[G.R. No. L-48349. December 29, 1986.

] agreed to be paid, as the case may be; and (4) a

corrupt intent to take more than the legal rate for the
FRANCISCO HERRERA, plaintiff appellant use of money loaned. Unless these four things concur
vs. PETROPHIL CORPORATION,defendant-appellee. in every transaction, it is safe to affirm that no case of
usury can be declared.
SYLLABUS
6. ID.; CONTRACTS; INTERPRETED
1. CIVIL LAW; SPECIAL CONTRACTS; LEASE; ACCORDING TO THEIR LITERAL MEANING, NOT
ADVANCE PAYMENT OF RENTALS; CANNOT BE BEYOND INTENTION OF PARTIES. — Computation of
CONSTRUED AS REPAYMENT OF A LOAN. — As its the deductible discount appears to be too technical
title plainly indicates, the contract between the mumbo jumbo and could not have been the intention
parties is one of lease and not of loan. It is clearly of the parties to the transaction. Had it been so, then
denominated a "LEASE AGREEMENT". Nowhere in lit should have been clearly stipulated in the contract.
the contract is there any showing that the parties Contracts should be interpreted according to their
intended a loan rather than a lease. The provision for literal meaning and should not be interpreter beyond
the payment of rentals in advance cannot be their obvious intendment.
construed as a repayment of a loan because there
was no grant or forbearance of money as to DECISION
constitute an indebtedness on the part of the lessor. CRUZ, J p:
On the contrary, the defendant-appellee was
discharging its obligation in advance by paying the This is an appeal by the plaintiff-appellant from a
eight years rentals, and it was for this advance decision rendered by the then Court of First Instance
payment that it was getting a rebate or discount. of Rizal on a pure question of law.

2. ID.; ID.; ID.; DISCOUNT PROVISION; The judgment appealed from was rendered on the
VALIDITY THEREOF. — The provision for a discount pleadings, the parties having agreed during the
is not unusual in lease contracts. As to its validity, it is pretrial conference on the factual antecedents.
settled that the parties may establish such
stipulations, clauses, terms and conditions as they The facts are as follows:
may want to include; and as long as such agreements
are not contrary to law, morals, good customs, public On December 5, 1969, the plaintiff-appellant and
policy or public order, they shall have the force of law ESSO Standard Eastern, Inc., (later substituted by
between them. Petrophil Corporation) entered into a "Lease
Agreement" whereby the former leased to the latter a
3. ID.; ID.; USURY LAW; NO APPLICATION IN portion of his property for a period of twenty (20)
THE CASE AT BAR. — There is no usury in this case years from said date, subject inter alia to the
because no money was given by the defendant- following conditions:
appellee to the plaintiff-appellant, nor did it allow
him to use its money already in his possession. There "3. Rental: The LESSEE shall pay the LESSOR a rental
was neither loan nor forbearance but a mere of P1.40 sqm. per month on 400 sqm. and are to be
discount which the plaintiff-appellant allowed the expropriated later on (sic) or P560 per month and
defendant-appellee to deduct from the total P1.40 per sqm. per month on 1,693 sqm. or
payments because they were being made in advance P2,370.21 per month or a total of P2,930.20 per
for eight years. The discount was in effect a reduction month 2,093 sqm. more or less, payable yearly in
of the rentals which the lessor had the right to advance within the 1st twenty days of each year;
determine, and any reduction thereof, by any provided, a financial aid in the sum of P15,000 to
amount, could not contravene the Usury Law. clear the leased premises of existing improvements
thereon is paid in this manner; P10,000 upon
4. ID.; ID.; DISCOUNT AND LOAN, execution of this lease and P5,000 upon delivery of
DIFFERENTIATED. — The difference between a leased premises free and clear of improvements
discount and a loan or forbearance is that the former thereon within 30 days from the date of execution of
does not have to be repaid. The loan or forbearance is this agreement. The portion on the side of the leased
subject to repayment and is therefore governed by premises with an area of 365 sqm. more or less, will
the laws on usury. To constitute usury, "there must be occupied by LESSEE without rental during the
be loan or forbearance; the loan must be money or lifetime of this lease. PROVIDED FINALLY, that the
something circulating as money; it must be repayable Lessor is paid 8 years advance rental based on
absolutely and in all events; and something must be P2,930.70 per month discounted at 12% interest per
exacted for the use of the money in excess of and in annum or a total net amount of P130,288.47 before
addition to interest allowed by law." registration of lease. Leased premises shall be
delivered within 30 days after 1st partial payment of
5. ID.; ID.; ELEMENTS OF USURY. — It has financial aid."
been held that the elements of usury are (1) a loan
express or implied; (2) an understanding between On December 31, 1969, pursuant to the said contract,
the parties that the money lent shall or may be the defendant-appellee paid to the plaintiff-appellant
returned; (3) that for such loan a greater rate or advance rentals for the first eight years, subtracting
interest that is allowed by law shall be paid, or therefrom the amount of P101,010.73, the amount it
computed as constituting the interest or discount for The provision for a discount is not unusual in lease
the first eight years, in the total sum P180,288.47. On contracts. As to its validity, it is settled that the
August 20, 1970, the defendant-appellee, explaining parties may establish such stipulations, clauses,
that there had been a mistake in computation, paid to terms and condition as they may want to include; and
the plaintiff-appellant the additional sum of as long as such agreements are not contrary to law,
P2,182.70, thereby reducing the deducted amount to morals, good customs, public policy or public order,
only P98,828.03. they shall have the force of law between them.

On October 14, 1974, the plaintiff-appellant sued the There is no usury in this case because no money was
defendant-appellee for the sum of P98,828.03, with given by the defendant-appellee to the plaintiff-
interest, claiming this had been illegally deducted appellant, nor did it allow him to use its money
from him in violation of the Usury Law. He also already in his possession. There was neither loan nor
prayed for moral damages and attorney's fees. In its forbearance but a mere discount which the plaintiff-
answer, the defendant-appellee admitted the factual appellant allowed the defendant-appellee to deduct
allegations of the complaint but argued that the from the total payments because they were being
amount deducted was not usurious interest but a made in advance for eight years. The discount was in
discount given to it for paying the rentals in advance effect a reduction of the rentals which the lessor had
for eight years. Judgment on the pleadings was the right to determine, and any reduction thereof, by
rendered for the defendant. any amount, would not contravene the Usury Law.

Plaintiff-appellant now prays for a reversal of that The difference between a discount and a loan or
Judgment, insisting that the lower court erred in the forbearance is that the former does not have to be
computation of the interest collected out of the repaid. The loan or forbearance is subject to
rentals paid for the first eight years; that such repayment and is therefore governed by the laws on
interest was excessive and violative of the Usury usury. To constitute usury, "there must be loan or
Law; and that he had neither agreed to nor accepted forbearance; the loan must be of money or something
the defendant-appellant's computation of the total circulating as money; it must be repayable absolutely
amount to be deducted for the eight years advance and in all events; and something must be exacted for
rentals. the use of the money in excess of and in addition to
interest allowed by law."
The thrust of the plaintiff-appellant's position is set
forth in paragraph 6 of his complaint, which read: It has been held that the elements of usury are (1) a
loan, express or implied; (2) an understanding
"6. The interest collected by defendant out of the between the parties that the money lent shall or may
rentals for the first eight years was excessive and be returned; (3) that for such loan a greater rate or
beyond that allowable by law, because the total interest that is allowed by law shall be paid, or
interest on the said amount is only P33,755.90 at agreed to be paid, as the case may be; and (4) a
P4,219.4880 per yearly rental; and considering that corrupt intent to take more than the legal rate for the
the interest should be computed excluding the first use of money loaned. Unless these four things concur
year rental because at the time the amount of in every transaction, it is safe to affirm that no case of
P281,199.20 was paid it was already due under the usury can be declared.
lease contract hence no interest should be collected
from the rental for the first year, the amount of Concerning the computation of the deductible
P29,536.42 only as the total interest should have discount, the trial court declared:
been deducted by defendant from the sum of
P281,299.20." "As above-quoted, the 'Lease Agreement' expressly
provides that the lessee (defendant) shall pay the
The defendant maintains that the correct amount of lessor (plaintiff) eight (8) years in advance rentals
the discount is P98,828.03 and that the same is not based on P2,930.20 per month discounted at 12%
excessive and above that allowed by law. interest per annum. Thus, the total rental for one-
year period is P35,162.40 (P2,930.20 multiplied by
As its title plainly indicates, the contract between the 12 months) and that the interest therefrom is
parties is one of lease and not of loan. It is clearly P4,219.4880 (P35,162.40 multiplied by 12%). So,
denominated a "LEASE AGREEMENT." Nowhere in therefore, the total interest for the first eight (8)
the contract is there any showing that the parties years should be only P33,755.90 (P4,129.4880
intended a loan rather than a lease. The provision for multiplied by eight (8) years) and not P98,828.03 as
the payment of rentals in advance cannot be the defendant claimed it to be."
construed as a repayment of a loan because there
was no grant or forbearance of money as to "The afore-quoted manner of computation made by
constitute an indebtedness on the part of the lessor. plaintiff is patently erroneous. It is most seriously
On the contrary, the defendant-appellee was misleading. He just computed the annual discount to
discharging its obligation in advance by paying the be at P4,129.4880 and then simply multiplied it by
eight years rentals, and it was for this advance eight (8) years. He did not take into consideration the
payment that it was getting a rebate or discount. 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, On the annual rental of P35,168.40, the deducted
those due on the fifth year by four (4) years, those 12% discount was P4,220.21; and for eight years, the
due on the fourth year by three (3) years, those due total rental was P281,347.20 from which was
on the third year by two (2) years, and those due on deducted the total discount of P33,761.68, leaving a
the second year by one (1) year, so much so that the difference of P247,585.52. Subtracting from this
total number of years by which the annual rental of amount, the sum of P182,471.17 already paid will
P4,129.4880 was paid in advance is twenty-eight leave a balance of P65,114.35 still due the plaintiff-
(28), resulting in a total amount of P118,145.44 appellant.
(P4,129.48 multiplied by 28 years) as the discount.
However, defendant was most fair to plaintiff. It did The above computation is based on the more
not simply multiply the annual rental discount by 28 reasonable interpretation of the contract as a
years. It computed the total discount with the whole rather on the single stipulation invoked by the
principal diminishing month to month as shown by respondent for the flat reduction of P130,288.47.
Annex 'A' of its memorandum. This is why the total
discount amount to only P8,828.03. WHEREFORE, the decision of the trial court is hereby
modified, and the defendant-appellee Petrophil
"The allegation of plaintiff that defendant made the Corporation is ordered to pay plaintiff-appellant the
computation in a compounded manner is erroneous. amount of Sixty Five Thousand One Hundred
Also after making its own computations and after Fourteen pesos and Thirty-Five Centavos
examining closely defendant's Annex 'A' of its (P65,114.35), with interest at the legal rate until fully
memorandum, the court finds that defendant did not paid, plus Ten Thousand Pesos (P10,000.00) as
charge 12% discount on the rentals due for the first attorney's fees. Costs against the defendant-appellee.
year so much so that the computation conforms with
the provision of the Lease Agreement to the effect SO ORDERED.
that the rentals shall be `payable yearly in advance
within the 1st 20 days of each year.'"

