G.R. No.

L-20240 December 31, 1965

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.
JOSE GRIJALDO, defendant-appellant.

Office of the Solicitor General for plaintiff-appellee.

Isabelo P. Samson for defendant-appellant.

ZALDIVAR, J.:

In the year 1943 appellant Jose Grijaldo obtained five loans from the branch office of the Bank of
Taiwan, Ltd. in Bacolod City, in the total sum of P1,281.97 with interest at the rate of 6% per annum,
compounded quarterly. These loans are evidenced by five promissory notes executed by the
appellant in favor of the Bank of Taiwan, Ltd., as follows: On June 1, 1943, P600.00; on June 3,
1943, P159.11; on June 18, 1943, P22.86; on August 9, 1943,P300.00; on August 13, 1943,
P200.00, all notes without due dates, but because the loans were due one year after they were
incurred. To secure the payment of the loans the appellant executed a chattel mortgage on the
standing crops on his land, Lot No. 1494 known as Hacienda Campugas in Hinigiran, Negros
Occidental.

By virtue of Vesting Order No. P-4, dated January 21, 1946, and under the authority provided for in
the Trading with the Enemy Act, as amended, the assets in the Philippines of the Bank of Taiwan,
Ltd. were vested in the Government of the United States. Pursuant to the Philippine Property Act of
1946 of the United States, these assets, including the loans in question, were subsequently
transferred to the Republic of the Philippines by the Government of the United States under Transfer
Agreement dated July 20, 1954. These assets were among the properties that were placed under
the administration of the Board of Liquidators created under Executive Order No. 372, dated
November 24, 1950, and in accordance with Republic Acts Nos. 8 and 477 and other pertinent laws.

On September 29, 1954 the appellee, Republic of the Philippines, represented by the Chairman of
the Board of Liquidators, made a written extrajudicial demand upon the appellant for the payment of
the account in question. The record shows that the appellant had actually received the written
demand for payment, but he failed to pay.

The aggregate amount due as principal of the five loans in question, computed under the Ballantyne
scale of values as of the time that the loans were incurred in 1943, was P889.64; and the interest
due thereon at the rate of 6% per annum compounded quarterly, computed as of December 31,
1959 was P2,377.23.

On January 17, 1961 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran,
Negros Occidental, to collect from the appellant the unpaid account in question. The Justice of the
Peace Of Hinigaran, after hearing, dismissed the case on the ground that the action had prescribed.
The appellee appealed to the Court of First Instance of Negros Occidental and on March 26, 1962
the court a quo rendered a decision ordering the appellant to pay the appellee the sum of P2,377.23
as of December 31, 1959, plus interest at the rate of 6% per annum compounded quarterly from the
date of the filing of the complaint until full payment was made. The appellant was also ordered to pay
the sum equivalent to 10% of the amount due as attorney's fees and costs.

The appellant appealed directly to this Court. During the pendency of this appeal the appellant Jose
Grijaldo died. Upon motion by the Solicitor General this Court, in a resolution of May 13, 1963,
required Manuel Lagtapon, Jacinto Lagtapon, Ruben Lagtapon and Anita L. Aguilar, who are the
legal heirs of Jose Grijaldo to appear and be substituted as appellants in accordance with Section 17
of Rule 3 of the Rules of Court.

In the present appeal the appellant contends: (1) that the appellee has no cause of action against
the appellant; (2) that if the appellee has a cause of action at all, that action had prescribed; and (3)
that the lower court erred in ordering the appellant to pay the amount of P2,377.23.

In discussing the first point of contention, the appellant maintains that the appellee has no privity of
contract with the appellant. It is claimed that the transaction between the Taiwan Bank, Ltd. and the
appellant, so that the appellee, Republic of the Philippines, could not legally bring action against the
appellant for the enforcement of the obligation involved in said transaction. This contention has no
merit. It is true that the Bank of Taiwan, Ltd. was the original creditor and the transaction between
the appellant and the Bank of Taiwan was a private contract of loan. However, pursuant to the
Trading with the Enemy Act, as amended, and Executive Order No. 9095 of the United States; and
under Vesting Order No. P-4, dated January 21, 1946, the properties of the Bank of Taiwan, Ltd., an
entity which was declared to be under the jurisdiction of the enemy country (Japan), were vested in
the United States Government and the Republic of the Philippines, the assets of the Bank of Taiwan,
Ltd. were transferred to and vested in the Republic of the Philippines. The successive transfer of the
rights over the loans in question from the Bank of Taiwan, Ltd. to the United States Government, and
from the United States Government to the government of the Republic of the Philippines, made the
Republic of the Philippines the successor of the rights, title and interest in said loans, thereby
creating a privity of contract between the appellee and the appellant. In defining the word "privy" this
Court, in a case, said:

The word "privy" denotes the idea of succession ... hence an assignee of a credit, and one
subrogated to it, etc. will be privies; in short, he who by succession is placed in the position
of one of those who contracted the judicial relation and executed the private document and
appears to be substituting him in the personal rights and obligation is a privy (Alpurto vs.
Perez, 38 Phil. 785, 790).

