SUPREME COURT REPORTS ANNOTATED
:
Marcelo vs. Court of Appeals
G.R. No. 131803. April 14, 1999.*
SOTERA PAULINO MARCELO, GABRIELA M. ANGELES,
SIMEONA CUENCO, EMILIA MARCELO and RUBEN MARCELO,
petitioners, vs. HON. COURT OF APPEALS, FERNANDO CRUZ
and SERVANDO FLORES, respondents.
Civil Law; Property; Ownership; Prescription; Acquisitive
prescription is a mode of acquiring ownership by a possessor through
the requisite lapse of time; In order to ripen into ownership,
possession must be in the concept of an owner, public, peaceful and
uninterrupted.—Acquisitive prescription is a mode of acquiring
ownership by a possessor through the requisite lapse of time. In
order to ripen into ownership, possession must be in the concept of
an owner, public, peaceful and uninterrupted. Thus, mere possession
with a juridical title, such as, to exemplify, by a usufructuary, a
trustee, a lessee, an agent or a pledgee, not being in the concept of
an owner, cannot ripen into ownership by acquisitive prescription,
unless the juridical relation is first expressly repudiated and such
repudiation has been communicated to the other party. Acts of
possessory character executed due to license or by mere tolerance
of the owner would likewise be inadequate. Possession, to constitute
the foundation of a prescriptive right, must be en concepto de
dueno, or, to use the common law equivalent of the term, that
possession should be adverse, if not, such possessory acts, no
matter how long, do not start the running of the period of prescription.
Same; Same; Same; Same; Acquisitive prescription of
dominion and other real rights may be ordinary or extraordinary.—
Acquisitive prescription of dominion and other real rights may be
ordinary or
_______________
* THIRD DIVISION.
801
VOL. 305, APRIL 14, 1999
Marcelo vs. Court of Appeals
extraordinary. Ordinary acquisitive prescription requires
possession of things in good faith and with just title for the time fixed
by law without good faith and just title, acquisitive prescription can
only be extraordinary in character.
Same; Same; Same; Same; Ordinary acquisitive prescription
demands that the possession be in “good faith and with just title.”—
Ordinary acquisitive prescription demands, as aforesaid, that the
possession be “in good faith and with just title.” The good faith of the
possessor consists in the reasonable belief that the person from
whom the thing is received has been the owner thereof and could
thereby transmit that ownership. There is, upon the other hand, just
title when the adverse claimant comes into possession of the
property through any of the modes recognized by law for the
acquisition of ownership or other real rights, but that the grantor is
neither the owner nor in a position to transmit the right.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Telesforo T. Barbadillo for petitioner.
De Jesus, Orioste, Silvestre and Lim for private respondents.
VITUG, J.
The reversal of the 28th November 1996 decision1 of the Court of
Appeals setting aside that of the Regional Trial Court (“RTC”),
Branch 19, of Malolos, Bulacan, is sought in this petition for review
on certiorari. Petitioners seek the reinstatement of the RTC decision
which has ordered respondents Fernando Cruz and Servando Flores
to return the ownership and possession of a portion of unregistered
and untitled land located in Sta. Lucia, Angat, Bulacan, to herein
petitioners.
__________________
1 Rollo, pp. 36-42.
802
802 SUPREME COURT REPORTS ANNOTATED
Marcelo vs. Court of Appeals
It would appear that on 06 October 1982, herein petitioners, heirs of
the deceased Jose Marcelo filed with the Regional Trial Court of
Malolos, Bulacan, an action for the recovery of a portion of
unregistered land in Sta. Lucia, Angat, Bulacan. The complaint, later
amended on 12 October 1983, averred that two parcels of land in
Sta. Lucia, declared for taxation purposes under Tax Declarations
No. 2880 and No. 2882, owned by the late Jose Marcelo and his
spouse, Sotera Paulino-Marcelo, had been encroached, to the extent
of 7,5402 square meters thereof by respondents Fernando Cruz and
Servando Flores.
In their answer, respondents Cruz and Flores denied the
allegations of petitioners assailing at the same time the jurisdiction of
the trial court to act on the complaint which it was claimed had
effectively asserted a cause of action for ejectment (unlawful
detainer).
The appellate court adopted the summary of evidence made by
the trial court, thus:
“Evidence adduced by the plaintiffs through the testimony of plaintiff
Gabriela Angeles showed that the parcel of land subject of litigation
covering Lot 3098 and embraced under Tax Declaration No. 2882
(Exh. 801
A) was originally owned by spouses Jose Marcelo and Sotera
Paulino and they had been in continuous possession of said property
since 1939. Following the death of plaintiffs’ father in 1965, they
discovered in 1967 that a portion of said property had been
encroached by defendant Fernando Cruz. Plaintiffs caused the
relocation survey of said property and per plan of Lot 3096 and Lot
3098 of the Angat Cadastre as surveyed for the heirs of Jose
Marcelo (Exh. B), 7540 square meters of Lot 3098 had been
encroached by defendant Fernando Cruz as indicated in the shaded
portion of said plan (Exh. B-1).
“Defendant Fernando Cruz sold his property with an area of
13,856 square meters to defendant Servando Flores pursuant to a
deed of sale (Kasulatan ng Bilihan) dated November 3, 1968 (Exh.
_________________
2 This figure appears in some portion of the decision of the Court
of Appeals, as well as in other documents to be 7,856 square meters.
803
VOL. 305, APRIL 14, 1999 8
Marcelo vs. Court of Appeals
C) which sale, includes the encroached portion (7,540 square meters
of plaintiffs’ property). Defendant Fernando Cruz heretofore
purchased the said property from Engracia de la Cruz and Vicente,
Marta, and Florentino all surnamed Sarmiento, pursuant to a
‘Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang
Patulayan’ dated November 19, 1960 (Exh. D) covering an area of
6,000 square meters. The Tax Declaration No. 4482 (Exh. E)
covering the property in the name of Jorge Sarmiento and Engracia
Cruz covered an area of 6,8003 square meters. As soon as the said
property was sold to Fernando Cruz, the adjoining property described
and classified as ‘parang’ with an area of 7,856 square meters was
declared by said Fernando Cruz in his name which circumstance,
increased his landholding to 13,856 square meters (Exh. F). The said
property was subsequently sold by defendant Fernando Cruz to
defendant Servando Flores.
“According to Gabriela, they attempted to cultivate the disputed
portion sometime in 1968, but were barred from doing so by
defendant Servando Flores who claimed that the area was part of the
land he bought from co-defendant Fernando Cruz.
“On the other hand, both defendants testified to refute plaintiffs
evidence. They invariably declared that the portion sought to be
recovered by plaintiffs is part of the land which defendant Fernando
Cruz acquired in 1960 from the Heirs of Jorge Sarmiento; that as
stated in their document (Exh. 2), the land sold to defendant
Fernando Cruz contained 6,000 square meters of ‘palayero’ or
riceland and 7,856 square meters of ‘parang’ or pasture land, that
defendant Fernando Cruz caused the entire parcel to be surveyed
sometime in 1967 (Exhs. 3 & 4), which he then declared for taxation
purposes under Tax Declaration No. 8505 (Exh. F); that on
November 3, 1968 defendant Fernando Cruz sold the whole lot to
defendant Servando Flores (Exh. I), who thereupon occupied and
cultivated it.”4
Evaluating the evidence of the contending parties, the trial court
found and ratiocinated:
_________________
3 This figure also appears in some portion of the decision of the
Court of Appeals as well as in other documents as 6,000 square
meters.
4 Rollo, pp. 37-38.
804
804 SUPREME COURT REPORTS ANNOTATED
Marcelo vs. Court of Appeals
“The crux of the matter at issue apparently revolves on the socalled
pasture land (parang) supposedly sold by the Sarmientos and
Engracia dela Cruz to defendant Fernando Cruz. The said
‘parang’ was never included and/or embraced in the Tax Declaration
No. 4882 (Exh. E) of the Sarmientos at the time of the said sale in
favor of defendant Fernando Cruz pursuant to an extrajudicial
partition with sale dated November 19, 1960 (Exh. D). This is evident
as indicated by the fact that the same was only declared by Fernando
Cruz in his name in 1961 as evidenced by the tax declaration issued
in his favor (Exh. F). On the other hand, the said ‘parang’ is a part
and parcel of plaintiffs’ property to which they had been in
possession thereof prior to World War II and evidenced by Tax
Declaration No. 2882 (Exh. A). The plan of Lot 3096 and Lot 3098 of
the Angat Cadastre (Exhs. B and B-1) inevitably indicated that what
has been encroached by defendants refers to the ‘parang’ of 7.540
square meters which defendant Fernando Cruz declared the same in
his name in 1961. This explains the unnecessary increase of his
property from 6,000 square meters which he purchased from the
Sarmientos pursuant to an extrajudicial partition with sale and
embraced under Tax Declaration No. 4882 (Exh. E), to 13,856
square meters.”5
The trial court thereupon ruled in favor of petitioners; the dispositive
portion of its decision concluded:
“WHEREFORE, judgment is hereby rendered against the defendants
ordering the following:
1. “a.To return the ownership and possession of 7,540 square
meters to the plaintiffs as indicated in the relocation
survey plan; and
2. “b.To pay attorneys fees in the amount of P5,000.00.
“No actual and or moral damages (sic) is awarded for lack of
factual evidence.
“The counterclaim is hereby dismissed for lack of factual and or
legal basis.”6
Respondents Cruz and Flores went to the Court of Appeals; in its
now assailed decision, the appellate court reversed the
________________
5 Rollo, pp. 39-40.
6 Rollo, p. 38.
805
VOL. 305, APRIL 14, 1999 8
Marcelo vs. Court of Appeals
judgment of the court a quo. Petitioners moved for a reconsideration;
the motion, however, was denied.
In this latest recourse petitioners assail the holding of the Court
of Appeals that the action initiated in 1982 by petitioners against
respondent Flores would not prosper on the theory that Flores
already has acquired ownership of the disputed land by ordinary
acquisitive prescription. Petitioners argue that—
1. “1.The respondent court erred in not applying the doctrine
laid down by this Honorable Court in Tero vs. Tero, 131
SCRA 105 considering that respondents never acquired
the 7,540 square meters lawfully, as the respondent court
already stated that what was sold to respondent Cruz was
the 6,800 square meters which he then sold to
respondent Flores, hence respondents can not account
as to how they acquire said lot, whereas the petitioner
proved the 7,540 square meters formed part of 19,231
square meters of their parents in their possession since
1939.
2. “2.The respondent court erred in disregarding the findings
of facts of the trial court, and substitute its own perception
of the facts contrary to the incontrovertible evidence.”7
Petitioners assert that the property sold by the Sarmientos to
respondent Cruz on 19 November 1960, under a “Kasulatan ng
Partisyon sa Labas ng Hukuman at Bilihang Patuluyan,” covers only
the “palayero” or riceland, which measures about 6,000 square
meters, and that the “parang,” containing 7,856 square meters, has
not been included.
The petition must be denied.
Contrary to the insistence of petitioners, the “Kasulatan ng
Partisyon sa Labas ng Hukuman at Bilihang Patuluyan,” executed on
19 March 1960 by Engracia de la Cruz (widow of Jorge Sarmiento)
and her children Vicente Sarmiento, Maria Sarmiento and Florentino
Sarmiento, pertained not only to the “palayero” but also to
the “parang” as well, this agreement provided thus:
_________________
7 Rollo, pp. 21-22.
806
806 SUPREME COURT REPORTS ANNOTATED
Marcelo vs. Court of Appeals
“1. Na akong si Engracia de la Cruz at ang aking yumao ng asawang
si Jorge Sarmiento (nuong nabubuhay ito) ay nakapagpundar ng
isang lupa na ang buong description ay gaya ang sumusunod:
“Isang parselang lupang PALAYERO na may kasamang
PARANG (Cogonales) na matatagpuan sa Barrio Ng Santa Lucia,
Angat, Bulacan, P.I.
