Case Digest: Producers Bank of the Philippines v. Court of Appeals, G.R. No. 115324, February 19, 2003

Commercial Law | Commodatum

Recit Ver: 

• Franklin Vives was asked by his neighbor, Angeles Sanchez, to assist Col. Arturo Doronilla in incorporating his business, Sterela Marketing and Services.
• Vives issued a ₱200,000 check to Sterela for incorporation purposes.
• Vives' wife, Mrs. Inocencia Vives, accompanied Doronilla's private secretary, Estrella Dumagpi, to open a bank account in Producers Bank of the Philippines-Makati for Sterela.
• Doronilla withdrew part of the money from the account, leaving only ₱90,000.
• Rufo Atienza, the assistant manager, informed Vives that the remaining amount could not be withdrawn due to postdated checks issued by Doronilla.
• Attempts to return the money through postdated checks failed.
• Vives instituted an action for recovery of sum of money against Doronilla, Sanchez, Dumagpi and Producers Bank of the Philippines. 
• Producers Bank of the Philippines denied liability because it is not privy to the transaction between the Vives and Doronilla.
• Whether the transaction between Vives and Doronilla was a simple loan or commodatum.
• A circumspect examination of the records reveals that the transaction between them was a commodatum. 
• The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract. 
• As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private respondent agreed to deposit his money in the savings account of Sterela specifically for the purpose of making it appear "that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within thirty (30) days."
• Private respondent merely "accommodated" Doronilla by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not be removed from Sterela’s savings account and would be returned to private respondent after thirty (30) days.
• Doronilla’s attempts to return to private respondent the amount of ₱200,000.00 which the latter deposited in Sterela’s account together with an additional ₱12,000.00, allegedly representing interest on the mutuum, did not convert the transaction from a commodatum into a mutuum because such was not the intent of the parties and because the additional ₱12,000.00 corresponds to the fruits of the lending of the ₱200,000.00. Article 1935 of the Civil Code expressly states that "[t]he bailee in commodatum acquires the use of the thing loaned but not its fruits." Hence, it was only proper for Doronilla to remit to private respondent the interest accruing to the latter’s money deposited with petitioner.
• Neither does the Court agree with petitioner’s contention that it is not solidarily liable for the return of private respondent’s money because it was not privy to the transaction between Doronilla and private respondent. The nature of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of petitioner’s liability for the return of private respondent’s money because the factual circumstances of the case clearly show that petitioner, through its employee Mr. Atienza, was partly responsible for the loss of private respondent’s money and is liable for its restitution.

Facts: 

• In 1979, Franklin Vives was asked by his neighbor, Angeles Sanchez, to assist Col. Arturo Doronilla in incorporating his business, Sterela Marketing and Services.
• Sanchez assured Vives that he could deposit money in the bank account of Sterela for incorporation purposes and withdraw it within a month.
• On May 9, 1979, a meeting took place between Vives, Sanchez, Doronilla, and Estrella Dumagpi, Doronilla’s private secretary, where Vives issued a ₱200,000 check in favor of Sterela.
• Vives instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez to open a bank account for Sterela in the Makati branch of Producers Bank of the Philippines, but only Sanchez and Dumagpi went to the bank with Mrs. Vives. They opened Savings Account No. 10-1567.
• Later, Vives discovered that part of the money in the account had been withdrawn by Doronilla, leaving only ₱90,000.
• Rufo Atienza, the assistant manager, informed Vives that the remaining amount could not be withdrawn due to postdated checks issued by Doronilla.
• Doronilla opened Current Account No. 10-0320 for Sterela and obtained a ₱175,000 loan from the bank, using Savings Account No. 10-1567 as collateral.
• Doronilla issued three postdated checks to cover the loan, all of which were dishonored. Doronilla could assign or withdraw the money in Savings Account No. 10-1567 because he was the sole proprietor of Sterela.
• Vives received a letter from Doronilla assuring him that his money was intact and would be returned.
• On August 13, 1979, Doronilla issued a postdated check for ₱212,000 to Vives, but it was dishonored upon presentation.
• Vives referred the matter to a lawyer, who made a written demand upon Doronilla for the return of the money.
• Doronilla issued another check for ₱212,000 in favor of Vives, but it was also dishonored for insufficiency of funds.
• Vives instituted an action for recovery of sum of money against Doronilla, Sanchez, Dumagpi and Producers Bank of the Philippines. 