The United States of America acting as a belligerent sovereign power seized the assets of the Bank
of Taiwan, Ltd. which belonged to an enemy country. The confiscation of the assets of the Bank of
Taiwan, Ltd. being an involuntary act of war, and sanctioned by international law, the United States
succeeded to the rights and interests of said Bank of Taiwan, Ltd. over the assets of said bank. As
successor in interest in, and transferee of, the property rights of the United States of America over
the loans in question, the Republic of the Philippines had thereby become a privy to the original
contracts of loan between the Bank of Taiwan, Ltd. and the appellant. It follows, therefore, that the
Republic of the Philippines has a legal right to bring the present action against the appellant Jose
Grijaldo.

The appellant likewise maintains, in support of his contention that the appellee has no cause of
action, that because the loans were secured by a chattel mortgage on the standing crops on a land
owned by him and these crops were lost or destroyed through enemy action his obligation to pay the
loans was thereby extinguished. This argument is untenable. The terms of the promissory notes and
the chattel mortgage that the appellant executed in favor of the Bank of Taiwan, Ltd. do not support
the claim of appellant. The obligation of the appellant under the five promissory notes was not to
deliver a determinate thing namely, the crops to be harvested from his land, or the value of the crops
that would be harvested from his land. Rather, his obligation was to pay a generic thing — the
amount of money representing the total sum of the five loans, with interest. The transaction between
the appellant and the Bank of Taiwan, Ltd. was a series of five contracts of simple loan of sums of
money. "By a contract of (simple) loan, one of the parties delivers to another ... money or other
consumable thing upon the condition that the same amount of the same kind and quality shall be
paid." (Article 1933, Civil Code) The obligation of the appellant under the five promissory notes
evidencing the loans in questions is to pay the value thereof; that is, to deliver a sum of money — a
clear case of an obligation to deliver, a generic thing. Article 1263 of the Civil Code provides:

In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind
does not extinguish the obligation.

The chattel mortgage on the crops growing on appellant's land simply stood as a security for the
fulfillment of appellant's obligation covered by the five promissory notes, and the loss of the crops did
not extinguish his obligation to pay, because the account could still be paid from other sources aside
from the mortgaged crops.

In his second point of contention, the appellant maintains that the action of the appellee had
prescribed. The appellant points out that the loans became due on June 1, 1944; and when the
complaint was filed on January 17,1961 a period of more than 16 years had already elapsed — far
beyond the period of ten years when an action based on a written contract should be brought to
court.

This contention of the appellant has no merit. Firstly, it should be considered that the complaint in
the present case was brought by the Republic of the Philippines not as a nominal party but in the
exercise of its sovereign functions, to protect the interests of the State over a public property. Under
paragraph 4 of Article 1108 of the Civil Code prescription, both acquisitive and extinctive, does not
run against the State. This Court has held that the statute of limitations does not run against the right
of action of the Government of the Philippines (Government of the Philippine Islands vs. Monte de
Piedad, etc., 35 Phil. 738-751).Secondly, the running of the period of prescription of the action to
collect the loan from the appellant was interrupted by the moratorium laws (Executive Orders No. 25,
dated November 18, 1944; Executive Order No. 32. dated March 10, 1945; and Republic Act No.
342, approved on July 26, 1948). The loan in question, as evidenced by the five promissory notes,
were incurred in the year 1943, or during the period of Japanese occupation of the Philippines. This
case is squarely covered by Executive Order No. 25, which became effective on November 18,
1944, providing for the suspension of payments of debts incurred after December 31, 1941. The
period of prescription was, therefore, suspended beginning November 18, 1944. This Court, in the
case of Rutter vs. Esteban (L-3708, May 18, 1953, 93 Phil. 68), declared on May 18, 1953 that the
Moratorium Laws, R.A. No. 342 and Executive Orders Nos. 25 and 32, are unconstitutional; but in
that case this Court ruled that the moratorium laws had suspended the prescriptive period until May
18, 1953. This ruling was categorically reiterated in the decision in the case of Manila Motors vs.
Flores, L-9396, August 16, 1956. It follows, therefore, that the prescriptive period in the case now
before US was suspended from November 18,1944, when Executive Orders Nos. 25 and 32 were
declared unconstitutional by this Court. Computed accordingly, the prescriptive period was
suspended for 8 years and 6 months. By the appellant's own admission, the cause of action on the
five promissory notes in question arose on June 1, 1944. The complaint in the present case was filed
on January 17, 1961, or after a period of 16 years, 6 months and 16 days when the cause of action
arose. If the prescriptive period was not interrupted by the moratorium laws, the action would have
prescribed already; but, as We have stated, the prescriptive period was suspended by the
moratorium laws for a period of 8 years and 6 months. If we deduct the period of suspension (8
years and 6 months) from the period that elapsed from the time the cause of action arose to the time
when the complaint was filed (16 years, 6 months and 16 days) there remains a period of 8 years
and 16 days. In other words, the prescriptive period ran for only 8 years and 16 days. There still
remained a period of one year, 11 months and 14 days of the prescriptive period when the complaint
was filed.
In his third point of contention the appellant maintains that the lower court erred in ordering him to
pay the amount of P2,377.23. It is claimed by the appellant that it was error on the part of the lower
court to apply the Ballantyne Scale of values in evaluating the Japanese war notes as of June 1943
when the loans were incurred, because what should be done is to evaluate the loans on the basis of
the Ballantyne Scale as of the time the loans became due, and that was in June 1944. This
contention of the appellant is also without merit.

