force of law between them.
There is no usury in this case because no money was
given by the defendant-appellee to the plaintiff-
appellant, nor did it allow him to use its money
already in his possession. There was neither loan nor
forbearance but a mere discount which the plaintiff-
appellant allowed the defendant-appellee to deduct
from the total payments because they were being
made in advance for eight years. The discount was in
effect a reduction of the rentals which the lessor had
the right to determine, and any reduction thereof, by
any amount, would not contravene the Usury Law.
The difference between a discount and a loan or
forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to
repayment and is therefore governed by the laws on
usury. To constitute usury, "there must be loan or
forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely
and in all events; and something must be exacted for
the use of the money in excess of and in addition to
interest allowed by law."
It has been held that the elements of usury are (1) a
loan, express or implied; (2) an understanding
between the parties that the money lent shall or may
be returned; (3) that for such loan a greater rate or
interest that is allowed by law shall be paid, or
agreed to be paid, as the case may be; and (4) a
corrupt intent to take more than the legal rate for the
use of money loaned. Unless these four things concur
in every transaction, it is safe to affirm that no case of
usury can be declared.
Concerning the computation of the deductible
discount, the trial court declared:
"As above-quoted, the 'Lease Agreement' expressly
provides that the lessee (defendant) shall pay the
lessor (plaintiff) eight (8) years in advance rentals
based on P2,930.20 per month discounted at 12%
interest per annum. Thus, the total rental for one-
year period is P35,162.40 (P2,930.20 multiplied by
12 months) and that the interest therefrom is
P4,219.4880 (P35,162.40 multiplied by 12%). So,
therefore, the total interest for the first eight (8)
years should be only P33,755.90 (P4,129.4880
multiplied by eight (8) years) and not P98,828.03 as
the defendant claimed it to be."
"The afore-quoted manner of computation made by
plaintiff is patently erroneous. It is most seriously
misleading. He just computed the annual discount to
be at P4,129.4880 and then simply multiplied it by
eight (8) years. He did not take into consideration the
naked fact that the rentals due on the eight year were
paid in advance by seven (7) years, the rentals due on
the seventh year were paid in advance by six (6)
years, those due on the sixth year by five (5) years,
those due on the fifth year by four (4) years, those
due on the fourth year by three (3) years, those due
on the third year by two (2) years, and those due on
the second year by one (1) year, so much so that the
total number of years by which the annual rental of
P4,129.4880 was paid in advance is twenty-eight
(28), resulting in a total amount of P118,145.44
(P4,129.48 multiplied by 28 years) as the discount.
However, defendant was most fair to plaintiff. It did
not simply multiply the annual rental discount by 28
years. It computed the total discount with the
principal diminishing month to month as shown by
Annex 'A' of its memorandum. This is why the total
discount amount to only P8,828.03.
"The allegation of plaintiff that defendant made the
computation in a compounded manner is erroneous.
Also after making its own computations and after
examining closely defendant's Annex 'A' of its
memorandum, the court finds that defendant did not
charge 12% discount on the rentals due for the first
year so much so that the computation conforms with
the provision of the Lease Agreement to the effect
that the rentals shall be `payable yearly in advance
within the 1st 20 days of each year.'"
On the annual rental of P35,168.40, the deducted
12% discount was P4,220.21; and for eight years, the
total rental was P281,347.20 from which was
deducted the total discount of P33,761.68, leaving a
difference of P247,585.52. Subtracting from this
amount, the sum of P182,471.17 already paid will
leave a balance of P65,114.35 still due the plaintiff-
appellant.
The above computation is based on the more
reasonable interpretation of the contract as a
whole rather on the single stipulation invoked by the
respondent for the flat reduction of P130,288.47.
WHEREFORE, the decision of the trial court is hereby
modified, and the defendant-appellee Petrophil
Corporation is ordered to pay plaintiff-appellant the
amount of Sixty Five Thousand One Hundred
Fourteen pesos and Thirty-Five Centavos
(P65,114.35), with interest at the legal rate until fully
paid, plus Ten Thousand Pesos (P10,000.00) as
attorney's fees. Costs against the defendant-appellee.
SO ORDERED.

We do not agree. The above computation appears to

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

The plaintiff-appellant simply understood that for

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

The lower court, following the defendant-appellee's

formula, declared that the plaintiff-appellant had
actually agreed to a 12% reduction for advance
rentals for all oftwenty eight years. That is absurd. It
is not normal for a person to agree to a reduction
corresponding to twenty eight years advance rentals
when all he is receiving in advance rentals is for only
eight years.

The deduction shall be for only eight years because

that was plainly what the parties intended at the time
they signed the lease agreement. "Simplistic" it may
be, as the Solicitor General describes it, but that is
how the lessor understood the arrangement, In fact,
the Court will reject his subsequent modification that
the interest should be limited to only seven years
because the first year rental was not being paid in
advance. The agreement was for a uniform deduction
for the advance rentals for each of the eight years,
and neither of the parties can deviate from it now.
[G.R. No. 174269. May 8, 2009.]
POLO S. PANTALEON, petitioner, vs. AMERICAN
EXPRESS INTERNATIONAL, INC., respondent.
DECISION
TINGA, J p:
The petitioner, lawyer Polo Pantaleon, his
wife Julialinda, daughter Anna Regina and son Adrian
Roberto, joined an escorted tour of Western Europe
organized by Trafalgar Tours of Europe, Ltd., in
October of 1991. The tour group arrived in
Amsterdam in the afternoon of 25 October 1991, the
second to the last day of the tour. As the group had
arrived late in the city, they failed to engage in any
sight-seeing. Instead, it was agreed upon that they
would start early the next day to see the entire city
before ending the tour.
The following day, the last day of the tour, the
group arrived at the Coster Diamond House in
Amsterdam around 10 minutes before 9:00 a.m. The
group had agreed that the visit to Coster should end
by 9:30 a.m. to allow enough time to take in a guided
city tour of Amsterdam. The group was ushered into
Coster shortly before 9:00 a.m., and listened to a
lecture on the art of diamond polishing that lasted for
around ten minutes. 1 Afterwards, the group was led
to the store's showroom to allow them to select items
for purchase. Mrs. Pantaleon had already planned to
purchase even before the tour began a 2.5 karat
diamond brilliant cut, and she found a diamond close
enough in approximation that she decided to
buy. 2 Mrs. Pantaleon also selected for purchase a
pendant and a chain, 3 all of which totaled U.S.
$13,826.00.
To pay for these purchases, Pantaleon
presented his American Express credit card together
with his passport to the Coster sales clerk. This
occurred at around 9:15 a.m., or 15 minutes before
the tour group was slated to depart from the store.
The sales clerk took the card's imprint, and asked
Pantaleon to sign the charge slip. The charge
purchase was then referred electronically to
respondent's Amsterdam office at 9:20 a.m.
Ten minutes later, the store clerk informed
Pantaleon that his AmexCard had not yet been
approved. His son, who had already boarded the tour
bus, soon returned to Coster and informed the other
members of the Pantaleon family that the entire tour
group was waiting for them. As it was already 9:40
a.m., and he was already worried about further
inconveniencing the tour group, Pantaleon asked the
store clerk to cancel the sale. The store manager
though asked plaintiff to wait a few more minutes.
After 15 minutes, the store manager informed
Pantaleon that respondent had demanded bank
references. Pantaleon supplied the names of his
depositary banks, then instructed his daughter to
return to the bus and apologize to the tour group for
the delay.
At around 10:00 a.m., or around 45 minutes
after Pantaleon had presented his AmexCard, and 30
minutes after the tour group was supposed to have
left the store, Coster decided to release the items
even without respondent's approval of the purchase.
The spouses Pantaleon returned to the bus. It is
alleged that their offers of apology were met by their
tourmates with stony silence. 4 The tour group's
visible irritation was aggravated when the tour guide
announced that the city tour of Amsterdam was to be
canceled due to lack of remaining time, as they had to
catch a 3:00 p.m. ferry at Calais, Belgium to
London. 5 Mrs. Pantaleon ended up weeping, while
her husband had to take a tranquilizer to calm his
nerves.
It later emerged that Pantaleon's purchase
was first transmitted for approval to respondent's
Amsterdam office at 9:20 a.m., Amsterdam time, then
referred to respondent's Manila office at 9:33 a.m.,
then finally approved at 10:19 a.m., Amsterdam
time. 6 The Approval Code was transmitted to
respondent's Amsterdam office at 10:38 a.m., several
minutes after petitioner had already left Coster, and
78 minutes from the time the purchases were
electronically transmitted by the jewelry store to
respondent's Amsterdam office.
After the star-crossed tour had ended, the
Pantaleon family proceeded to the United States
before returning to Manila on 12 November 1992.
While in the United States, Pantaleon continued to
use his AmEx card, several times without hassle or
delay, but with two other incidents similar to the
Amsterdam brouhaha. On 30 October 1991,
Pantaleon purchased golf equipment amounting to
US $1,475.00 using his AmEx card, but he cancelled
his credit card purchase and borrowed money
instead from a friend, after more than 30 minutes had
transpired without the purchase having been
approved. On 3 November 1991, Pantaleon used the
card to purchase children's shoes worth $87.00 at a
store in Boston, and it took 20 minutes before this
transaction was approved by respondent.
On 4 March 1992, after coming back to
Manila, Pantaleon sent a letter 7 through counsel to
the respondent, demanding an apology for the
"inconvenience, humiliation and embarrassment he
and his family thereby suffered" for respondent's
refusal to provide credit authorization for the
aforementioned purchases. 8 In response,
respondent sent a letter dated 24 March
1992, 9 stating among others that the delay in
authorizing the purchase from Coster was
attributable to the circumstance that the charged
purchase of US $13,826.00 "was out of the usual
charge purchase pattern established". 10 Since
respondent refused to accede to Pantaleon's demand
for an apology, the aggrieved cardholder instituted an
action for damages with the Regional Trial Court
(RTC) of Makati City, Branch 145. 11Pantaleon
prayed that he be awarded P2,000,000.00, as moral
damages; P500,000.00, as exemplary damages;
P100,000.00, as attorney's fees; and P50,000.00 as
litigation expenses. 12