“Ang Palayero ay may sukat na 6,000 metros cuadrados,
klasipikado 2-b, amillarado P270.00 Tax No. 4482; at ang parang ay
may sukat na 7,856 metros cuadrados. Humahangga sa Norte, kay
Antonio de la Rosa; Este, kina Fabian Garcia at Juan Geronimo; Sur,
Kina Miguel Illescas, Ciriaco Reyes y Juan de la Cruz; Oeste, Juan
de la Cruz hoy Jose Marcelo y Mariano de la Cruz hoy Felipe de
Leon. Walang mejoras at ang hangganan sa paligid ay makikilala sa
pamamagitan ng mga matutuwid na sikang o pilapil na buhay.
“2. Ayon sa Tax No. 4482 ay lupang palayero lamang ang
nakatala, subalit ito’y mayroong kasamang parang na hindi lamang
naipatala niyang nakaraang pasukan ng lupa sa tanggapan ng
Assessor Provincial, kaya’t ngayon ay magalang naming hinihiling na
matala ang naturang parang.”8 (Emphasis supplied)
Shortly after the execution of the deed of sale in his favor,
respondent Cruz declared both parcels, i.e., the palayero and
the parang, for taxation purposes in 1960 in the Office of the
Provincial Assessor and forthwith a new tax declaration was issued in
his name for the entire 13,856 square-meter property. The trial court
itself likewise found that the sale by the Sarmientos to respondent
Cruz covered both the riceland and the pasture land, it said:
“x x x It is worthy to note that the ownership of the adjoining property
by defendant Fernando Cruz originated from an extrajudicial partition
with sale (Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang
Patuluyan dated November 19, 1960 x x x Under the said document,
Engracia de la Cruz and her children Vicente, Marta, and Florentino,
all surnamed Sarmiento, sold to defendant Fernando Cruz a rice land
containing an area of 6,000 square meters
________________
8 Rollo, p. 54.
807
VOL. 305, APRIL 14, 1999
Marcelo vs. Court of Appeals
and embraced under Tax Declaration No. 4482 and a pasture land
(parang) containing an area of 7,856 square meters. x x x”9
In turn, respondent Cruz sold, on 03 November 1968, the 13,856
square meters of land to respondent Flores under a “Kasulatan ng
Bilihan.” Respondent Flores immediately took possession of the
property to the exclusion of all others and promptly paid the realty
taxes thereon. From that time on, Flores had been in possession of
the entire area in the concept of an owner and holding it in that
capacity for almost fourteen (14) years before petitioners initiated
their complaint on 06 October 1982.
Acquisitive prescription is a mode of acquiring ownership by a
possessor through the requisite lapse of time. In order to ripen into
ownership, possession must be in the concept of an owner, public,
peaceful and uninterrupted.10 Thus, mere possession with a juridical
title, such as, to exemplify, by a usufructuary, a trustee, a lessee, an
agent or a pledgee, not being in the concept of an owner, cannot
ripen into ownership by acquisitive prescription,11 unless the juridical
relation is first expressly repudiated and such repudiation has been
communicated to the other party.12 Acts of possessory character
executed due to license or by mere tolerance of the owner would
likewise be inadequate.13 Possession, to constitute the founda-
________________
9 Rollo, p. 56.
10 Art. 1118. Civil Code. See also Arts. 537 and 540 Civil Code.
“Art. 1118. Possession has to be in the concept of an owner, public,
peaceful and uninterrupted.”
11 See De Borja vs. De Borja, 59 Phil. 19; Cristobal vs.
Gomez, 50 Phil. 810; Government vs. Abadilla, 46 Phil.
642; Severino vs. Severino, 44 Phil. 343; Bargayo vs. Camumot, 40
Phil. 857; Wolfson vs. Reyes, 8 Phil. 364.
12 See Mariategui vs. CA, 205 SCRA 337; Adille vs. CA, 157
SCRA 455; Bargayo vs. Camumot, 40 Phil. 857; Laguna vs.
Levantino, 71 Phil. 566.
13 Art. 1119. Civil Code, Coronado vs. CA, 191 SCRA 814.
808
808 SUPREME COURT REPORTS ANNOTATED
Marcelo vs. Court of Appeals
tion of a prescriptive right, must be en concepto de dueno, or, to use
the common law equivalent of the term, that possession should be
adverse, if not, such possessory acts, no matter how long, do not
start the running of the period of prescription.14
Acquisitive prescription of dominion and other real rights may be
ordinary or extraordinary. Ordinary acquisitive prescription requires
possession of things in good faith and with just title for the time fixed
by law15 without good faith and just title, acquisitive prescription can
only be extraordinary in character.
As regards, real or immovable property Article 1134 of the Civil
Code provides:
“ART. 1134. Ownership and other real rights over immovable
property are acquired by ordinary prescription through possession of
ten years.”
Ordinary acquisitive prescription demands, as aforesaid, that the
possession be “in good faith and with just title.”16 The good faith of
the possessor consists in the reasonable belief that the person from
whom the thing is received has been the owner thereof and could
thereby transmit that ownership.17 There is,
807
___________________
“Art. 1119. Acts of possessory character executed in virtue of license
or by mere tolerance of the owner shall not be available for the
purposes of possession.”
14 Coronado vs. CA, 191 SCRA 814.
15 Art. 1117. Civil Code.
“Art. 1117. Acquisitive prescription of dominion and other real rights
may be ordinary or extraordinary.” “Ordinary acquisitive prescription
requires possession of things in good faith and with just title for the
time fixed by law.”
See Footnote 9 absent good faith and just title the law requires
16
under extraordinary acquisitive prescription an uninterrupted adverse
possession for thirty years (Art. 1137, Civil Code).
 17Art. 1127. Civil Code. possession of the entire parcel which includes the portion sought to
“Art. 1127. The good faith of the possessor consists in the be recovered by appellees was not only in the concept of an owner
reasonable belief that the person from whom he receive the but also public, peaceful and uninterrupted. While it is true that the
possession of the entire area by his predecessor-in-interest
809 (Fernando Cruz) may not have been peaceful as it was indeed
VOL. 305, APRIL 14, 1999 809
characterized with violence which resulted in the death of Jose
Marcelo vs. Court of Appeals Marcelo, this cannot be said of appellant Flores’ possession of the
upon the other hand, just title when the adverse claimant comes into property, in respect of which no evidence to the contrary appears on
possession of the property through any of the modes recognized by record.”21
law for the acquisition of ownership or other real rights, but that the
grantor is neither the owner nor in a position to transmit the The Court finds no cogent reasons to reverse the above findings of
right.18 In Doliendo vs. Biarnesa,19 the Supreme Court has explained the appellate court and thus gives its affirmance to the assailed
the law in Article 1130 of the Civil Code which states that the “title for decision.
prescription must be true and valid.” Thus— WHEREFORE, the petition for review on certiorari is DENIED.
“We think that this contention is based on a misconception of the No costs.
scope and effect of the provisions of this article of the Code in its SO ORDERED.
application to ‘ordinary prescription.’ It is evident that by a ‘titulo
verdadero y valido’ in this connection we are not to understand a
‘titulo que por si solo tiene fuerza de transferir el dominio sin
necesidad de la prescripcion’ (a title which of itself is sufficient to
transfer the ownership without the necessity of the lapse of the
prescription period); and we accept the opinion of a learned Spanish
law writer who holds that the ‘titulo verdadero y valido’ as used in this
article of the code prescribes a ‘titulo colorado’ and not merely
‘putativo’; a ‘titulo colorado’ being one ‘which a person has when he
buys a thing, in good faith from one whom he believes to be the
owner,’ and a ‘titulo putativo’ ‘being one which is supposed to have
preceded the acquisition of a thing, although in fact it did not, as
might happen when one is in possession of a thing in the belief that it
had been bequeathed to him.’ (Viso Derecho Civil, Parte Segunda, p.
541)”20

The records of the case amply supports the holding of the appellate
court that the requirements for ordinary prescrip-
___________________

thing was the owner thereof and could transmit his ownership.”
18 Art. 1129. Civil Code.

“Art. 1129. For the purposes of prescription there is just title when the
adverse claimant came into possession of the property through one
of the modes recognized by law for the acquisition of ownership or
other real rights but the grantor was not the owner or could not
transmit any right.”
19 7 Phil. 232.
20 At p. 234.

810
810 SUPREME COURT REPORTS ANNOTATED
Marcelo vs. Court of Appeals
tion hereinabove described have indeed been duly met; it explained:
“In the instant case appellant Servando Flores took possession of the
controverted portion in good faith and with just title This is so
because the said portion of 7,540 square meters was an integral part
of that bigger tract of land which he bought from Fernando Cruz
under public document (Exh. I). As explicitly mentioned in the
document of sale (Exh. I) executed in 1968, the disputed portion
referred to as “parang” was included in the sale to appellant Flores.
Parenthetically, at the time of the sale, the whole area consisting of
the riceland and pasture land was already covered by a tax
declaration in the name of Fernando Cruz (Exh. F) and further
surveyed in his favor (Exhs. 3 & 4) Hence, appellant Flores’
G.R. No. 147951. December 14, 2009.*
ARSENIO OLEGARIO and HEIRS OF ARISTOTELES F.
OLEGARIO, represented by CARMELITA GUZMAN-OLEGARIO,
petitioners, vs. PEDRO C. MARI, represented by LILIA C. MARI-
CAMBA, respondent.
Ownership; Prescription; Ownership cannot be acquired by
mere occupation—unless coupled with the element of hostility
towards the true owner, occupation and use, however long, will not
confer title by prescription or adverse possession.—Despite 25 years
of occupying the disputed lots, therefore, petitioners did not acquire
ownership. Firstly, they had no just title. Petitioners did not present
any document to show how the titles over Lot Nos. 17526 and 17533
were transferred to them, whether from respondent, his predecessor,
or any other person. Petitioners, therefore, could not acquire the
disputed real property by ordinary prescription through possession for
10 years. Secondly, it is settled that ownership cannot be acquired by
mere occupation. Unless coupled with the element of hostility
towards the true owner, occupation and use, however long, will not
confer title by prescription or adverse possession. In other words,
possession, to constitute the foundation of a prescriptive right, must
be possession under claim of title, that is, it must be adverse.
Same; Same; Mere material possession of land is not adverse
possession as against the owner and is insufficient to vest title,
unless such possession is accompanied by the intent to possess as
an owner.—Petitioners’ acts of a possessory character—acts that
might have been merely tolerated by the owner—did not constitute
possession. No matter how long tolerated possession is continued, it
does not start the running of the prescriptive period. Mere material
possession of land is not adverse possession as against the owner
and is insufficient to vest title, unless such possession is
accompanied by the intent to possess as an owner. There should be
a hostile use of such a nature and exercised under such
circumstance as to manifest and give notice that the possession is
under a claim of right.
_______________
* SECOND DIVISION.
135
Same; Same; Tax Declarations; Tax declarations prove that
the holder has a claim of title over the property—aside from
manifesting a sincere desire to obtain title thereto, they announce the
holder’s adverse claim against the state and other interested
parties.—Petitioners have failed to prove that their possession was
adverse or under claim of title or right. Unlike respondent, petitioners
did not have either the courage or forthrightness to publicly declare
the disputed lots as owned by them for tax purposes. Tax
declarations “prove that the holder has a claim of title over the
property. Aside from manifesting a sincere desire to obtain title
thereto, they announce the holder’s adverse claim against the state
and other interested parties.” Petitioners’ omission, when viewed in
conjunction with respondent’s continued unequivocal declaration of
ownership over, payment of taxes on and possession of the subject
realty, shows a lack of sufficient adverseness of the formers’
possession to qualify as being one in the concept of owner.
Same; Same; Open, exclusive and undisputed possession of
alienable public land for the period prescribed by law creates the
legal fiction whereby the land, upon completion of the requisite
period, ipso jure and without the need of judicial or other sanction,
ceases to be public land and becomes private property.—On the
other hand, being the sole transferree of his father, respondent
showed through his tax declarations which were coupled with
possessory acts that he, through his predecessor, had been in
possession of the land for more than 30 years since 1916. “Open,
exclusive and undisputed possession of alienable public land for the
period prescribed by law creates the legal fiction whereby the land,
upon completion of the requisite period—ipso jure and without the
need of judicial or other sanction, ceases to be public land and
becomes private property.” Ownership of immovable property is
acquired by extraordinary prescription through possession for 30
years. For purposes of deciding the instant case, therefore, the
possession by respondent and his predecessor had already ripened
into ownership of the subject realty by virtue of prescription as early
as 1946.