RTC-Pasig: Ruled in favor of Vives, ordering Doronilla, Dumagpi, and Producers Bank of the Philippines to pay him ₱200,000 plus interest, damages, attorney’s fees, and costs of the suit.

CA:  Affirmed the RTC decision..

Issue: 

• Whether the CA erred in upholding that the transaction between Vives and Doronilla was one of simple loan and not a commodatum. NO

Petitioner Contention:

• The transaction between private respondent and Doronilla is a simple loan (mutuum) since all the elements of a mutuum are present: 

1. what was delivered by private respondent to Doronilla was money, a consumable thing; and 
2. the transaction was onerous as Doronilla was obliged to pay interest, as evidenced by the check issued by Doronilla in the amount of ₱212,000.00, or ₱12,000 more than what private respondent deposited in Sterela’s bank account.

• Moreover, the fact that private respondent sued his good friend Sanchez for his failure to recover his money from Doronilla shows that the transaction was not merely gratuitous but "had a business angle" to it. Hence, petitioner argues that it cannot be held liable for the return of private respondent’s ₱200,000.00 because it is not privy to the transaction between the latter and Doronilla.
• It argues further that petitioner’s Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing Doronilla to withdraw from the savings account of Sterela since the latter was the sole proprietor of said company. Petitioner asserts that Doronilla’s May 8, 1979 letter addressed to the bank, authorizing Mrs. Vives and Sanchez to open a savings account for Sterela, did not contain any authorization for these two to withdraw from said account. Hence, the authority to withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of Sterela, and who alone had legal title to the savings account. Petitioner points out that no evidence other than the testimonies of private respondent and Mrs. Vives was presented during trial to prove that private respondent deposited his ₱200,000.00 in Sterela’s account for purposes of its incorporation. Hence, petitioner should not be held liable for allowing Doronilla to withdraw from Sterela’s savings account.
• Petitioner also asserts that the Court of Appeals erred in affirming the trial court’s decision since the findings of fact therein were not accord with the evidence presented by petitioner during trial to prove that the transaction between private respondent and Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla to withdraw from Sterela’s savings account.
• Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the actual damages suffered by private respondent, and neither may it be held liable for moral and exemplary damages as well as attorney’s fees.

Respondent Contention:

• Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a mutuum but an accommodation, since he did not actually part with the ownership of his ₱200,000.00 and in fact asked his wife to deposit said amount in the account of Sterela so that a certification can be issued to the effect that Sterela had sufficient funds for purposes of its incorporation but at the same time, he retained some degree of control over his money through his wife who was made a signatory to the savings account and in whose possession the savings account passbook was given.
• He likewise asserts that the trial court did not err in finding that petitioner, Atienza’s employer, is liable for the return of his money. He insists that Atienza, petitioner’s assistant manager, connived with Doronilla in defrauding private respondent since it was Atienza who facilitated the opening of Sterela’s current account three days after Mrs. Vives and Sanchez opened a savings account with petitioner for said company, as well as the approval of the authority to debit Sterela’s savings account to cover any overdrawings in its current account.

Held:

There is no merit in the petition.

At the outset, it must be emphasized that only questions of law may be raised in a petition for review filed with this Court. The Court has repeatedly held that it is not its function to analyze and weigh all over again the evidence presented by the parties during trial. The Court’s jurisdiction is in principle limited to reviewing errors of law that might have been committed by the Court of Appeals. Moreover, factual findings of courts, when adopted and confirmed by the Court of Appeals, are final and conclusive on this Court unless these findings are not supported by the evidence on record. There is no showing of any misapprehension of facts on the part of the Court of Appeals in the case at bar that would require this Court to review and overturn the factual findings of that court, especially since the conclusions of fact of the Court of Appeals and the trial court are not only consistent but are also amply supported by the evidence on record.