On 5 August 1996, the Makati City RTC
rendered a decision 13 in favor of Pantaleon,
awarding him P500,000.00 as moral damages,
P300,000.00 as exemplary damages, P100,000.00 as
attorney's fees, and P85,233.01 as expenses of
litigation. Respondent filed a Notice of Appeal, while
Pantaleon moved for partial reconsideration, praying
that the trial court award the increased amount of
moral and exemplary damages he had prayed
for. 14 The RTC denied Pantaleon's motion for partial
reconsideration, and thereafter gave due course to
respondent's Notice of Appeal. 15
On 18 August 2006, the Court of Appeals
rendered a decision 16 reversing the award of
damages in favor of Pantaleon, holding that
respondent had not breached its obligations to
petitioner. Hence, this petition.
The key question is whether respondent, in
connection with the aforementioned transactions,
had committed a breach of its obligations to
Pantaleon. In addition, Pantaleon submits that even
assuming that respondent had not been in breach of
its obligations, it still remained liable for damages
under Article 21 of the Civil Code.
The RTC had concluded, based on the
testimonial representations of Pantaleon and
respondent's credit authorizer, Edgardo Jaurigue,
that the normal approval time for purchases was "a
matter of seconds". Based on that standard,
respondent had been in clear delay with respect to
the three subject transactions. As it appears, the
Court of Appeals conceded that there had been delay
on the part of respondent in approving the
purchases. However, it made two critical conclusions
in favor of respondent. First, the appellate court ruled
that the delay was not attended by bad faith, malice,
or gross negligence. Second, it ruled that respondent
"had exercised diligent efforts to effect the approval"
of the purchases, which were "not in accordance with
the charge pattern" petitioner had established for
himself, as exemplified by the fact that at Coster, he
was "making his very first single charge purchase of
US$13,826", and "the record of [petitioner]'s past
spending with [respondent] at the time does not
favorably support his ability to pay for such
purchase." 17
On the premise that there was an obligation
on the part of respondent "to approve or disapprove
with dispatch the charge purchase", petitioner argues
that the failure to timely approve or disapprove the
purchase constituted mora solvendi on the part of
respondent in the performance of its obligation. For
its part, respondent characterizes the depiction by
petitioner of its obligation to him as "to approve
purchases instantaneously or in a matter of seconds."
Petitioner correctly cites that under mora
solvendi, the three requisites for a finding of default
are that the obligation is demandable and liquidated;
the debtor delays performance; and the creditor
judicially or extrajudicially requires the debtor's
performance. 18 Petitioner asserts that the Court of
Appeals had wrongly applied the principle of mora
accipiendi, which relates to delay on the part of the
obligee in accepting the performance of the
obligation by the obligor. The requisites of mora
accipiendi are: an offer of performance by the debtor
who has the required capacity; the offer must be to
comply with the prestation as it should be
performed; and the creditor refuses the performance
19 The error of the appellate court, argues petitioner,
is in relying on the invocation by respondent of "just
cause" for the delay, since while just cause is
determinative of mora accipiendi, it is not so with the
case of mora solvendi.
We can see the possible source of confusion
as to which type of mora to appreciate. Generally, the
relationship between a credit card provider and its
card holders is that of creditor-debtor, 20 with the
card company as the creditor extending loans and
credit to the card holder, who as debtor is obliged to
repay the creditor. This relationship already takes
exception to the general rule that as between a bank
and its depositors, the bank is deemed as the debtor
while the depositor is considered as the
creditor. 21 Petitioner is asking us, not baselessly, to
again shift perspectives and again see the credit card
company as the debtor/obligor, insofar as it has the
obligation to the customer as creditor/obligee to act
promptly on its purchases on credit.
Ultimately, petitioner's perspective appears
more sensible than if we were to still regard
respondent as the creditor in the context of this cause
of action. If there was delay on the part of respondent
in its normal role as creditor to the cardholder, such
delay would not have been in the acceptance of the
performance of the debtor's obligation (i.e., the
repayment of the debt), but it would be delay in the
extension of the credit in the first place. Such delay
would not fall under mora accipiendi, which
contemplates that the obligation of the debtor, such
as the actual purchases on credit, has already been
constituted. Herein, the establishment of the debt
itself (purchases on credit of the jewelry) had not yet
been perfected, as it remained pending the approval
or consent of the respondent credit card company.
Still, in order for us to appreciate that
respondent was in mora solvendi, we will have to first
recognize that there was indeed an obligation on the
part of respondent to act on petitioner's purchases
with "timely dispatch", or for the purposes of this
case, within a period significantly less than the one
hour it apparently took before the purchase at Coster
was finally approved.
The findings of the trial court, to our mind,
amply established that the tardiness on the part of
respondent in acting on petitioner's purchase at
Coster did constitute culpable delay on its part in
complying with its obligation to act promptly on its
customer's purchase request, whether such action be
favorable or unfavorable. We quote the trial court,
thus:
 As to the first issue, both parties have
testified that normal approval time for purchases was
a matter of seconds.
Plaintiff testified that his personal experience
with the use of the card was that except for the three
charge purchases subject of this case, approvals of his
charge purchases were always obtained in a matter
of seconds.
Defendant's credit authorizer Edgardo
Jaurique likewise testified:
Q. You also testified that on normal occasions, the
normal approval time for charges would be 3 to 4
seconds?
A. Yes, Ma'am.
Both parties likewise presented evidence that the
processing and approval of plaintiff's charge
purchase at the Coster Diamond House was way
beyond the normal approval time of a "matter of
seconds".
Plaintiff testified that he presented his Amex
Card to the sales clerk at Coster, at 9:15 a.m. and by
the time he had to leave the store at 10:05 a.m., no
approval had yet been received. In fact, the Credit
Authorization System (CAS) record of defendant at
Phoenix Amex shows that defendant's Amsterdam
office received the request to approve plaintiff's
charge purchase at 9:20 a.m., Amsterdam time or
01:20, Phoenix time, and that the defendant relayed
its approval to Coster at 10:38 a.m., Amsterdam time,
or 2:38, Phoenix time, or a total time lapse of one
hour and [18] minutes. And even then, the approval
was conditional as it directed in computerese
[sic] "Positive Identification of Card holder necessary
further charges require bank information due to high
exposure. By Jack Manila".
The delay in the processing is apparent to be undue
as shown from the frantic successive queries of
Amexco Amsterdam which reads: "US$13,826. Card
member buying jewels. ID seen. Advise how long will
this take?" They were sent at 01:33, 01:37, 01:40,
01:45, 01:52 and 02:08, all times Phoenix.
Manila Amexco could be unaware of the need for
speed in resolving the charge purchase referred to it,
yet it sat on its hand, unconcerned.
xxx xxx xxx
To repeat, the Credit Authorization System (CAS)
record on the Amsterdam transaction shows how
Amexco Netherlands viewed the delay as unusually
frustrating. In sequence expressed in Phoenix time
from 01:20 when the charge purchased was referred
for authorization, defendants own record shows:
01:22 — the authorization is referred to Manila
Amexco
01:32 — Netherlands gives information that the
identification of the cardmember has been presented
and he is buying jewelries worth US $13,826.
01:33 — Netherlands asks "How long will this take?"
02:08 — Netherlands is still asking "How long will
this take?"
The Court is convinced that defendants delay
constitute[s] breach of its contractual obligation to
act on his use of the card abroad "with special
handling". 22 (Citations omitted)
xxx xxx xxx
Notwithstanding the popular notion that
credit card purchases are approved "within seconds",
there really is no strict, legally determinative point of
demarcation on how long must it take for a credit
card company to approve or disapprove a customer's
purchase, much less one specifically contracted upon
by the parties. Yet this is one of those instances when
"you'd know it when you'd see it", and one hour
appears to be an awfully long, patently unreasonable
length of time to approve or disapprove a credit card
purchase. It is long enough time for the customer to
walk to a bank a kilometer away, withdraw money
over the counter, and return to the store.
Notably, petitioner frames the obligation of
respondent as "to approve or disapprove" the
purchase "in timely dispatch", and not "to approve
the purchase instantaneously or within seconds".
Certainly, had respondent disapproved petitioner's
purchase "within seconds" or within a timely
manner, this particular action would have never seen
the light of day. Petitioner and his family would have
returned to the bus without delay — internally
humiliated perhaps over the rejection of his card —
yet spared the shame of being held accountable by
newly-made friends for making them miss the chance
to tour the city of Amsterdam.
We do not wish do * dispute that respondent
has the right, if not the obligation, to verify whether
the credit it is extending upon on a particular
purchase was indeed contracted by the cardholder,
and that the cardholder is within his means to make
such transaction. The culpable failure of respondent
herein is not the failure to timely approve petitioner's
purchase, but the more elemental failure to timely act
on the same, whether favorably or unfavorably. Even
assuming that respondent's credit authorizers did
not have sufficient basis on hand to make a judgment,
we see no reason why respondent could not have
promptly informed petitioner the reason for the
delay, and duly advised him that resolving the same
could take some time. In that way, petitioner would
have had informed basis on whether or not to pursue
the transaction at Coster, given the attending
circumstances. Instead, petitioner was left
uncomfortably dangling in the chilly autumn winds in
a foreign land and soon forced to confront the wrath
of foreign folk.
Moral damages avail in cases of breach of
contract where the defendant acted fraudulently or in
bad faith, and the court should find that under the
circumstances, such damages are due. The findings of
the trial court are ample in establishing the bad faith
and unjustified neglect of respondent, attributable in
particular to the "dilly-dallying" of respondent's
Manila credit authorizer, Edgardo Jaurique. 23 Wrote
the trial court:
While it is true that the Cardmembership
Agreement, which defendant prepared, is silent as to
the amount of time it should take defendant to grant
authorization for a charge purchase, defendant
acknowledged that the normal time for approval
should only be three to four seconds. Specially so
with cards used abroad which requires "special
handling", meaning with priority. Otherwise, the
object of credit or charge cards would be lost; it
would be so inconvenient to use that buyers and
consumers would be better off carrying bundles of
currency or traveller's checks, which can be delivered
and accepted quickly. Such right was not accorded to
plaintiff in the instances complained off * for reasons
known only to defendant at that time. This, to the
Court's mind, amounts to a wanton and deliberate
refusal to comply with its contractual obligations, or
at least abuse of its rights, under the contract. 24
xxx xxx xxx
The delay committed by defendant was clearly
attended by unjustified neglect and bad faith, since it
alleges to have consumed more than one hour to
simply go over plaintiff's past credit history with
defendant, his payment record and his credit and
bank references, when all such data are already
stored and readily available from its computer. This
Court also takes note of the fact that there is nothing
in plaintiff's billing history that would warrant the
imprudent suspension of action by defendant in
processing the purchase. Defendant's witness
Jaurique admits:
RTC. 27 Those circumstances are fairly unusual, and
should not give rise to a general entitlement for
damages under a more mundane set of facts.
We sustain the amount of moral damages
awarded to petitioner by the RTC. There is no hard-
and-fast rule in determining what would be a fair and
reasonable amount of moral damages, since each case
must be governed by its own peculiar facts, however,
it must be commensurate to the loss or injury
suffered. 28 Petitioner's original prayer for
P5,000,000.00 for moral damages is excessive under
the circumstances, and the amount awarded by the
trial court of P500,000.00 in moral damages more
seemly.
Likewise, we deem exemplary damages
available under the circumstances, and the amount of
P300,000.00 appropriate. There is similarly no cause
though to disturb the determined award of
P100,000.00 as attorney's fees, and P85,233.01 as
expenses of litigation.
WHEREFORE, the petition is GRANTED. The
assailed Decision of the Court of Appeals
is REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Makati, Branch 145 in Civil
Case No. 92-1665 is hereby REINSTATED. Costs
against respondent.
SO ORDERED.
|||

Q. But did you discover that he did not have any

outstanding account?
A. Nothing in arrears at that time.
Q. You were well aware of this fact on this very date?
A. Yes, sir.