Same; Laches; Elements; The essence of laches is the failure
or neglect, for an unreasonable and unexplained length of time, to do
that which, through due diligence, could or should have been done
earlier, thus giving rise to a presumption that the party entitled to
assert it had earlier abandoned or declined to assert it.—Petitioners
136cannot find refuge in the principle of laches. It is not just
the lapse of time or delay that constitutes laches. The essence of
laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, through due diligence, could or
should have been done earlier, thus giving rise to a presumption that
the party entitled to assert it had earlier abandoned or declined to
assert it. The essential elements of laches are: (a) conduct on the
part of the defendant, or of one under whom he claims, giving rise to
the situation complained of; (b) delay in asserting complainant’s
rights after he had knowledge of defendant’s acts and after he has
had the opportunity to sue; (c) lack of knowledge or notice by
defendant that the complainant will assert the right on which he
bases his suit and (d) injury or prejudice to the defendant in the event
the relief is accorded to the complainant.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Aquino and Martinez Law Offices for petitioners.
Rogelio O. Montero for respondent.
DEL CASTILLO, J.:
Possession, to constitute the foundation of acquisitive
prescription, must be possession under a claim of title or must be
adverse. Acts of a possessory character performed by one who holds
the property by mere tolerance of the owner are clearly not in the
concept of an owner and such possessory acts, no matter how long
continued, do not start the running of the period of prescription.
In the present Petition for Review on Certiorari,1 petitioners
assail the April 18, 2001 Decision2 of the Court of Appeals
_______________
1 Rollo, pp. 18-43.
2 CA Rollo, pp. 81-92; penned by Associate Justice Fermin A.
Martin, Jr. and concurred in by Associate Justices Portia Aliño-
Hormachuelos and Mercedes Gozo-Dadole.
137(CA) in CA-G.R. CV No. 52124, reversing the October 13, 1995
Decision3 of the Regional Trial Court (RTC) of Pangasinan, Branch
39. The CA declared the respondent herein as the owner of Lot Nos.
17553, 17526 and 14356 of the Mangatarem cadastral survey.
Factual antecedents
As early as 1916,4 Juan Mari, the father of respondent, declared
his ownership over a parcel of land in Nancasalan, Mangatarem for
tax purposes. He took possession of the same by delineating the
limits with a bamboo fence,5 planting various fruit bearing trees and
bamboos6 and constructing a house thereon.7 After a survey made in
1950, Tax Declaration No. 80488 for the year 1951 specified the
subject realty as a residential land with an area of 897 square meters
and as having the following boundaries: North— Magdalena
Fernandez; South— Catalina Cacayorin; East— Camino Vecinal; and
West— Norberto Bugarin. In 1974, the subject realty was transferred
to respondent, Pedro Mari, by virtue of a deed of sale.
Meanwhile, in 1947, Wenceslao Olegario, the husband of
Magdalena Fernandez and father of petitioner Arsenio Olegario, filed
a new tax declaration9 for a certain 50-square meter parcel of land,
indicating the following boundaries: North— Cesario and Antonio
Fernandez; South— Juan Mari; East— Barrio Road; and West—
Norberto Bugarin. Then on May 14, 1961, Wenceslao Olegario
executed a “Deed of Quit-
_______________
3 Records, pp. 280-286; penned by Judge Eugenio G. Ramos.
4 Tax No. 17893.
5 Records, p. 68.
6 Id., at p. 189.
7 See tax declarations.
8 This cancelled Tax No. 32661 which in turn cancelled Tax No.
17893.
9 Exhibit “12,” Records, p. 216.
138Claim of Unregistered Property”10 in favor of Arsenio Olegario
transferring to the latter inter alia the aforementioned 50-square
meter property.
In the cadastral survey conducted from 1961 to 1962, the subject
realty was identified as Lot Nos. 17526, 17553 and 14356 of the
Mangatarem Cadastre. At this time, Wenceslao Olegario disputed
Juan Mari’s claim over Lot Nos. 17526 and 17553. Hence, on the two
corresponding survey notification cards dated September 28,
1968,11 the claimant appeared as “Juan Mari v. Wenceslao Olegario”.
With regard to Lot No. 14356, the survey notification card named
Juan Mari as the claimant.
Sometime around 1988, respondent filed with the Department of
Environment and Natural Resources Regional Office in Pangasinan a
protest against the petitioners because of their encroachment into the
disputed realty. After investigation, said office decided in favor of the
respondent and found the latter to be the owner of Lot Nos. 17526,
17553 and 14356. Petitioners did not appeal and the said decision
became final and executory.
In 1989, Arsenio Olegario caused the amendment of his tax
declaration12 for the 50-square meter property to reflect 1) an
increased area of 341 square meters; 2) the Cadastral Lot No. as
17526, Pls-768-D;13 and 3) the boundaries as: North-NE Lot 16385 &
Road; South-NW-Lots 14363 & 6385, Pls-768-D; East-SE-Lot 17552,
Pls-768-D and West-SW-Lot 14358, Pls-768-D.
Proceedings before the Regional Trial Court
In 1990, after discovering the amended entries in Arsenio
Olegario’s Tax Declaration No. 4107-R, respondent filed a
_______________
10 Exhibit “R,” Id., at p. 220.
11 Exhibits “A” and “B,” Id., at pp. 202-203.
12 No. 4107-R.
13 Prior to 1989 this item remained blank.
139complaint14 with the RTC of Lingayen, Pangasinan, for Recovery
of Possession and Annulment of Tax Declaration No. 4107-R.
Respondent alleged, inter alia, that Juan Mari, and subsequently his
successor, was deprived by the Olegarios of the possession of
portions of subject realty which respondent owned. Trial thereafter
ensued.
On October 13, 1995, the RTC rendered judgment in favor of the
petitioners, viz:
“WHEREFORE, in the light of the foregoing considerations,
judgment is hereby rendered as follows:
1. Declaring the defendants-Olegario the owners of Lots 17553
and 17526 of the Mangatarem cadastral survey.
2. Dismissing the plaintiff’s Complaint on the ground of
prescription of action and on the further ground that [he] failed to
prove [his] ownership of any portion of the two lots mentioned in the
next preceding paragraph (assuming arguendo that [his] action has
not prescribed);
3. Ordering the plaintiff to pay the costs of this suit. No
damages are awarded by the Court.
SO ORDERED.”15
Proceedings before the Court of Appeals
Respondent appealed to the CA which reversed the trial court’s
findings. The CA found respondent to have adduced stronger
evidence of prior possession and ownership of the disputed realty.
The dispositive portion of the CA Decision states:
“WHEREFORE, the trial court’s Decision dated October 13, 1995
is REVERSED and SET ASIDE and a new one is hereby entered
declaring appellant Pedro C. Mari represented by Lilia C. Mari-
Camba the lawful owner of Lot Nos. 17526, 17553 and 14356 of the
Mangatarem Cadastre, without pronouncement as to costs.
_______________
14 Records, pp. 1-4.
15 Id., at p. 286.
140 SO ORDERED.”16
Petitioners, without filing a motion for reconsideration of the CA
Decision, thereafter filed the present petition for review.
Issues
Petitioners raise the following issues:
1. Whether or not there was failure on [the part of] the Court of
Appeals to appreciate and give weight to the evidence presented by
the petitioners;
2. Whether or not the Court of Appeals erred in its decision in
adjudicating ownership of the said lots in favor of the respondent and
[in] giving great weight to the respondent’s evidence;
3. Whether or not the Court of Appeals erred in its failure to
declare the action as barred by laches;
4. Whether or not the Court of Appeals failed to find an[d]
declare the petitioners as having acquired ownership of the disputed
lots by acquisitive prescription;
5. Whether or not the Court of Appeals erred in adjudicating the
lot in favor of respondent and also [in] denying award of damages to
petitioners.17
Petitioners’ Arguments
Petitioners contend that they have been in possession of the
disputed lots since 1948 or thereabouts, or for more than 30 years
already. Hence, they acquired ownership thereover by virtue of
prescription. They also impute negligence or failure on the part of
respondent to assert his alleged rights within a reasonable time.
_______________
16 CA Rollo, pp. 91-92.
 17 Rollo, pp. 200-201.
141
Respondent’s Arguments
On the other hand, respondent asserts that petitioners claim
ownership over only a certain 50-square meter parcel of land, as
evidenced by their tax declaration which consistently declared only
such area. It was only in September 1989 that petitioners sought to
expand the area of their claim to 341 square meters by virtue of a
letter to the Provincial Assessor of Pangasinan. Hence, respondent
asserts that prescription has not set in. Respondent also contends
that petitioners’ occupancy has been illegal from the point of
inception and thus, such possession can never ripen into a legal
status.
Our Ruling
The petition has no merit.
Petitioners’ Evidence is Weak
Considering the conflicting findings of the RTC and the CA, a
circumstance that constitutes an exception18 to the general rule that
only questions of law are proper subjects of a petition under Rule 45,
we shall assess and weigh the evidence adduced by the parties and
shall resolve the questions of fact raised by petitioners.
A study of the evidence presented by petitioners shows that the
CA did not err in finding such evidence weaker than that of
respondent. Arsenio Olegario testified that as early as 1937 their
family had built a nipa house on the land where they lived. Yet he
also testified that the former owner of the land was his mother,
Magdalena Fernandez.19 Significantly, Magdalena Fernandez has
never claimed and was never in pos-
_______________
18 Philippine Phosphate Fertilizer Corporation v. Kamalig
Resources, Inc., G.R. No. 165608, December 13, 2007, 540 SCRA
139, 151; Republic v. Enriquez, G.R. No. 160990, September 11,
2006, 501 SCRA 436, 442.
19 TSN, November 3, 1993, p. 7.
142session or ownership of Lot Nos. 17553, 17526 and 14356.
Petitioners’ evidence thus supports the conclusion that in 1937 they
were in possession, not of Lot No. 17526, but of their mother’s land,
possibly 50 square meters of it, which is the approximate floor area of
the house. Conversely, petitioners’ evidence fails to clearly prove that
in 1937 they were already occupying the disputed lots. The records,
in fact, do not show exactly when the Olegarios entered and started
occupying the disputed lots.
The evidence shows that a hollow block fence, an improvement
introduced by the Olegarios in 1965, now exists somewhere along
the disputed lots. Petitioners’ claim that they were in possession of
the disputed lots even prior to 1965 based on the existence of the
bamboo fence on the boundary of their land preceding the existence
of the hollow block fence, however, holds no water. The testimony of
Marcelino Gutierrez shows that formerly there was a bamboo fence
demarcating between the land of the Olegarios and the Maris and
that in 1964 or 1965 a hollow block fence was constructed. He did
not say, however, that the place where the hollow block fence was
constructed was the exact same place where the bamboo boundary
fence once stood. Even the testimony of Arsenio Olegario was
ambiguous on this matter, viz:
Q When was the [concrete] hollow block
[fence] separating your property [from] the property
of Juan Mari constructed?
AIt was constructed in 1965.
Q Before the construction of that concrete hollow block fence
between your land and the land of Juan Mari [in] 1965, what
was the visible boundary between your land and the land of
Juan Mari?
A Bamboo fence, sir.20
_______________
20 TSN, Nov. 3, 1993, p. 9.
143 Arsenio merely testified that a bamboo fence was formerly
the visible boundary between his land and the land of Juan Mari; and
that a concrete hollow block fence was constructed in 1965. His
testimony failed to show that the concrete hollow block fence was
constructed in the same position where the bamboo boundary fence
once stood.
On the other hand, there is ample evidence on record, embodied
in Tax Declaration No. 9404 for the year 1947; the survey sketch plan
of 1961; and the survey plan of 1992, that the boundary claimed by
the Olegarios kept moving in such a way that the portion they
occupied expanded from 50 square meters (in the land of his mother)
to 377 square meters.21 Viewed in relation to the entire body of
evidence presented by the parties in this case, these documents
cannot plausibly all be mistaken in the areas specified therein. As
against the bare claim of Arsenio22 that his predecessor merely made
an inaccurate estimate in providing 50 square meters as the area
claimed by the latter in 1947 in the tax declaration,23 we find it more
plausible to believe that each of the documents on record stated the
true area measurements of the parties’ claims at the particular time
each document was executed.