No error was committed by the Court of Appeals when it ruled that the transaction between private respondent and Doronilla was a commodatum and not a mutuum. A circumspect examination of the records reveals that the transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of loans in this wise:

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

Commodatum is essentially gratuitous.

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

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

The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as money, the contract would be a mutuum. However, there are some instances where a commodatum may have for its object a consumable thing. Article 1936 of the Civil Code provides:

Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition.

Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and not a mutuum.

The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract. In case of doubt, the contemporaneous and subsequent acts of the parties shall be considered in such determination.

As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private respondent agreed to deposit his money in the savings account of Sterela specifically for the purpose of making it appear "that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within thirty (30) days."

Private respondent merely "accommodated" Doronilla by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not be removed from Sterela’s savings account and would be returned to private respondent after thirty (30) days.

Doronilla’s attempts to return to private respondent the amount of ₱200,000.00 which the latter deposited in Sterela’s account together with an additional ₱12,000.00, allegedly representing interest on the mutuum, did not convert the transaction from a commodatum into a mutuum because such was not the intent of the parties and because the additional ₱12,000.00 corresponds to the fruits of the lending of the ₱200,000.00. Article 1935 of the Civil Code expressly states that "[t]he bailee in commodatum acquires the use of the thing loaned but not its fruits." Hence, it was only proper for Doronilla to remit to private respondent the interest accruing to the latter’s money deposited with petitioner.

Neither does the Court agree with petitioner’s contention that it is not solidarily liable for the return of private respondent’s money because it was not privy to the transaction between Doronilla and private respondent. The nature of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of petitioner’s liability for the return of private respondent’s money because the factual circumstances of the case clearly show that petitioner, through its employee Mr. Atienza, was partly responsible for the loss of private respondent’s money and is liable for its restitution.

Petitioner’s rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of Sterela for Savings Account No. 10-1567 expressly states that—

"2. Deposits and withdrawals must be made by the depositor personally or upon his written authority duly authenticated, and neither a deposit nor a withdrawal will be permitted except upon the production of the depositor savings bank book in which will be entered by the Bank the amount deposited or withdrawn."

Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant Branch Manager for the Buendia Branch of petitioner, to withdraw therefrom even without presenting the passbook (which Atienza very well knew was in the possession of Mrs. Vives), not just once, but several times. Both the Court of Appeals and the trial court found that Atienza allowed said withdrawals because he was party to Doronilla’s "scheme" of defrauding private respondent:

X X X

But the scheme could not have been executed successfully without the knowledge, help and cooperation of Rufo Atienza, assistant manager and cashier of the Makati (Buendia) branch of the defendant bank. Indeed, the evidence indicates that Atienza had not only facilitated the commission of the fraud but he likewise helped in devising the means by which it can be done in such manner as to make it appear that the transaction was in accordance with banking procedure.

To begin with, the deposit was made in defendant’s Buendia branch precisely because Atienza was a key officer therein. The records show that plaintiff had suggested that the ₱200,000.00 be deposited in his bank, the Manila Banking Corporation, but Doronilla and Dumagpi insisted that it must be in defendant’s branch in Makati for "it will be easier for them to get a certification". In fact before he was introduced to plaintiff, Doronilla had already prepared a letter addressed to the Buendia branch manager authorizing Angeles B. Sanchez and company to open a savings account for Sterela in the amount of ₱200,000.00, as "per coordination with Mr. Rufo Atienza, Assistant Manager of the Bank x x x" (Exh. 1). This is a clear manifestation that the other defendants had been in consultation with Atienza from the inception of the scheme. Significantly, there were testimonies and admission that Atienza is the brother-in-law of a certain Romeo Mirasol, a friend and business associate of Doronilla.

Then there is the matter of the ownership of the fund. Because of the "coordination" between Doronilla and Atienza, the latter knew before hand that the money deposited did not belong to Doronilla nor to Sterela. Aside from such foreknowledge, he was explicitly told by Inocencia Vives that the money belonged to her and her husband and the deposit was merely to accommodate Doronilla. Atienza even declared that the money came from Mrs. Vives.