The decision of the court a quo ordered the appellant to pay the sum of P2,377.23 as of December
31, 1959, plus interest rate of 6% per annum compounded quarterly from the date of the filing of the
complaint. The sum total of the five loans obtained by the appellant from the Bank of Taiwan, Ltd.
was P1,281.97 in Japanese war notes. Computed under the Ballantyne Scale of values as of June
1943, this sum of P1,281.97 in Japanese war notes in June 1943 is equivalent to P889.64 in
genuine Philippine currency which was considered the aggregate amount due as principal of the five
loans, and the amount of P2,377.23 as of December 31, 1959 was arrived at after computing the
interest on the principal sum of P889.64 compounded quarterly from the time the obligations were
incurred in 1943.

It is the stand of the appellee that the Ballantyne scale of values should be applied as of the time the
obligation was incurred, and that was in June 1943. This stand of the appellee was upheld by the
lower court; and the decision of the lower court is supported by the ruling of this Court in the case
of Hilado vs. De la Costa (G.R. No. L-150, April 30, 1949; 46 O.G. 5472), which states:

... Contracts stipulating for payments presumably in Japanese war notes may be enforced in
our Courts after the liberation to the extent of the just obligation of the contracting parties
and, as said notes have become worthless, in order that justice may be done and the party
entitled to be paid can recover their actual value in Philippine Currency, what the debtor or
defendant bank should return or pay is the value of the Japanese military notes in relation to
the peso in Philippine Currency obtaining on the date when and at the place where the
obligation was incurred unless the parties had agreed otherwise. ... . (italics supplied)

IN VIEW OF THE FOREGOING, the decision appealed from is affirmed, with costs against the
appellant. Inasmuch as the appellant Jose Grijaldo died during the pendency of this appeal, his
estate must answer in the execution of the judgment in the present case.

Bengzon, C.J., Concepcion, Barrera, Regala, Bautista Angelo, Reyes, J.B.L., Makalintal and
Bengzon, J.P., JJ., concur.

REPUBLIC vs. GRIJALDO 15 SCRA 638

Republic v Grijaldo[G.R. No. L-20240. December 31, 1965.]Art 1953: A person who receives a loan
of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and quality.

FACTS: Jose Grijaldo obtained five crop loans from the branch office of the Bank of Taiwan, Ltd. in
Bacolod City, in the total sum of P1,281.97 with interest at the rate of 6% per annum, compounded
quarterly. These loans are evidenced by five promissory notes executed by the appellant in favor of
the Bank. All notes without due dates, but because the loans were crop loans it was considered that
the loans were due one year after they were incurred. To secure the payment of the loans the
appellant executed a chattel mortgage on the standing crops on his land known as Hacienda
Campugas.By virtue of Trading with the Enemy Act the assets in the Philippines of the Bank of
Taiwan, Ltd. were vested in the Government of the United States which were subsequently
transferred to the Republic of the Philippines.Grijaldo failed to pay the crop loans despite the extra-
judicial demand of the Government of the Philippines. He argued that the Government has no cause
of action, that because the loans were secured by a chattel mortgage on the standing crops on a
land owned by him and those crops were lost or destroyed through enemy action his obligation
to pay the loans was thereby extinguished.

ISSUE: Whether or not Grijaldos obligation to pay the crop loans had extinguished due to the crops
that were lost or destroyed through enemy action.

HELD/RATIO: NO. The obligation of the Grijaldo under the five promissory notes was not to deliver
a determinate thing; namely, the crops to be harvested from his land, or the value of the crops that
would be harvested from his land. Rather, his obligation was to pay a generic thing the amount
of money representing the total sum of the five loans, with interest.The chattel mortgage on the
crops growing on appellant's land simply stood asa security for the fulfillment of appellant's
obligation covered by the five promissorynotes, and the loss of the crops did not extinguish his
obligation to pay, because theaccount could still be paid from other sources aside from the
mortgaged crops.The court ordered the estate of Grijaldo to answer for the settlement of the crop
loans.