As correctly found by the CA, the earliest that petitioners can be
considered to have occupied the disputed property was in 1965 when
the concrete hollow block fence was constructed on the disputed lots.
_______________
21 341 square meters of Lot No. 17526 plus 36 square meters of
Lot No. 14356.
22 He testified that the 50-square meter area was just an
estimate of the floor area of the house but not of the entire lot area
claimed by them.
23 Significantly, the same area of 50 square meters was
mentioned in the Deed of Quit-Claim of Unregistered Real property
dated May 14, 1961.
144
Ownership and Prescription
As previously mentioned, respondent’s predecessor, Juan Mari,
had declared the disputed realty24 for tax purposes as early as 1916.
The tax declarations show that he had a two storey house on the
realty. He also planted fruit bearing trees and bamboos thereon. The
records25 also show that the 897-square meter property had a
bamboo fence along its perimeter. All these circumstances clearly
show that Juan Mari was in possession of subject realty in the
concept of owner, publicly and peacefully since 1916 or long before
petitioners entered the disputed realty sometime in 1965.
Based on Article 538 of the Civil Code,26 the respondent is the
preferred possessor because, benefiting from his father’s tax
declaration of the subject realty since 1916, he has been in
possession thereof for a longer period. On the other hand, petitioners
acquired joint possession only sometime in 1965.
Despite 25 years of occupying the disputed lots, therefore,
petitioners did not acquire ownership. Firstly, they had no just title.
Petitioners did not present any document to show how the titles over
Lot Nos. 17526 and 17533 were transferred to them, whether from
respondent, his predecessor, or
_______________
24 Surveyed as Lots No. 17553, 17526 and 14356.
25 Records, p. 68.
26 Art. 538 of the Civil Code states:
Possession as a fact cannot be recognized at the same time in
two different personalities except in the cases of co-possession.
Should a question arise regarding the fact of possession, the present
possessor shall be preferred; if there are two possessors, the one
longer in possession; if the dates of the possession are the same, the
one who presents a title; and if all these conditions are equal, the
thing shall be placed in judicial deposit pending determination of its
possession or ownership through proper proceedings.
145any other person.27 Petitioners, therefore, could not acquire the
disputed real property by ordinary prescription through possession for
10 years. Secondly, it is settled that ownership cannot be acquired by
mere occupation. Unless coupled with the element of hostility
towards the true owner, occupation and use, however long, will not
confer title by prescription or adverse possession.28 In other words,
possession, to constitute the foundation of a prescriptive right, must
be possession under claim of title, that is, it must be adverse.29
Petitioners’ acts of a possessory character—acts that might have
been merely tolerated by the owner—did not constitute possession.
No matter how long tolerated possession is continued, it does not
start the running of the prescriptive period.30 Mere material
possession of land is not adverse possession as against the owner
and is insufficient to vest title, unless such possession is
accompanied by the intent to possess as an owner. There should be
a hostile use of such a nature and exercised under such
circumstance as to manifest and give notice that the possession is
under a claim of right.31
Petitioners have failed to prove that their possession was
adverse or under claim of title or right. Unlike respondent, petitioners
did not have either the courage or forthrightness to publicly declare
the disputed lots as owned by them for tax purposes. Tax
declarations “prove that the holder has a claim
_______________
27 What is on record is a “Deed of Quitclaim of Unregistered
Real Property” over a 50-square meter realty, which has not been
proven to be the same as Lots 17526 and 17533.
28 Cequeña v. Bolante, 386 Phil. 419, 430; 330 SCRA 216, 227
(2000).
29 Bogo-Medellin Milling Co., Inc. v. Court of Appeals, 455 Phil.
285, 298-299; 407 SCRA 518, 525 (2003).
30 Larena v. Mapili, 455 Phil. 944, 954-955; 408 SCRA 484, 492
(2003).
31 Bogo-Medellin Milling Co., Inc. v. Court of
Appeals, supra note 29 at 300; The Director of Lands v. Court of
Appeals, 367 Phil. 597; 308 SCRA 317 (1999).
146of title over the property. Aside from manifesting a sincere desire
to obtain title thereto, they announce the holder’s adverse claim
against the state and other interested parties.”32 Petitioners’
omission, when viewed in conjunction with respondent’s continued
unequivocal declaration of ownership over, payment of taxes on and
possession of the subject realty, shows a lack of sufficient
adverseness of the formers’ possession to qualify as being one in the
concept of owner.
The only instance petitioners assumed a legal position
sufficiently adverse to respondent’s ownership of the disputed
properties was when they declared Lot No. 17526 for tax purposes in
their name in 1989.33 Since then and until the filing of the complaint
for recovery of possession in 1990, only one year had elapsed.
Hence, petitioners never acquired ownership through extraordinary
prescription of the subject realty.
On the other hand, being the sole transferree of his father,
respondent showed through his tax declarations which were coupled
with possessory acts that he, through his predecessor, had been in
possession of the land for more than 30 years since 1916. “Open,
exclusive and undisputed possession of alienable public land for the
period prescribed by law creates the legal fiction whereby the land,
upon completion of the requisite period—ipso jure and without the
need of judicial or other sanction, ceases to be public land and
becomes private property.”34 Ownership of immovable property is
acquired by extraordinary prescription through possession for 30
years.35 For purposes of deciding the instant case, therefore, the
possession by respondent and his predecessor had already rip-
_______________
32 Cequeña v. Bolante, supra note 28 at 430; p. 227,
citing Republic of the Phils. v. Court of Appeals, 328 Phil. 238, 248;
258 SCRA 712, 720 (1996).
33 Exhibit “U,” Records p. 223.
34 San Miguel Corporation v. Court of Appeals, G.R. No. 57667,
May 28, 1990, 185 SCRA 722, 724-725.
35 Civil Code, Art. 1137.
147ened into ownership of the subject realty by virtue of prescription
as early as 1946.
Laches
Petitioners cannot find refuge in the principle of laches. It is not
just the lapse of time or delay that constitutes laches. The essence of
laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, through due diligence, could or
should have been done earlier, thus giving rise to a presumption that
the party entitled to assert it had earlier abandoned or declined to
assert it.
The essential elements of laches are: (a) conduct on the part of
the defendant, or of one under whom he claims, giving rise to the
situation complained of; (b) delay in asserting complainant’s rights
after he had knowledge of defendant’s acts and after he has had the
opportunity to sue; (c) lack of knowledge or notice by defendant that
the complainant will assert the right on which he bases his suit and
(d) injury or prejudice to the defendant in the event the relief is
accorded to the complainant.36
In the instant case, the second and third elements are missing.
Petitioners had notice and knew all along the position of the
respondent and his predecessor Juan Mari—they were standing pat
on his ownership over the subject realty. This stand of respondent
and his predecessor was recorded and clearly visible from the
notification survey cards.37 From 1968, the date of the cards, until
1989 there was nothing to indicate any change in the position of any
of the parties. Moreover, that respondent had not conceded
ownership and possession of the land to petitioners is clear also from
the fact that Pedro Mari continued to declare the entire 897-square
_______________
 36 Bogo-Medellin Milling Co., Inc. v. Court of
Appeals, supra note 29 at 302 citing Avisado v. Rumbaua, 406 Phil.
704; 354 SCRA 245 (2001).
37 Exhibits “A” and “B,” Records, pp. 202-203.
148meter property in his name and pay taxes for the entire area after
his father transferred the property to him.
On the other hand, it was petitioners who suddenly changed their
position in 1989 by changing the area of the property declared in their
name from 50 square meters to 341 square meters and specifying
the details to make it appear that the tax declaration for the 50-
square meter property pertained to Lot No. 17526. As previously
discussed, it was only at this point, in 1989, that it can be clearly
stated that petitioners were making their claim of ownership public
and unequivocal and converting their possession over Lot No. 17526
into one in the concept of owner.
Upon discovery of this clear and unequivocal change in status of
petitioners’ position over the disputed land respondent immediately
acted. He filed in 1990 the complaint for recovery of possession and
nullification of tax declaration. Hence, we find no laches in the instant
case.
In conclusion, we find no reversible error on the part of the CA in
recognizing the ownership and right of possession of respondent
over Lot Nos. 17526, 17553 and 14356. There is, thus, also no basis
for an award of damages and attorney’s fees in favor of petitioners.
WHEREFORE, the instant petition is DENIED. The assailed
Decision of the Court of Appeals dated April 18, 2001 is AFFIRMED.
SO ORDERED.
VOL. 331, APRIL 28, 2000
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appeals
G.R. No. 135602. April 28, 2000.*
HEIRS OF QUIRICO SERASPI AND
PURIFICACION R. SERASPI,
petitioners, vs. COURT OF APPEALS AND
SIMEON RECASA, respondents.
Ownership; Prescription; The contention of a
party of having acquired ownership of a piece of land
by ordinary prescription through adverse possession
for 10 years is untenable where he has neither just title
nor good faith.—Acquisitive prescription of dominion
and other real rights may be ordinary or
extraordinary, depending on whether the property is
possessed in good faith and with just title for the time
fixed by law. Private respondent contends that he
acquired the ownership of the questioned property by
ordinary pre-
______________
* SECOND DIVISION.
294
2 SUPREME COURT REPORTS ANNOTATED
94
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of respondent,
scription through adverse possession for ten (10)
years. The contention has no merit, because he has
neither just title nor good faith. As Art. 1129 provides:
For the purposes of prescription, there is just title
when the adverse claimant came into possession of
the property through one of the modes recognized by
law for the acquisition of ownership or other real
rights, but the grantor was not the owner or could not
transmit any right. In the case at bar, private
respondent did not acquire possession of the property
through any of the modes recognized by the Civil
Code, to wit: (1) occupation, (2) intellectual creation,
(3) law, (4) donation, (5) succession, (6) tradition in
consequence of certain contracts, and (7) prescription.
Same; Occupation; Succession; Co-
Ownership; While as heir to the intestate estate of his
deceased parent is a co-owner of all of the latter’s
properties, such co-ownership rights were effectively
dissolved by the partition agreed upon by the heirs.—
Private respondent could not have acquired ownership
over the property through occupation since, under Art.
714 of the Civil Code, the ownership of a piece of land
cannot be acquired by occupation. Nor can he base his
ownership on succession for the property was not part
of those distributed to the heirs of the third marriage,
to which private respondent belongs. It must be
remembered that in the partition of the intestate
estate of Marcelino Recasa, the properties were
divided into three parts, each part being reserved for
each group of heirs belonging to one of the three
marriages Marcelino entered into. Since the contested
parcels of land were adjudicated to the heirs of the
first and second marriages, it follows that private
respondent,
293 as heir of the third marriage, has no right
over the parcels of land. While, as heir to the intestate
estate of his father, private respondent was co-owner
of all of his father’s properties, such co-ownership
rights were effectively dissolved by the partition
agreed upon by the heirs of Marcelino Recasa.
Good Faith; Words and Phrases; Good faith
consists in the reasonable belief that the person from
whom the possessor received the thing was its owner
but could not transmit the ownership thereof.—
Neither can private respondent claim good faith in his
favor. Good faith consists in the reasonable belief that
the person from whom the possessor received the
thing was its owner but could not transmit the
ownership thereof. Private respondent entered the
property without the consent of the previous owner.
For all intents and purposes, he is a mere usurper.
295
VOL. 331, APRIL 28, 2000
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of A
Sales; While a contract of sale is perfected by the
meeting of minds upon the thing which is the object of
the contract and upon the price, the ownership of the
thing sold is not transferred to the vendee until actual
or constructive delivery of the property.—Like private
Appeals petitioners have not acquired the
property through any of the modes recognized by law
for the acquisition of ownership. The basis of
petitioners’ claim of ownership is the contract of sale
they had with Rata, but this by itself is insufficient to
make them owners of the property. For while a
contract of sale is perfected by the meeting of minds
upon the thing which is the object of the contract and
upon the price, the ownership of the thing sold is not
transferred to the vendee until actual or constructive
delivery of the property. Hence, the maxim non nudis
pactis, sed traditione dominia dominica rerum
transferuntur (not mere agreements but tradition
transfers the ownership of things).
