PRODUCERS BANK OF THE PHILIPPINES (NOW FIRST INTERNATIONAL BANK), PETITIONER, VS. HON. COURT OF APPEALS AND FRANKLIN VIVES, RESPONDENTS.

Producers Bank of the Philippines versus Court of Appeals and Franklin Vives

The Case

This is a petition for review on certiorari brought by Producers Bank of the Philippines, now First International Bank, against the Court of Appeals and Franklin Vives. Vives had sued the bank and several individuals to recover two hundred thousand pesos that he had deposited in the bank account of a corporation being formed by his friend, only to discover that the money had been withdrawn by another person. The case matters because it fixes the dividing line between two kinds of loan, the commodatum and the mutuum, and because it holds a bank solidarily liable for the fraud of its own branch officer under the employer's liability provision of the Civil Code.

Procedural History

Vives filed an action for recovery of a sum of money in the Regional Trial Court of Pasig against Arturo Doronilla, Angeles Sanchez, Estrella Dumagpi, and Producers Bank. Sanchez died while the case was pending. The trial court rendered judgment sentencing Doronilla, Dumagpi, and the bank to pay Vives jointly and severally the amount of two hundred thousand pesos with legal interest, moral damages of fifty thousand pesos, exemplary damages of fifty thousand pesos, attorney's fees of forty thousand pesos, and the costs of suit. The bank appealed to the Court of Appeals, which affirmed the trial court's decision in full and later denied the bank's motion for reconsideration with finality. The bank then filed the present petition for review on certiorari with the Supreme Court.

Facts

Sometime in 1979, Vives was asked by his neighbor and friend Angeles Sanchez to help her friend and townmate, Colonel Arturo Doronilla, in incorporating his business, Sterela Marketing and Services. Sanchez asked Vives to deposit money in the bank account of Sterela for purposes of its incorporation, assuring him that he could withdraw the money within a month. Relying on these assurances, Vives issued a check for two hundred thousand pesos in favor of Sterela. He instructed his wife, Inocencia Vives, to accompany Doronilla and Sanchez in opening a savings account for Sterela at the Buendia, Makati branch of Producers Bank. Only Sanchez, Mrs. Vives, and Doronilla's secretary, Estrella Dumagpi, went to the bank. They carried an authorization letter from Doronilla authorizing them, in coordination with Rufo Atienza, to open the account. The authorized signatories were Inocencia Vives and or Angeles Sanchez, and a passbook was issued to Mrs. Vives.

Later, Vives learned that Sterela was no longer holding office at the address given to him. He and his wife went to the bank, where the assistant manager, Rufo Atienza, told them that part of the money had been withdrawn by Doronilla and that only ninety thousand pesos remained. He said Mrs. Vives could not withdraw the balance because it had to answer for postdated checks issued by Doronilla. It turned out that Doronilla had opened a current account for Sterela and had been authorized to debit the savings account to cover overdrawings, and that Sterela had obtained a loan of one hundred seventy five thousand pesos. Doronilla issued checks to return the money, including one for two hundred twelve thousand pesos, but all were dishonored for insufficiency of funds.

The trial and appellate courts found that Atienza, the assistant manager, had connived with Doronilla. He allowed withdrawals from the savings account without the passbook, which he himself knew was in the possession of Mrs. Vives. He facilitated the opening of the current account three days after the deposit and the approval of the authority to debit the savings account. He knew the money belonged to the Vives spouses and that Doronilla's signature was not on the signature card.

Issues

• Whether or not the transaction between Vives and Doronilla was a simple loan, or mutuum, rather than a commodatum.
• Whether or not the bank, though not a party to that transaction, may be held solidarily liable for the loss of Vives's money.
• Whether or not the Court of Appeals erred in affirming the factual findings of the trial court.
• Whether or not the bank is liable for actual, moral, and exemplary damages, attorney's fees, and costs of suit.

Applicable Provisions

Article 1933 of the Civil Code provides:

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.

This provision supplies the test the Court used to classify the transaction between Vives and Doronilla.

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.

This provision shows that money itself may be the object of a commodatum when the purpose is not its consumption.

Article 1935 of the Civil Code provides:

The bailee in commodatum acquires the use of the thing loaned but not its fruits.

This provision explains why the additional twelve thousand pesos offered by Doronilla did not convert the transaction into a mutuum.

Article 2180 of the Civil Code provides:

Employers shall be held primarily and solidarily liable for damages caused by their employees acting within the scope of their assigned tasks.

This provision is the basis of the bank's solidary liability for the wrongful acts of Atienza.

Ruling

On the first issue, the Court held that the transaction was a commodatum, not a mutuum. The intention of the parties is given primordial consideration, and in case of doubt their contemporaneous and subsequent acts are considered. Vives deposited the money only to make it appear that Sterela had sufficient capitalization for incorporation, with the promise that the amount would be returned within thirty days. He lent it without consideration, as a favor to his friend Sanchez, and it was clear to the parties that the money would not be removed from the account. Doronilla's attempt to return the amount with an additional twelve thousand pesos did not convert the transaction into a mutuum, because that was not the intent of the parties and the additional amount merely corresponded to the fruits of the money, which under Article 1935 belong to the bailor and not the bailee.

On the second issue, the Court held that the bank is solidarily liable. The nature of the transaction has no bearing on the bank's liability, because the bank, through Atienza, was partly responsible for the loss of the money. The bank's own passbook rule required that withdrawals be made only upon production of the passbook, yet Atienza allowed Doronilla to withdraw several times without it. Under Article 2180, an employer is liable when an employer-employee relationship exists and the employee acted within the scope of his assigned tasks. Atienza was the bank's assistant branch manager, and his acts of helping Doronilla were done in furtherance of the bank's interests, even though he violated the bank's rules. The bank failed to prove that it exercised due diligence to prevent the unauthorized withdrawals and that it was not negligent in the selection and supervision of Atienza.

On the third issue, the Court held that only questions of law may be raised in a petition for review, and that factual findings of the trial court, when adopted and confirmed by the Court of Appeals, are final and conclusive unless not supported by the evidence. No misapprehension of facts was shown.

On the fourth issue, the Court held that since the bank is liable, no error was committed in the award of actual, moral, and exemplary damages, attorney's fees, and costs of suit.

Doctrine

A contract of loan over money is not automatically a mutuum. Where consumable goods are lent not for consumption but to be returned in kind, and the intention of the parties so shows, the contract is a commodatum. The intention of the parties is given primordial consideration, and in case of doubt their contemporaneous and subsequent acts are considered. The bailee in a commodatum acquires the use of the thing loaned but not its fruits. An employer is primarily and solidarily liable for damages caused by an employee acting within the scope of his assigned tasks, and the employer must prove due diligence in preventing the harm and in the selection and supervision of the employee to escape liability.

Disposition

The petition was denied, and the decision and resolution of the Court of Appeals were affirmed, holding the bank solidarily liable with Doronilla and Dumagpi for the two hundred thousand pesos and the damages awarded.

Remember This

Memorize this line: money lent to be returned in kind, without transfer of ownership and without consideration, is a commodatum, not a mutuum. Examiners use this case to test the commodatum and mutuum distinction under Articles 1933, 1935, and 1936, and the solidary liability of an employer for the wrongful acts of an employee under Article 2180.