Although the savings account was in the name of Sterela, the bank records disclose that the only ones empowered to withdraw the same were Inocencia Vives and Angeles B. Sanchez. In the signature card pertaining to this account (Exh. J), the authorized signatories were Inocencia Vives &/or Angeles B. Sanchez. Atienza stated that it is the usual banking procedure that withdrawals of savings deposits could only be made by persons whose authorized signatures are in the signature cards on file with the bank. He, however, said that this procedure was not followed here because Sterela was owned by Doronilla. He explained that Doronilla had the full authority to withdraw by virtue of such ownership. The Court is not inclined to agree with Atienza. 

In the first place, he was all the time aware that the money came from Vives and did not belong to Sterela. He was also told by Mrs. Vives that they were only accommodating Doronilla so that a certification can be issued to the effect that Sterela had a deposit of so much amount to be sued in the incorporation of the firm. 

In the second place, the signature of Doronilla was not authorized in so far as that account is concerned inasmuch as he had not signed the signature card provided by the bank whenever a deposit is opened. 

In the third place, neither Mrs. Vives nor Sanchez had given Doronilla the authority to withdraw.

Moreover, the transfer of fund was done without the passbook having been presented. It is an accepted practice that whenever a withdrawal is made in a savings deposit, the bank requires the presentation of the passbook. In this case, such recognized practice was dispensed with. The transfer from the savings account to the current account was without the submission of the passbook which Atienza had given to Mrs. Vives. Instead, it was made to appear in a certification signed by Estrella Dumagpi that a duplicate passbook was issued to Sterela because the original passbook had been surrendered to the Makati branch in view of a loan accommodation assigning the savings account (Exh. C). Atienza, who undoubtedly had a hand in the execution of this certification, was aware that the contents of the same are not true. He knew that the passbook was in the hands of Mrs. Vives for he was the one who gave it to her. Besides, as assistant manager of the branch and the bank official servicing the savings and current accounts in question, he also was aware that the original passbook was never surrendered. He was also cognizant that Estrella Dumagpi was not among those authorized to withdraw so her certification had no effect whatsoever.

The circumstance surrounding the opening of the current account also demonstrate that Atienza’s active participation in the perpetration of the fraud and deception that caused the loss. The records indicate that this account was opened three days later after the ₱200,000.00 was deposited. In spite of his disclaimer, the Court believes that Atienza was mindful and posted regarding the opening of the current account considering that Doronilla was all the while in "coordination" with him. That it was he who facilitated the approval of the authority to debit the savings account to cover any overdrawings in the current account (Exh. 2) is not hard to comprehend.

Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. x x x. 

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for damages caused by their employees acting within the scope of their assigned tasks. To hold the employer liable under this provision, it must be shown that an employer-employee relationship exists, and that the employee was acting within the scope of his assigned task when the act complained of was committed. Case law in the United States of America has it that a corporation that entrusts a general duty to its employee is responsible to the injured party for damages flowing from the employee’s wrongful act done in the course of his general authority, even though in doing such act, the employee may have failed in its duty to the employer and disobeyed the latter’s instructions. 

There is no dispute that Atienza was an employee of petitioner. Furthermore, petitioner did not deny that Atienza was acting within the scope of his authority as Assistant Branch Manager when he assisted Doronilla in withdrawing funds from Sterela’s Savings Account No. 10-1567, in which account private respondent’s money was deposited, and in transferring the money withdrawn to Sterela’s Current Account with petitioner. Atienza’s acts of helping Doronilla, a customer of the petitioner, were obviously done in furtherance of petitioner’s interests34 even though in the process, Atienza violated some of petitioner’s rules such as those stipulated in its savings account passbook.  It was established that the transfer of funds from Sterela’s savings account to its current account could not have been accomplished by Doronilla without the invaluable assistance of Atienza, and that it was their connivance which was the cause of private respondent’s loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil Code, petitioner is liable for private respondent’s loss and is solidarily liable with Doronilla and Dumagpi for the return of the ₱200,000.00 since it is clear that petitioner failed to prove that it exercised due diligence to prevent the unauthorized withdrawals from Sterela’s savings account, and that it was not negligent in the selection and supervision of Atienza. Accordingly, no error was committed by the appellate court in the award of actual, moral and exemplary damages, attorney’s fees and costs of suit to private respondent.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.