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.] At around 10:00 a.m., or around 45 minutes
after Pantaleon had presented his AmexCard, and 30
POLO S. PANTALEON, petitioner, vs. AMERICAN minutes after the tour group was supposed to have
EXPRESS INTERNATIONAL, INC., respondent. left the store, Coster decided to release the items
even without respondent's approval of the purchase.
DECISION The spouses Pantaleon returned to the bus. It is
alleged that their offers of apology were met by their
TINGA, J p: tourmates with stony silence. 4 The tour group's
visible irritation was aggravated when the tour guide
The petitioner, lawyer Polo Pantaleon, his announced that the city tour of Amsterdam was to be
wife Julialinda, daughter Anna Regina and son Adrian canceled due to lack of remaining time, as they had to
Roberto, joined an escorted tour of Western Europe catch a 3:00 p.m. ferry at Calais, Belgium to
organized by Trafalgar Tours of Europe, Ltd., in London. 5 Mrs. Pantaleon ended up weeping, while
October of 1991. The tour group arrived in her husband had to take a tranquilizer to calm his
Amsterdam in the afternoon of 25 October 1991, the nerves.
second to the last day of the tour. As the group had
arrived late in the city, they failed to engage in any It later emerged that Pantaleon's purchase
sight-seeing. Instead, it was agreed upon that they was first transmitted for approval to respondent's
would start early the next day to see the entire city Amsterdam office at 9:20 a.m., Amsterdam time, then
before ending the tour. referred to respondent's Manila office at 9:33 a.m.,
then finally approved at 10:19 a.m., Amsterdam
The following day, the last day of the tour, the time. 6 The Approval Code was transmitted to
group arrived at the Coster Diamond House in respondent's Amsterdam office at 10:38 a.m., several
Amsterdam around 10 minutes before 9:00 a.m. The minutes after petitioner had already left Coster, and
group had agreed that the visit to Coster should end 78 minutes from the time the purchases were
by 9:30 a.m. to allow enough time to take in a guided electronically transmitted by the jewelry store to
city tour of Amsterdam. The group was ushered into respondent's Amsterdam office.
Coster shortly before 9:00 a.m., and listened to a
lecture on the art of diamond polishing that lasted for After the star-crossed tour had ended, the
around ten minutes. 1 Afterwards, the group was led Pantaleon family proceeded to the United States
to the store's showroom to allow them to select items before returning to Manila on 12 November 1992.
for purchase. Mrs. Pantaleon had already planned to While in the United States, Pantaleon continued to
purchase even before the tour began a 2.5 karat use his AmEx card, several times without hassle or
diamond brilliant cut, and she found a diamond close delay, but with two other incidents similar to the
enough in approximation that she decided to Amsterdam brouhaha. On 30 October 1991,
buy. 2 Mrs. Pantaleon also selected for purchase a Pantaleon purchased golf equipment amounting to
pendant and a chain, 3 all of which totaled U.S. US $1,475.00 using his AmEx card, but he cancelled
$13,826.00. his credit card purchase and borrowed money
instead from a friend, after more than 30 minutes had
To pay for these purchases, Pantaleon transpired without the purchase having been
presented his American Express credit card together approved. On 3 November 1991, Pantaleon used the
with his passport to the Coster sales clerk. This card to purchase children's shoes worth $87.00 at a
occurred at around 9:15 a.m., or 15 minutes before store in Boston, and it took 20 minutes before this
the tour group was slated to depart from the store. transaction was approved by respondent.
The sales clerk took the card's imprint, and asked
Pantaleon to sign the charge slip. The charge On 4 March 1992, after coming back to
purchase was then referred electronically to Manila, Pantaleon sent a letter 7 through counsel to
respondent's Amsterdam office at 9:20 a.m. the respondent, demanding an apology for the
"inconvenience, humiliation and embarrassment he
Ten minutes later, the store clerk informed and his family thereby suffered" for respondent's
Pantaleon that his AmexCard had not yet been refusal to provide credit authorization for the
approved. His son, who had already boarded the tour aforementioned purchases. 8 In response,
bus, soon returned to Coster and informed the other respondent sent a letter dated 24 March
members of the Pantaleon family that the entire tour 1992, 9 stating among others that the delay in
group was waiting for them. As it was already 9:40 authorizing the purchase from Coster was
a.m., and he was already worried about further attributable to the circumstance that the charged
inconveniencing the tour group, Pantaleon asked the purchase of US $13,826.00 "was out of the usual
store clerk to cancel the sale. The store manager charge purchase pattern established". 10 Since
though asked plaintiff to wait a few more minutes. respondent refused to accede to Pantaleon's demand
After 15 minutes, the store manager informed for an apology, the aggrieved cardholder instituted an
Pantaleon that respondent had demanded bank action for damages with the Regional Trial Court
references. Pantaleon supplied the names of his (RTC) of Makati City, Branch 145. 11Pantaleon
depositary banks, then instructed his daughter to prayed that he be awarded P2,000,000.00, as moral
return to the bus and apologize to the tour group for damages; P500,000.00, as exemplary damages;
the delay. P100,000.00, as attorney's fees; and P50,000.00 as
litigation expenses. 12
 performance. 18 Petitioner asserts that the Court of
On 5 August 1996, the Makati City RTC Appeals had wrongly applied the principle of mora
rendered a decision 13 in favor of Pantaleon, accipiendi, which relates to delay on the part of the
awarding him P500,000.00 as moral damages, obligee in accepting the performance of the
P300,000.00 as exemplary damages, P100,000.00 as obligation by the obligor. The requisites of mora
attorney's fees, and P85,233.01 as expenses of accipiendi are: an offer of performance by the debtor
litigation. Respondent filed a Notice of Appeal, while who has the required capacity; the offer must be to
Pantaleon moved for partial reconsideration, praying comply with the prestation as it should be
that the trial court award the increased amount of performed; and the creditor refuses the performance
moral and exemplary damages he had prayed 19 The error of the appellate court, argues petitioner,
for. 14 The RTC denied Pantaleon's motion for partial is in relying on the invocation by respondent of "just
reconsideration, and thereafter gave due course to cause" for the delay, since while just cause is
respondent's Notice of Appeal. 15 determinative of mora accipiendi, it is not so with the
case of mora solvendi.
On 18 August 2006, the Court of Appeals
rendered a decision 16 reversing the award of We can see the possible source of confusion
damages in favor of Pantaleon, holding that as to which type of mora to appreciate. Generally, the
respondent had not breached its obligations to relationship between a credit card provider and its
petitioner. Hence, this petition. card holders is that of creditor-debtor, 20 with the
card company as the creditor extending loans and
The key question is whether respondent, in credit to the card holder, who as debtor is obliged to
connection with the aforementioned transactions, repay the creditor. This relationship already takes
had committed a breach of its obligations to exception to the general rule that as between a bank
Pantaleon. In addition, Pantaleon submits that even and its depositors, the bank is deemed as the debtor
assuming that respondent had not been in breach of while the depositor is considered as the
its obligations, it still remained liable for damages creditor. 21 Petitioner is asking us, not baselessly, to
under Article 21 of the Civil Code. again shift perspectives and again see the credit card
company as the debtor/obligor, insofar as it has the
The RTC had concluded, based on the obligation to the customer as creditor/obligee to act
testimonial representations of Pantaleon and promptly on its purchases on credit.
respondent's credit authorizer, Edgardo Jaurigue,
that the normal approval time for purchases was "a Ultimately, petitioner's perspective appears
matter of seconds". Based on that standard, more sensible than if we were to still regard
respondent had been in clear delay with respect to respondent as the creditor in the context of this cause
the three subject transactions. As it appears, the of action. If there was delay on the part of respondent
Court of Appeals conceded that there had been delay in its normal role as creditor to the cardholder, such
on the part of respondent in approving the delay would not have been in the acceptance of the
purchases. However, it made two critical conclusions performance of the debtor's obligation (i.e., the
in favor of respondent. First, the appellate court ruled repayment of the debt), but it would be delay in the
that the delay was not attended by bad faith, malice, extension of the credit in the first place. Such delay
or gross negligence. Second, it ruled that respondent would not fall under mora accipiendi, which
"had exercised diligent efforts to effect the approval" contemplates that the obligation of the debtor, such
of the purchases, which were "not in accordance with as the actual purchases on credit, has already been
the charge pattern" petitioner had established for constituted. Herein, the establishment of the debt
himself, as exemplified by the fact that at Coster, he itself (purchases on credit of the jewelry) had not yet
was "making his very first single charge purchase of been perfected, as it remained pending the approval
US$13,826", and "the record of [petitioner]'s past or consent of the respondent credit card company.
spending with [respondent] at the time does not
favorably support his ability to pay for such Still, in order for us to appreciate that
purchase." 17 respondent was in mora solvendi, we will have to first
recognize that there was indeed an obligation on the
On the premise that there was an obligation part of respondent to act on petitioner's purchases
on the part of respondent "to approve or disapprove with "timely dispatch", or for the purposes of this
with dispatch the charge purchase", petitioner argues case, within a period significantly less than the one
that the failure to timely approve or disapprove the hour it apparently took before the purchase at Coster
purchase constituted mora solvendi on the part of was finally approved.
respondent in the performance of its obligation. For
its part, respondent characterizes the depiction by The findings of the trial court, to our mind,
petitioner of its obligation to him as "to approve amply established that the tardiness on the part of
purchases instantaneously or in a matter of seconds." respondent in acting on petitioner's purchase at
Coster did constitute culpable delay on its part in
Petitioner correctly cites that under mora complying with its obligation to act promptly on its
solvendi, the three requisites for a finding of default customer's purchase request, whether such action be
are that the obligation is demandable and liquidated; favorable or unfavorable. We quote the trial court,
the debtor delays performance; and the creditor thus:
judicially or extrajudicially requires the debtor's
 As to the first issue, both parties have 01:33 — Netherlands asks "How long will this take?"
testified that normal approval time for purchases was 02:08 — Netherlands is still asking "How long will
a matter of seconds. this take?"

Plaintiff testified that his personal experience The Court is convinced that defendants delay
with the use of the card was that except for the three constitute[s] breach of its contractual obligation to
charge purchases subject of this case, approvals of his act on his use of the card abroad "with special
charge purchases were always obtained in a matter handling". 22 (Citations omitted)
of seconds.
xxx xxx xxx
Defendant's credit authorizer Edgardo
Jaurique likewise testified: Notwithstanding the popular notion that
credit card purchases are approved "within seconds",
Q. You also testified that on normal occasions, the there really is no strict, legally determinative point of
normal approval time for charges would be 3 to 4 demarcation on how long must it take for a credit
seconds? card company to approve or disapprove a customer's
A. Yes, Ma'am. purchase, much less one specifically contracted upon
by the parties. Yet this is one of those instances when
Both parties likewise presented evidence that the "you'd know it when you'd see it", and one hour
processing and approval of plaintiff's charge appears to be an awfully long, patently unreasonable
purchase at the Coster Diamond House was way length of time to approve or disapprove a credit card
beyond the normal approval time of a "matter of purchase. It is long enough time for the customer to
seconds". walk to a bank a kilometer away, withdraw money
over the counter, and return to the store.
Plaintiff testified that he presented his Amex
Card to the sales clerk at Coster, at 9:15 a.m. and by Notably, petitioner frames the obligation of
the time he had to leave the store at 10:05 a.m., no respondent as "to approve or disapprove" the
approval had yet been received. In fact, the Credit purchase "in timely dispatch", and not "to approve
Authorization System (CAS) record of defendant at the purchase instantaneously or within seconds".
Phoenix Amex shows that defendant's Amsterdam Certainly, had respondent disapproved petitioner's
office received the request to approve plaintiff's purchase "within seconds" or within a timely
charge purchase at 9:20 a.m., Amsterdam time or manner, this particular action would have never seen
01:20, Phoenix time, and that the defendant relayed the light of day. Petitioner and his family would have
its approval to Coster at 10:38 a.m., Amsterdam time, returned to the bus without delay — internally
or 2:38, Phoenix time, or a total time lapse of one humiliated perhaps over the rejection of his card —
hour and [18] minutes. And even then, the approval yet spared the shame of being held accountable by
was conditional as it directed in computerese newly-made friends for making them miss the chance
[sic] "Positive Identification of Card holder necessary to tour the city of Amsterdam.
further charges require bank information due to high
exposure. By Jack Manila". We do not wish do * dispute that respondent
has the right, if not the obligation, to verify whether
The delay in the processing is apparent to be undue the credit it is extending upon on a particular
as shown from the frantic successive queries of purchase was indeed contracted by the cardholder,
Amexco Amsterdam which reads: "US$13,826. Card and that the cardholder is within his means to make
member buying jewels. ID seen. Advise how long will such transaction. The culpable failure of respondent
this take?" They were sent at 01:33, 01:37, 01:40, herein is not the failure to timely approve petitioner's
01:45, 01:52 and 02:08, all times Phoenix. purchase, but the more elemental failure to timely act
on the same, whether favorably or unfavorably. Even
Manila Amexco could be unaware of the need for assuming that respondent's credit authorizers did
speed in resolving the charge purchase referred to it, not have sufficient basis on hand to make a judgment,
yet it sat on its hand, unconcerned. we see no reason why respondent could not have
promptly informed petitioner the reason for the
xxx xxx xxx delay, and duly advised him that resolving the same
could take some time. In that way, petitioner would
To repeat, the Credit Authorization System (CAS) have had informed basis on whether or not to pursue
record on the Amsterdam transaction shows how the transaction at Coster, given the attending
Amexco Netherlands viewed the delay as unusually circumstances. Instead, petitioner was left
frustrating. In sequence expressed in Phoenix time uncomfortably dangling in the chilly autumn winds in
from 01:20 when the charge purchased was referred a foreign land and soon forced to confront the wrath
for authorization, defendants own record shows: of foreign folk.