Mr. Jaurique further testified that there were no

"delinquencies" in plaintiff's account. 25

It should be emphasized that the reason why

petitioner is entitled to damages is not simply
because respondent incurred delay, but because the
delay, for which culpability lies under Article 1170,
led to the particular injuries under Article 2217 of the
Civil Code for which moral damages are
remunerative. 26 Moral damages do not avail to
soothe the plaints of the simply impatient, so this
decision should not be cause for relief for those who
time the length of their credit card transactions with
a stopwatch. The somewhat unusual attending
circumstances to the purchase at Coster — that there
was a deadline for the completion of that purchase by
petitioner before any delay would redound to the
injury of his several traveling companions — gave
rise to the moral shock, mental anguish, serious
anxiety, wounded feelings and social humiliation
sustained by the petitioner, as concluded by the
[G.R. No. L-17474. October 25, 1962.]
REPUBLIC OF THE PHILIPPINES, plaintiff-
appellee, vs. JOSE V. BAGTAS, defendant. FELICIDAD
M. BAGTAS, Administratrix of the Intestate Estate
left by the late Jose V. Bagtas, petitioner-appellant.
SYLLABUS
1. CONTRACTS; LOAN OF BULLS FOR
BREEDING PURPOSES; NATURE OF CONTRACT
AFFECTED BY PAYMENT OF FEE. — The loan by the
Bureau of Animal Industry to the defendant of three
bulls for breeding purposes for a period of one year,
later on renewed for another as regards one bull, was
subject to the payment by the borrower of breeding fee
of 10% of the book value of the bulls. If the breeding fee
be considered a compensation, the contract would be a
lease of the bulls; it could not be a contract of
commodatum, because that contract is essential
gratuitous.
2. JUDGMENTS; PROCEEDINGS FOR
ADMINISTRATIONS AND SETTLEMENT OF ESTATE OF
THE DECEASED; ENFORCEMENT OF MONEY
JUDGMENT. — Where special proceedings for the
administration and settlement of the estate of the
deceased have been instituted, the money judgment
rendered in favor of a party cannot be enforced by
means of a writ of execution, but must be presented to
the probate court for payment by the administrator
appointed by the court.
DECISION
PADILLA, J p:
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 P499.62, both with interests, and costs;
and that other just and equitable relief be granted it
(civil No. 12818).
On 5 July 1951 Jose V. Bagtas, through counsel Navarro,
Rosete and Manalo, answered that because of the bad
peace and order situation in Cagayan Valley,
particularly in the barrio of Baggao, and of the pending
appeal he had taken to the Secretary of Agriculture and
Natural Resources and the President of the Philippines
from the refusal by the Director of Animal Industry to
deduct from the book value of the bulls corresponding
yearly depreciation of 8% from the date of acquisition,
to which depreciation the Auditor General did not
object, he could not return the animals nor pay their
value and prayed for the dismissal of the complaint.
After hearing, on 30 July 1956 the trial court rendered
judgment —
. . . sentencing the latter (defendant) to pay the sum of
P3,625.09 the total value of the three bulls plus the
breeding fees in the amount of P626.17 with interest on
both sums of (at) the legal rate from the filing of this
complaint and costs.
On 9 October 1958 the plaintiff moved ex parte for a
writ of execution which the court granted on 18 October
and issued on 11 November 1958. On 2 December 1958
it granted an ex-parte motion filed by the plaintiff on 28
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 V. Bagtas who died on 23 October 1951
and as administratrix of his estate, was notified. On 7
January 1959 she filed a motion alleging that on 26 June
1952 the two bulls, Sindhi and Bhagnari, were returned
to the Bureau of Animal Industry and that sometime in
November 1953 the third bull, the Sahiniwal, died from
gunshot wounds inflicted during a Huks 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 P859.5.3 be issued against the estate of
defendant deceased José 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 Huks 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 the
returning the bull or paying its value to the appellee.
The contention is without merit. The loan by the
appellee to the late defendant José 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 thing, 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 wit: 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
executor or 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
issued letters of administration of the estate of the late
José V. Bagtas and that "all persons having claims for
money against the deceased José 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 money 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 abovequoted 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, 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
José 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.
[G.R. Nos. 80294-95. September 21, 1988.]
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN
PROVINCE petitioner vs. COURT OF APPEALS, HEIRS
OF EGMIDIO OCTAVIANO AND JUAN VALDEZ,
respondents.
SYLLABUS
REMEDIAL LAW; JUDGMENT; RES JUDICATA.—
The findings of the trial court affirmed by the appellate
court that the private respondent's predecessor were
possessors of the lots in dispute with claim of
ownership from 1906 to 1951 while the petitioner was
in possession as borrower in commodatum up to 1951
are res judicatabetween the parties.
DECISION
GANCAYCO, J p:
The principal issue in this case is whether or not a
decision of the Court of Appeals promulgated a long
time ago can properly be considered res judicata by
respondent Court of Appeals in the present two cases
between petitioner and two private respondents.
Petitioner questions as allegedly erroneous the Decision
dated August 31, 1987 of the Ninth Division of
Respondent Court of Appeals 1 in CA-G.R. No. 05148
[Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil
Case No. 3655 (429)], both for Recovery of Possession,
which affirmed the Decision of the Honorable Nicodemo
T. Ferrer, Judge of the Regional Trial Court of Baguio
and Benguet in Civil Case No. 3607 (419) and Civil Case
No. 3655 (429), with the dispositive portion as follows:
"WHEREFORE, Judgment is hereby rendered ordering
the defendant, Catholic Vicar Apostolic of the Mountain
Province to return and surrender Lot 2 of Plan Psu-
194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3
of the same Plan to the other set of plaintiffs, the Heirs
of Egmidio Octaviano (Leonardo Valdez, et al.). For lack
or insufficiency of evidence, the plaintiffs' claim or
damages is hereby denied. Said defendant is ordered to
pay costs." (p 36, Rollo)
Respondent Court of Appeals, in affirming the trial
court's decision, sustained the trial court's conclusions
that the Decision of the Court of Appeals, dated May 4,
1977 in CA-G.R. No. 38830-R, in the two cases affirmed
by the Supreme Court, touched on the ownership of lots
2 and 3 in question; that the two lots were possessed by
the predecessors-in-interest of private respondents
under claim of ownership in good faith from 1906 to
1951; that petitioner had been in possession of the
same lots as bailee in commodatum up to 1951, when
petitioner repudiated the trust and when it applied for
registration in 1962; that petitioner had just been in
possession as owner for eleven years, hence there is no
possibility of acquisitive prescription which requires 10
years possession with just title and 30 years of
possession without; that the principle of res judicata on
these findings by the Court of Appeals will bar a
reopening of these questions of fact; and that those facts
may no longer be altered.
Petitioner's motion for reconsideration of the
respondent appellate court's Decision in the two
aforementioned cases (CA-G.R. No. CV-05418 and
05419) was denied.
The facts and background of the cases as narrated by
the trial court are as follows —
". . . The documents and records presented reveal that
the whole controversy started when the defendant
Catholic Vicar Apostolic of the Mountain Province
(VICAR for brevity) filed with the Court of First Instance
of Baguio-Benguet, on September 5, 1962 an application
for registration of title over Lots 1, 2, 3, and 4 in Psu-
194357, situated at Poblacion Central, La Trinidad,
Benguet, docketed as LRC N-91, said Lots being the sites
of the Catholic Church building, convents, high school
building, school gymnasium, school dormitories, social
hall, stonewalls, etc. On March 22, 1963 the Heirs of
Juan Valdez and the Heirs of Egmidio Octaviano filed
their Answer/Opposition on Lots Nos. 2 and 3,
respectively, asserting ownership and title thereto.
After trial on the merits, the land registration court
promulgated its Decision, dated November 17, 1965,
confirming the registrable title of VICAR to Lots 1, 2, 3,
and 4.
The Heirs of Juan Valdez (plaintiffs in the herein Civil
Case No. 3655) and the Heirs of Egmidio Octaviano
(plaintiffs in the herein Civil Case No. 3607) appealed
the decision of the land registration court to the then
Court of Appeals, docketed as CA-G.R. No. 38830-R. The
Court of Appeals rendered its decision, dated May 9,
1977, reversing the decision of the land registration
court and dismissing the VICAR's application as to Lots
2 and 3, the lots claimed by the two sets of oppositors in
the land registration case (and two sets of plaintiffs in
the two cases now at bar), the first lot being presently
occupied by the convent and the second by the women's
dormitory and the sisters' convent.
On May 9, 1977, the Heirs of Octaviano filed a motion
for reconsideration praying the Court of Appeals to
order the registration of Lot 3 in the names of the Heirs
of Egmidio Octaviano, and on May 17, 1977, the Heirs of
Juan Valdez and Pacita Valdez filed their motion for
reconsideration praying that both Lots 2 and 3 be
ordered registered in the names of the Heirs of Juan
Valdez and Pacita Valdez. On August 12, 1977, the Court
of Appeals denied the motion for reconsideration filed
by the Heirs of Juan Valdez on the ground that there
was "no sufficient merit to justify reconsideration one
way or the other . . .," and likewise denied that of the
Heirs of Egmidio Octaviano.
Thereupon, the VICAR filed with the Supreme Court a
petition for review on certiorari of the decision of the
Court of Appeals dismissing his (its) application for
registration of Lots 2 and 3, docketed as G.R. No. L-
46832, entitled, 'Catholic Vicar Apostolic of the
Mountain Province vs. Court of Appeals and Heirs of
Egmidio Octaviano.'
From the denial by the Court of Appeals of their motion
for reconsideration, the Heirs of Juan Valdez and Pacita
Valdez, on September 8, 1977, filed with the Supreme
Court a petition for review, docketed as G.R. No. L-
46872, entitled, 'Heirs of Juan Valdez and Pacita Valdez
vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano
and Amable O. Valdez.
On January 13, 1978, the Supreme Court denied in a
minute resolution both petitions (of VICAR on the one
hand and the Heirs of Juan Valdez and Pacita Valdez on
the other) for lack of merit. Upon the finality of both
Supreme Court resolutions in G.R. No. L-46832 and G.R.
No. L-46872, the Heirs of Octaviano filed with the then
Court of First Instance of Baguio, Branch 11, a Motion
For Execution of Judgment praying that the Heirs of
Octaviano be placed in possession of Lot 3. The Court,
presided over by Hon. Salvador J. Valdez, on December
7, 1978, denied the motion on the ground that the Court
of Appeals decision in CA-G.R. No. 38870 did not grant
the Heirs of Octaviano any affirmative relief.
On February 7, 1979, the Heirs of Octaviano filed with
the Court of Appeals a petition for certiorari and
mandamus, docketed as CA-G.R. No. 08890-R, entitled
'Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez,
Jr. and Vicar.' In its decision dated May 16, 1979, the
Court of Appeals dismissed the petition.
It was at that stage that the instant cases were filed. The
Heirs of Egmidio Octaviano filed Civil Case No. 3607
(419) on July 24, 1979, for recovery of possession of Lot
3; and the Heirs of Juan Valdez filed Civil Case No. 3655
(429) on September 24, 1979, likewise for recovery of
possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).
"In Civil Case No. 3607 (419) trial was held. The
plaintiffs Heirs of Egmidio Octaviano presented one (1)
witness, Fructuoso Valdez, who testified on the alleged
ownership of the land in question (Lot 3) by their
predecessor-in-interest, Egmidio Octaviano (Exh. C); his
written demand (Exh. B - B-4) to defendant Vicar for the
return of the land to them; and the reasonable rentals
for the use of the land at P10,000.00 per month. On the
other hand, defendant Vicar presented the Register of
Deeds for the Province of Benguet, Atty. Nicanor Sison,
who testified that the land in question is not covered by
any title in the name of Egmidio Octaviano or any of the
plaintiffs (Exh. 8). The defendant dispensed with the
testimony of Mons. William Brasseur when the plaintiffs
admitted that the witness if called to the witness stand,
would testify that defendant Vicar has been in
possession of Lot 3, for seventy-five (75) years
continuously and peacefully and has constructed
permanent structures thereon.
"In Civil Case No. 3655, the parties admitting that the
material facts are not in dispute, submitted the case on
the sole issue of whether or not the decisions of the
Court of Appeals and the Supreme Court touching on
the ownership of Lot 2, which in effect declared the
plaintiffs the owners of the land constitute res judicata.
"In these two cases, the plaintiffs argue that the
defendant Vicar is barred from setting up the defense of
ownership and or long and continuous possession of the
two lots in question since this is barred by prior
judgment of the Court of Appeals in CA-G.R. No. 038830-
R under the principle of res judicata. Plaintiffs contend
that the question of possession and ownership have
already been determined by the Court of Appeals (Exh.
C, Decision, CA-G.R. No. 038830-R) and affirmed by the
Supreme Court (Exh. 1, Minute Resolution of the
Supreme Court). On his part, defendant Vicar maintains
that the principle of res judicata would not prevent
them from litigating the issues of long possession and
ownership. Because the dispositive portion of the prior
judgment in CA-G.R. No. 038830-R merely dismissed
their application for registration and titling of lots 2 and
3. Defendant Vicar contends that only the dispositive
portion of the decision, and not its body, is the
controlling pronouncement of the Court of Appeals." 2
The alleged errors committed by respondent Court of
Appeals according to petitioner are as follows:
1. ERROR IN APPLYING LAW OF THE CASE AND RES
JUDICATA;
2. ERROR IN FINDING THAT THE TRIAL COURT RULED
THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE
BUT WITHOUT DOCUMENTARY EVIDENCE
PRESENTED;
3. ERROR IN FINDING THAT PETITIONER'S CLAIM IT
PURCHASED LOTS 2 AND 3 FROM VALDEZ AND
OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE
FORMER OWNERS WERE VALDEZ AND OCTAVIANO;
4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF
PRIVATE RESPONDENTS WHO WERE IN POSSESSION
OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT
PETITIONER;
5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO
HAD FREE PATENT APPLICATIONS AND THE
PREDECESSORS OF PRIVATE RESPONDENTS ALREADY
HAD FREE PATENT APPLICATIONS SINCE 1906;
6. ERROR IN FINDING THAT PETITIONER DECLARED
LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A
PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION
TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY
ACQUISITIVE PRESCRIPTION OF 10 YEARS;
7. ERROR IN FINDING THAT THE DECISION OF THE
COURT OF APPEALS IN CA G.R. NO. 038830 WAS
AFFIRMED BY THE SUPREME COURT;
8. ERROR IN FINDING THAT THE DECISION IN CA G.R.
NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND
3 AND THAT PRIVATE RESPONDENTS AND THEIR
PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND
3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH
FROM 1906 TO 1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN
POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE
(BORROWER) IN COMMODATUM, A GRATUITOUS
LOAN FOR USE;
10. ERROR IN FINDING THAT PETITIONER IS A
POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT
RIGHTS OF RETENTION AND REIMBURSEMENT AND IS
BARRED BY THE FINALITY AND CONCLUSIVENESS OF
THE DECISION IN CA G.R. NO. 033830. 3
The petition is bereft of merit.
Petitioner questions the ruling of respondent Court of
Appeals in CA-G.R. Nos. 05148 and 05149, when it
clearly held that it was in agreement with the findings
of the trial court that the Decision of the Court of
Appeals dated May 4, 1977 in CA-G.R. No. 38830-R, on
the question of ownership of Lots 2 and 3, declared that
the said Court of Appeals Decision (CA-G.R. No. 38830-
R) did not positively declare private respondents as
owners of the land, neither was it declared that they
were not owners of the land, but it held that the
predecessors of private respondents were possessors of
Lots 2 and 3, with claim of ownership in good faith from
1906 to 1951. Petitioner was in possession as borrower
in commodatum up to 1951, when it repudiated the
trust by declaring the properties in its name for taxation
purposes. When petitioner applied for registration of
Lots 2 and 3 in 1962, it had been in possession in
concept of owner only for eleven years. Ordinary
acquisitive prescription requires possession for ten
years, but always with just title. Extraordinary
acquisitive prescription requires 30 years. 4
On the above findings of facts supported by evidence
and evaluated by the Court of Appeals in CA-G.R. No.
38830-R, affirmed by this Court, We see no error in
respondent appellate court's ruling that said findings
are res judicata between the parties. They can no longer
be altered by presentation of evidence because those
issues were resolved with finality a long time ago. To
ignore the principle of res judicata would be to open the
door to endless litigations by continuous determination
of issues without end.
under claim of ownership in good faith from 1906; that
petitioner Vicar was only a bailee in commodatum; and
that the adverse claim and repudiation of trust came
only in 1951.
We find no reason to disregard or reverse the ruling of
the Court of Appeals in CA-G.R. No. 38830-R. Its findings
of fact have become incontestible. This Court declined
to review said decision, thereby in effect, affirming it. It
has become final and executory a long time ago.