G.R. No. 84719 January 25, 1991

YONG CHAN KIM, petitioner,

vs.
PEOPLE OF THE PHILIPPINES, HON. EDGAR D. GUSTILO, Presiding Judge, RTC, 6th Judicial
Region, Branch 28 Iloilo City and Court of Appeals (13th Division) respondents.

Remedios C. Balbin and Manuel C. Cases, Jr. for petitioner.

Hector P. Teodosio for private respondent.

PADILLA, J.:

This petition seeks the review on certiorari of the following:

1. The decision dated 3 September 1986 of the 15th Municipal Circuit Trial Court (Guimbal-
Igbaras-Tigbauan-Tubungan) in Guimbal, Iloilo, in Criminal Case No. 628,1 and the affirming
decision of the Regional Trial Court, Branch XXVIII, Iloilo City, in Criminal Case No. 20958,
promulgated on 30 July 1987;2

2. The decision of the Court of Appeals, dated 29 April 1988,3

dismissing petitioner's appeal/petition for review for having been filed out of time, and the resolution,
dated 19 August 1988, denying petitioner's motion for reconsideration.4
The antecedent facts are as follows:

Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture Department of the
Southeast Asian Fisheries Development Center (SEAFDEC) with head station at Tigbauan, Province
of Iloilo. As Head of the Economics Unit of the Research Division, he conducted prawn surveys
which required him to travel to various selected provinces in the country where there are potentials
for prawn culture.

On 15 June 1982, petitioner was issued Travel Order No. 2222 which covered his travels to
different places in Luzon from 16 June to 21 July 1982, a period of thirty five (35) days. Under
this travel order, he received P6,438.00 as cash advance to defray his travel expenses.

Within the same period, petitioner was issued another travel order, T.O. 2268, requiring him to travel
from the Head Station at Tigbauan, Iloilo to Roxas City from 30 June to 4 July 1982, a period of five
(5) days. For this travel order, petitioner received a cash advance of P495.00.

On 14 January 1983, petitioner presented both travel orders for liquidation, submitting Travel
Expense Reports to the Accounting Section. When the Travel Expense Reports were audited, it
was discovered that there was an overlap of four (4) days (30 June to 3 July 1982) in the two (2)
travel orders for which petitioner collected per diemstwice. In sum, the total amount in the form of per
diems and allowances charged and collected by petitioner under Travel Order No. 2222, when he
did not actually and physically travel as represented by his liquidation papers, was P1,230.00.

Petitioner was required to comment on the internal auditor's report regarding the alleged anomalous
claim for per diems. In his reply, petitioner denied the alleged anomaly, claiming that he made make-
up trips to compensate for the trips he failed to undertake under T.O. 2222 because he was recalled
to the head office and given another assignment.

In September 1983, two (2) complaints for Estafa were filed against the petitioner before the
Municipal Circuit Trial Court at Guimbal, Iloilo, docketed as Criminal Case Nos. 628 and 631.

After trial in Criminal Case No. 628, the Municipal Circuit Trial Court rendered a decision, the
dispositive part of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the court finds the accused, Yong
Chan Kim, guilty beyond reasonable doubt for the crime of Estafa penalized under paragraph
l(b) of Article 315, Revised Penal Code. Records disclose there is no aggravating
circumstance proven by the prosecution. Neither there is any mitigating circumstance proven
by the accused. Considering the amount subject of the present complaint, the imposable
penalty should be in the medium period of arresto mayor in its maximum period to prision
correccional in its minimum period in accordance with Article 315, No. 3, Revised Penal
Code. Consonantly, the Court hereby sentences the accused to suffer an imprisonment
ranging from four (4) months as the minimum to one (1) year and six (6) months as the
maximum in accordance with the Indeterminate Sentence Law and to reimburse the amount
of P1,230.00 to SEAFDEC.

The surety bond of the accused shall remain valid until final judgment in accordance
herewith.

Costs against the accused.5

Criminal Case No. 631 was subsequently dismissed for failure to prosecute.

Petitioner appealed from the decision of the Municipal Circuit Trial Court in Criminal Case No. 628.
On 30 July 1987, the Regional Trial Court in Iloilo City in Criminal Case No. 20958 affirmed in
toto the trial court's decision.6

The decision of the Regional Trial Court was received by petitioner on 10 August 1987. On 11
August 1987, petitioner, thru counsel, filed a notice of appeal with the Regional Trial Court which
ordered the elevation of the records of the case to the then Intermediate Appellate Court on the
following day, 12 August 1987. The records of the case were received by the Intermediate Appellate
Court on 8 October 1987, and the appeal was docketed as CA-G.R. No. 05035.

On 30 October 1987, petitioner filed with the appellate court a petition for review. As earlier stated,
on 29 April 1988, the Court of Appeals dismissed the petition for having been filed out of time.
Petitioner's motion for reconsideration was denied for lack of merit.