01:22 — the authorization is referred to Manila Moral damages avail in cases of breach of
Amexco contract where the defendant acted fraudulently or in
01:32 — Netherlands gives information that the bad faith, and the court should find that under the
identification of the cardmember has been presented circumstances, such damages are due. The findings of
and he is buying jewelries worth US $13,826. the trial court are ample in establishing the bad faith
and unjustified neglect of respondent, attributable in RTC. 27 Those circumstances are fairly unusual, and
particular to the "dilly-dallying" of respondent's should not give rise to a general entitlement for
Manila credit authorizer, Edgardo Jaurique. 23 Wrote damages under a more mundane set of facts.
the trial court:
We sustain the amount of moral damages
While it is true that the Cardmembership awarded to petitioner by the RTC. There is no hard-
Agreement, which defendant prepared, is silent as to and-fast rule in determining what would be a fair and
the amount of time it should take defendant to grant reasonable amount of moral damages, since each case
authorization for a charge purchase, defendant must be governed by its own peculiar facts, however,
acknowledged that the normal time for approval it must be commensurate to the loss or injury
should only be three to four seconds. Specially so suffered. 28 Petitioner's original prayer for
with cards used abroad which requires "special P5,000,000.00 for moral damages is excessive under
handling", meaning with priority. Otherwise, the the circumstances, and the amount awarded by the
object of credit or charge cards would be lost; it trial court of P500,000.00 in moral damages more
would be so inconvenient to use that buyers and seemly.
consumers would be better off carrying bundles of Likewise, we deem exemplary damages
currency or traveller's checks, which can be delivered available under the circumstances, and the amount of
and accepted quickly. Such right was not accorded to P300,000.00 appropriate. There is similarly no cause
plaintiff in the instances complained off * for reasons though to disturb the determined award of
known only to defendant at that time. This, to the P100,000.00 as attorney's fees, and P85,233.01 as
Court's mind, amounts to a wanton and deliberate expenses of litigation.
refusal to comply with its contractual obligations, or
at least abuse of its rights, under the contract. 24 WHEREFORE, the petition is GRANTED. The
assailed Decision of the Court of Appeals
xxx xxx xxx is REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Makati, Branch 145 in Civil
The delay committed by defendant was clearly Case No. 92-1665 is hereby REINSTATED. Costs
attended by unjustified neglect and bad faith, since it against respondent.
alleges to have consumed more than one hour to
simply go over plaintiff's past credit history with SO ORDERED.
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:

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.] and that other just and equitable relief be granted it
(civil No. 12818).
REPUBLIC OF THE PHILIPPINES, plaintiff-
appellee, vs. JOSE V. BAGTAS, defendant. FELICIDAD On 5 July 1951 Jose V. Bagtas, through counsel Navarro,
M. BAGTAS, Administratrix of the Intestate Estate Rosete and Manalo, answered that because of the bad
left by the late Jose V. Bagtas, petitioner-appellant. peace and order situation in Cagayan Valley,
particularly in the barrio of Baggao, and of the pending
SYLLABUS appeal he had taken to the Secretary of Agriculture and
Natural Resources and the President of the Philippines
1. CONTRACTS; LOAN OF BULLS FOR from the refusal by the Director of Animal Industry to
BREEDING PURPOSES; NATURE OF CONTRACT deduct from the book value of the bulls corresponding
AFFECTED BY PAYMENT OF FEE. — The loan by the yearly depreciation of 8% from the date of acquisition,
Bureau of Animal Industry to the defendant of three to which depreciation the Auditor General did not
bulls for breeding purposes for a period of one year, object, he could not return the animals nor pay their
later on renewed for another as regards one bull, was value and prayed for the dismissal of the complaint.
subject to the payment by the borrower of breeding fee
of 10% of the book value of the bulls. If the breeding fee After hearing, on 30 July 1956 the trial court rendered
be considered a compensation, the contract would be a judgment —
lease of the bulls; it could not be a contract of
commodatum, because that contract is essential . . . sentencing the latter (defendant) to pay the sum of
gratuitous. P3,625.09 the total value of the three bulls plus the
breeding fees in the amount of P626.17 with interest on
2. JUDGMENTS; PROCEEDINGS FOR both sums of (at) the legal rate from the filing of this
ADMINISTRATIONS AND SETTLEMENT OF ESTATE OF complaint and costs.
THE DECEASED; ENFORCEMENT OF MONEY
JUDGMENT. — Where special proceedings for the On 9 October 1958 the plaintiff moved ex parte for a
administration and settlement of the estate of the writ of execution which the court granted on 18 October
deceased have been instituted, the money judgment and issued on 11 November 1958. On 2 December 1958
rendered in favor of a party cannot be enforced by it granted an ex-parte motion filed by the plaintiff on 28
means of a writ of execution, but must be presented to November 1958 for the appointment of a special sheriff
the probate court for payment by the administrator to serve the writ outside Manila. Of this order
appointed by the court. appointing a special sheriff, on 6 December 1958
Felicidad M. Bagtas, the surviving spouse of the
DECISION defendant Jose V. Bagtas who died on 23 October 1951
PADILLA, J p: and as administratrix of his estate, was notified. On 7
January 1959 she filed a motion alleging that on 26 June
The Court of Appeals certified this case to this Court 1952 the two bulls, Sindhi and Bhagnari, were returned
because only questions of law are raised. to the Bureau of Animal Industry and that sometime in
November 1953 the third bull, the Sahiniwal, died from
On 8 May 1948 Jose V. Bagtas borrowed from gunshot wounds inflicted during a Huks raid on
the Republic of the Philippines through the Bureau of Hacienda Felicidad Intal, and praying that the writ of
Animal Industry three bulls: a Red Sindhi with a book execution be quashed and that a writ of preliminary
value of P1,176.46, a Bhagnari, of P1,320.56 and a injunction be issued. On 31 January 1959 the plaintiff
Sahiniwal, of P744.46, for a period of one year from 8 objected to her motion. On 6 February 1959 she filed a
May 1948 to 7 May 1949 for breeding purposes subject reply thereto. On the same day, 6 February, the Court
to a government charge of breeding fee of 10% of the denied her motion. Hence, this appeal certified by the
book value of the bulls. Upon the expiration on 7 May Court of Appeals to this Court, as stated at the beginning
1949 of the contract, the borrower asked for a renewal of this opinion.
for another period of one year. However, the Secretary
of Agriculture and Natural Resources approved a It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of
renewal thereof of only one bull for another year from 8 the appellant by the late defendant, returned the Sindhi
May 1949 to 7 May 1950 and requested the return of and Bhagnari bulls to Roman Remorin, Superintendent
the other two. On 25 March 1950 Jose V. Bagtas wrote of the NVB Station, Bureau of Animal Industry,
to the Director of Animal Industry that he would pay the Bayombong, Nueva Vizcaya, as evidenced by a
value of the three bulls. On 17 October 1950 he memorandum receipt signed by the latter (Exhibit 2).
reiterated his desire to buy them at a value with a That is why in its objection of 31 January 1959 to the
deduction of yearly depreciation to be approved by the appellant's motion to quash the writ of execution the
Auditor General. On 19 October 1950 the Director of appellee prays "that another writ of execution in the
Animal Industry advised him that the book value of the sum of P859.5.3 be issued against the estate of
three bulls could not be reduced and that they either be defendant deceased José V. Bagtas." She cannot be held
returned or their book value paid not later than 31 liable for the two bulls which already had been returned
October 1950. Jose V. Bagtas failed to pay the book to and received by the appellee.
value of the three bulls or to return them. So, on 20
December 1950 in the Court of First Instance of Manila The appellant contends that the Sahiniwal bull was
the Republic of the Philippines commenced an action accidentally killed during a raid by the Huks in
against him praying that he be ordered to return the November 1953 upon the surrounding barrios of
three bulls loaned to him or to pay their book value in Hacienda Felicidad Intal, Baggao, Cagayan, where the
the total sum of P3,241.45 and the unpaid breeding fee animal was kept, and that as such death was due
in the sum of P499.62, both with interests, and costs; 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 issued letters of administration of the estate of the late
appellee to the late defendant José V. Bagtas of the three José V. Bagtas and that "all persons having claims for
bulls for breeding purposes for a period of one year money against the deceased José V. Bagtas, arising from
from 8 May 1948 to 7 May 1949, later on renewed for contract, express or implied, whether the same be due,
another year as regards one bull, was subject to the not due, or contingent, for funeral expenses and
payment by the borrower of breeding fee of 10% of the expenses of the last sickness of the said decedent, and
book value of the bulls. The appellant contends that the judgment for money against him, to file said claims with
contract was commodatum and that, for that reason, as the Clerk of this Court at the City Hall Bldg., Highway 54,
the appellee retained ownership or title to the bull it Quezon City, within six (6) months from the date of the
should suffer its loss due to force majeure A contract first publication of this order, serving a copy thereof
of commodatum is essentially gratuitous.1 If the upon the aforementioned Felicidad M. Bagtas, the
breeding fee be considered a compensation, then the appointed administratrix of the estate of the said
contract would be a lease of the bull. Under article 1671 deceased," is not a notice to the court and the appellee
of the Civil Code the lessee would be subject to the who were to be notified of the defendant's death in
responsibilities of a possessor in bad faith, because she accordance with the abovequoted rule, and there was
had continued possession of the bull after the expiry of no reason for such failure to notify, because the
the contract. And even if the contract be commodatum, attorney who appeared for the defendant was the same
still the appellant is liable, because article 1942 of the who represented the administratrix in the special
Civil Code provides that a bailee in a contract proceedings instituted for the administration and
of commodatum — settlement of his estate. The appellee or its attorney or
representative could not be expected to know of the
. . . is liable for loss of the thing, even if it should be death of the defendant or of the administration
through a fortuitous event: proceedings of his estate instituted in another court, if
the attorney for the deceased defendant did not notify
(2) If he keeps it longer than the period stipulated. . . . the plaintiff or its attorney of such death as required by
(3) If the thing loaned has been delivered with appraisal the rule.
of its value, unless there is a stipulation exempting the
bailee from responsibility in case of a fortuitous event: As the appellant already had returned the two bulls to
the appellee, the estate of the late defendant is only
The original period of the loan was from 8 May 1948 to liable for the sum of P859.63, the value of the bull which
7 May 1949. The loan of one bull was renewed for has not been returned to the appellee, because it was
another period of one year to end on 8 May 1950. But killed while in the custody of the administratrix of his
the appellant kept and used the bull until November estate. This is the amount prayed for by the appellee in
1953 when during a Huk raid it was killed by stray its objection on 31 January 1959 to the motion filed on
bullets. Furthermore, when lent and delivered to the 7 January 1959 by the appellant for the quashing of the
deceased husband of the appellant the bulls had each an writ of execution.
appraised book value, to wit: the Sindhi, at P1,176.46;
the Bhagnari, at P1,320.56 and the Sahiniwal; at Special proceedings for the administration and
P744.46. It was not stipulated that in case of loss of the settlement of the estate of the deceased
bull due to fortuitous event the late husband of the José V. Bagtas having been instituted in the Court of
appellant would be exempt from liability. First Instance of Rizal (Q-200), the money judgment
rendered in favor of the appellee cannot be enforced by
The appellant's contention that the demand or prayer means of a writ of execution but must be presented to
by the appellee for the return of the bull or the payment the probate court for payment by the appellant, the
of its value being a money claim should be presented or administratrix appointed by the court.
filed in the intestate proceedings of the defendant who ACCORDINGLY, the writ of execution appealed from is
died on 23 October 1951, is not altogether without set aside, without pronouncement as to costs.
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
[G.R. Nos. 80294-95. September 21, 1988.] The facts and background of the cases as narrated by
the trial court are as follows —
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN
PROVINCE petitioner vs. COURT OF APPEALS, HEIRS ". . . The documents and records presented reveal that
OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, the whole controversy started when the defendant
respondents. Catholic Vicar Apostolic of the Mountain Province
(VICAR for brevity) filed with the Court of First Instance
SYLLABUS of Baguio-Benguet, on September 5, 1962 an application
for registration of title over Lots 1, 2, 3, and 4 in Psu-
REMEDIAL LAW; JUDGMENT; RES JUDICATA.— 194357, situated at Poblacion Central, La Trinidad,
The findings of the trial court affirmed by the appellate Benguet, docketed as LRC N-91, said Lots being the sites
court that the private respondent's predecessor were of the Catholic Church building, convents, high school
possessors of the lots in dispute with claim of building, school gymnasium, school dormitories, social
ownership from 1906 to 1951 while the petitioner was hall, stonewalls, etc. On March 22, 1963 the Heirs of
in possession as borrower in commodatum up to 1951 Juan Valdez and the Heirs of Egmidio Octaviano filed
are res judicatabetween the parties. their Answer/Opposition on Lots Nos. 2 and 3,
respectively, asserting ownership and title thereto.
DECISION After trial on the merits, the land registration court
GANCAYCO, J p: promulgated its Decision, dated November 17, 1965,
confirming the registrable title of VICAR to Lots 1, 2, 3,
The principal issue in this case is whether or not a and 4.
decision of the Court of Appeals promulgated a long
time ago can properly be considered res judicata by The Heirs of Juan Valdez (plaintiffs in the herein Civil
respondent Court of Appeals in the present two cases Case No. 3655) and the Heirs of Egmidio Octaviano
between petitioner and two private respondents. (plaintiffs in the herein Civil Case No. 3607) appealed
Petitioner questions as allegedly erroneous the Decision the decision of the land registration court to the then
dated August 31, 1987 of the Ninth Division of Court of Appeals, docketed as CA-G.R. No. 38830-R. The
Respondent Court of Appeals 1 in CA-G.R. No. 05148 Court of Appeals rendered its decision, dated May 9,
[Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil 1977, reversing the decision of the land registration
Case No. 3655 (429)], both for Recovery of Possession, court and dismissing the VICAR's application as to Lots
which affirmed the Decision of the Honorable Nicodemo 2 and 3, the lots claimed by the two sets of oppositors in
T. Ferrer, Judge of the Regional Trial Court of Baguio the land registration case (and two sets of plaintiffs in
and Benguet in Civil Case No. 3607 (419) and Civil Case the two cases now at bar), the first lot being presently
No. 3655 (429), with the dispositive portion as follows: occupied by the convent and the second by the women's
dormitory and the sisters' convent.
"WHEREFORE, Judgment is hereby rendered ordering
the defendant, Catholic Vicar Apostolic of the Mountain On May 9, 1977, the Heirs of Octaviano filed a motion
Province to return and surrender Lot 2 of Plan Psu- for reconsideration praying the Court of Appeals to
194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3 order the registration of Lot 3 in the names of the Heirs
of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano, and on May 17, 1977, the Heirs of
of Egmidio Octaviano (Leonardo Valdez, et al.). For lack Juan Valdez and Pacita Valdez filed their motion for
or insufficiency of evidence, the plaintiffs' claim or reconsideration praying that both Lots 2 and 3 be
damages is hereby denied. Said defendant is ordered to ordered registered in the names of the Heirs of Juan
pay costs." (p 36, Rollo) Valdez and Pacita Valdez. On August 12, 1977, the Court
of Appeals denied the motion for reconsideration filed
Respondent Court of Appeals, in affirming the trial by the Heirs of Juan Valdez on the ground that there
court's decision, sustained the trial court's conclusions was "no sufficient merit to justify reconsideration one
that the Decision of the Court of Appeals, dated May 4, way or the other . . .," and likewise denied that of the
1977 in CA-G.R. No. 38830-R, in the two cases affirmed Heirs of Egmidio Octaviano.
by the Supreme Court, touched on the ownership of lots
2 and 3 in question; that the two lots were possessed by Thereupon, the VICAR filed with the Supreme Court a
the predecessors-in-interest of private respondents petition for review on certiorari of the decision of the
under claim of ownership in good faith from 1906 to Court of Appeals dismissing his (its) application for
1951; that petitioner had been in possession of the registration of Lots 2 and 3, docketed as G.R. No. L-
same lots as bailee in commodatum up to 1951, when 46832, entitled, 'Catholic Vicar Apostolic of the
petitioner repudiated the trust and when it applied for Mountain Province vs. Court of Appeals and Heirs of
registration in 1962; that petitioner had just been in Egmidio Octaviano.'
possession as owner for eleven years, hence there is no From the denial by the Court of Appeals of their motion
possibility of acquisitive prescription which requires 10 for reconsideration, the Heirs of Juan Valdez and Pacita
years possession with just title and 30 years of Valdez, on September 8, 1977, filed with the Supreme
possession without; that the principle of res judicata on Court a petition for review, docketed as G.R. No. L-
these findings by the Court of Appeals will bar a 46872, entitled, 'Heirs of Juan Valdez and Pacita Valdez
reopening of these questions of fact; and that those facts vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano
may no longer be altered. and Amable O. Valdez.
Petitioner's motion for reconsideration of the
respondent appellate court's Decision in the two On January 13, 1978, the Supreme Court denied in a
aforementioned cases (CA-G.R. No. CV-05418 and minute resolution both petitions (of VICAR on the one
05419) was denied. 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 The alleged errors committed by respondent Court of
Court of First Instance of Baguio, Branch 11, a Motion Appeals according to petitioner are as follows:
For Execution of Judgment praying that the Heirs of
Octaviano be placed in possession of Lot 3. The Court, 1. ERROR IN APPLYING LAW OF THE CASE AND RES
presided over by Hon. Salvador J. Valdez, on December JUDICATA;
7, 1978, denied the motion on the ground that the Court 2. ERROR IN FINDING THAT THE TRIAL COURT RULED
of Appeals decision in CA-G.R. No. 38870 did not grant THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE
the Heirs of Octaviano any affirmative relief. BUT WITHOUT DOCUMENTARY EVIDENCE
PRESENTED;
On February 7, 1979, the Heirs of Octaviano filed with 3. ERROR IN FINDING THAT PETITIONER'S CLAIM IT
the Court of Appeals a petition for certiorari and PURCHASED LOTS 2 AND 3 FROM VALDEZ AND
mandamus, docketed as CA-G.R. No. 08890-R, entitled OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE
'Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, FORMER OWNERS WERE VALDEZ AND OCTAVIANO;
Jr. and Vicar.' In its decision dated May 16, 1979, the 4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF
Court of Appeals dismissed the petition. PRIVATE RESPONDENTS WHO WERE IN POSSESSION
OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT
It was at that stage that the instant cases were filed. The PETITIONER;
Heirs of Egmidio Octaviano filed Civil Case No. 3607 5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO
(419) on July 24, 1979, for recovery of possession of Lot HAD FREE PATENT APPLICATIONS AND THE
3; and the Heirs of Juan Valdez filed Civil Case No. 3655 PREDECESSORS OF PRIVATE RESPONDENTS ALREADY
(429) on September 24, 1979, likewise for recovery of HAD FREE PATENT APPLICATIONS SINCE 1906;
possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.). 6. ERROR IN FINDING THAT PETITIONER DECLARED
LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A
"In Civil Case No. 3607 (419) trial was held. The PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION
plaintiffs Heirs of Egmidio Octaviano presented one (1) TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY
witness, Fructuoso Valdez, who testified on the alleged ACQUISITIVE PRESCRIPTION OF 10 YEARS;
ownership of the land in question (Lot 3) by their 7. ERROR IN FINDING THAT THE DECISION OF THE
predecessor-in-interest, Egmidio Octaviano (Exh. C); his COURT OF APPEALS IN CA G.R. NO. 038830 WAS
written demand (Exh. B - B-4) to defendant Vicar for the AFFIRMED BY THE SUPREME COURT;
return of the land to them; and the reasonable rentals 8. ERROR IN FINDING THAT THE DECISION IN CA G.R.
for the use of the land at P10,000.00 per month. On the NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND
other hand, defendant Vicar presented the Register of 3 AND THAT PRIVATE RESPONDENTS AND THEIR
Deeds for the Province of Benguet, Atty. Nicanor Sison, PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND
who testified that the land in question is not covered by 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH
any title in the name of Egmidio Octaviano or any of the FROM 1906 TO 1951;
plaintiffs (Exh. 8). The defendant dispensed with the 9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN
testimony of Mons. William Brasseur when the plaintiffs POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE
admitted that the witness if called to the witness stand, (BORROWER) IN COMMODATUM, A GRATUITOUS
would testify that defendant Vicar has been in LOAN FOR USE;
possession of Lot 3, for seventy-five (75) years 10. ERROR IN FINDING THAT PETITIONER IS A
continuously and peacefully and has constructed POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT
permanent structures thereon. RIGHTS OF RETENTION AND REIMBURSEMENT AND IS
BARRED BY THE FINALITY AND CONCLUSIVENESS OF
"In Civil Case No. 3655, the parties admitting that the THE DECISION IN CA G.R. NO. 033830. 3
material facts are not in dispute, submitted the case on
the sole issue of whether or not the decisions of the The petition is bereft of merit.
Court of Appeals and the Supreme Court touching on
the ownership of Lot 2, which in effect declared the Petitioner questions the ruling of respondent Court of
plaintiffs the owners of the land constitute res judicata. Appeals in CA-G.R. Nos. 05148 and 05149, when it
"In these two cases, the plaintiffs argue that the clearly held that it was in agreement with the findings
defendant Vicar is barred from setting up the defense of of the trial court that the Decision of the Court of
ownership and or long and continuous possession of the Appeals dated May 4, 1977 in CA-G.R. No. 38830-R, on
two lots in question since this is barred by prior the question of ownership of Lots 2 and 3, declared that
judgment of the Court of Appeals in CA-G.R. No. 038830- the said Court of Appeals Decision (CA-G.R. No. 38830-
R under the principle of res judicata. Plaintiffs contend R) did not positively declare private respondents as
that the question of possession and ownership have owners of the land, neither was it declared that they
already been determined by the Court of Appeals (Exh. were not owners of the land, but it held that the
C, Decision, CA-G.R. No. 038830-R) and affirmed by the predecessors of private respondents were possessors of
Supreme Court (Exh. 1, Minute Resolution of the Lots 2 and 3, with claim of ownership in good faith from
Supreme Court). On his part, defendant Vicar maintains 1906 to 1951. Petitioner was in possession as borrower
that the principle of res judicata would not prevent in commodatum up to 1951, when it repudiated the
them from litigating the issues of long possession and trust by declaring the properties in its name for taxation
ownership. Because the dispositive portion of the prior purposes. When petitioner applied for registration of
judgment in CA-G.R. No. 038830-R merely dismissed Lots 2 and 3 in 1962, it had been in possession in
their application for registration and titling of lots 2 and concept of owner only for eleven years. Ordinary
3. Defendant Vicar contends that only the dispositive acquisitive prescription requires possession for ten
portion of the decision, and not its body, is the years, but always with just title. Extraordinary
controlling pronouncement of the Court of Appeals." 2 acquisitive prescription requires 30 years. 4
On the above findings of facts supported by evidence under claim of ownership in good faith from 1906; that
and evaluated by the Court of Appeals in CA-G.R. No. petitioner Vicar was only a bailee in commodatum; and
38830-R, affirmed by this Court, We see no error in that the adverse claim and repudiation of trust came
respondent appellate court's ruling that said findings only in 1951.
are res judicata between the parties. They can no longer
be altered by presentation of evidence because those We find no reason to disregard or reverse the ruling of
issues were resolved with finality a long time ago. To the Court of Appeals in CA-G.R. No. 38830-R. Its findings
ignore the principle of res judicata would be to open the of fact have become incontestible. This Court declined
door to endless litigations by continuous determination to review said decision, thereby in effect, affirming it. It
of issues without end. has become final and executory a long time ago.