An examination of the Court of Appeals Decision dated
May 4, 1977, First Division 5 in CA-G.R. No. 38830-R,
shows that it reversed the trial court's
Decision 6 finding petitioner to be entitled to register
the lands in question under its ownership, on its
evaluation of evidence and conclusion of facts.
The Court of Appeals found that petitioner did not meet
the requirement of 30 years possession for acquisitive
prescription over Lots 2 and 3. Neither did it satisfy the
requirement of 10 years possession for ordinary
acquisitive prescription because of the absence of just
title. The appellate court did not believe the findings of
the trial court that Lot 2 was acquired from Juan Valdez
by purchase and Lot 3 was acquired also by purchase
from Egmidio Octaviano by petitioner Vicar because
there was absolutely no documentary evidence to
support the same and the alleged purchases were never
mentioned in the application for registration.
Respondent appellate court did not commit any
reversible error, much less grave abuse of discretion,
when it held that the Decision of the Court of Appeals in
CA-G.R. No. 38830-R is governing, under the principle
of res judicata, hence the rule, in the present cases CA-
G.R. No. 05148 and CA-G.R. No. 05149. The facts as
supported by evidence established in that decision may
no longer be altered.
WHEREFORE AND BY REASON OF THE FOREGOING,
this petition is DENIED for lack of merit, the Decision
dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149,
by respondent Court of Appeals is AFFIRMED, with
costs against petitioner.
SO ORDERED.

By the very admission of petitioner Vicar, Lots 2 and 3

were owned by Valdez and Octaviano. Both Valdez and
Octaviano had Free Patent Application for those lots
since 1906. The predecessors of private respondents,
not petitioner Vicar, were in possession of the
questioned lots since 1906.

There is evidence that petitioner Vicar occupied Lots 1

and 4, which are not in question, but not Lots 2 and 3,
because the buildings standing thereon were only
constructed after liberation in 1945. Petitioner Vicar
only declared Lots 2 and 3 for taxation purposes in
1951. The improvements on Lots 1, 2, 3, 4 were paid for
by the Bishop but said Bishop was appointed only in
1947, the church was constructed only in 1951 and the
new convent only 2 years before the trial in 1963.
When petitioner Vicar was notified of the oppositor's
claims, the parish priest offered to buy the lot from
Fructuoso Valdez. Lots 2 and 3 were surveyed by
request of petitioner Vicar only in 1962.