Actions; Ownership; Reconveyance; When the
property belonging to a person is unlawfully taken by
another, the former has the right of action against the
latter for the recovery of the property, and such right
may be transferred by the sale or assignment of the
property, and the transferee can maintain such action
against the wrongdoer.—This does not give private
respondent a right to remain in possession of the
property. Petitioners’ title to the property prevails
over private respondents’ possession in fact but
without basis in law. As held in Waite v. Peterson,
when the property belonging to a person is unlawfully
taken by another, the former has the right of action
against the latter for the recovery of the property.
Such right may be transferred by the sale or
assignment of the property, and the transferee can
maintain such action against the wrongdoer.
PETITION for review on certiorari of a decision of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Public Attorney’s Office for petitioners.
Cyril Tagle for private respondent.
296
296 SUPREME COURT REPORTS ANNOTATED
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appeals
MENDOZA, J.:
This case is here for review of the decision 1 of the
Court of Appeals, dated May 15, 1998, reversing the
decision of Branch 1 of the Regional Trial Court,
Kalibo, Aklan and dismissing, on the ground of
prescription, the complaint filed by petitioners for the
recovery of possession and ownership of two parcels of
land in Banga, Aklan.
The facts are as follows:
Marcelino Recasa was the owner of two parcels of
land described as follows:
PARCEL I: A parcel of cocal land located at Barangay
Lapnag, Banga, Aklan, with an area of 770 square
meters, more or less; bounded North by Lazaro
Navarra, now Flocerfina Ibit; South by Celsa Retis;
East by Banga-Libacao Provincial Road; and West by
Aklan River, which parcel of land declared in the
name of Marcelino Recasa under Tax Declaration No.
3721, Series of 1984, with an assessed value of
P2,440.00;
PARCEL II: A parcel of cocal land with an area of
3,648 square meters, more or less, located in
Barangay Lapnag, Banga, Aklan; bounded North by
Concepcion Navarra; South by Diosdado Navarra;
East by Gabriel Reloj; and West by National Road;
covered by Tax Declaration No. 11079 in the name of
Purificacion Seraspi, Series of 1984, and having an
assessed value of P1,650.00.
During his lifetime, Marcelino contracted three (3)
marriages. At the time of his death in 1943, he had
fifteen (15) children from his three marriages. In
1948, his intestate estate was partitioned into three
parts by his heirs, each part corresponding to the
share of the heirs in each marriage.
In the same year, Patronicio Recasa, representing
the heirs of the first marriage, sold the share of the
heirs in the estate to Dominador Recasa, an heir of
the second marriage. On June 15, 1950, Dominador,
representing the heirs of the second marriage, in turn
sold the share of the heirs to Quirico
_______________
1 Per Justice Eugenio S. Labitoria and concurred
in by Justices Jainal D. Rasul and Marina L. Buzon.
297
VOL. 331, APRIL 28, 2000
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appeals
and Purificacion Seraspi whose heirs are the present
petitioners. Included in this sale was the property sold
by Patronicio to Dominador.
In 1958, the Seraspis obtained a loan from the
Kalibo Rural Bank, Inc. (KRBI) on the security of the
lands in question to finance improvements on the
lands. However, they failed to pay the loan for which
reason the mortgage was foreclosed and the lands
were sold to KRBI as the highest bidder.
Subsequently, the lands were sold by KRBI to Manuel
Rata, brother-in-law of Quirico Seraspi. It appears
that Rata, as owner of the property, allowed Quirico
Seraspi to administer the property.
In 1974, private respondent Simeon Recasa,
Marcelino’s child by his third wife, taking advantage
of the illness of Quirico Seraspi, who had been
paralyzed due to a stroke, forcibly entered the lands
in question and took possession thereof.
In 1983, the Seraspis purchased the lands from
Manuel Rata and afterwards filed a complaint against
Simeon Recasa for recovery of possession of the lands.
The trial court ruled in favor of the Seraspis,
stating that they had acquired the property through a
sale and acquisitive prescription. However, on appeal,
the Court of Appeals reversed on the ground that the
action of the Seraspis was barred by the statute of
limitations. Hence, this petition filed by Quirico
Seraspi who, in the meantime, had passed away and
was thus substituted by his heirs.
Two issues are presented: (1) whether petitioners’
action is barred by extinctive prescription; and (2)
whether private respondent Simeon Recasa acquired
ownership of the properties in question through
acquisitive prescription.
We rule for petitioners.
The Court of Appeals, while ruling that petitioners
were able to establish the identity of the property as
well as the credibility of their title—the elements
required to prove one’s
298
298 SUPREME COURT REPORTS ANNOTATED
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appea
claim for recovery of property2—nonetheless held that
the action was barred by prescription.
Citing Arradaza v. Court of Appeals,3 it held that an
action for recovery of title or possession of real
property or an interest therein can only be brought
within ten (10) years after the cause of action has
accrued. Since the action for recovery of possession
and ownership was filed by petitioners only on April
12, 1987, i.e., thirteen (13) years after their
predecessor-in-interest had been allegedly deprived of
the possession of the property by private respondent,
it was held that the action had prescribed.
Arradaza involves acquisitive, not extinctive,
prescription. What is more, the facts in that case
arose before the effectivity of the Civil Code.
Accordingly, what was applied was §41 of the Code of
297
Civil Procedure which provides that title by
prescription is acquired after ten (10) years, in
whatever manner possession may have been
commenced or continued, and regardless of good faith
or with just title. On the other hand, what is involved
here is extinctive prescription, and the applicable law
is Art. 1141 of the Civil Code which provides:
Real actions over immovables prescribe after thirty
years.
This provision is without prejudice to what is
established for the acquisition of ownership and other
real rights by prescription.
The question, therefore, is whether private
respondent has acquired the ownership of the two
lands by prescription. On this point, the Civil Code
provides:
Art. 1117. Acquisitive prescription of dominion and
other real rights may be ordinary or extraordinary.
Ordinary acquisitive prescription requires
possession of things in good faith and with just title
for the time fixed by law.
_______________
2 CIVIL CODE, Art. 434. In an action to recover,
the property must be identified, and the plaintiff must
rely on the strength of his title and not on the
weakness of the defendant’s claim.
3 170 SCRA 12 (1989).
299
VOL. 331, APRIL 28, 2000
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appeals
Art. 1134. Ownership and other real rights over
immovable property are acquired by ordinary
prescription through possession of ten years.
Art. 1137. Ownership and other real rights over
immovables also prescribe through uninterrupted
adverse possession thereof for thirty years, without
need of title or of good faith.
Thus, acquisitive prescription of dominion and other
real rights may be ordinary or extraordinary,
depending on whether the property is possessed in
good faith and with just title for the time fixed by
law.4 Private respondent contends that he acquired
the ownership of the questioned property by ordinary
prescription through adverse possession for ten (10)
years.
The contention has no merit, because he has
neither just title nor good faith. As Art. 1129 provides:
For the purposes of prescription, there is just title
when the adverse claimant came into possession of
the property through one of the modes recognized by
law for the acquisition of ownership or other real
rights, but the grantor was not the owner or could not
transmit any right.
In the case at bar, private respondent did not acquire
possession of the property through any of
the modes recognized by the Civil Code, to wit: (1)
occupation, (2) intellectual creation, (3) law, (4)
donation, (5) succession, (6) tradition in consequence
of certain contracts, and (7) prescription.5
Private respondent could not have acquired
ownership over the property through occupation since,
under Art. 714 of the Civil Code, the ownership of a
piece of land cannot be ac-
_______________
4 CIVIL CODE, Art. 1117.
5 Id., Art. 712. Ownership is acquired by
occupation and by intellectual creation.
Ownership and other real rights over property are
acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence
of certain contracts, by tradition.
They may also be acquired by means of
prescription.
300
300 SUPREME COURT REPORTS ANNOTATED
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appea
quired by occupation. Nor can he base his ownership
on succession for the property was not part of those
distributed to the heirs of the third marriage, to which
private respondent belongs. It must be remembered
that in the partition of the intestate estate of
Marcelino Recasa, the properties were divided into
three parts, each part being reserved for each group of
heirs belonging to one of the three marriages
Marcelino entered into. Since the contested parcels of
land were adjudicated to the heirs of the first and
299
second marriages, it follows that private respondent,
as heir of the third marriage, has no right over the
parcels of land. While, as heir to the intestate estate
of his father, private respondent was co-owner of all of
his father’s properties, such co-ownership rights were
effectively dissolved by the partition agreed upon by
the heirs of Marcelino Recasa.
Neither can private respondent claim good faith in
his favor. Good faith consists in the reasonable belief
that the person from whom the possessor received the
thing was its owner but could not transmit the
ownership thereof.6 Private respondent entered the
property without the consent of the previous owner.
For all intents and purposes, he is a mere usurper.
Like private respondent, petitioners have not
acquired the property through any of the modes
recognized by law for the acquisition of ownership.
The basis of petitioners’ claim of ownership is the
contract of sale they had with Rata, but this by itself
is insufficient to make them owners of the property.
For while a contract of sale is perfected by the
meeting of minds upon the thing which is the object of
the contract and upon the price,7 the ownership of the
thing sold is not transferred to the vendee until actual
or constructive delivery of the property.8 Hence, the
maxim non nudis pactis, sed traditione dominia
dominica rerum transferuntur (not mere agreements
but tradition transfers the ownership of things).
_______________
6 Id., Art. 1127.
 7 Id., Art. 1475.
8 Id., Art. 1477.
301
VOL. 331, APRIL 28, 2000 301
Heirs of Quirico Seraspi and Purificacion R. Seraspi vs. Court of Appeals
Consequently, petitioners are not the owners of the
property since it has not been delivered to them. At
the time they bought the property from Rata in 1983,
the property was in the possession of private
respondent.
However, this does not give private respondent a
right to remain in possession of the property.
Petitioners’ title to the property prevails over private
respondents’ possession in fact but without basis in
law. As held in Waite v. Peterson,9 when the property
belonging to a person is unlawfully taken by another,
the former has the right of action against the latter
for the recovery of the property. Such right may be
transferred by the sale or assignment of the property,
and the transferee can maintain such action against
the wrongdoer.
WHEREFORE, the decision of the respondent
Court of Appeals is hereby REVERSED, and private
respondent Simeon Recasa is ordered to return the
possession of the contested parcels of land to
petitioners as heirs of Quirico and Purificacion
Seraspi.
SO ORDERED.
184 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
G.R. No. 123498. November 23, 2007.*
BPI FAMILY BANK, petitioner, vs. AMADO
FRANCO and COURT OF APPEALS, respondents.
Civil Law; Property; The movable property
mentioned in Article 559 of the Civil Code pertains to a
specific or determinate thing—a determinate or
specific thing is one that is individualized and can be
identified or distinguished from others of the same
kind.—BPI-FB’s argument is unsound. To begin with,
the movable property mentioned in Article 559 of the
Civil Code pertains to a specific or determinate thing.
A determinate or specific thing is one that is
individualized and can be identified or distinguished
from others of the same kind.
_______________
*THIRD DIVISION.
185
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
Same; Same; In this case, the deposit in Franco’s
accounts consists of money which, albeit characterized
as a movable, is generic and fungible.—In this case,
the deposit in Franco’s accounts consists of money
which, albeit characterized as a movable, is generic
and fungible. The quality of being fungible depends
upon the possibility of the property, because of its
nature or the will of the parties, being substituted by
others of the same kind, not having a distinct
individuality.
Mercantile Law; Banking Laws; Money as a
Medium of Exchange; Money, which had passed
through various transactions in the general course of
banking business, even if of traceable origin, bears no
earmarks of peculiar ownership.—It bears
emphasizing that money bears no earmarks of
peculiar ownership, and this characteristic is all the
more manifest in the instant case which involves
money in a banking transaction gone awry. Its
primary function is to pass from hand to hand as a
medium of exchange, without other evidence of its
title. Money, which had passed through various
transactions in the general course of banking
business, even if of traceable origin, bears no
earmarks of peculiar ownership.
Same; Same; Nature of a Bank; As a business
affected with public interest and because of the nature
of its functions, the bank is under obligation to treat
the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of the
relation-ship.—In every case, the depositor expects
the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred
pesos or of millions. The bank must record every
single transaction accurately, down to the last
centavo, and as promptly as possible. This has to be
done if the account is to reflect at any given time the
amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and
to whomever directs. A blunder on the part of the
bank, such as the dishonor of the check without good
reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps
even civil and criminal litigation. The point is that as
a business affected with public interest and because of
the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary
nature of their relationship. x x x.