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

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.] she lent him for his use. She appealed from the
judgment of the Court of First Instance of Manila
MARGARITA QUINTOS and ANGEL A. which ordered that the defendant return to her the
ANSALDO, plaintiffs-appellants, vs. BECK, defendant- three gas heaters and the four electric lamps found in
appellee. the possession of the Sheriff of said city, that she call
for the other furniture from the said Sheriff of Manila
SYLLABUS at her own expense, and that the fees which the
sheriff may charge for the deposit of the furniture be
1. COMMODATUM; OBLIGATION OF THE paid pro rata by both parties, without
PARTIES. — The contract entered into between the pronouncement as to the costs.
parties is one of commodatum, because under t the
plaintiff gratuitously granted the use of the furniture The defendant was a tenant of the plaintiff
to the defendant reserving for herself the ownership and as such occupied the latter's house on M. H. del
thereof, by this contract the defendant bound himself Pilar street, No. 1175. On January 14, 1936, upon the
to return the furniture to the plaintiff, upon the novation of the contract of lease between the plaintiff
latter's demand (Clause 7 of the contract, Exhibit "A"; and the defendant, the former gratuitously granted to
articles 1740, paragraph, and 1741 of the Civil Code). the latter the use of the furniture described in the
The obligation voluntarily assumed by the defendant third paragraph of the stipulation of facts, subject to
to return the furniture upon the plaintiff's demand the condition that the defendant would return them
means that he should return all of them to the to the plaintiff upon the latter's demand. The plaintiff
plaintiff at the latter's residence or house. The sold the property to Maria Lopez and Rosario Lopez
defendant did not comply with this obligation when and on September 14, 1936, these three notified the
he merely placed them at the disposal of the plaintiff, defendant of the conveyance, giving him sixty days to
retaining for his benefit the three gas heaters and the vacate the premises under one of the clauses of the
four electric lamps. contract of lease. There after the plaintiff required
the defendant to return all the furniture transferred
2. ID.; ID.; EXPENSES FOR DEPOSIT OF to him for his use. The defendant answered that she
FURNITURE. — AS the defendant had voluntarily may call for them in the house where they are found.
undertaken to return all the furniture to the plaintiff, On November 5, 1936, the defendant, through
upon the latter's demand, the Court could not legally another person, wrote to the plaintiff reiterating that
compel her to bear the expenses occasioned by the she may call for the furniture in the ground floor of
deposit of the furniture at the defendant's behest. the house. On the 7th of the same month, the
The latter, as bailee, was not entitled to place the defendant wrote another letter to the plaintiff
furniture on deposit; nor was the plaintiff under a informing her that he could not give up the three gas
duty to accept the offer to return the furniture, heaters and the four electric lamps because he would
because the defendant wanted to retain the three gas use them until the 15th of the same month when the
heaters and the four electric lamps. lease is due to expire. The plaintiff refused to get the
furniture in view of the fact that the defendant had
3. ID.; ID.; VALUE OF FURNITURE. — AS to declined to make delivers of all of them. On
the value of the furniture. we do not believe that the November 15th, before vacating the house, the
plaintiff is entitled to the payment thereof by the defendant deposited with the Sheriff all the furniture
defendant in case of his inability to return some of belonging to the plaintiff and they are now on deposit
the furniture, because under paragraph 6 of the in the warehouse situated at No. 1521, Rizal Avenue.
stipulation of facts, the defendant has neither agreed in the custody of the said sheriff.
to nor admitted the correctness of the said value.
Should the defendant fail to deliver some of the In their seven assigned errors the plaintiffs
furniture, the value thereof should be later contend that the trial court incorrectly applied the
determined by the trial Court through evidence law: in holding that they violated the contract by not
which the parties may desire to present. calling for all the furniture on November 5, 1936,
when the defendant placed them at their disposal; in
4. COSTS OF LITIGATION. — The costs in both not ordering the defendant to pay them the value of
instances should be borne by the defendant because the furniture in case they are not delivered; in
the plaintiff is the prevailing party (section 487 of the holding that they should get all the furniture from the
Code of Civil Procedure). The defendant was the one sheriff at their expenses; in ordering them to pay
who breached the contract of Commodatum, and one-half of the expenses claimed by the Sheriff for the
without any reason he refused to return and deliver deposit of the furniture; in ruling that both parties
all the furniture upon the plaintiff's demand. In these should pay their respective legal expenses or the
circumstances, it is just and equitable that he pay the costs; and in denying the motions for reconsideration
legal expenses and other judicial costs which the and new trial. To dispose of the case, it is only
plaintiff would not have otherwise defrayed. necessary to decide whether the defendant complied
with his obligation to return the furniture upon the
DECISION plaintiff's demand; whether the latter is bound to
IMPERIAL, J p: bear the deposit fees thereof, and whether she is
entitled to the costs of litigation.
The plaintiff brought this action to compel the
defendant to return to her certain furniture which
 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.] B) pay unto plaintiff the sum of THREE HUNDRED
PESOS (P300.00) monthly as reasonable
COLITO T. PAJUYO, petitioner, vs. COURT OF compensation for the use of the premises starting
APPEALS and EDDIE GUEVARRA, respondents. from the last demand;
C) pay plaintiff the sum of P3,000.00 as and by way
DECISION of attorney's fees; and
CARPIO, J p: D) pay the cost of suit.

The Case SO ORDERED. 7

Before us is a petition for review 1 of the 21 June Aggrieved, Guevarra appealed to the Regional Trial
2000 Decision 2 and 14 December 2000 Resolution Court of Quezon City, Branch 81 ("RTC").
of the Court of Appeals in CA-G.R. SP No. 43129. The
Court of Appeals set aside the 11 November 1996 On 11 November 1996, the RTC affirmed the MTC
decision 3 of the Regional Trial Court of Quezon City, decision. The dispositive portion of the RTC decision
Branch 81, 4 affirming the 15 December 1995 reads:
decision 5 of the Metropolitan Trial Court of Quezon
City, Branch 31. 6 WHEREFORE, premises considered, the Court finds
no reversible error in the decision appealed from,
The Antecedents being in accord with the law and evidence presented,
and the same is hereby affirmed en toto. SO
In June 1979, petitioner Colito T. Pajuyo ("Pajuyo") ORDERED. 8
paid P400 to a certain Pedro Perez for the rights over
a 250-square meter lot in Barrio Payatas, Quezon Guevarra received the RTC decision on 29 November
City. Pajuyo then constructed a house made of light 1996. Guevarra had only until 14 December 1996 to
materials on the lot. Pajuyo and his family lived in the file his appeal with the Court of Appeals. Instead of
house from 1979 to 7 December 1985. filing his appeal with the Court of Appeals, Guevarra
filed with the Supreme Court a "Motion for Extension
On 8 December 1985, Pajuyo and private respondent of Time to File Appeal by Certiorari Based on Rule
Eddie Guevarra ("Guevarra") executed 42" ("motion for extension"). Guevarra theorized that
a Kasunduan or agreement. Pajuyo, as owner of the his appeal raised pure questions of law. The
house, allowed Guevarra to live in the house for free Receiving Clerk of the Supreme Court received the
provided Guevarra would maintain the cleanliness motion for extension on 13 December 1996 or one
and orderliness of the house. Guevarra promised that day before the right to appeal expired.
he would voluntarily vacate the premises on Pajuyo's
demand. On 3 January 1997, Guevarra filed his petition for
review with the Supreme Court.
In September 1994, Pajuyo informed Guevarra of his
need of the house and demanded that Guevarra On 8 January 1997, the First Division of the Supreme
vacate the house. Guevarra refused. Court issued a Resolution 9 referring the motion for
extension to the Court of Appeals which has
Pajuyo filed an ejectment case against Guevarra with concurrent jurisdiction over the case. The case
the Metropolitan Trial Court of Quezon City, Branch presented no special and important matter for the
31 ("MTC"). Supreme Court to take cognizance of at the first
instance.
In his Answer, Guevarra claimed that Pajuyo had no
valid title or right of possession over the lot where On 28 January 1997, the Thirteenth Division of the
the house stands because the lot is within the 150 Court of Appeals issued a Resolution 10 granting the
hectares set aside by Proclamation No. 137 for motion for extension conditioned on the timeliness of
socialized housing. Guevarra pointed out that from the filing of the motion.
December 1985 to September 1994, Pajuyo did not
show up or communicate with him. Guevarra insisted On 27 February 1997, the Court of Appeals ordered
that neither he nor Pajuyo has valid title to the lot. Pajuyo to comment on Guevarra's petition for review.
On 11 April 1997, Pajuyo filed his Comment.
On 15 December 1995, the MTC rendered its decision
in favor of Pajuyo. The dispositive portion of the MTC On 21 June 2000, the Court of Appeals issued its
decision reads: decision reversing the RTC decision. The dispositive
portion of the decision reads:
WHEREFORE, premises considered, judgment is
hereby rendered for the plaintiff and against WHEREFORE, premises considered, the assailed
defendant, ordering the latter to: Decision of the court a quo in Civil Case No. Q-96-
26943 is REVERSED and SET ASIDE; and it is hereby
A) vacate the house and lot occupied by the declared that the ejectment case filed against
defendant or any other person or persons defendant-appellant is without factual and legal
claiming any right under him; basis. SO ORDERED. 11
Pajuyo filed a motion for reconsideration of the Since Pajuyo admitted that he resurfaced only in
decision. Pajuyo pointed out that the Court of Appeals 1994 to claim the property, the appellate court held
should have dismissed outright Guevarra's petition that Guevarra has a better right over the property
for review because it was filed out of time. Moreover, underProclamation No. 137. President Corazon C.
it was Guevarra's counsel and not Guevarra who Aquino ("President Aquino") issued Proclamation No.
signed the certification against forum-shopping. 137 on 7 September 1987. At that time, Guevarra was
in physical possession of the property. Under Article
On 14 December 2000, the Court of Appeals issued a VI of the Code of Policies Beneficiary Selection and
resolution denying Pajuyo's motion for Disposition of Homelots and Structures in the
reconsideration. The dispositive portion of the National Housing Project ("the Code"), the actual
resolution reads: occupant or caretaker of the lot shall have first
priority as beneficiary of the project. The Court of
WHEREFORE, for lack of merit, the motion for Appeals concluded that Guevarra is first in the
reconsideration is hereby DENIED. No costs. hierarchy of priority.
SO ORDERED. 12 In denying Pajuyo's motion for reconsideration, the
appellate court debunked Pajuyo's claim that
The Ruling of the MTC Guevarra filed his motion for extension beyond the
period to appeal.
The MTC ruled that the subject of the agreement The Court of Appeals pointed out that Guevarra's
between Pajuyo and Guevarra is the house and not motion for extension filed before the Supreme Court
the lot. Pajuyo is the owner of the house, and he was stamped "13 December 1996 at 4:09 PM" by the
allowed Guevarra to use the house only by tolerance. Supreme Court's Receiving Clerk. The Court of
Thus, Guevarra's refusal to vacate the house on Appeals concluded that the motion for extension bore
Pajuyo's demand made Guevarra's continued a date, contrary to Pajuyo's claim that the motion for
possession of the house illegal. extension was undated. Guevarra filed the motion for
extension on time on 13 December 1996 since he
The Ruling of the RTC filed the motion one day before the expiration of the
reglementary period on 14 December 1996. Thus, the
The RTC upheld the Kasunduan, which established motion for extension properly complied with the
the landlord and tenant relationship between Pajuyo condition imposed by the Court of Appeals in its 28
and Guevarra. The terms of the Kasunduan bound January 1997 Resolution. The Court of Appeals
Guevarra to return possession of the house on explained that the thirty-day extension to file the
demand. petition for review was deemed granted because of
such compliance.
The RTC rejected Guevarra's claim of a better right The Court of Appeals rejected Pajuyo's argument that
under Proclamation No. 137, the Revised National the appellate court should have dismissed the
Government Center Housing Project Code of Policies petition for review because it was Guevarra's counsel
and other pertinent laws. In an ejectment suit, the and not Guevarra who signed the certification against
RTC has no power to decide Guevarra's rights under forum-shopping. The Court of Appeals pointed out
these laws. The RTC declared that in an ejectment that Pajuyo did not raise this issue in his Comment.
case, the only issue for resolution is material or The Court of Appeals held that Pajuyo could not now
physical possession, not ownership. seek the dismissal of the case after he had extensively
argued on the merits of the case. This technicality, the
The Ruling of the Court of Appeals appellate court opined, was clearly an afterthought.