Private respondents were able to prove that their

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

The Court of Appeals found that the predecessors-in-

interest and private respondents were possessors
[G.R. No. 46240. November 3, 1939.]
MARGARITA QUINTOS and ANGEL A.
ANSALDO, plaintiffs-appellants, vs. BECK, defendant-
appellee.
SYLLABUS
1. COMMODATUM; OBLIGATION OF THE
PARTIES. — The contract entered into between the
parties is one of commodatum, because under t 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
latter's demand (Clause 7 of the contract, Exhibit "A";
articles 1740, paragraph, and 1741 of the Civil Code).
The obligation voluntarily assumed by the defendant
to return the furniture upon the plaintiff's demand
means that he should return all of them to the
plaintiff at the latter's residence or house. The
defendant did not comply with this obligation when
he merely placed them at the disposal of the plaintiff,
retaining for his benefit the three gas heaters and the
four electric lamps.
2. ID.; ID.; EXPENSES FOR DEPOSIT OF
FURNITURE. — AS the defendant had voluntarily
undertaken to return all the furniture to the plaintiff,
upon the latter's demand, the Court could not legally
compel her to bear the expenses occasioned by the
deposit of the furniture at the defendant's behest.
The latter, as bailee, was not entitled to place the
furniture on deposit; nor was the plaintiff under a
duty to accept the offer to return the furniture,
because the defendant wanted to retain the three gas
heaters and the four electric lamps.
3. ID.; ID.; VALUE OF FURNITURE. — AS to
the value of the furniture. we do not believe that the
plaintiff is entitled to the payment thereof by the
defendant in case of his inability to return some of
the furniture, because under paragraph 6 of the
stipulation of facts, the defendant has neither agreed
to nor admitted the correctness of the said value.
Should the defendant fail to deliver some of the
furniture, the value thereof should be later
determined by the trial Court through evidence
which the parties may desire to present.
4. COSTS OF LITIGATION. — The costs in both
instances should be borne by the defendant because
the plaintiff is the prevailing party (section 487 of the
Code of Civil Procedure). The defendant was the one
who breached the contract of Commodatum, and
without any reason he refused to return and deliver
all the furniture upon the plaintiff's demand. In these
circumstances, it is just and equitable that he pay the
legal expenses and other judicial costs which the
plaintiff would not have otherwise defrayed.
DECISION
IMPERIAL, J p:
The plaintiff brought this action to compel the
defendant to return to her certain furniture which
she lent him for his use. She appealed from the
judgment of the Court of First Instance of Manila
which ordered that the defendant return to her the
three gas heaters and the four electric lamps found in
the possession of the Sheriff of said city, that she call
for the other furniture from the said Sheriff of Manila
at her own expense, and that the fees which the
sheriff may charge for the deposit of the furniture be
paid pro rata by both parties, without
pronouncement as to the costs.
The defendant was a tenant of the plaintiff
and as such occupied the latter's house on M. H. del
Pilar street, No. 1175. On January 14, 1936, upon the
novation of the contract of lease between the plaintiff
and the defendant, the former gratuitously granted to
the latter the use of the furniture described in the
third paragraph of the stipulation of facts, subject to
the condition that the defendant would return them
to the plaintiff upon the latter's demand. The plaintiff
sold the property to Maria Lopez and Rosario Lopez
and on September 14, 1936, these three notified the
defendant of the conveyance, giving him sixty days to
vacate the premises under one of the clauses of the
contract of lease. There after the plaintiff required
the defendant to return all the furniture transferred
to him for his use. The defendant answered that she
may call for them in the house where they are found.
On November 5, 1936, the defendant, through
another person, wrote to the plaintiff reiterating that
she may call for the furniture in the ground floor of
the house. On the 7th of the same month, the
defendant wrote another letter to the plaintiff
informing her that he could not give up the three gas
heaters and the four electric lamps because he would
use them until the 15th of the same month when the
lease is due to expire. The plaintiff refused to get the
furniture in view of the fact that the defendant had
declined to make delivers of all of them. On
November 15th, before vacating the house, the
defendant deposited with the Sheriff all the furniture
belonging to the plaintiff and they are now on deposit
in the warehouse situated at No. 1521, Rizal Avenue.
in the custody of the said sheriff.
In their seven assigned errors the plaintiffs
contend that the trial court incorrectly applied the
law: in holding that they violated the contract by not
calling for all the furniture on November 5, 1936,
when the defendant placed them at their disposal; in
not ordering the defendant to pay them the value of
the furniture in case they are not delivered; in
holding that they should get all the furniture from the
sheriff at their expenses; in ordering them to pay
one-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 the motions for reconsideration
and new trial. To dispose of the case, it is only
necessary to decide whether the defendant complied
with his obligation to return the furniture upon the
plaintiff's demand; whether the latter is bound to
bear the deposit fees thereof, and whether she is
entitled to the costs of litigation.
 The contract entered into between the parties
is one of commodatum, because under it the plaintiff
gratuitously granted the use of the furniture to the
defendant, reserving for herself the ownership
thereof; by this contract the defendant bound himself
to return the furniture to the plaintiff, upon the
latter's demand (clause 7 of the contract, Exhibit A;
articles 1740, paragraph 1, and 1741 of the Civil
Code) The obligation voluntarily assumed by the
defendant to return the furniture upon the plaintiff's
demand, means that he should return all of them to
the plaintiff at the latter's residence or house. The
defendant did not comply with this obligation when
he merely placed them at the disposal of the plaintiff,
retaining for his benefit the three gas heaters and the
four 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.

As the defendant had voluntarily undertaken

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

As to the value of the furniture, we do not

believe that the plaintiff is entitled to the payment
thereof by the defendant in case of his inability to
return some of the furniture, because under
paragraph 6 of the stipulation of facts, the defendant
has neither agreed to nor admitted the correctness of
the said value. Should the defendant fail to deliver
some of the furniture, the value thereof should be
later determined by the trial Court through evidence
which the parties may desire to present.