186
1 SUPREME COURT REPORTS ANNOTATED
86
BPI Family Bank vs. Franco
Remedial Law; Civil Procedure; Amendment to
Conform to Evidence; When issues not raised by the
pleadings are tried with the express or implied consent
of the parties,
18 they shall be treated in all respects as if
they
5 had been raised in the pleadings—such
amendment of the pleadings as may be necessary to
cause them to conform to the evidence and to raise
these issues may be made upon motion of any party at
anytime, even after judgment, but failure to amend
does not affect the result of the trial of these issues.—
Section 5. Amendment to conform to or authorize
presentation of evidence.—When issues not raised by
the pleadings are tried with the express or implied
consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings.
Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence
and to raise these issues may be made upon motion of
any party at any time, even after judgment; but
failure to amend does not affect the result of the trial
of these issues. If evidence is objected to at the trial on
the ground that it is now within the issues made by
the pleadings, the court may allow the pleadings to be
amended and shall do so with liberality if the
presentation of the merits of the action and the ends
of substantial justice will be subserved thereby. The
court may grant a continuance to enable the
amendment to be made.
Service of Court Papers; It should be noted that
the strict requirement on the service of papers upon the
parties affected is designed to comply with the
elementary requisite of due process.—In this
argument, we perceive BPI-FB’s clever but
transparent ploy to circumvent Section 4, Rule 13 of
the Rules of Court. It should be noted that the strict
requirement on service of court papers upon the
parties affected is designed to comply with the
elementary requisites of due process. Franco was
entitled, as a matter of right, to notice, if the
requirements of due process are to be observed. Yet,
he received a copy of the Notice of Garnishment only
on September 27, 1989, several days after the two
checks he issued were dishonored by BPI-FB on
September 20 and 21, 1989. Verily, it was premature
for BPI-FB to freeze Franco’s accounts without even
awaiting service of the Makati RTC’s Notice of
Garnishment on Franco.
Civil Law; Damages; Moral Damages; In the
absence of fraud or bad faith, moral damages cannot
be awarded; and that the adverse result of an action
does not per se make the action wrongful, or the party
liable for it. One may err, but error alone is not a
ground for
187
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
granting such damages.—We have had occasion
to hold that in the absence of fraud or bad faith, moral
damages cannot be awarded; and that the adverse
result of an action does not per se make the action
wrongful, or the party liable for it. One may err, but
error alone is not a ground for granting such damages.
Same; Exemplary Damages; As there is no basis
for the award of moral damages, neither can
exemplary damages be granted.—We also deny the
claim for exemplary damages. Franco should show
that he is entitled to moral, temperate, or
compensatory damages before the court may even
consider the question of whether exemplary damages
should be awarded to him. As there is no basis for the
award of moral damages, neither can exemplary
damages be granted.
PETITION for review on certiorari of a decision of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Ramirez, Bargas, Benedicto & Associates for
petitioner.
Lawrence P. Villanueva for private respondent.
NACHURA, J.:
Banks are exhorted to treat the accounts of their
depositors with meticulous care and utmost fidelity.
We reiterate this exhortation in the case at bench.
Before us is a Petition for Review
on Certiorari seeking the reversal of the Court of
Appeals (CA) Decision1 in CA-G.R. CV No.
43424 which affirmed with modification the
judgment2 of the Regional Trial Court, Branch 55,
Manila (Manila RTC), in Civil Case No. 90-53295.
_______________
1 Penned by Associate Justice Eugenio S.
Labitoria, with Associate Justices Cancio C. Garcia
(retired Associate Justice of the Supreme Court) and
Portia Alino-Hormachuelos, concurring; Rollo, pp. 40-
55.
2 CA Rollo, pp. 70-79.
188
188 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
This case has its genesis in an ostensible fraud
perpetrated on the petitioner BPI Family Bank (BPI-
FB) allegedly by respondent Amado Franco (Franco)
in conspiracy with other individuals,3 some of whom
opened and maintained separate accounts with BPI-
FB, San Francisco del Monte (SFDM) branch, in a
series of transactions.
On 18August 15, 1989, Tevesteco Arrastre-
Stevedoring
7 Co., Inc. (Tevesteco) opened a savings and
current account with BPI-FB. Soon thereafter, or on
August 25, 1989, First Metro Investment Corporation
(FMIC) also opened a time deposit account with the
same branch of BPI-FB with a deposit of
P100,000,000.00, to mature one year thence.
Subsequently, on August 31, 1989, Franco opened
three accounts, namely, a current,4 savings,5 and time
deposit,6 with BPI-FB. The current and savings
accounts were respectively funded with an initial
deposit of P500,000.00 each, while the time deposit
account had P1,000,000.00 with a maturity date of
August 31, 1990. The total amount of P2,000,000.00
used to open these accounts is traceable to a check
issued by Te-vesteco allegedly in consideration of
Franco’s introduction of Eladio Teves,7 who was
looking for a conduit bank to facilitate Tevesteco’s
business transactions, to Jaime Sebastian, who was
then BPI-FB SFDM’s Branch Manager. In turn, the
funding for the P2,000,000.00 check was part of the
P80,000,000.00 debited by BPI-FB from FMIC’s time
deposit account and credited to Tevesteco’s current
account pursuant to an Authority to Debit purportedly
signed by FMIC’s officers.
_______________
3 Antonio T. Ong, Manuel Bienvenida, Jr.,
Milagros Nayve, Jaime Sebastian, Ador de Asis, and
Eladio Teves. Rollo, pp. 160-207. RTC, Quezon City,
Branch 85, Decision in Crim. Case No. Q91-22386.
4 Account No. 840-107483-7.
5 Account No. 1668238-1.
6 Account No. 08523412.
7 President of Tevesteco.
189
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
It appears, however, that the signatures of FMIC’s
officers on the Authority to Debit were forged.8 On
September 4, 1989, Antonio Ong,9 upon being shown
the Authority to Debit, personally declared his
signature therein to be a forgery. Unfortunately,
Tevesteco had already effected several withdrawals
from its current account (to which had been credited
the P80,000,000.00 covered by the forged Authority to
Debit) amounting to P37,455,410.54, including the
P2,000,000.00 paid to Franco.
On September 8, 1989, impelled by the need to
protect its interests in light of FMIC’s forgery claim,
BPI-FB, thru its Senior Vice-President, Severino
Coronacion, instructed Jesus Arangorin10 to debit
Franco’s savings and current accounts for the
amounts remaining therein.11 However, Franco’s time
deposit account could not be debited due to the
capacity limitations of BPI-FB’s computer.12
In the meantime, two checks13 drawn by Franco
against his BPI-FB current account were dishonored
upon presentment for payment, and stamped with a
notation “account under garnishment.” Apparently,
Franco’s current account was garnished by virtue of
an Order of Attachment issued by the Regional Trial
Court of Makati (Makati RTC) in Civil Case No. 89-
4996 (Makati Case), which had been filed by BPI-FB
against Franco et al.,14 to recover the P37,455,410.54
representing Tevesteco’s total withdrawals from its
account.
_______________
8 BPI-FB’s Memorandum, Rollo, pp. 104-105.
9 Executive Vice-President of FMIC.
10 The new BPI-FB SFDM branch manager who
replaced Jaime Sebastian.
11 BPI-FB’s Memorandum, Rollo, p. 105.
12 Id.
13 Respectively dated September 11 and 18, 1989.
The first check dated August 31, 1989 Franco issued
in the amount of P50,000.00 was honored by BPI-FB.
14 Supra note 3. The names of other defendants in
Crim. Case No. 091-22386.
190
190 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
Notably, the dishonored checks were issued by Franco
and presented for payment at BPI-FB prior to
Franco’s receipt of notice that his accounts were under
garnishment.15 In fact, at the time the Notice of
Garnishment dated September 27, 1989 was served on
BPI-FB, Franco had yet to be impleaded in the Makati
case where the writ of attachment was issued.
It was only on May 15, 1990, through the service of
a copy of the Second Amended Complaint in Civil
Case No. 89-4996, that Franco was impleaded in the
Makati case.16 Immediately, upon receipt of such copy,
Franco filed a Motion to Discharge Attachment which
the Makati RTC granted on May 16, 1990. The Order
Lifting the Order of Attachment was served on BPI-
FB on even date, with Franco demanding the release
to him of the funds in his savings and current
accounts. Jesus Arangorin, BPI-FB’s new manager,
could not forthwith comply with the demand as the
funds, as previously stated, had already been debited
because of FMIC’s forgery claim. As such, BPI-FB’s
computer at the SFDM Branch indicated that the
current account record was “not on file.”
With respect to Franco’s savings account, it
appears that Franco agreed to an arrangement, as a
favor to Sebastian, whereby P400,000.00 from his
savings account was temporarily transferred to
Domingo Quiaoit’s savings account, subject to its
immediate return upon issuance of a certificate of
deposit which Quiaoit needed in connection with his
visa application at the Taiwan Embassy. As part of
the arrangement, Sebastian retained custody of
Quiaoit’s savings account passbook to ensure that no
withdrawal would be effected therefrom, and to
preserve Franco’s deposits.
On May 17, 1990, Franco pre-terminated his time
deposit account. BPI-FB deducted the amount of
P63,189.00 from the
_______________
15 Franco received the Notice of Garnishment on
September 27, 1989, but the 2 checks he had issued
were presented for payment at BPI-FB on September
20 & 21, 1989, respectively.
16 Franco’s Memorandum, Rollo, p. 137.
191
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
remaining balance of the time deposit account
representing advance interest paid to him.
These transactions spawned a number of cases,
some of which we had already resolved.
FMIC filed a complaint against BPI-FB for the
recovery of the amount of P80,000,000.00 debited from
its account.17 The case eventually reached this Court,
and in BPI Family Savings Bank, Inc. v. First Metro
Investment Corporation,18 we upheld the finding of the
courts below that BPI-FB failed to exercise the degree
of diligence required by the nature of its obligation to
treat the accounts of its depositors with meticulous
care. Thus, BPI-FB was found liable to FMIC for the
debited amount in its time deposit. It was ordered to
pay P65,332,321.99 plus interest at 17% per
annum from August 29, 1989 until fully restored. In
turn, the 17% shall itself earn interest at 12% from
October 4, 1989 until fully paid.
In a related case, Edgardo Buenaventura, Myrna
Lizardo and Yolanda Tica (Buenaventura, et
al.),19 recipients of a P500,000.00 check proceeding
from the P80,000,000.00 mistakenly credited to
Tevesteco, likewise filed suit. Buenaven-tura et al., as
in the case of Franco, were also prevented from
effecting withdrawals20 from their current account
with BPI-FB, Bonifacio Market, Edsa, Caloocan City
Branch. Likewise, when the case was elevated to this
Court docketed as BPI Family Bank v.
Buenaventura,21 we ruled that BPI-FB had no right to
freeze Buenaventura, et al.’s accounts and adjudged
BPI-FB liable therefor, in addition to damages.
_______________
17 Docketed as Civil Case No. 89-5280 and entitled
“First Metro Investment Corporation v. BPI Family
Bank.”
18 G.R. No. 132390, May 21, 2004, 429 SCRA 30.
19 Officers of the International Baptist Church and
International Baptist Academy in Malabon, Metro
Manila.
20 The checks issued by Buenaventura, et al. were
dishonored upon presentment for payment.
21 G.R. No. 148196, September 30, 2005, 471 SCRA
431.
192
192 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
Meanwhile, BPI-FB filed separate civil and criminal
cases against those believed to be the perpetrators of
the multimillion peso scam.22 In the criminal case,
Franco, along with the other accused, except for
Manuel Bienvenida who was still at large, were
acquitted of the crime of Estafa as defined and
penalized under Article 351, par. 2(a) of the Revised
Penal Code.23 However, the civil case24 remains under
litigation and the respective rights and liabilities of
the parties have yet to be adjudicated.
Consequently, in light of BPI-FB’s refusal to heed
Franco’s demands to unfreeze his accounts and
release his deposits therein, the latter filed on June 4,
1990 with the Manila RTC the subject suit. In his
complaint, Franco prayed for the fol-lowing reliefs: (1)
the interest on the remaining balance 25 of his current
account which was eventually released to him on
October 31, 1991; (2) the balance 26 on his savings
account, plus interest thereon; (3) the advance
interest27 paid to him which had been deducted when
he pre-terminated his time deposit account; and (4)
the payment of actual, moral and exemplary damages,
as well as attorney’s fees.