The Court of Appeals declared that Pajuyo and The Issues

Guevarra are squatters. Pajuyo and Guevarra illegally
occupied the contested lot which the government Pajuyo raises the following issues for resolution:
owned. WHETHER THE COURT OF APPEALS ERRED OR
ABUSED ITS AUTHORITY AND DISCRETION
Perez, the person from whom Pajuyo acquired his TANTAMOUNT TO LACK OF JURISDICTION:
rights, was also a squatter. Perez had no right or title
over the lot because it is public land. The assignment 1) in GRANTING, instead of denying, Private
of rights between Perez and Pajuyo, and Respondent's Motion for an Extension of thirty days
the Kasunduan between Pajuyo and Guevarra, did not to file petition for review at the time when there was
have any legal effect. Pajuyo and Guevarra are in pari no more period to extend as the decision of the
delicto or in equal fault. The court will leave them Regional Trial Court had already become final and
where they are. executory.

The Court of Appeals reversed the MTC and RTC 2) in giving due course, instead of dismissing, private
rulings, which held that the Kasunduan between respondent's Petition for Review even though the
Pajuyo and Guevarra created a legal tie akin to that of certification against forum-shopping was signed only
a landlord and tenant relationship. The Court of by counsel instead of by petitioner himself.
Appeals ruled that the Kasunduan is not a lease
contract but a commodatum because the agreement is 3) in ruling that the Kasunduan voluntarily entered
not for a price certain. into by the parties was in fact a commodatum, instead
of a Contract of Lease as found by the Metropolitan In his petition for review before this Court, Guevarra
Trial Court and in holding that "the ejectment case no longer disputed the facts. Guevarra's petition for
filed against defendant-appellant is without legal and review raised these questions: (1) Do ejectment cases
factual basis". pertain only to possession of a structure, and not the
lot on which the structure stands? (2) Does a suit by a
4) in reversing and setting aside the Decision of the squatter against a fellow squatter constitute a valid
Regional Trial Court in Civil Case No. Q-96-26943 and case for ejectment? (3) Should a Presidential
in holding that the parties are in pari delicto being Proclamation governing the lot on which a squatter's
both squatters, therefore, illegal occupants of the structure stands be considered in an ejectment suit
contested parcel of land. filed by the owner of the structure?

5) in deciding the unlawful detainer case based on These questions call for the evaluation of the rights of
the so-called Code of Policies of the National the parties under the law on ejectment and the
Government Center Housing Project instead of Presidential Proclamation. At first glance, the
deciding the same under the Kasunduan voluntarily questions Guevarra raised appeared purely legal.
executed by the parties, the terms and conditions of However, some factual questions still have to be
which are the laws between themselves. 13 resolved because they have a bearing on the legal
questions raised in the petition for review. These
The Ruling of the Court factual matters refer to the metes and bounds of the
disputed property and the application of Guevarra as
The procedural issues Pajuyo is raising are baseless. beneficiary of Proclamation No. 137.
However, we find merit in the substantive issues
Pajuyo is submitting for resolution. The Court of Appeals has the power to grant an
extension of time to file a petition for review.
Procedural Issues In Lacsamana v. Second Special Cases Division of the
Intermediate Appellate Court, 18 we declared that the
Pajuyo insists that the Court of Appeals should have Court of Appeals could grant extension of time in
dismissed outright Guevarra's petition for review appeals by petition for review. In Liboro v. Court of
because the RTC decision had already become final Appeals, 19 we clarified that the prohibition against
and executory when the appellate court acted on granting an extension of time applies only in a case
Guevarra's motion for extension to file the petition. where ordinary appeal is perfected by a mere notice
Pajuyo points out that Guevarra had only one day of appeal. The prohibition does not apply in a petition
before the expiry of his period to appeal the RTC for review where the pleading needs verification. A
decision. Instead of filing the petition for review with petition for review, unlike an ordinary appeal,
the Court of Appeals, Guevarra filed with this Court requires preparation and research to present a
an undated motion for extension of 30 days to file a persuasive position. 20 The drafting of the petition
petition for review. This Court merely referred the for review entails more time and effort than filing a
motion to the Court of Appeals. Pajuyo believes that notice of appeal. 21 Hence, the Court of Appeals may
the filing of the motion for extension with this Court allow an extension of time to file a petition for
did not toll the running of the period to perfect the review.
appeal. Hence, when the Court of Appeals received
the motion, the period to appeal had already expired. In the more recent case of Commissioner of Internal
We are not persuaded. Revenue v. Court of Appeals, 22 we held
that Liboro's clarification of Lacsamana is consistent
Decisions of the regional trial courts in the exercise of with the Revised Internal Rules of the Court of
their appellate jurisdiction are appealable to the Appeals and Supreme Court Circular No. 1-91. They
Court of Appeals by petition for review in cases all allow an extension of time for filing petitions for
involving questions of fact or mixed questions of fact review with the Court of Appeals. The extension,
and law. 14 Decisions of the regional trial courts however, should be limited to only fifteen days save
involving pure questions of law are appealable in exceptionally meritorious cases where the Court of
directly to this Court by petition for review. 15 These Appeals may grant a longer period.
modes of appeal are now embodied in Section 2, Rule
41 of the 1997 Rules of Civil Procedure. A judgment becomes "final and executory" by
operation of law. Finality of judgment becomes a fact
Guevarra believed that his appeal of the RTC decision on the lapse of the reglementary period to appeal if
involved only questions of law. Guevarra thus filed no appeal is perfected. 23 The RTC decision could not
his motion for extension to file petition for review have gained finality because the Court of Appeals
before this Court on 14 December 1996. On 3 January granted the 30-day extension to Guevarra.
1997, Guevarra then filed his petition for review with
this Court. A perusal of Guevarra's petition for review The Court of Appeals did not commit grave abuse of
gives the impression that the issues he raised were discretion when it approved Guevarra's motion for
pure questions of law. There is a question of law extension. The Court of Appeals gave due course to
when the doubt or difference is on what the law is on the motion for extension because it complied with
a certain state of facts.16 There is a question of fact the condition set by the appellate court in its
when the doubt or difference is on the truth or falsity resolution dated 28 January 1997. The resolution
of the facts alleged. 17 stated that the Court of Appeals would only give due
course to the motion for extension if filed on time. or any person who personally knows the truth of the
The motion for extension met this condition. facts alleged in the pleading may sign the
verification. 31
The material dates to consider in determining the
timeliness of the filing of the motion for extension are We agree with the Court of Appeals that the issue on
(1) the date of receipt of the judgment or final order the certificate against forum shopping was merely an
or resolution subject of the petition, and (2) the date afterthought. Pajuyo did not call the Court of Appeals'
of filing of the motion for extension. 24 It is the date attention to this defect at the early stage of the
of the filing of the motion or pleading, and not the proceedings. Pajuyo raised this procedural issue too
date of execution, that determines the timeliness of late in the proceedings.
the filing of that motion or pleading. Thus, even if the
motion for extension bears no date, the date of filing Absence of Title over the Disputed Property will not
stamped on it is the reckoning point for determining Divest the Courts of Jurisdiction to Resolve the Issue of
the timeliness of its filing. Possession

Guevarra had until 14 December 1996 to file an Settled is the rule that the defendant's claim of
appeal from the RTC decision. Guevarra filed his ownership of the disputed property will not divest
motion for extension before this Court on 13 the inferior court of its jurisdiction over the
December 1996, the date stamped by this Court's ejectment case. 32 Even if the pleadings raise the
Receiving Clerk on the motion for extension. Clearly, issue of ownership, the court may pass on such issue
Guevarra filed the motion for extension exactly one to determine only the question of possession,
day before the lapse of the reglementary period to especially if the ownership is inseparably linked with
appeal. the possession. 33 The adjudication on the issue of
ownership is only provisional and will not bar an
Assuming that the Court of Appeals should have action between the same parties involving title to the
dismissed Guevarra's appeal on technical grounds, land. 34 This doctrine is a necessary consequence of
Pajuyo did not ask the appellate court to deny the the nature of the two summary actions of ejectment,
motion for extension and dismiss the petition for forcible entry and unlawful detainer, where the only
review at the earliest opportunity. Instead, Pajuyo issue for adjudication is the physical or material
vigorously discussed the merits of the case. It was possession over the real property. 35
only when the Court of Appeals ruled in Guevarra's
favor that Pajuyo raised the procedural issues against In this case, what Guevarra raised before the courts
Guevarra's petition for review. was that he and Pajuyo are not the owners of the
contested property and that they are mere squatters.
A party who, after voluntarily submitting a dispute Will the defense that the parties to the ejectment case
for resolution, receives an adverse decision on the are not the owners of the disputed lot allow the
merits, is estopped from attacking the jurisdiction of courts to renounce their jurisdiction over the case?
the court. 25Estoppel sets in not because the The Court of Appeals believed so and held that it
judgment of the court is a valid and conclusive would just leave the parties where they are since
adjudication, but because the practice of attacking they are in pari delicto.
the court's jurisdiction after voluntarily submitting to
it is against public policy. 26 We do not agree with the Court of Appeals.