Hence, the present recourse.

On 19 October 1988, the Court resolved to require the respondents to comment on the petition for
review. The Solicitor General filed his Comment on 20 January 1989, after several grants of
extensions of time to file the same.

In his Comment, the Solicitor General prayed for the dismissal of the instant petition on the ground
that, as provided for under Section 22, Batas Pambansa 129, Section 22 of the Interim Rules and
Guidelines, and Section 3, Rule 123 of the 1985 Rules of Criminal Procedure, the petitioner should
have filed a petition for review with the then Intermediate Appellate Court instead of a notice of
appeal with the Regional Trial Court, in perfecting his appeal from the RTC to the Intermediate
Appellate Court, since the RTC judge was rendered in the exercise of its appellate jurisdiction over
municipal trial courts. The failure of petitioner to file the proper petition rendered the decision of the
Regional Trial Court final and executory, according to the Solicitor General.

Petitioner's counsel submitted a Reply (erroneously termed Comment)7 wherein she contended that
the peculiar circumstances of a case, such as this, should be considered in order that the principle
barring a petitioner's right of review can be made flexible in the interest of justice and equity.

In our Resolution of 29 May 1989, we resolved to deny the petition for failure of petitioner to
sufficiently show that the Court of Appeals had committed any reversible error in its questioned
judgment which had dismissed petitioner's petition for review for having been filed out of time.8

Petitioner filed a motion for reconsideration maintaining that his petition for review did not limit itself
to the issue upon which the appellate court's decision of 29 April 1988 was based, but rather it
delved into the substance and merits of the case.9

On 10 August 1990, we resolved to set aside our resolution dismissing this case and gave due
course to the petition. In the said resolution, we stated:

In several cases decided by this Court, it had set aside technicalities in the Rules in order to
give way to justice and equity. In the present case, we note that the petitioner, in filing his
Notice of Appeal the very next day after receiving the decision of the court a quo lost no time
in showing his intention to appeal, although the procedure taken was not correct. The Court
can overlook the wrong pleading filed, if strict compliance with the rules would mean
 sacrificing justice to technicality. The imminence of a person being deprived unjustly of his
liberty due to procedural lapse of counsel is a strong and compelling reason to warrant
suspension of the Rules. Hence, we shall consider the petition for review filed in the Court of
Appeals as a Supplement to the Notice of Appeal. As the Court declared in a recent
decision, '. . . there is nothing sacred about the procedure of pleadings. This Court may go
beyond the pleadings when the interest of justice so warrants. It has the prerogative to
suspend its rules for the same purpose. . . . Technicality, when it deserts its proper office as
an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. [Alonzo v. Villamor, et al., 16 Phil. 315]

Conscience cannot rest in allowing a man to go straight to jail, closing the door to his every
entreaty for a full opportunity to be heard, even as he has made a prima facie showing of a
meritorious cause, simply because he had chosen an appeal route, to be sure, recognized
by law but made inapplicable to his case, under altered rules of procedure. While the Court
of Appeals can not be faulted and, in fact, it has to be lauded for correctly applying the rules
of procedure in appeals to the Court of Appeals from decisions of the RTC rendered in the
exercise of its appellate jurisdiction, yet, this Court, as the ultimate bulwark of human rights
and individual liberty, will not allow substantial justice to be sacrified at the altar of procedural
rigor.10

In the same resolution, the parties were required to file their respective memoranda, and in
compliance with said resolution, petitioner filed his memorandum on 25 October 1989, while private
respondent SEAFDEC filed its required memorandum on 10 April 1990. On the other hand, the
Solicitor General filed on 13 March 1990 a Recommendation for Acquittal in lieu of the required
memorandum.

Two (2) issues are raised by petitioner to wit:

I. WHETHER OR NOT THE DECISION (sic) OF THE MUNICIPAL CIRCUIT TRIAL COURT
(GUIMBAL, ILOILO) AND THE REGIONAL TRIAL COURT, BRANCH 28 (ILOILO CITY)
ARE SUPPORTED BY THE FACTS AND EVIDENCE OR CONTRARY TO LAW AND THAT
THE TWO COURTS A QUO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION OR HAVE ACTED WITHOUT OR IN EXCESS
OF JURISDICTION.

II. WHETHER OR NOT THE DECISION OF THE HONORABLE COURT OF APPEALS IS

CONTRARY TO LAW, ESTABLISHED JURISPRUDENCE, EQUITY AND DUE PROCESS.

The second issue has been resolved in our Resolution dated 10 August 1990, when we granted
petitioner's second motion for reconsideration. We shall now proceed to the first issue.

We find merit in the petition.