BPI-FB traversed this complaint, insisting that it
was correct in freezing the accounts of Franco and
refusing to release his deposits, claiming that it had a
better right to the amounts which consisted of part of
the money allegedly fraudulently withdrawn from it
by Tevesteco and ending up
_______________
22 Supra note 3.
23 Rollo, pp. 160-208.
24 The Makati Case for recovery of the
P37,455,410.54 representing Tevesteco’s total
withdrawals wherein Franco was belatedly
impleaded, and a Writ of Garnishment was issued on
Franco’s accounts.
25 P450,000.00.
26 The reflected amount of P98,973.23 plus
P400,000.00 representing what was transferred to
Quiaoit’s account under their arrangement.
27 P63,189.00.
193
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
in Franco’s accounts. BPI-FB asseverated that the
claimed consideration of P2,000,000.00 for the
introduction facilitated by Franco between George
Daantos and Eladio Teves, on the one hand, and
Jaime Sebastian, on the other, spoke volumes of
Franco’s participation in the fraudulent transaction.
On August 4, 1993, the Manila RTC rendered
judgment, the dispositive portion of which reads as
follows:
“WHEREFORE, in view of all the foregoing, judgment
is hereby rendered in favor of [Franco] and against
[BPI-FB], ordering the latter to pay to the former the
following sums:
1. 1.P76,500.00 representing the legal rate of
interest on the amount of P450,000.00 from
May 18, 1990 to October 31, 1991;
2. 2.P498,973.23 representing the balance on
[Franco’s] savings account as of May 18,
1990, together with the interest thereon in
accordance with the bank’s guidelines on the
payment therefor;
3. 3.P30,000.00 by way of attorney’s fees; and
4. 4.P10,000.00 as nominal damages.
The counterclaim of the defendant is DISMISSED
for lack of factual and legal anchor. Costs against
[BPI-FB].
SO ORDERED.”28
Unsatisfied with the decision, both parties filed their
respective appeals before the CA. Franco confined his
appeal to the Manila RTC’s denial of his claim for
moral and exemplary damages, and the diminutive
award of attorney’s fees. In affirming with
modification the lower court’s decision, the appellate
court decreed, to wit:
“WHEREFORE, foregoing considered, the appealed
decision is hereby AFFIRMED with modification
ordering [BPI-FB] to pay [Franco] P63,189.00
representing the interest deducted from the time
deposit of plaintiff-appellant. P200,000.00 as moral
damages and P100,000.00 as exemplary damages,
deleting the award of
_______________
28 CA Rollo, p. 79.
194
194 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
nominal damages (in view of the award of moral and
exemplary damages) and increasing the award of
attorney’s fees from P30,000.00 to P75,000.00.
Cost against [BPI-FB].
SO ORDERED.”29
In this recourse, BPI-FB ascribes error to the CA
when it ruled that: (1) Franco had a better right to the
deposits in the subject accounts which are part of the
proceeds of a forged Authority to Debit; (2) Franco is
entitled to interest on his current account; (3) Franco
can recover the P400,000.00 deposit in Quiaoit’s
savings account; (4) the dishonor of Franco’s checks
was not legally in order; (5) BPI-FB is liable for
interest on Franco’s time deposit, and for moral and
exemplary damages; and (6) BPI-FB’s counter-claim
has no factual and legal anchor.
The petition is partly meritorious.
We are in full accord with the common ruling of
the lower courts that BPI-FB cannot unilaterally
freeze Franco’s accounts and preclude him from
withdrawing his deposits. However, contrary to the
appellate court’s ruling, we hold that Franco is not
entitled to unearned interest on the time deposit as
well as to moral and exemplary damages.
First. On the issue of who has a better right to the
deposits in Franco’s accounts, BPI-FB urges us that
the legal consequence of FMIC’s forgery claim is that
the money transferred by BPI-FB to Tevesteco is its
own, and considering that it was able to recover
possession of the same when the money was
redeposited by Franco, it had the right to set up its
ownership thereon and freeze Franco’s accounts.
BPI-FB contends that its position is not unlike
that of an owner of personal property who regains
possession after it is stolen, and to illustrate this
point, BPI-FB gives the following example: where X’s
television set is stolen by Y who thereaf-
_______________
29 Rollo, p. 54.
195
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
ter sells it to Z, and where Z unwittingly entrusts
possession of the TV set to X, the latter would have
the right to keep possession of the property and
preclude Z from recovering possession thereof. To
bolster its position, BPI-FB cites Article 559 of the
Civil Code, which provides:
“Article 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from
the person in possession of the same.
If the possessor of a movable lost or of which the
owner has been unlawfully deprived, has acquired it
in good faith at a public sale, the owner cannot obtain
its return without reimbursing the price paid
therefor.”
BPI-FB’s argument is unsound. To begin with, the
movable property mentioned in Article 559 of the Civil
Code pertains to a specific or determinate thing.30 A
determinate or specific thing is one that is
individualized and can be identified or distinguished
from others of the same kind.31
In this case, the deposit in Franco’s accounts
consists of money which, albeit characterized as a
movable, is generic and fungible.32 The quality of
being fungible depends upon the possibility of the
property, because of its nature or the will of the
parties, being substituted by others of the same kind,
not having a distinct individuality.33
Significantly, while Article 559 permits an owner
who has lost or has been unlawfully deprived of a
movable to recover
_______________
30 See Article 1460, paragraph 1 of the Civil Code.
A thing is determinate when it is particularly
designated or physically segregated from all others of
the same class.
31 Tolentino, Civil Code of the Philippines
Commentaries and Jurisprudence, Vol. IV, 1985, p.
90.
32 See Article 418 of the Civil Code, taken from
Article 337 of the Old Civil Code which used the
words “fungible or non-fungible.”
33 Tolentino, Civil Code of the Philippines
Commentaries and Jurisprudence, Vol. II, 1983, p. 26.
196
196 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
the exact same thing from the current possessor, BPI-
FB simply claims ownership of the equivalent amount
of money, i.e., the value thereof, which it had
mistakenly debited from FMIC’s account and credited
to Tevesteco’s, and subsequently traced to Franco’s
account. In fact, this is what BPI-FB did in filing the
Makati Case against Franco, et al. It staked its claim
on195
the money itself which passed from one account to
another, commencing with the forged Authority to
Debit.
It bears emphasizing that money bears no
earmarks of peculiar ownership,34 and this
characteristic is all the more manifest in the instant
case which involves money in a banking transaction
gone awry. Its primary function is to pass from hand
to hand as a medium of exchange, without other
evidence of its title.35 Money, which had passed
through various transactions in the general course of
banking business, even if of traceable origin, is no
exception.
Thus, inasmuch as what is involved is not a
specific or determinate personal property, BPI-FB’s
illustrative example, ostensibly based on Article 559,
is inapplicable to the instant case.
There is no doubt that BPI-FB owns the deposited
monies in the accounts of Franco, but not as a legal
consequence of its unauthorized transfer of FMIC’s
deposits to Tevesteco’s account. BPI-FB conveniently
forgets that the deposit of money in banks is governed
by the Civil Code provisions on simple loan or
mutuum.36 As there is a debtor-creditor relationship
between a bank and its depositor, BPI-FB ultimately
acquired ownership of Franco’s deposits, but such
ownership is coupled with a corresponding obligation
to pay him an equal amount
_______________
34 United States v. Sotelo, 28 Phil. 147, 158 (1914).
35 Id.
36 Article 1980 of the Civil Code: Fixed, savings,
and current deposits of money in banks and similar
institutions shall be governed by the provisions
concerning loan. See Article 1933 of the Civil Code.
197
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
on demand.37 Although BPI-FB owns the deposits in
Franco’s accounts, it cannot prevent him from
demanding payment of BPI-FB’s obligation by
drawing checks against his current account, or asking
for the release of the funds in his savings account.
Thus, when Franco issued checks drawn against his
current account, he had every right as creditor to
expect that those checks would be honored by BPI-FB
as debtor.
More importantly, BPI-FB does not have a
unilateral right to freeze the accounts of Franco based
on its mere suspicion that the funds therein were
proceeds of the multi-million peso scam Franco was
allegedly involved in. To grant BPI-FB, or any bank
for that matter, the right to take whatever action it
pleases on deposits which it supposes are derived from
shady transactions, would open the floodgates of
public distrust in the banking industry.
Our pronouncement in Simex International
(Manila), Inc. v. Court of Appeals 38 continues to
resonate, thus:
“The banking system is an indispensable institution
in the modern world and plays a vital role in the
economic life of every civilized nation. Whether as
mere passive entities for the safekeeping and saving
of money or as active instruments of business and
commerce, banks have become an ubiquitous presence
among the people, who have come to regard them with
respect and even gratitude and, most of all,
confidence. Thus, even the humble wage-earner has
not hesitated to entrust his life’s savings to the bank
of his choice, knowing that they will be safe in its
custody and will even earn some interest for him. The
ordinary person, with equal faith, usually maintains a
modest checking account for security and convenience
in the settling of his monthly bills and the payment of
ordinary expenses. x x x.
_______________
37 Article 1953 of the Civil Code: A person who
receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay
the creditor an equal amount of the same kind and
quality.
38 G.R. No. 88013, March 19, 1990, 183 SCRA 360,
366-367.
198
198 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
In every case, the depositor expects the bank to treat
his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of
millions. The bank must record every single
transaction accurately, down to the last centavo, and
as promptly as possible. This has to be done if the
account
197 is to reflect at any given time the amount of
money the depositor can dispose of as he sees fit,
confident that the bank will deliver it as and to
whomever directs. A blunder on the part of the bank,
such as the dishonor of the check without good reason,
can cause the depositor not a little embarrassment if
not also financial loss and perhaps even civil and
criminal litigation.
The point is that as a business affected with public
interest and because of the nature of its functions, the
bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in
mind the fiduciary nature of their relationship. x x x.”
Ineluctably, BPI-FB, as the trustee in the fiduciary
relationship, is duty bound to know the signatures of
its customers. Having failed to detect the forgery in
the Authority to Debit and in the process
inadvertently facilitate the FMIC-Tevesteco transfer,
BPI-FB cannot now shift liability thereon to Franco
and the other payees of checks issued by Tevesteco, or
prevent withdrawals from their respective accounts
without the appropriate court writ or a favorable final
judgment.
Further, it boggles the mind why BPI-FB, even
without delving into the authenticity of the signature
in the Authority to Debit, effected the transfer of
P80,000,000.00 from FMIC’s to Tevesteco’s account,
when FMIC’s account was a time deposit and it had
already paid advance interest to FMIC. Considering
that there is as yet no indubitable evidence
establishing Franco’s participation in the forgery, he
remains an innocent party. As between him and BPI-
FB, the latter, which made possible the present
predicament, must bear the resulting loss or
inconvenience.
Second. With respect to its liability for interest on
Franco’s current account, BPI-FB argues that its
noncompliance with the Makati RTC’s Order Lifting
the Order of
199
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
Attachment and the legal consequences thereof, is a
matter that ought to be taken up in that court.
The argument is tenuous. We agree with the
succinct hold-ing of the appellate court in this respect.
The Manila RTC’s order to pay interests on Franco’s
current account arose from BPI-FB’s unjustified
refusal to comply with its obligation to pay Franco
pursuant to their contract of mutuum. In other words,
from the time BPI-FB refused Franco’s demand for
the release of the deposits in his current account,
specifically, from May 17, 1990, interest at the rate of
12% began to accrue thereon.39
Undeniably, the Makati RTC is vested with the
authority to determine the legal consequences of BPI-
FB’s noncompliance with the Order Lifting the Order
of Attachment. However, such authority does not
preclude the Manila RTC from ruling on BPI-FB’s
liability to Franco for payment of interest based on its
continued and unjustified refusal to perform a
contractual obligation upon demand. After all, this
was the core issue raised by Franco in his complaint
before the Manila RTC.
Third. As to the award to Franco of the deposits in
Quiaoit’s account, we find no reason to depart from
the factual findings of both the Manila RTC and the
CA.