The costs in both instances should be borne

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

The appealed judgment is modified and the

defendant is ordered to return and deliver to the
plaintiff, in the residence or house of the latter, all the
furniture described in paragraph 3 of the stipulation
of facts Exhibit A. The expenses which may be
occasioned by the delivery to and deposit of the
furniture with the Sheriff shall be for the account of
the defendant. The defendant shall pay the costs in
both instances. So ordered.
[G.R. No. 146364. June 3, 2004.]
COLITO T. PAJUYO, petitioner, vs. COURT OF
APPEALS and EDDIE GUEVARRA, respondents.
DECISION
CARPIO, J p:
The Case
Before us is a petition for review 1 of the 21 June
2000 Decision 2 and 14 December 2000 Resolution
of the Court of Appeals in CA-G.R. SP No. 43129. The
Court of Appeals set aside the 11 November 1996
decision 3 of the Regional Trial Court of Quezon City,
Branch 81, 4 affirming the 15 December 1995
decision 5 of the Metropolitan Trial Court of Quezon
City, Branch 31. 6
The Antecedents
In June 1979, petitioner Colito T. Pajuyo ("Pajuyo")
paid P400 to a certain Pedro Perez for the rights over
a 250-square meter lot in Barrio Payatas, Quezon
City. Pajuyo then constructed a house made of light
materials on the lot. Pajuyo and his family lived in the
house from 1979 to 7 December 1985.
On 8 December 1985, Pajuyo and private respondent
Eddie Guevarra ("Guevarra") executed
a Kasunduan or agreement. Pajuyo, as owner of the
house, allowed Guevarra to live in the house for free
provided Guevarra would maintain the cleanliness
and orderliness of the house. Guevarra promised that
he would voluntarily vacate the premises on Pajuyo's
demand.
In September 1994, Pajuyo informed Guevarra of his
need of the house and demanded that Guevarra
vacate the house. Guevarra refused.
Pajuyo filed an ejectment case against Guevarra with
the Metropolitan Trial Court of Quezon City, Branch
31 ("MTC").
In his Answer, Guevarra claimed that Pajuyo had no
valid title or right of possession over the lot where
the house stands because the lot is within the 150
hectares set aside by Proclamation No. 137 for
socialized housing. Guevarra pointed out that from
December 1985 to September 1994, Pajuyo did not
show up or communicate with him. Guevarra insisted
that neither he nor Pajuyo has valid title to the lot.
On 15 December 1995, the MTC rendered its decision
in favor of Pajuyo. The dispositive portion of the MTC
decision reads:
WHEREFORE, premises considered, judgment is
hereby rendered for the plaintiff and against
defendant, ordering the latter to:
A) vacate the house and lot occupied by the
defendant or any other person or persons
claiming any right under him;
B) pay unto plaintiff the sum of THREE HUNDRED
PESOS (P300.00) monthly as reasonable
compensation for the use of the premises starting
from the last demand;
C) pay plaintiff the sum of P3,000.00 as and by way
of attorney's fees; and
D) pay the cost of suit.
SO ORDERED. 7
Aggrieved, Guevarra appealed to the Regional Trial
Court of Quezon City, Branch 81 ("RTC").
On 11 November 1996, the RTC affirmed the MTC
decision. The dispositive portion of the RTC decision
reads:
WHEREFORE, premises considered, the Court finds
no reversible error in the decision appealed from,
being in accord with the law and evidence presented,
and the same is hereby affirmed en toto. SO
ORDERED. 8
Guevarra received the RTC decision on 29 November
1996. Guevarra had only until 14 December 1996 to
file his appeal with the Court of Appeals. Instead of
filing his appeal with the Court of Appeals, Guevarra
filed with the Supreme Court a "Motion for Extension
of Time to File Appeal by Certiorari Based on Rule
42" ("motion for extension"). Guevarra theorized that
his appeal raised pure questions of law. The
Receiving Clerk of the Supreme Court received the
motion for extension on 13 December 1996 or one
day before the right to appeal expired.
On 3 January 1997, Guevarra filed his petition for
review with the Supreme Court.
On 8 January 1997, the First Division of the Supreme
Court issued a Resolution 9 referring the motion for
extension to the Court of Appeals which has
concurrent jurisdiction over the case. The case
presented no special and important matter for the
Supreme Court to take cognizance of at the first
instance.
On 28 January 1997, the Thirteenth Division of the
Court of Appeals issued a Resolution 10 granting the
motion for extension conditioned on the timeliness of
the filing of the motion.
On 27 February 1997, the Court of Appeals ordered
Pajuyo to comment on Guevarra's petition for review.
On 11 April 1997, Pajuyo filed his Comment.
On 21 June 2000, the Court of Appeals issued its
decision reversing the RTC decision. The dispositive
portion of the decision reads:
WHEREFORE, premises considered, the assailed
Decision of the court a quo in Civil Case No. Q-96-
26943 is REVERSED and SET ASIDE; and it is hereby
declared that the ejectment case filed against
defendant-appellant is without factual and legal
basis. SO ORDERED. 11
Pajuyo filed a motion for reconsideration of the
decision. Pajuyo pointed out that the Court of Appeals
should have dismissed outright Guevarra's petition
for review because it was filed out of time. Moreover,
it was Guevarra's counsel and not Guevarra who
signed the certification against forum-shopping.
On 14 December 2000, the Court of Appeals issued a
resolution denying Pajuyo's motion for
reconsideration. The dispositive portion of the
resolution reads:
WHEREFORE, for lack of merit, the motion for
reconsideration is hereby DENIED. No costs.
SO ORDERED. 12
The Ruling of the MTC
The MTC ruled that the subject of the agreement
between Pajuyo and Guevarra is the house and not
the lot. Pajuyo is the owner of the house, and he
allowed Guevarra to use the house only by tolerance.
Thus, Guevarra's refusal to vacate the house on
Pajuyo's demand made Guevarra's continued
possession of the house illegal.
The Ruling of the RTC
The RTC upheld the Kasunduan, which established
the landlord and tenant relationship between Pajuyo
and Guevarra. The terms of the Kasunduan bound
Guevarra to return possession of the house on
demand.
The RTC rejected Guevarra's claim of a better right
under Proclamation No. 137, the Revised National
Government Center Housing Project Code of Policies
and other pertinent laws. In an ejectment suit, the
RTC has no power to decide Guevarra's rights under
these laws. The RTC declared that in an ejectment
case, the only issue for resolution is material or
physical possession, not ownership.
The Ruling of the Court of Appeals
The Court of Appeals declared that Pajuyo and
Guevarra are squatters. Pajuyo and Guevarra illegally
occupied the contested lot which the government
owned.
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.
The Court of Appeals 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.
Since Pajuyo admitted that he resurfaced only in
1994 to claim the property, the appellate court held
that Guevarra has a better right over the property
underProclamation No. 137. President Corazon C.
Aquino ("President Aquino") issued Proclamation No.
137 on 7 September 1987. At that time, Guevarra was
in physical possession of the property. Under Article
VI of the Code of Policies Beneficiary Selection and
Disposition of Homelots and Structures in the
National Housing Project ("the Code"), the actual
occupant or caretaker of the lot shall have first
priority as beneficiary of the project. The Court of
Appeals concluded that Guevarra is first in the
hierarchy of priority.
In denying Pajuyo's motion for reconsideration, the
appellate court debunked Pajuyo's claim that
Guevarra filed his motion for extension beyond the
period to appeal.
The Court of Appeals pointed out that Guevarra's
motion for extension filed before the Supreme Court
was stamped "13 December 1996 at 4:09 PM" by the
Supreme Court's Receiving Clerk. The Court of
Appeals concluded that the motion for extension bore
a date, contrary to Pajuyo's claim that the motion for
extension was undated. Guevarra filed the motion for
extension on time on 13 December 1996 since he
filed the motion one day before the expiration of the
reglementary period on 14 December 1996. Thus, the
motion for extension properly complied with the
condition imposed by the Court of Appeals in its 28
January 1997 Resolution. The Court of Appeals
explained that the thirty-day extension to file the
petition for review was deemed granted because of
such compliance.
The Court of Appeals rejected Pajuyo's argument that
the appellate court should have dismissed the
petition for review because it was Guevarra's counsel
and not Guevarra who signed the certification against
forum-shopping. The Court of Appeals pointed out
that Pajuyo did not raise this issue in his Comment.
The Court of Appeals held that Pajuyo could not now
seek the dismissal of the case after he had extensively
argued on the merits of the case. This technicality, the
appellate court opined, was clearly an afterthought.
The Issues
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 GRANTING, instead of denying, Private
Respondent's Motion for an Extension of thirty days
to file petition for review at the time when there was
no more period to extend as the decision of the
Regional Trial Court had already become final and
executory.
2) in giving due course, instead of dismissing, private
respondent's Petition for Review even though the
certification against forum-shopping was signed only
by counsel instead of by petitioner himself.
3) 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".
4) 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.
5) 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. 13
The Ruling of the Court
The procedural issues Pajuyo is raising are baseless.
However, we find merit in the substantive issues
Pajuyo is submitting for resolution.
Procedural Issues
Pajuyo insists that the Court of Appeals should have
dismissed outright Guevarra's petition for review
because the RTC decision had already become final
and executory when the appellate court acted on
Guevarra's motion for extension to file the petition.
Pajuyo points out that Guevarra had only one day
before the expiry of his period to appeal the RTC
decision. Instead of filing the petition for review with
the Court of Appeals, Guevarra filed with this Court
an undated motion for extension of 30 days to file a
petition for review. This Court merely referred the
motion to the Court of Appeals. Pajuyo believes that
the filing of the motion for extension with this Court
did not toll the running of the period to perfect the
appeal. Hence, when the Court of Appeals received
the motion, the period to appeal had already expired.
We are not persuaded.
Decisions of the regional trial courts in the exercise of
their appellate jurisdiction are appealable to the
Court of Appeals by petition for review in cases
involving questions of fact or mixed questions of fact
and law. 14 Decisions of the regional trial courts
involving pure questions of law are appealable
directly to this Court by petition for review. 15 These
modes of appeal are now embodied in Section 2, Rule
41 of the 1997 Rules of Civil Procedure.
Guevarra believed that his appeal of the RTC decision
involved only questions of law. Guevarra thus filed
his motion for extension to file petition for review
before this Court on 14 December 1996. On 3 January
1997, Guevarra then filed his petition for review with
this Court. A perusal of Guevarra's petition for review
gives the impression that the issues he raised were
pure questions of law. There is a question of law
when the doubt or difference is on what the law is on
a certain state of facts.16 There is a question of fact
when the doubt or difference is on the truth or falsity
of the facts alleged. 17
In his petition for review before this Court, Guevarra
no longer disputed the facts. Guevarra's petition for
review raised these questions: (1) Do ejectment cases
pertain only to possession of a structure, and not the
lot on which the structure stands? (2) Does a suit by a
squatter against a fellow squatter constitute a valid
case for ejectment? (3) Should a Presidential
Proclamation governing the lot on which a squatter's
structure stands be considered in an ejectment suit
filed by the owner of the structure?
These questions call for the evaluation of the rights of
the parties under the law on ejectment and the
Presidential Proclamation. At first glance, the
questions Guevarra raised appeared purely legal.
However, some factual questions still have to be
resolved because they have a bearing on the legal
questions raised in the petition for review. These
factual matters refer to the metes and bounds of the
disputed property and the application of Guevarra as
beneficiary of Proclamation No. 137.
The Court of Appeals has the power to grant an
extension of time to file a petition for review.
In Lacsamana v. Second Special Cases Division of the
Intermediate Appellate Court, 18 we declared that the
Court of Appeals could grant extension of time in
appeals by petition for review. In Liboro v. Court of
Appeals, 19 we clarified that the prohibition against
granting an extension of time applies only in a case
where ordinary appeal is perfected by a mere notice
of appeal. The prohibition does not apply in a petition
for review where the pleading needs verification. A
petition for review, unlike an ordinary appeal,
requires preparation and research to present a
persuasive position. 20 The drafting of the petition
for review entails more time and effort than filing a
notice of appeal. 21 Hence, the Court of Appeals may
allow an extension of time to file a petition for
review.
In the more recent case of Commissioner of Internal
Revenue v. Court of Appeals, 22 we held
that Liboro's clarification of Lacsamana is consistent
with the Revised Internal Rules of the Court of
Appeals and Supreme Court Circular No. 1-91. They
all allow an extension of time for filing petitions for
review with the Court of Appeals. The extension,
however, should be limited to only fifteen days save
in exceptionally meritorious cases where the Court of
Appeals may grant a longer period.
A judgment becomes "final and executory" by
operation of law. Finality of judgment becomes a fact
on the lapse of the reglementary period to appeal if
no appeal is perfected. 23 The RTC decision could not
have gained finality because the Court of Appeals
granted the 30-day extension to Guevarra.
The Court of Appeals did not commit grave abuse of
discretion when it approved Guevarra's motion for
extension. The Court of Appeals gave due course to
the motion for extension because it complied with
the condition set by the appellate court in its
resolution dated 28 January 1997. The resolution
stated that the Court of Appeals would only give due
course to the motion for extension if filed on time.
The motion for extension met this condition.
The material dates to consider in determining the
timeliness of the filing of the motion for extension are
(1) the date of receipt of the judgment or final order
or resolution subject of the petition, and (2) the date
of filing of the motion for extension. 24 It is the date
of the filing of the motion or pleading, and not the
date of execution, that determines the timeliness of
the filing of that motion or pleading. Thus, even if the
motion for extension bears no date, the date of filing
stamped on it is the reckoning point for determining
the timeliness of its filing.
Guevarra had until 14 December 1996 to file an
appeal from the RTC decision. Guevarra filed his
motion for extension before this Court on 13
December 1996, the date stamped by this Court's
Receiving Clerk on the motion for extension. Clearly,
Guevarra filed the motion for extension exactly one
day before the lapse of the reglementary period to
appeal.
Assuming that the Court of Appeals should have
dismissed Guevarra's appeal on technical grounds,
Pajuyo did not ask the appellate court to deny the
motion for extension and dismiss the petition for