It is undisputed that petitioner received a cash advance from private respondent SEAFDEC to defray
his travel expenses under T.O. 2222. It is likewise admitted that within the period covered by T.O.
2222, petitioner was recalled to the head station in Iloilo and given another assignment which was
covered by T.O. 2268. The dispute arose when petitioner allegedly failed to return P1,230.00 out of
the cash advance which he received under T.O. 2222. For the alleged failure of petitioner to return
the amount of P1,230.00, he was charged with the crime of Estafa under Article 315, par. 1(b) of the
Revised Penal Code, which reads as follows:
 Art. 315. Swindling (Estafa). Any person who shall defraud another by any of the means
mentioned herein below shall be punished by:

xxx xxx xxx

1. With unfaithfulness or abuse of confidence, namely:

(a) x x x xxx xxx

(b) By misappropriating or converting, to the prejudice of another, money, goods, or

any other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of; or
to return, the same, even though such obligation be fatally or partially guaranteed by
a bond; or by denying having received such money, goods, or other property.

In order that a person can be convicted under the abovequoted provision, it must be proven that he
had the obligation to deliver or return the same money, good or personal property that he had
received.11

Was petitioner under obligation to return the same money (cash advance) which he had received?
We belive not. Executive Order No. 10, dated 12 February 1980 provides as follows:

B. Cash Advance for Travel

xxx xxx xxx

4. All cash advances must be liquidated within 30 days after date of projected return of the
person. Otherwise, corresponding salary deduction shall be made immediately following the
expiration day.

Liquidation simply means the settling of an indebtedness. An employee, such as herein petitioner,
who liquidates a cash advance is in fact paying back his debt in the form of a loan of money
advanced to him by his employer, as per diems and allowances. Similarly, as stated in the assailed
decision of the lower court, "if the amount of the cash advance he received is less than the amount
he spent for actual travel . . . he has the right to demand reimbursement from his employer the
amount he spent coming from his personal funds.12 In other words, the money advanced by either
party is actually a loan to the other. Hence, petitioner was under no legal obligation to return the
same cash or money, i.e., the bills or coins, which he received from the private respondent.13

Article 1933 and Article 1953 of the Civil Code define the nature of a simple loan.

Art. 1933. By the contract of loan, one of the parties delivers to another, either something not
consumable so that the latter may use the same for a certain time and return it, in which
case the contract is called a commodatum; or money or other consumable thing, upon the
condition that the same amount of the same kind and quality shall be paid, in which case the
contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

 In commodatum the bailor retains the ownership of the thing loaned, while in simple loan,
ownership passes to the borrower.

Art. 1953.— A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.

The ruling of the trial judge that ownership of the cash advanced to the petitioner by private
respondent was not transferred to the latter is erroneous. Ownership of the money was transferred
to the petitioner. Even the prosecution witness, Virgilio Hierro, testified thus:

Q When you gave cash advance to the accused in this Travel Order No. 2222 subject to
liquidation, who owns the funds, accused or SEAFDEC? How do you consider the funds in
the possession of the accused at the time when there is an actual transfer of cash? . . .

A The one drawing cash advance already owns the money but subject to liquidation. If he will
not liquidate, be is obliged to return the amount.

Qxxx xxx xxx

So why do you treat the itinerary of travel temporary when in fact as of that time the accused
owned already the cash advance. You said the cash advance given to the accused is his
own money. In other words, at the time you departed with the money it belongs already to
the accused?

A Yes, but subject for liquidation. He will be only entitled for that credence if he liquidates.

Q If other words, it is a transfer of ownership subject to a suspensive condition that he

liquidates the amount of cash advance upon return to station and completion of the travel?

A Yes, sir.

(pp. 26-28, tsn, May 8, 1985).14

Since ownership of the money (cash advance) was transferred to petitioner, no fiduciary relationship
was created. Absent this fiduciary relationship between petitioner and private respondent, which is
an essential element of the crime of estafa by misappropriation or conversion, petitioner could not
have committed estafa.15

Additionally, it has been the policy of private respondent that all cash advances not liquidated are to
be deducted correspondingly from the salary of the employee concerned. The evidence shows that
the corresponding salary deduction was made in the case of petitioner vis-a-vis the cash advance in
question.

WHEREFORE, the decision dated 3 September 1986 of the 15th Municipal Circuit Trial Court in
Guimbal, Iloilo in Criminal Case No. 628, finding petitioner guilty of estafa under Article 315, par. 1
(b) of the Revised Penal Code and the affirming decision of the Regional Trial Court, Branch XXVIII,
Iloilo City, in Criminal Case No. 20958, promulgated on 30 July 1987 are both hereby SET ASIDE.
Petitioner is ACQUITTED of criminal charge filed against him.

SO ORDERED
YONG CHAN KIM, petitioner,
vs.
PEOPLE OF THE PHILIPPINES, HON. EDGAR D. GUSTILO, Presiding Judge, RTC, 6th Judicial
Region, Branch 28 Iloilo City and Court of Appeals (13th Division) respondents.