Noteworthy is the fact that Quiaoit himself
testified that the deposits in his account are actually
owned by Franco who simply accommodated Jaime
Sebastian’s request to temporarily transfer
P400,000.00 from Franco’s savings account to
Quiaoit’s account.40 His testimony cannot be
characterized as hearsay as the records reveal that he
had personal knowledge of the arrangement made
between Franco, Sebastian and himself.41
_______________
39 See Eastern Shipping Lines, Inc. v. Court of
Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78,
95.
40 TSN, July 30, 1991, p. 5.
41 Id., at pp. 5-11.
200
200 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
BPI-FB makes capital of Franco’s belated allegation
relative to this particular arrangement. It insists that
the transaction with Quiaoit was not specifically
alleged in Franco’s complaint before the Manila RTC.
However, it appears that BPI-FB had impliedly
consented to the trial of this issue given its extensive
cross-examination of Quiaoit.
Section 5, Rule 10 of the Rules of Court provides:
“Section 5. Amendment to conform to or authorize
presentation of evidence.—When issues not raised
by the pleadings are tried with the express or
implied consent of the parties, they shall be
treated in all respects as if they had been raised
in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to
conform to the evidence and to raise these
issues may be made upon motion of any party at
any time, even after judgment; but failure to
amend does not affect the result of the trial of
these issues. If evidence is objected to at the trial on
the ground that it is now within the issues made by
the pleadings, the court may allow the pleadings to be
amended and shall do so with liberality if the
presentation of the merits of the action and the ends
of substantial justice will be sub-served thereby. The
court may grant a continuance to enable the
amendment to be made.” (Emphasis supplied)
In all, BPI-FB’s argument that this case is not the
right forum for Franco to recover the P400,000.00
begs the issue. To reiterate, Quiaoit, testifying during
the trial, unequivocally disclaimed ownership of the
funds in his account, and pointed to Franco as the
actual owner thereof. Clearly, Franco’s action for the
recovery of his deposits appropriately covers the
deposits in Quiaoit’s account.
Fourth. Notwithstanding all the foregoing, BPI-FB
continues to insist that the dishonor of Franco’s
checks respectively dated September 11 and 18, 1989
was legally in order in view of the Makati RTC’s
supplemental writ of attachment issued on September
14, 1989. It posits that as the party that applied for
the writ of attachment before the Makati RTC, it
201
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
need not be served with the Notice of Garnishment
before it could place Franco’s accounts under
garnishment.
The argument is specious. In this argument, we
perceive BPI-FB’s clever but transparent ploy to
circumvent Section 4,42 Rule 13 of the Rules of Court.
It should be noted that the strict requirement on
service of court papers upon the parties affected is
designed to comply with the elementary requisites of
due process. Franco was entitled, as a matter of right,
to notice, if the requirements of due process are to be
observed. Yet, he received a copy of the Notice of
Garnishment only on September 27, 1989, several
days after the two checks he issued were dishonored
by BPI-FB on September 20 and 21, 1989. Verily, it
was premature for BPI-FB to freeze Franco’s accounts
without even awaiting service of the Makati RTC’s
Notice of Garnishment on Franco.
Additionally, it should be remembered that the
enforcement of a writ of attachment cannot be made
without including in the main suit the owner of the
property attached by virtue thereof. Section 5, Rule 13
of the Rules of Court specifically provides that “no
levy or attachment pursuant to the writ issued x x x
shall be enforced unless it is preceded, or
contemporaneously accompanied, by service of
summons, together with a copy of the complaint, the
application for attachment, on the defendant within
the Philippines.”
Franco was impleaded as party-defendant only on
May 15, 1990. The Makati RTC had yet to acquire
jurisdiction over the person of Franco when BPI-FB
garnished his accounts.43 Effectively, therefore, the
Makati RTC had no authority yet to bind the deposits
of Franco through the writ of attachment,
_______________
42 SEC. 4. Papers required to be filed and served.—
Every judgment, resolution, order, pleading
subsequent to the complaint, written motion, notice,
appearance, demand, offer of judgment or similar
papers shall be filed with the court, and served upon
the parties affected.
43 See Sievert v. Court of Appeals, G.R. No. L-
84034, December 22, 1988, 168 SCRA 692, 696.
202
202 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
and consequently, there was no legal basis for BPI-FB
to dishonor the checks issued by Franco.
Fifth. Anent the CA’s finding that BPI-FB was in
bad faith and as such liable for the advance interest it
deducted from Franco’s time deposit account, and for
moral as well as exemplary damages, we find it proper
to reinstate the ruling of the trial court, and allow
only the recovery of nominal damages in the amount
of P10,000.00. However, we retain the CA’s award of
P75,000.00 as attorney’s fees.
In granting Franco’s prayer for interest on his time
deposit account and for moral and exemplary
damages, the CA attributed bad faith to BPI-FB
because it (1) completely disregarded its obligation to
Franco; (2) misleadingly claimed that Franco’s
deposits were under garnishment; (3) misrepresented
that Franco’s current account was not on file; and (4)
refused to return the P400,000.00 despite the fact that
the ostensible owner, Quiaoit, wanted the amount
returned to Franco.
In this regard, we are guided by Article 2201 of the
Civil Code which provides:
“Article 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in good faith
is liable shall be those that are the natural and
probable consequences of the breach of the obligation,
and which the parties have foreseen or could have
reasonable foreseen at the time the obligation was
constituted.
In case of fraud, bad faith, malice or wanton
attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to
the non-performance of the obligation.”
(Emphasis supplied.)
We find, as the trial court did, that BPI-FB acted out
of the impetus of self-protection and not out of
malevolence or ill will. BPI-FB was not in the corrupt
state of mind contemplated in Article 2201 and should
not be held liable for all damages now being imputed
to it for its breach of obligation.
203
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
For the same reason, it is not liable for the unearned
interest on the time deposit.
Bad faith does not simply connote bad judgment or
negligence; it imports a dishonest purpose or some
moral obliquity and conscious doing of wrong; it
partakes of the nature of fraud.44 We have held that it
is a breach of a known duty through some motive of
interest or ill will.45 In the instant case, we cannot
attribute to BPI-FB fraud or even a motive of self-
enrichment. As the trial court found, there was no
denial whatsoever by BPI-FB of the existence of the
accounts. The computer-generated document which
indicated that the current account was “not on file”
resulted from the prior debit by BPI-FB of the
deposits. The remedy of freezing the account, or the
garnishment, or even the outright refusal to honor
any transaction thereon was resorted to solely for the
purpose of holding on to the funds as a security for its
intended court action,46 and with no other goal but to
ensure the integrity of the accounts.
We have had occasion to hold that in the absence
of fraud or bad faith,47 moral damages cannot be
awarded; and that the adverse result of an action does
not per se make the action wrongful, or the party
liable for it. One may err, but error alone is not a
ground for granting such damages.48
An award of moral damages contemplates the
existence of the following requisites: (1) there must be
an injury clearly sustained by the claimant, whether
physical, mental or psy-
_______________
44 Board of Liquidators v. Heirs of Maximo Kalaw,
et al., 127 Phil. 399, 421; 20 SCRA 987, 1007 (1967).
45 Lopez, et al. v. Pan American World
Airways, 123 Phil. 256, 264-265; 16 SCRA 431, 438
(1966).
46 CA Rollo, p. 74.
47 Suario v. Bank of the Philippine Islands, G.R.
No. 50459, August 25, 1989, 176 SCRA 688, 696;
citing Guita v. Court of Appeals, 139 SCRA 576, 580
(1985).
48 Bank of the Philippine Islands v. Casa
Montessori Internationale, G.R. No. 149454, May 28,
2004, 430 SCRA 261, 293-294.
204
204 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
chological; (2) there must be a culpable act or omission
factually established; (3) the wrongful act or omission
of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) the award for
damages is predicated on any of the cases stated in
Article 2219 of the Civil Code.49
Franco could not point to, or identify any
particular circumstance in Article 2219 of the Civil
Code,50 upon which to base his claim for moral
damages.
Thus, not having acted in bad faith, BPI-FB
cannot be held liable for moral damages under Article
2220 of the Civil Code for breach of contract.51
_______________
49 United Coconut Planters Bank v. Ramos, 461
Phil. 277, 298; 415 SCRA 596, 612 (2003);
citing Cathay Pacific Airways, Ltd. v. Spouses
Vazquez, 447 Phil. 306; 399 SCRA 207 (2003).
50 Art. 2219. Moral damages may be recovered in
the follow-ing and analogous cases:
1. (1)A criminal offense resulting in physical
injuries;
2. (2)Quasi-delicts causing physical injuries;
3. (3)Seduction, abduction, rape, or other
lascivious acts;
4. (4)Adultery or concubinage;
5. (5)Illegal or arbitrary detention or arrest;
6. (6)Illegal search;
7. (7)Libel, slander or any other form of
defamation;
8. (8)Malicious prosecution;
9. (9)Acts mentioned in Article 309;
10. (10)Acts and actions referred to in Articles
21, 26, 27, 28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted,
raped, or abused, referred to in No. 3 of this article,
may also recover moral damages.
The spouse, descendants, ascendants, and brother
and sisters may bring the action mentioned in No. 9 of
this article, in the order named.
51 Art. 2220. Willful injury to property may be a
legal ground for awarding moral damages if the court
should find that, under the circumstances, such
damages are justly due. The same rule applies to
breaches of contract where the defendant acted
fraudulently or in bad faith.
205
VOL. 538, NOVEMBER 23, 2007
BPI Family Bank vs. Franco
We also deny the claim for exemplary damages.
Franco should show that he is entitled to moral,
temperate, or compensatory damages before the court
may even consider the question of whether exemplary
damages should be awarded to him.52 As there is no
basis for the award of moral damages, neither can
exemplary damages be granted.
While it is a sound policy not to set a premium on
the right to litigate,53 we, however, find that Franco is
entitled to reasonable attorney’s fees for having been
compelled to go to court in order to assert his right.
Thus, we affirm the CA’s grant of P75,000.00 as
attorney’s fees.
Attorney’s fees may be awarded when a party is
compelled to litigate or incur expenses to protect his
interest,54 or when the court deems it just and
equitable.55 In the case at bench, BPI-FB refused to
unfreeze the deposits of Franco despite the Makati
RTC’s Order Lifting the Order of Attachment and
Quiaoit’s unwavering assertion that the P400,000.00
was part of Franco’s savings account. This refusal
constrained Franco to incur expenses and litigate for
almost two (2) decades in order to protect his interests
and recover his deposits. There-
_______________
52 Article 2234 of the Civil Code.
Art. 2234. While the amount of the exemplary
damages need not be proved, the plaintiff must show
that he is entitled to moral, temperate or
compensatory damages before the court may consider
the question of whether or not exemplary damages
should be awarded. In case liquidated damages have
been agreed upon, although no proof of loss is
necessary in order that such liquidated damages may
be recovered, nevertheless, before the court may
consider the question of granting exemplary in
addition to the liquidated damages, the plaintiff must
show that he would be entitled to moral, temperate or
compensatory damages were it not for the stipulation
for liquidated damages.
53 Bank of the Philippine Islands v. Casa
Montessori Internationale, supra note 48, at p. 296.
54 CIVIL CODE, Art. 2208, par. (2).
55 CIVIL CODE, Art. 2208, par. (11).
206
206 SUPREME COURT REPORTS ANNOTATED
BPI Family Bank vs. Franco
fore, this Court deems it just and equitable to grant
Franco P75,000.00 as attorney’s fees. The award is
reasonable in view of the complexity of the issues and
the time it has taken for this case to be resolved.56
Sixth. As for the dismissal of BPI-FB’s counter-
claim, we uphold the Manila RTC’s ruling, as affirmed
by the CA, that BPI-FB is not entitled to recover
P3,800,000.00 as actual damages. BPI-FB’s alleged
loss
205of profit as a result of Franco’s suit is, as already
pointed out, of its own making. Accordingly, the denial
of its counter-claim is in order.
WHEREFORE, the petition is PARTIALLY
GRANTED. The Court of Appeals Decision dated
November 29, 1995 is AFFIRMED with the
MODIFICATION that the award of unearned interest
on the time deposit and of moral and exemplary
damages is DELETED.
No pronouncement as to costs.
SO ORDERED.