review at the earliest opportunity. Instead, Pajuyo
vigorously discussed the merits of the case. It was
only when the Court of Appeals ruled in Guevarra's
favor that Pajuyo raised the procedural issues against
Guevarra's petition for review.
A party who, after voluntarily submitting a dispute
for resolution, receives an adverse decision on the
merits, is estopped from attacking the jurisdiction of
the court. 25Estoppel sets in not because the
judgment of the court is a valid and conclusive
adjudication, but because the practice of attacking
the court's jurisdiction after voluntarily submitting to
it is against public policy. 26
In his Comment before the Court of Appeals, Pajuyo
also failed to discuss Guevarra's failure to sign the
certification against forum shopping. Instead, Pajuyo
harped on Guevarra's counsel signing the
verification, claiming that the counsel's verification is
insufficient since it is based only on "mere
information."
A party's failure to sign the certification against
forum shopping is different from the party's failure to
sign personally the verification. The certificate of
non-forum shopping must be signed by the party, and
not by counsel. 27 The certification of counsel
renders the petition defective. 28
On the other hand, the requirement on verification of
a pleading is a formal and not a jurisdictional
requisite. 29 It is intended simply to secure an
assurance that what are alleged in the pleading are
true and correct and not the product of the
imagination or a matter of speculation, and that the
pleading is filed in good faith. 30 The party need not
sign the verification. A party's representative, lawyer
or any person who personally knows the truth of the
facts alleged in the pleading may sign the
verification. 31
We agree with the Court of Appeals that the issue on
the certificate against forum shopping was merely an
afterthought. Pajuyo did not call the Court of Appeals'
attention to this defect at the early stage of the
proceedings. Pajuyo raised this procedural issue too
late in the proceedings.
Absence of Title over the Disputed Property will not
Divest the Courts of Jurisdiction to Resolve the Issue of
Possession
Settled is the rule that the defendant's claim of
ownership of the disputed property will not divest
the inferior court of its jurisdiction over the
ejectment case. 32 Even if the pleadings raise the
issue of ownership, the court may pass on such issue
to determine only the question of possession,
especially if the ownership is inseparably linked with
the possession. 33 The adjudication on the issue of
ownership is only provisional and will not bar an
action between the same parties involving title to the
land. 34 This doctrine is a necessary consequence of
the nature of the two summary actions of ejectment,
forcible entry and unlawful detainer, where the only
issue for adjudication is the physical or material
possession over the real property. 35
In this case, what Guevarra raised before the courts
was that he and Pajuyo are not the owners of the
contested property and that they are mere squatters.
Will the defense that the parties to the ejectment case
are not the owners of the disputed lot allow the
courts to renounce their jurisdiction over the case?
The Court of Appeals believed so and held that it
would just leave the parties where they are since
they are in pari delicto.
We do not agree with the Court of Appeals.
Ownership or the right to possess arising from
ownership is not at issue in an action for recovery of
possession. The parties cannot present evidence to
prove ownership or right to legal possession except
to prove the nature of the possession when necessary
to resolve the issue of physical possession. 36 The
same is true when the defendant asserts the absence
of title over the property. The absence of title over
the contested lot is not a ground for the courts to
withhold relief from the parties in an ejectment case.
The only question that the courts must resolve in
ejectment proceedings is — who is entitled to the
physical possession of the premises, that is, to the
possession de facto and not to the possession de
jure. 37 It does not even matter if a party's title to the
property is questionable, 38 or when both parties
intruded into public land and their applications to
own the land have yet to be approved by the proper
government agency. 39 Regardless of the actual
condition of the title to the property, the party in
peaceable quiet possession shall not be thrown out
by a strong hand, violence or terror. 40 Neither is the
unlawful withholding of property allowed. Courts
will always uphold respect for prior possession.
Thus, a party who can prove prior possession can
recover such possession even against the owner
himself. 41 Whatever may be the character of his
possession, if he has in his favor prior possession in
time, he has the security that entitles him to remain
on the property until a person with a better right
lawfully ejects him. 42 To repeat, the only issue that
the court has to settle in an ejectment suit is the right
to physical possession.
In Pitargue v. Sorilla, 43 the government owned the
land in dispute. The government did not authorize
either the plaintiff or the defendant in the case of
forcible entry case to occupy the land. The plaintiff
had prior possession and had already introduced
improvements on the public land. The plaintiff had a
pending application for the land with the Bureau of
Lands when the defendant ousted him from
possession. The plaintiff filed the action of forcible
entry against the defendant. The government was not
a party in the case of forcible entry.
The defendant questioned the jurisdiction of the
courts to settle the issue of possession because while
the application of the plaintiff was still pending, title
remained with the government, and the Bureau of
Public Lands had jurisdiction over the case. We
disagreed with the defendant. We ruled that courts
have jurisdiction to entertain ejectment suits even
before the resolution of the application. The plaintiff,
by priority of his application and of his entry,
acquired prior physical possession over the public
land applied for as against other private claimants.
That prior physical possession enjoys legal
protection against other private claimants because
only a court can take away such physical possession
in an ejectment case.
While the Court did not brand the plaintiff and the
defendant in Pitargue 44 as squatters, strictly
speaking, their entry into the disputed land was
illegal. Both the plaintiff and defendant entered the
public land without the owner's permission. Title to
the land remained with the government because it
had not awarded to anyone ownership of the
contested public land. Both the plaintiff and the
defendant were in effect squatting on government
property. Yet, we upheld the courts' jurisdiction to
resolve the issue of possession even if the plaintiff
and the defendant in the ejectment case did not have
any title over the contested land.
Courts must not abdicate their jurisdiction to resolve
the issue of physical possession because of the public
need to preserve the basic policy behind the
summary actions of forcible entry and unlawful
detainer. The underlying philosophy behind
ejectment suits is to prevent breach of the peace and
criminal disorder and to compel the party out of
possession to respect and resort to the law alone to
obtain what he claims is his. 45 The party deprived of
possession must not take the law into his own
hands. 46 Ejectment proceedings are summary in
nature so the authorities can settle speedily actions
to recover possession because of the overriding need
to quell social disturbances. 47
We further explained in Pitargue the greater interest
that is at stake in actions for recovery of possession.
We made the following pronouncements in Pitargue:
The question that is before this Court is: Are courts
without jurisdiction to take cognizance of possessory
actions involving these public lands before final
award is made by the Lands Department, and before
title is given any of the conflicting claimants? It is one
of utmost importance, as there are public lands
everywhere and there are thousands of settlers,
especially in newly opened regions. It also involves a
matter of policy, as it requires the determination of
the respective authorities and functions of two
coordinate branches of the Government in
connection with public land conflicts.
Our problem is made simple by the fact that under
the Civil Code, either in the old, which was in force in
this country before the American occupation, or in
the new, we have a possessory action, the aim and
purpose of which is the recovery of the physical
possession of real property, irrespective of the
question as to who has the title thereto. Under the
Spanish Civil Code we had the accion interdictal, a
summary proceeding which could be brought within
one year from dispossession (Roman Catholic Bishop
of Cebu vs. Mangaron, 6 Phil. 286, 291); and as early
as October 1, 1901, upon the enactment of the Code
of Civil Procedure (Act No. 190 of the Philippine
Commission) we implanted the common law action
of forcible entry (section 80 of Act No. 190), the
object of which has been stated by this Court to be "to
prevent breaches of the peace and criminal disorder
which would ensue from the withdrawal of the remedy,
and the reasonable hope such withdrawal would
create that some advantage must accrue to those
persons who, believing themselves entitled to the
possession of property, resort to force to gain
possession rather than to some appropriate action in
the court to assert their claims." (Supia and Batioco
vs. Quintero and Ayala, 59 Phil. 312, 314.) So before
the enactment of the first Public Land Act (Act No.
926) the action of forcible entry was already
available in the courts of the country. So the question
to be resolved is, Did the Legislature intend, when it
vested the power and authority to alienate and
dispose of the public lands in the Lands Department,
to exclude the courts from entertaining the
possessory action of forcible entry between rival
claimants or occupants of any land before award
thereof to any of the parties? Did Congress intend
that the lands applied for, or all public lands for that
matter, be removed from the jurisdiction of the
judicial Branch of the Government, so that any
troubles arising therefrom, or any breaches of the
peace or disorders caused by rival claimants, could
be inquired into only by the Lands Department to the
exclusion of the courts? The answer to this question
seems to us evident. The Lands Department does not
have the means to police public lands; neither does it
have the means to prevent disorders arising
therefrom, or contain breaches of the peace among
settlers; or to pass promptly upon conflicts of
possession. Then its power is clearly limited to
disposition and alienation, and while it may decide
conflicts of possession in order to make proper award,
the settlement of conflicts of possession which is
recognized in the court herein has another ultimate
purpose, i.e., the protection of actual possessors and
occupants with a view to the prevention of breaches of
the peace. The power to dispose and alienate could not
have been intended to include the power to prevent or
settle disorders or breaches of the peace among rival
settlers or claimants prior to the final award. As to
this, therefore, the corresponding branches of the
Government must continue to exercise power and
jurisdiction within the limits of their respective
functions. The vesting of the Lands Department with
authority to administer, dispose, and alienate public
lands, therefore, must not be understood as depriving
the other branches of the Government of the exercise of
the respective functions or powers thereon, such as the
authority to stop disorders and quell breaches of the
peace by the police, the authority on the part of the
courts to take jurisdiction over possessory actions
arising therefrom not involving, directly or indirectly,
alienation and disposition.
Our attention has been called to a principle
enunciated in American courts to the effect that
courts have no jurisdiction to determine the rights of
claimants to public lands, and that until the
disposition of the land has passed from the control of
the Federal Government, the courts will not interfere
with the administration of matters concerning the
same. (50 C. J. 1093-1094.) We have no quarrel with
this principle. The determination of the respective
rights of rival claimants to public lands is different
from the determination of who has the actual
physical possession or occupation with a view to
protecting the same and preventing disorder and
breaches of the peace. A judgment of the court
ordering restitution of the possession of a parcel of
land to the actual occupant, who has been deprived
thereof by another through the use of force or in any
other illegal manner, can never be "prejudicial
interference" with the disposition or alienation of
public lands. On the other hand, if courts were
deprived of jurisdiction of cases involving conflicts of
possession, that threat of judicial action against
breaches of the peace committed on public lands would
be eliminated, and a state of lawlessness would
probably be produced between applicants, occupants
or squatters, where force or might, not right or justice,
would rule.
It must be borne in mind that the action that would
be used to solve conflicts of possession between
rivals or conflicting applicants or claimants would be
no other than that of forcible entry. This action, both
in England and the United States and in our
jurisdiction, is a summary and expeditious remedy
whereby one in peaceful and quiet possession may
recover the possession of which he has been
deprived by a stronger hand, by violence or terror; its
ultimate object being to prevent breach of the peace
and criminal disorder. (Supia and Batioco vs. Quintero
and Ayala, 59 Phil. 312, 314.) The basis of the remedy
is mere possession as a fact, of physical possession,
not a legal possession. (Mediran vs. Villanueva, 37
Phil. 752.) The title or right to possession is never in
issue in an action of forcible entry; as a matter of fact,
evidence thereof is expressly banned, except to prove
the nature of the possession. (Second 4, Rule 72,
Rules of Court.) With this nature of the action in
mind, by no stretch of the imagination can conclusion
be arrived at that the use of the remedy in the courts
of justice would constitute an interference with the
alienation, disposition, and control of public lands. To
limit ourselves to the case at bar can it be pretended
at all that its result would in any way interfere with
the manner of the alienation or disposition of the
land contested? On the contrary, it would facilitate
adjudication, for the question of priority of
possession having been decided in a final manner by
the courts, said question need no longer waste the
time of the land officers making the adjudication or
award. (Emphasis ours)
The Principle of Pari Delicto is not Applicable to
Ejectment Cases
The Court of Appeals erroneously applied the
principle of pari delicto to this case.
Articles 1411 and 1412 of the Civil Code 48 embody
the principle of pari delicto. We explained the
principle of pari delicto in these words:
The rule of pari delicto is expressed in the maxims 'ex
dolo malo non eritur actio' and 'in pari delicto potior
est conditio defedentis.' The law will not aid either
party to an illegal agreement. It leaves the parties
where it finds them. 49
The application of the pari delicto principle is not
absolute, as there are exceptions to its application.
One of these exceptions is where the application of
the pari delicto rule would violate well-established
public policy. 50
In Drilon v. Gaurana, 51 we reiterated the basic policy
behind the summary actions of forcible entry and
unlawful detainer. We held that:
It must be stated that the purpose of an action of
forcible entry and detainer is that, regardless of the
actual condition of the title to the property, the party