Facts:

Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture Department of the
Southeast Asian Fisheries Development Center (SEAFDEC) with head station at Tigbauan, Province
of Iloilo. As Head of the Economics Unit of the Research Division, he conducted prawn surveys
which required him to travel to various selected provinces in the country where there are potentials
for prawn culture.

On 15 June 1982, petitioner was issued Travel Order No. 2222 which covered his travels to different
places in Luzon from 16 June to 21 July 1982, a period of thirty five (35) days. Under this travel
order, he received P6,438.00 as cash advance to defray his travel expenses.

Within the same period, petitioner was issued another travel order, T.O. 2268, requiring him to travel
from the Head Station at Tigbauan, Iloilo to Roxas City from 30 June to 4 July 1982, a period of five
(5) days. For this travel order, petitioner received a cash advance of P495.00.

On 14 January 1983, petitioner presented both travel orders for liquidation, submitting Travel
Expense Reports to the Accounting Section. When the Travel Expense Reports were audited, it
was discovered that there was an overlap of four (4) days (30 June to 3 July 1982) in the two (2)
travel orders for which petitioner collected per diemstwice. In sum, the total amount in the form of per
diems and allowances charged and collected by petitioner under Travel Order No. 2222, when he
did not actually and physically travel as represented by his liquidation papers, was P1,230.00.

Petitioner was required to comment on the internal auditor's report regarding the alleged anomalous
claim for per diems. In his reply, petitioner denied the alleged anomaly, claiming that he made make-
up trips to compensate for the trips he failed to undertake under T.O. 2222 because he was recalled
to the head office and given another assignment.

In September 1983, two (2) complaints for Estafa were filed against the petitioner before the
Municipal Circuit Trial Court at Guimbal, Iloilo, docketed as Criminal Case Nos. 628 and 631

ISSUE: was pet. Under obligation to return the same money?

Consolidated Bank and Trust Corporation v. CA,

G.R. No. 114286, April 19, 2001

FACTS:
 Respondents Continental Cement Corporation (Corporation) and Gregory T. Lim
obtained, from petitioner Consolidated Bank and Trust Corporation, Letter of Credit No. DOM-
23277 in the amount of P 1,068,150.00. The letter of credit was used to purchase around five
hundred thousand liters of bunker fuel oil from Petrophil Corporation, which the latter delivered
directly to respondent Corporation in its Bulacan plant. In relation to the same transaction, a
trust receipt for the amount of P 1,001,520.93 was executed by respondent Corporation, with
respondent Lim as signatory.
Claiming that respondents failed to turn over the goods covered by the trust receipt or
the proceeds thereof, petitioner filed a complaint for sum of money with application for
preliminary attachment. In answer to the complaint, respondents averred that the transaction
between them was a simple loan and not a trust receipt transaction, and that the amount
claimed by petitioner did not take into account payments already made by them. Respondent
Lim also denied any personal liability in the subject transactions.
The trial court dismissed the Complaint. Both parties appealed to the Court of Appeals,
which partially modified the Decision by deleting the award of attorney's fees in favor of
respondents and, instead, ordering respondent Corporation to pay petitioner P37,469.22 as and
for attorney's fees and litigation expenses.

ISSUE: WON the transaction was a trust receipt transaction?

RULING:
NO.
The Supreme Court held that petitioner failed to convince them that the transaction is
really a trust receipt transaction instead of merely a simple loan, as found by the lower court and
the CA.
As held in Colinares v. Court of Appeals, which appears to be foursquare with the facts
obtaining in the case at bar, inasmuch as the debtor received the goods subject of the trust
receipt before the trust receipt itself was entered into, the transaction in question was a simple
loan and not a trust receipt agreement. Prior to the date of execution of the trust receipt,
ownership over the goods was already transferred to the debtor. This situation is inconsistent
with what normally obtains in a pure trust receipt transaction, wherein the goods belong in
ownership to the bank and are only released to the importer in trust after the loan is granted.
Here, as in Colinares, the delivery to respondent Corporation of the goods subject of the
trust receipt occurred long before the trust receipt itself was executed. More specifically,
delivery of the bunker fuel oil to respondent Corporation's Bulacan plant commenced on July 7,
1982 and was completed by July 19, 1982.13 Further, the oil was used up by respondent
Corporation in its normal operations by August, 1982.14 On the other hand, the subject trust
receipt was only executed nearly two months after full delivery of the oil was made to
respondent Corporation, or on September 2, 1982.
As explained in Colinares, the Trust Receipts Law does not seek to enforce payment of
the loan, rather it punishes the dishonesty and abuse of confidence in the handling of money
or goods to the prejudice of another regardless of whether the latter is the owner. The practice
of banks of making borrowers sign trust receipts to facilitate collection of loans and place them
under the threats of criminal prosecution should they be unable to pay it may be unjust and
inequitable, if not reprehensible. Such agreements are contracts of adhesion which borrowers
have no option but to sign lest their loan be disapproved. The resort to this scheme leaves poor
and hapless borrowers at the mercy of banks, and is prone to misinterpretation.
Similarly, respondent Corporation cannot be said to have been dishonest in its dealings
with petitioner. Neither has it been shown that it has evaded payment of its obligations, as
shown by the various receipts issued by petitioner acknowledging payment on the loan.
Certainly, the payment of the sum of P1,832,158.38 on a loan with a principal amount of only
P681,075.93 negates any badge of dishonesty , abuse of confidence or mishandling of funds on
the part of respondent Corporation, which are the gravamen of a trust receipt violation.