In his Comment before the Court of Appeals, Pajuyo Ownership or the right to possess arising from
also failed to discuss Guevarra's failure to sign the ownership is not at issue in an action for recovery of
certification against forum shopping. Instead, Pajuyo possession. The parties cannot present evidence to
harped on Guevarra's counsel signing the prove ownership or right to legal possession except
verification, claiming that the counsel's verification is to prove the nature of the possession when necessary
insufficient since it is based only on "mere to resolve the issue of physical possession. 36 The
information." same is true when the defendant asserts the absence
of title over the property. The absence of title over
A party's failure to sign the certification against the contested lot is not a ground for the courts to
forum shopping is different from the party's failure to withhold relief from the parties in an ejectment case.
sign personally the verification. The certificate of
non-forum shopping must be signed by the party, and The only question that the courts must resolve in
not by counsel. 27 The certification of counsel ejectment proceedings is — who is entitled to the
renders the petition defective. 28 physical possession of the premises, that is, to the
possession de facto and not to the possession de
On the other hand, the requirement on verification of jure. 37 It does not even matter if a party's title to the
a pleading is a formal and not a jurisdictional property is questionable, 38 or when both parties
requisite. 29 It is intended simply to secure an intruded into public land and their applications to
assurance that what are alleged in the pleading are own the land have yet to be approved by the proper
true and correct and not the product of the government agency. 39 Regardless of the actual
imagination or a matter of speculation, and that the condition of the title to the property, the party in
pleading is filed in good faith. 30 The party need not peaceable quiet possession shall not be thrown out
sign the verification. A party's representative, lawyer by a strong hand, violence or terror. 40 Neither is the
unlawful withholding of property allowed. Courts nature so the authorities can settle speedily actions
will always uphold respect for prior possession. to recover possession because of the overriding need
to quell social disturbances. 47
Thus, a party who can prove prior possession can We further explained in Pitargue the greater interest
recover such possession even against the owner that is at stake in actions for recovery of possession.
himself. 41 Whatever may be the character of his We made the following pronouncements in Pitargue:
possession, if he has in his favor prior possession in The question that is before this Court is: Are courts
time, he has the security that entitles him to remain without jurisdiction to take cognizance of possessory
on the property until a person with a better right actions involving these public lands before final
lawfully ejects him. 42 To repeat, the only issue that award is made by the Lands Department, and before
the court has to settle in an ejectment suit is the right title is given any of the conflicting claimants? It is one
to physical possession. of utmost importance, as there are public lands
everywhere and there are thousands of settlers,
In Pitargue v. Sorilla, 43 the government owned the especially in newly opened regions. It also involves a
land in dispute. The government did not authorize matter of policy, as it requires the determination of
either the plaintiff or the defendant in the case of the respective authorities and functions of two
forcible entry case to occupy the land. The plaintiff coordinate branches of the Government in
had prior possession and had already introduced connection with public land conflicts.
improvements on the public land. The plaintiff had a
pending application for the land with the Bureau of Our problem is made simple by the fact that under
Lands when the defendant ousted him from the Civil Code, either in the old, which was in force in
possession. The plaintiff filed the action of forcible this country before the American occupation, or in
entry against the defendant. The government was not the new, we have a possessory action, the aim and
a party in the case of forcible entry. purpose of which is the recovery of the physical
possession of real property, irrespective of the
The defendant questioned the jurisdiction of the question as to who has the title thereto. Under the
courts to settle the issue of possession because while Spanish Civil Code we had the accion interdictal, a
the application of the plaintiff was still pending, title summary proceeding which could be brought within
remained with the government, and the Bureau of one year from dispossession (Roman Catholic Bishop
Public Lands had jurisdiction over the case. We of Cebu vs. Mangaron, 6 Phil. 286, 291); and as early
disagreed with the defendant. We ruled that courts as October 1, 1901, upon the enactment of the Code
have jurisdiction to entertain ejectment suits even of Civil Procedure (Act No. 190 of the Philippine
before the resolution of the application. The plaintiff, Commission) we implanted the common law action
by priority of his application and of his entry, of forcible entry (section 80 of Act No. 190), the
acquired prior physical possession over the public object of which has been stated by this Court to be "to
land applied for as against other private claimants. prevent breaches of the peace and criminal disorder
That prior physical possession enjoys legal which would ensue from the withdrawal of the remedy,
protection against other private claimants because and the reasonable hope such withdrawal would
only a court can take away such physical possession create that some advantage must accrue to those
in an ejectment case. persons who, believing themselves entitled to the
possession of property, resort to force to gain
While the Court did not brand the plaintiff and the possession rather than to some appropriate action in
defendant in Pitargue 44 as squatters, strictly the court to assert their claims." (Supia and Batioco
speaking, their entry into the disputed land was vs. Quintero and Ayala, 59 Phil. 312, 314.) So before
illegal. Both the plaintiff and defendant entered the the enactment of the first Public Land Act (Act No.
public land without the owner's permission. Title to 926) the action of forcible entry was already
the land remained with the government because it available in the courts of the country. So the question
had not awarded to anyone ownership of the to be resolved is, Did the Legislature intend, when it
contested public land. Both the plaintiff and the vested the power and authority to alienate and
defendant were in effect squatting on government dispose of the public lands in the Lands Department,
property. Yet, we upheld the courts' jurisdiction to to exclude the courts from entertaining the
resolve the issue of possession even if the plaintiff possessory action of forcible entry between rival
and the defendant in the ejectment case did not have claimants or occupants of any land before award
any title over the contested land. thereof to any of the parties? Did Congress intend
that the lands applied for, or all public lands for that
Courts must not abdicate their jurisdiction to resolve matter, be removed from the jurisdiction of the
the issue of physical possession because of the public judicial Branch of the Government, so that any
need to preserve the basic policy behind the troubles arising therefrom, or any breaches of the
summary actions of forcible entry and unlawful peace or disorders caused by rival claimants, could
detainer. The underlying philosophy behind be inquired into only by the Lands Department to the
ejectment suits is to prevent breach of the peace and exclusion of the courts? The answer to this question
criminal disorder and to compel the party out of seems to us evident. The Lands Department does not
possession to respect and resort to the law alone to have the means to police public lands; neither does it
obtain what he claims is his. 45 The party deprived of have the means to prevent disorders arising
possession must not take the law into his own therefrom, or contain breaches of the peace among
hands. 46 Ejectment proceedings are summary in settlers; or to pass promptly upon conflicts of
possession. Then its power is clearly limited to not a legal possession. (Mediran vs. Villanueva, 37
disposition and alienation, and while it may decide Phil. 752.) The title or right to possession is never in
conflicts of possession in order to make proper award, issue in an action of forcible entry; as a matter of fact,
the settlement of conflicts of possession which is evidence thereof is expressly banned, except to prove
recognized in the court herein has another ultimate the nature of the possession. (Second 4, Rule 72,
purpose, i.e., the protection of actual possessors and Rules of Court.) With this nature of the action in
occupants with a view to the prevention of breaches of mind, by no stretch of the imagination can conclusion
the peace. The power to dispose and alienate could not be arrived at that the use of the remedy in the courts
have been intended to include the power to prevent or of justice would constitute an interference with the
settle disorders or breaches of the peace among rival alienation, disposition, and control of public lands. To
settlers or claimants prior to the final award. As to limit ourselves to the case at bar can it be pretended
this, therefore, the corresponding branches of the at all that its result would in any way interfere with
Government must continue to exercise power and the manner of the alienation or disposition of the
jurisdiction within the limits of their respective land contested? On the contrary, it would facilitate
functions. The vesting of the Lands Department with adjudication, for the question of priority of
authority to administer, dispose, and alienate public possession having been decided in a final manner by
lands, therefore, must not be understood as depriving the courts, said question need no longer waste the
the other branches of the Government of the exercise of time of the land officers making the adjudication or
the respective functions or powers thereon, such as the award. (Emphasis ours)
authority to stop disorders and quell breaches of the
peace by the police, the authority on the part of the The Principle of Pari Delicto is not Applicable to
courts to take jurisdiction over possessory actions Ejectment Cases
arising therefrom not involving, directly or indirectly,
alienation and disposition. The Court of Appeals erroneously applied the
principle of pari delicto to this case.
Our attention has been called to a principle
enunciated in American courts to the effect that Articles 1411 and 1412 of the Civil Code 48 embody
courts have no jurisdiction to determine the rights of the principle of pari delicto. We explained the
claimants to public lands, and that until the principle of pari delicto in these words:
disposition of the land has passed from the control of
the Federal Government, the courts will not interfere The rule of pari delicto is expressed in the maxims 'ex
with the administration of matters concerning the dolo malo non eritur actio' and 'in pari delicto potior
same. (50 C. J. 1093-1094.) We have no quarrel with est conditio defedentis.' The law will not aid either
this principle. The determination of the respective party to an illegal agreement. It leaves the parties
rights of rival claimants to public lands is different where it finds them. 49
from the determination of who has the actual
physical possession or occupation with a view to The application of the pari delicto principle is not
protecting the same and preventing disorder and absolute, as there are exceptions to its application.
breaches of the peace. A judgment of the court One of these exceptions is where the application of
ordering restitution of the possession of a parcel of the pari delicto rule would violate well-established
land to the actual occupant, who has been deprived public policy. 50
thereof by another through the use of force or in any
other illegal manner, can never be "prejudicial In Drilon v. Gaurana, 51 we reiterated the basic policy
interference" with the disposition or alienation of behind the summary actions of forcible entry and
public lands. On the other hand, if courts were unlawful detainer. We held that:
deprived of jurisdiction of cases involving conflicts of
possession, that threat of judicial action against It must be stated that the purpose of an action of
breaches of the peace committed on public lands would forcible entry and detainer is that, regardless of the
be eliminated, and a state of lawlessness would actual condition of the title to the property, the party
probably be produced between applicants, occupants in peaceable quiet possession shall not be turned out
or squatters, where force or might, not right or justice, by strong hand, violence or terror. In affording this
would rule. remedy of restitution the object of the statute is to
prevent breaches of the peace and criminal disorder
It must be borne in mind that the action that would which would ensue from the withdrawal of the
be used to solve conflicts of possession between remedy, and the reasonable hope such withdrawal
rivals or conflicting applicants or claimants would be would create that some advantage must accrue to
no other than that of forcible entry. This action, both those persons who, believing themselves entitled to
in England and the United States and in our the possession of property, resort to force to gain
jurisdiction, is a summary and expeditious remedy possession rather than to some appropriate action in
whereby one in peaceful and quiet possession may the courts to assert their claims. This is the
recover the possession of which he has been philosophy at the foundation of all these actions of
deprived by a stronger hand, by violence or terror; its forcible entry and detainer which are designed to
ultimate object being to prevent breach of the peace compel the party out of possession to respect and
and criminal disorder. (Supia and Batioco vs. Quintero resort to the law alone to obtain what he claims is
and Ayala, 59 Phil. 312, 314.) The basis of the remedy his. 52
is mere possession as a fact, of physical possession,
Clearly, the application of the principle of pari Second. The Court of Appeals should not have given
delicto to a case of ejectment between squatters is credence to Guevarra's unsubstantiated claim that he
fraught with danger. To shut out relief to squatters on is the beneficiary of Proclamation No. 137. Guevarra
the ground ofpari delicto would openly invite merely alleged that in the survey the project
mayhem and lawlessness. A squatter would oust administrator conducted, he and not Pajuyo
another squatter from possession of the lot that the appeared as the actual occupant of the lot.
latter had illegally occupied, emboldened by the There is no proof that Guevarra actually availed of
knowledge that the courts would leave them where the benefits of Proclamation No. 137. Pajuyo allowed
they are. Nothing would then stand in the way of the Guevarra to occupy the disputed property in 1985.
ousted squatter from re-claiming his prior possession President Aquino signed Proclamation No. 137 into
at all cost. law on 11 March 1986. Pajuyo made his earliest
demand for Guevarra to vacate the property in
Petty warfare over possession of properties is September 1994.
precisely what ejectment cases or actions for
recovery of possession seek to prevent. 53 Even the During the time that Guevarra temporarily held the
owner who has title over the disputed property property up to the time that Proclamation No.
cannot take the law into his own hands to regain 137 allegedly segregated the disputed lot, Guevarra
possession of his property. The owner must go to never applied as beneficiary of Proclamation No. 137.
court. Even when Guevarra already knew that Pajuyo was
reclaiming possession of the property, Guevarra did
Courts must resolve the issue of possession even if not take any step to comply with the requirements
the parties to the ejectment suit are squatters. The of Proclamation No. 137.
determination of priority and superiority of
possession is a serious and urgent matter that cannot Third. Even assuming that the disputed lot is within
be left to the squatters to decide. To do so would the coverage of Proclamation No. 137 and Guevarra
make squatters receive better treatment under the has a pending application over the lot, courts should
law. The law restrains property owners from taking still assume jurisdiction and resolve the issue of
the law into their own hands. However, the principle possession. However, the jurisdiction of the courts
of pari delicto as applied by the Court of Appeals would be limited to the issue of physical possession
would give squatters free rein to dispossess fellow only.
squatters or violently retake possession of properties
usurped from them. Courts should not leave In Pitargue, 55 we ruled that courts have jurisdiction
squatters to their own devices in cases involving over possessory actions involving public land to
recovery of possession. determine the issue of physical possession. The
determination of the respective rights of rival
Possession is the only Issue for Resolution in an claimants to public land is, however, distinct from the
Ejectment Case determination of who has the actual physical
possession or who has a better right of physical
The case for review before the Court of Appeals was a possession. 56 The administrative disposition and
simple case of ejectment. The Court of Appeals alienation of public lands should be threshed out in
refused to rule on the issue of physical possession. the proper government agency. 57
Nevertheless, the appellate court held that the pivotal
issue in this case is who between Pajuyo and The Court of Appeals' determination of Pajuyo and
Guevarra has the "priority right as beneficiary of the Guevarra's rights under Proclamation No. 137 was
contested land underProclamation No. premature. Pajuyo and Guevarra were at most merely
137." 54 According to the Court of Appeals, Guevarra potential beneficiaries of the law. Courts should not
enjoys preferential right under Proclamation No. preempt the decision of the administrative agency
137 because Article VI of the Code declares that the mandated by law to determine the qualifications of
actual occupant or caretaker is the one qualified to applicants for the acquisition of public lands. Instead,
apply for socialized housing. courts should expeditiously resolve the issue of
physical possession in ejectment cases to prevent
The ruling of the Court of Appeals has no factual and disorder and breaches of peace.58
legal basis.
Pajuyo is Entitled to Physical Possession of the
First. Guevarra did not present evidence to show that Disputed Property
the contested lot is part of a relocation site
under Proclamation No. 137. Proclamation No. Guevarra does not dispute Pajuyo's prior possession
137 laid down the metes and bounds of the land that of the lot and ownership of the house built on it.
it declared open for disposition to bona fide residents. Guevarra expressly admitted the existence and due
The records do not show that the contested lot is execution of the Kasunduan. The Kasunduan reads:
within the land specified by Proclamation No. 137.
Guevarra had the burden to prove that the disputed Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa
lot is within the coverage of Proclamation No. 137. He Bo. Payatas, Quezon City, ay nagbibigay pahintulot
failed to do so. kay G. Eddie Guevarra, na pansamantalang
manirahan sa nasabing bahay at lote ng "walang
bayad." Kaugnay nito, kailangang panatilihin nila ang the Civil Code, precarium is a kind
kalinisan at kaayusan ng bahay at lote. of commodatum. 68