in peaceable quiet possession shall not be turned out
by strong hand, violence or terror. In affording this
remedy of restitution the object of the statute is to
prevent breaches of the peace and criminal disorder
which would ensue from the withdrawal of the
remedy, and the reasonable hope such withdrawal
would create that some advantage must accrue to
those persons who, believing themselves entitled to
the possession of property, resort to force to gain
possession rather than to some appropriate action in
the courts to assert their claims. This is the
philosophy at the foundation of all these actions of
forcible entry and detainer which are designed to
compel the party out of possession to respect and
resort to the law alone to obtain what he claims is
his. 52
Clearly, the application of the principle of pari
delicto to a case of ejectment between squatters is
fraught with danger. To shut out relief to squatters on
the ground ofpari delicto would openly invite
mayhem and lawlessness. A squatter would oust
another squatter from possession of the lot that the
latter had illegally occupied, emboldened by the
knowledge that the courts would leave them where
they are. Nothing would then stand in the way of the
ousted squatter from re-claiming his prior possession
at all cost.
Petty warfare over possession of properties is
precisely what ejectment cases or actions for
recovery of possession seek to prevent. 53 Even the
owner who has title over the disputed property
cannot take the law into his own hands to regain
possession of his property. The owner must go to
court.
Courts must resolve the issue of possession even if
the parties to the ejectment suit are squatters. The
determination of priority and superiority of
possession is a serious and urgent matter that cannot
be left to the squatters to decide. To do so would
make squatters receive better treatment under the
law. The law restrains property owners from taking
the law into their own hands. However, the principle
of pari delicto as applied by the Court of Appeals
would give squatters free rein to dispossess fellow
squatters or violently retake possession of properties
usurped from them. Courts should not leave
squatters to their own devices in cases involving
recovery of possession.
Possession is the only Issue for Resolution in an
Ejectment Case
The case for review before the Court of Appeals was a
simple case of ejectment. The Court of Appeals
refused to rule on the issue of physical possession.
Nevertheless, the appellate court held that the pivotal
issue in this case is who between Pajuyo and
Guevarra has the "priority right as beneficiary of the
contested land underProclamation No.
137." 54 According to the Court of Appeals, Guevarra
enjoys preferential right under Proclamation No.
137 because Article VI of the Code declares that the
actual occupant or caretaker is the one qualified to
apply for socialized housing.
The ruling of the Court of Appeals has no factual and
legal basis.
First. Guevarra did not present evidence to show that
the contested lot is part of a relocation site
under Proclamation No. 137. Proclamation No.
137 laid down the metes and bounds of the land that
it declared open for disposition to bona fide residents.
The records do not show that the contested lot is
within the land specified by Proclamation No. 137.
Guevarra had the burden to prove that the disputed
lot is within the coverage of Proclamation No. 137. He
failed to do so.
Second. The Court of Appeals should not have given
credence to Guevarra's unsubstantiated claim that he
is the beneficiary of Proclamation No. 137. Guevarra
merely alleged that in the survey the project
administrator conducted, he and not Pajuyo
appeared as the actual occupant of the lot.
There is no proof that Guevarra actually availed of
the benefits of Proclamation No. 137. Pajuyo allowed
Guevarra to occupy the disputed property in 1985.
President Aquino signed Proclamation No. 137 into
law on 11 March 1986. Pajuyo made his earliest
demand for Guevarra to vacate the property in
September 1994.
During the time that Guevarra temporarily held the
property up to the time that Proclamation No.
137 allegedly segregated the disputed lot, Guevarra
never applied as beneficiary of Proclamation No. 137.
Even when Guevarra already knew that Pajuyo was
reclaiming possession of the property, Guevarra did
not take any step to comply with the requirements
of Proclamation No. 137.
Third. Even assuming that the disputed lot is within
the coverage of Proclamation No. 137 and Guevarra
has a pending application over the lot, courts should
still assume jurisdiction and resolve the issue of
possession. However, the jurisdiction of the courts
would be limited to the issue of physical possession
only.
In Pitargue, 55 we ruled that courts have jurisdiction
over possessory actions involving public land to
determine the issue of physical possession. The
determination of the respective rights of rival
claimants to public land is, however, distinct from the
determination of who has the actual physical
possession or who has a better right of physical
possession. 56 The administrative disposition and
alienation of public lands should be threshed out in
the proper government agency. 57
The Court of Appeals' determination of Pajuyo and
Guevarra's rights under Proclamation No. 137 was
premature. Pajuyo and Guevarra were at most merely
potential beneficiaries of the law. Courts should not
preempt the decision of the administrative agency
mandated by law to determine the qualifications of
applicants for the acquisition of public lands. Instead,
courts should expeditiously resolve the issue of
physical possession in ejectment cases to prevent
disorder and breaches of peace.58
Pajuyo is Entitled to Physical Possession of the
Disputed Property
Guevarra does not dispute Pajuyo's prior possession
of the lot and ownership of the house built on it.
Guevarra expressly admitted the existence and due
execution of the Kasunduan. The Kasunduan reads:
Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa
Bo. Payatas, Quezon City, ay nagbibigay pahintulot
kay G. Eddie Guevarra, na pansamantalang
manirahan sa nasabing bahay at lote ng "walang
bayad." Kaugnay nito, kailangang panatilihin nila ang
kalinisan at kaayusan ng bahay at lote.
Sa sandaling kailangan na namin ang bahay at lote,
sila'y kusang aalis ng walang reklamo.
Based on the Kasunduan, Pajuyo permitted Guevarra
to reside in the house and lot free of rent, but
Guevarra was under obligation to maintain the
premises in good condition. Guevarra promised to
vacate the premises on Pajuyo's demand but
Guevarra broke his promise and refused to heed
Pajuyo's demand to vacate.
These facts make out a case for unlawful detainer.
Unlawful detainer involves the withholding by a
person from another of the possession of real
property to which the latter is entitled after the
expiration or termination of the former's right to
hold possession under a contract, express or
implied. 59
Where the plaintiff allows the defendant to use his
property by tolerance without any contract, the
defendant is necessarily bound by an implied
promise that he will vacate on demand, failing which,
an action for unlawful detainer will lie. 60 The
defendant's refusal to comply with the demand
makes his continued possession of the property
unlawful. 61 The status of the defendant in such a
case is similar to that of a lessee or tenant whose
term of lease has expired but whose occupancy
continues by tolerance of the owner. 62
This principle should apply with greater force in
cases where a contract embodies the permission or
tolerance to use the property.
The Kasunduan expressly articulated Pajuyo's
forbearance. Pajuyo did not require Guevarra to pay
any rent but only to maintain the house and lot in
good condition. Guevarra expressly vowed in
theKasunduan that he would vacate the property on
demand. Guevarra's refusal to comply with Pajuyo's
demand to vacate made Guevarra's continued
possession of the property unlawful.
We do not subscribe to the Court of Appeals' theory
that the Kasunduan is one of commodatum.
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. 63An 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. 64Thus,
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
thecommodatum is constituted. 65 If the bailor
should have urgent need of the thing, he may demand
its return for temporary use. 66 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. 67 Under
the Civil Code, precarium is a kind
of commodatum. 68
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. 69 The tenant's withholding of the property
would then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo
and Guevarra is one of commodatum, Guevarra as
bailee would still have the duty to turn over
possession of the property to Pajuyo, the bailor. The
obligation to deliver or to return the thing received
attaches to contracts for safekeeping, or contracts of
commission, administration and commodatum.
70 These contracts certainly involve the obligation to
deliver or return the thing received. 71
Guevarra turned his back on the Kasunduan on the
sole ground that like him, Pajuyo is also a squatter.
Squatters, Guevarra pointed out, cannot enter into a
contract involving the land they illegally occupy.
Guevarra insists that the contract is void.
Guevarra should know that there must be honor even
between squatters. Guevarra freely entered into
the Kasunduan. Guevarra cannot now impugn
the Kasunduanafter he had benefited from it.
The Kasunduan binds Guevarra.
The Kasunduan is not void for purposes of
determining who between Pajuyo and Guevarra has a
right to physical possession of the contested
property. The Kasunduanis the undeniable evidence
of Guevarra's recognition of Pajuyo's better right of
physical possession. Guevarra is clearly a possessor
in bad faith. The absence of a contract would not
yield a different result, as there would still be an
implied promise to vacate.
Guevarra contends that there is "a pernicious evil
that is sought to be avoided, and that is allowing an
absentee squatter who (sic) makes (sic) a profit out
of his illegal act." 72 Guevarra bases his argument on
the preferential right given to the actual occupant or
caretaker under Proclamation No. 137 on socialized
housing.
We are not convinced.
Pajuyo did not profit from his arrangement with
Guevarra because Guevarra stayed in the property
without paying any rent. There is also no proof that
Pajuyo is a professional squatter who rents out
usurped properties to other squatters. Moreover, it is
for the proper government agency to decide who
between Pajuyo and Guevarra qualifies for socialized
housing. The only issue that we are addressing is
physical possession.
Prior possession is not always a condition sine qua
non in ejectment. 73 This is one of the distinctions
between forcible entry and unlawful detainer. 74 In
forcible entry, the plaintiff is deprived of physical
possession of his land or building by means of force,
intimidation, threat, strategy or stealth. Thus, he
must allege and prove prior possession. 75 But in
unlawful detainer, the defendant unlawfully
withholds possession after the expiration or
termination of his right to possess under any
contract, express or implied. In such a case, prior
physical possession is not required. 76
Pajuyo's withdrawal of his permission to Guevarra
terminated the Kasunduan. Guevarra's transient right
to possess the property ended as well. Moreover, it
was Pajuyo who was in actual possession of the
property because Guevarra had to seek Pajuyo's
permission to temporarily hold the property and
Guevarra had to follow the conditions set by Pajuyo
in the Kasunduan. Control over the property still
rested with Pajuyo and this is evidence of actual
possession.
Pajuyo's absence did not affect his actual possession
of the disputed property. Possession in the eyes of
the law does not mean that a man has to have his feet
on every square meter of the ground before he is
deemed in possession. 77 One may acquire
possession not only by physical occupation, but also
by the fact that a thing is subject to the action of one's
will. 78 Actual or physical occupation is not always
necessary. 79
Ruling on Possession Does not Bind Title to the Land in
Dispute
We are aware of our pronouncement in cases where
we declared that "squatters and intruders who
clandestinely enter into titled government property
cannot, by such act, acquire any legal right to said
property." 80 We made this declaration because the
person who had title or who had the right to legal
possession over the disputed property was a party in
the ejectment suit and that party instituted the case
against squatters or usurpers.
In this case, the owner of the land, which is the
government, is not a party to the ejectment case. This
case is between squatters. Had the government
participated in this case, the courts could have
evicted the contending squatters, Pajuyo and
Guevarra.
Since the party that has title or a better right over the
property is not impleaded in this case, we cannot
evict on our own the parties. Such a ruling would
discourage squatters from seeking the aid of the
courts in settling the issue of physical possession.
Stripping both the plaintiff and the defendant of
possession just because they are squatters would
have the same dangerous implications as the
application of the principle of pari delicto. Squatters
would then rather settle the issue of physical
possession among themselves than seek relief from
the courts if the plaintiff and defendant in the
ejectment case would both stand to lose possession
of the disputed property. This would subvert the
policy underlying actions for recovery of possession.
Since Pajuyo has in his favor priority in time in
holding the property, he is entitled to remain on the
property until a person who has title or a better right
lawfully ejects him. Guevarra is certainly not that
person. The ruling in this case, however, does not
preclude Pajuyo and Guevarra from introducing
evidence and presenting arguments before the
proper administrative agency to establish any right
to which they may be entitled under the law. 81
In no way should our ruling in this case be
interpreted to condone squatting. The ruling on the
issue of physical possession does not affect title to
the property nor constitute a binding and conclusive
adjudication on the merits on the issue of
ownership. 82 The owner can still go to court to
recover lawfully the property from the person who
holds the property without legal title. Our ruling here
does not diminish the power of government agencies,
including local governments, to condemn, abate,
remove or demolish illegal or unauthorized
structures in accordance with existing laws.
Attorney's Fees and Rentals
The MTC and RTC failed to justify the award of
P3,000 attorney's fees to Pajuyo. Attorney's fees as
part of damages are awarded only in the instances
enumerated inArticle 2208 of the Civil Code. 83 Thus,
the award of attorney's fees is the exception rather
than the rule. 84 Attorney's fees are not awarded
every time a party prevails in a suit because of the
policy that no premium should be placed on the right
to litigate. 85 We therefore delete the attorney's fees
awarded to Pajuyo.
We sustain the P300 monthly rentals the MTC and
RTC assessed against Guevarra. Guevarra did not
dispute this factual finding of the two courts. We find
the amount reasonable compensation to Pajuyo. The
P300 monthly rental is counted from the last demand
to vacate, which was on 16 February 1995.
WHEREFORE, we GRANT the petition. The Decision
dated 21 June 2000 and Resolution dated 14
December 2000 of the Court of Appeals in CA-G.R. SP
No. 43129 are SET ASIDE. The Decision dated 11
November 1996 of the Regional Trial Court of
Quezon City, Branch 81 in Civil Case No. Q-96-26943,
affirming the Decision dated 15 December 1995 of
the Metropolitan Trial Court of Quezon City, Branch
31 in Civil Case No. 12432, is REINSTATED with
MODIFICATION. The award of attorney's fees is
deleted. No costs.
SO ORDERED.