PEOPLE OF THE PHILIPPINES vs. TERESITA PUIG and ROMEO PORRAS

Facts: On 7 November 2005, the Iloilo Provincial Prosecutor's Office filed before RTC in Dumangas,
Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig (Puig) and Romeo Porras
(Porras) who were the Cashier and Bookkeeper, respectively, of private complainant Rural Bank of
Pototan, Inc.It was alleged in the information that Teresita Puig and Romeo Porras took away
P15,000 without the consent of the owner Bank to the prejudice and damage of the bank. The RTC
dismissed the case for insufficiency of the information ruling that the real parties in interest are the
depositors-clients and not the bank because the bank does not acquire ownership of the money
deposited in it. Hence petitioner Rural Bank went directly to the court via petition for certiorari.
Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and current
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loans." Corollary thereto, Article 1953 of the same Code provides that "a
person who receives a loan of money or any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the same kind and quality." Thus, it posits
that the depositors who place their money with the bank are considered creditors of the bank. The
bank acquires ownership of the money deposited by its clients, making the money taken by
respondents as belonging to the bank.

Issue: Whether or not the Bank acquired ownership of the money deposited in it to be able to hold
the respondents liable for qualified theft which requires that there must be taking of the money
without the consent of the owners.

Held: YES. Banks where monies are deposited, are considered the owners thereof. This is very
clear not only from the express provisions of the law, but from established jurisprudence. The
relationship between banks and depositors has been held to be that of creditor and debtor. Articles
1953 and 1980 of the New Civil Code, as appropriately pointed out by petitioner, provide as follows:
Article 1953.A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.
Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be
governed by the provisions concerning loan. In a long line of cases involving Qualified Theft, the
Court has firmly established the nature of possession by the Bank of the money deposits therein,
and the duties being performed by its employees who have custody of the money or have come into
possession of it. The Court has consistently considered the allegations in the Information that such
employees acted with grave abuse of confidence, to the damage and prejudice of the Bank, without
particularly referring to it as owner of the money deposits, as sufficient to make out a case of
Qualified Theft. In summary, the Bank acquires ownership of the money deposited by its clients; and
the employees of the Bank, who are entrusted with the possession of money of the Bank due to the
confidence reposed in them, occupy positions of confidence. The Informations, therefore, sufficiently
allege all the essential elements constituting the crime of Qualified Theft.WHEREFORE, premises
considered, the Petition for Review on Certiorari is hereby GRANTED. The Orders dated 30 January
2006 and 9 June 2006 of the RTC dismissing Criminal cases No. 05-3054 to 05-3165 are
REVERSED and SET ASIDE.

Ligutan vs. CA G.R#138677

Facts: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained a loan in the amount of
P120,000.00 from respondent Security Bank and Trust Company. Petitioners executed a
promissory note binding themselves, jointly and severally, with an interest of 15.189% per annum
upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest
in case of default and also a 10% attorney’s fees if the matter were indorsed to a lawyer for
collection.
The obligation matured, the petitioners were not able to settle the obligation; The bank
gave an extension, still the same happened. Since the petitioners still defaulted, the former filed
a complaint for recovery of the due amount.

Issue: Whether the interest and penalty charge imposed by private respondent bank on
petitioners’ loan are manifestly exorbitant, iniquitous and unconscionable?

Ruling: The obligor would then be bound to pay the stipulated indemnity without the necessity
of proof on the existence and on the measure of damages caused by the breach. Although a court
may not at liberty ignore the freedom of the parties to agree on such terms and conditions as
they see fit that contravene neither law nor morals, good customs, public order or public policy,
a stipulated penalty, nevertheless, may be equitably reduced by the courts if it is iniquitous or
unconscionable or if the principal obligation has been partly or irregularly complied with.
The question of whether a penalty is reasonable or iniquitous can be partly subjective and
partly objective. Its resolution would depend on such factors as, but not necessarily confined to,
the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach
and its consequences, the supervening realities, the standing and relationship of the parties, and
the like, the application of which, by and large, is addressed to the sound discretion of the court.
The CA exercised good judgment in reducing the stipulated penalty interest from 5% to 3% a
month. It was also been held that the 15.189% per annum stipulated interest and the 10%
attorney’s is reasonable and not excessive. The interest prescribed in loan financing
arrangements is a fundamental part of the banking business and the core of a bank's existence.