Sa sandaling kailangan na namin ang bahay at lote, The Kasunduan reveals that the accommodation
sila'y kusang aalis ng walang reklamo. accorded by Pajuyo to Guevarra was not essentially
gratuitous. While the Kasunduan did not require
Based on the Kasunduan, Pajuyo permitted Guevarra Guevarra to pay rent, it obligated him to maintain the
to reside in the house and lot free of rent, but property in good condition. The imposition of this
Guevarra was under obligation to maintain the obligation makes the Kasunduan a contract different
premises in good condition. Guevarra promised to from a commodatum. The effects of
vacate the premises on Pajuyo's demand but the Kasunduan are also different from that of
Guevarra broke his promise and refused to heed a commodatum. Case law on ejectment has treated
Pajuyo's demand to vacate. relationship based on tolerance as one that is akin to
a landlord-tenant relationship where the withdrawal
These facts make out a case for unlawful detainer. of permission would result in the termination of the
Unlawful detainer involves the withholding by a lease. 69 The tenant's withholding of the property
person from another of the possession of real would then be unlawful. This is settled jurisprudence.
property to which the latter is entitled after the Even assuming that the relationship between Pajuyo
expiration or termination of the former's right to and Guevarra is one of commodatum, Guevarra as
hold possession under a contract, express or bailee would still have the duty to turn over
implied. 59 possession of the property to Pajuyo, the bailor. The
obligation to deliver or to return the thing received
Where the plaintiff allows the defendant to use his attaches to contracts for safekeeping, or contracts of
property by tolerance without any contract, the commission, administration and commodatum.
defendant is necessarily bound by an implied 70 These contracts certainly involve the obligation to
promise that he will vacate on demand, failing which, deliver or return the thing received. 71
an action for unlawful detainer will lie. 60 The
defendant's refusal to comply with the demand Guevarra turned his back on the Kasunduan on the
makes his continued possession of the property sole ground that like him, Pajuyo is also a squatter.
unlawful. 61 The status of the defendant in such a Squatters, Guevarra pointed out, cannot enter into a
case is similar to that of a lessee or tenant whose contract involving the land they illegally occupy.
term of lease has expired but whose occupancy Guevarra insists that the contract is void.
continues by tolerance of the owner. 62
Guevarra should know that there must be honor even
This principle should apply with greater force in between squatters. Guevarra freely entered into
cases where a contract embodies the permission or the Kasunduan. Guevarra cannot now impugn
tolerance to use the property. the Kasunduanafter he had benefited from it.
The Kasunduan expressly articulated Pajuyo's The Kasunduan binds Guevarra.
forbearance. Pajuyo did not require Guevarra to pay
any rent but only to maintain the house and lot in The Kasunduan is not void for purposes of
good condition. Guevarra expressly vowed in determining who between Pajuyo and Guevarra has a
theKasunduan that he would vacate the property on right to physical possession of the contested
demand. Guevarra's refusal to comply with Pajuyo's property. The Kasunduanis the undeniable evidence
demand to vacate made Guevarra's continued of Guevarra's recognition of Pajuyo's better right of
possession of the property unlawful. physical possession. Guevarra is clearly a possessor
in bad faith. The absence of a contract would not
We do not subscribe to the Court of Appeals' theory yield a different result, as there would still be an
that the Kasunduan is one of commodatum. implied promise to vacate.

In a contract of commodatum, one of the parties Guevarra contends that there is "a pernicious evil
delivers to another something not consumable so that is sought to be avoided, and that is allowing an
that the latter may use the same for a certain time absentee squatter who (sic) makes (sic) a profit out
and return it. 63An essential feature of his illegal act." 72 Guevarra bases his argument on
of commodatum is that it is gratuitous. Another the preferential right given to the actual occupant or
feature of commodatum is that the use of the thing caretaker under Proclamation No. 137 on socialized
belonging to another is for a certain period. 64Thus, housing.
the bailor cannot demand the return of the thing
loaned until after expiration of the period stipulated, We are not convinced.
or after accomplishment of the use for which
thecommodatum is constituted. 65 If the bailor Pajuyo did not profit from his arrangement with
should have urgent need of the thing, he may demand Guevarra because Guevarra stayed in the property
its return for temporary use. 66 If the use of the thing without paying any rent. There is also no proof that
is merely tolerated by the bailor, he can demand the Pajuyo is a professional squatter who rents out
return of the thing at will, in which case the usurped properties to other squatters. Moreover, it is
contractual relation is called a precarium. 67 Under for the proper government agency to decide who
between Pajuyo and Guevarra qualifies for socialized
housing. The only issue that we are addressing is would then rather settle the issue of physical
physical possession. possession among themselves than seek relief from
the courts if the plaintiff and defendant in the
Prior possession is not always a condition sine qua ejectment case would both stand to lose possession
non in ejectment. 73 This is one of the distinctions of the disputed property. This would subvert the
between forcible entry and unlawful detainer. 74 In policy underlying actions for recovery of possession.
forcible entry, the plaintiff is deprived of physical Since Pajuyo has in his favor priority in time in
possession of his land or building by means of force, holding the property, he is entitled to remain on the
intimidation, threat, strategy or stealth. Thus, he property until a person who has title or a better right
must allege and prove prior possession. 75 But in lawfully ejects him. Guevarra is certainly not that
unlawful detainer, the defendant unlawfully person. The ruling in this case, however, does not
withholds possession after the expiration or preclude Pajuyo and Guevarra from introducing
termination of his right to possess under any evidence and presenting arguments before the
contract, express or implied. In such a case, prior proper administrative agency to establish any right
physical possession is not required. 76 to which they may be entitled under the law. 81

Pajuyo's withdrawal of his permission to Guevarra In no way should our ruling in this case be
terminated the Kasunduan. Guevarra's transient right interpreted to condone squatting. The ruling on the
to possess the property ended as well. Moreover, it issue of physical possession does not affect title to
was Pajuyo who was in actual possession of the the property nor constitute a binding and conclusive
property because Guevarra had to seek Pajuyo's adjudication on the merits on the issue of
permission to temporarily hold the property and ownership. 82 The owner can still go to court to
Guevarra had to follow the conditions set by Pajuyo recover lawfully the property from the person who
in the Kasunduan. Control over the property still holds the property without legal title. Our ruling here
rested with Pajuyo and this is evidence of actual does not diminish the power of government agencies,
possession. including local governments, to condemn, abate,
remove or demolish illegal or unauthorized
Pajuyo's absence did not affect his actual possession structures in accordance with existing laws.
of the disputed property. Possession in the eyes of
the law does not mean that a man has to have his feet Attorney's Fees and Rentals
on every square meter of the ground before he is
deemed in possession. 77 One may acquire The MTC and RTC failed to justify the award of
possession not only by physical occupation, but also P3,000 attorney's fees to Pajuyo. Attorney's fees as
by the fact that a thing is subject to the action of one's part of damages are awarded only in the instances
will. 78 Actual or physical occupation is not always enumerated inArticle 2208 of the Civil Code. 83 Thus,
necessary. 79 the award of attorney's fees is the exception rather
than the rule. 84 Attorney's fees are not awarded
Ruling on Possession Does not Bind Title to the Land in every time a party prevails in a suit because of the
Dispute policy that no premium should be placed on the right
to litigate. 85 We therefore delete the attorney's fees
We are aware of our pronouncement in cases where awarded to Pajuyo.
we declared that "squatters and intruders who
clandestinely enter into titled government property We sustain the P300 monthly rentals the MTC and
cannot, by such act, acquire any legal right to said RTC assessed against Guevarra. Guevarra did not
property." 80 We made this declaration because the dispute this factual finding of the two courts. We find
person who had title or who had the right to legal the amount reasonable compensation to Pajuyo. The
possession over the disputed property was a party in P300 monthly rental is counted from the last demand
the ejectment suit and that party instituted the case to vacate, which was on 16 February 1995.
against squatters or usurpers.
WHEREFORE, we GRANT the petition. The Decision
In this case, the owner of the land, which is the dated 21 June 2000 and Resolution dated 14
government, is not a party to the ejectment case. This December 2000 of the Court of Appeals in CA-G.R. SP
case is between squatters. Had the government No. 43129 are SET ASIDE. The Decision dated 11
participated in this case, the courts could have November 1996 of the Regional Trial Court of
evicted the contending squatters, Pajuyo and Quezon City, Branch 81 in Civil Case No. Q-96-26943,
Guevarra. affirming the Decision dated 15 December 1995 of
the Metropolitan Trial Court of Quezon City, Branch
Since the party that has title or a better right over the 31 in Civil Case No. 12432, is REINSTATED with
property is not impleaded in this case, we cannot MODIFICATION. The award of attorney's fees is
evict on our own the parties. Such a ruling would deleted. No costs.
discourage squatters from seeking the aid of the
courts in settling the issue of physical possession. SO ORDERED.
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