G.R. No. 131803.

 April 14, 1999.* “Evidence adduced by the plaintiffs through the testimony of plaintiff Gabriela Angeles
SOTERA PAULINO MARCELO, GABRIELA M. ANGELES, SIMEONA CUENCO, showed that the parcel of land subject of litigation covering Lot 3098 and embraced under Tax
EMILIA MARCELO and RUBEN MARCELO, petitioners, vs. HON. COURT OF Declaration No. 2882 (Exh. A) was originally owned by spouses Jose Marcelo and Sotera
APPEALS, FERNANDO CRUZ and SERVANDO FLORES, respondents. 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
Civil Law; Property; Ownership;  Prescription; Acquisitive prescription is a mode of been encroached by defendant Fernando Cruz. Plaintiffs caused the relocation survey of said
acquiring ownership by a possessor through the requisite lapse of time; In order to ripen into property and per plan of Lot 3096 and Lot 3098 of the Angat Cadastre as surveyed for the heirs
ownership, possession must be in the concept of an owner, public, peaceful and uninterrupted. of Jose Marcelo (Exh. B), 7540 square meters of Lot 3098 had been encroached by defendant
—Acquisitive prescription is a mode of acquiring ownership by a possessor through the Fernando Cruz as indicated in the shaded portion of said plan (Exh. B-1).
requisite lapse of time. In order to ripen into ownership, possession must be in the concept of “Defendant Fernando Cruz sold his property with an area of 13,856 square meters to
an owner, public, peaceful and uninterrupted. Thus, mere possession with a juridical title, such defendant Servando Flores pursuant to a deed of sale (Kasulatan ng Bilihan) dated November
as, to exemplify, by a usufructuary, a trustee, a lessee, an agent or a pledgee, not being in the 3, 1968 (Exh. C) which sale, includes the encroached portion (7,540 square meters of
concept of an owner, cannot ripen into ownership by acquisitive prescription, unless the plaintiffs’ property). Defendant Fernando Cruz heretofore purchased the said property from
juridical relation is first expressly repudiated and such repudiation has been communicated to Engracia de la Cruz and Vicente, Marta, and Florentino all surnamed Sarmiento, pursuant to a
the other party. Acts of possessory character executed due to license or by mere tolerance of ‘Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang Patulayan’ dated November 19,
the owner would likewise be inadequate. Possession, to constitute the foundation of a 1960 (Exh. D) covering an area of 6,000 square meters. The Tax Declaration No. 4482 (Exh.
prescriptive right, must be en concepto de dueno, or, to use the common law equivalent of the E) covering the property in the name of Jorge Sarmiento and Engracia Cruz covered an area of
term, that possession should be adverse, if not, such possessory acts, no matter how long, do 6,8003 square meters. As soon as the said property was sold to Fernando Cruz, the adjoining
not start the running of the period of prescription. property described and classified as ‘parang’ with an area of 7,856 square meters was declared
Same;  Same; Same;  Same; Acquisitive prescription of dominion and other real rights by said Fernando Cruz in his name which circumstance, increased his landholding to 13,856
may be ordinary or extraordinary.—Acquisitive prescription of dominion and other real rights square meters (Exh. F). The said property was subsequently sold by defendant Fernando Cruz
may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of to defendant Servando Flores.
things in good faith and with just title for the time fixed by law without good faith and just title, “According to Gabriela, they attempted to cultivate the disputed portion sometime in
acquisitive prescription can only be extraordinary in character. 1968, but were barred from doing so by defendant Servando Flores who claimed that the area
Same;  Same; Same;  Same; Ordinary acquisitive prescription demands that the was part of the land he bought from co-defendant Fernando Cruz.
possession be in “good faith and with just title.”—Ordinary acquisitive prescription demands, “On the other hand, both defendants testified to refute plaintiffs evidence. They invariably
as aforesaid, that the possession be “in good faith and with just title.” The good faith of the declared that the portion sought to be recovered by plaintiffs is part of the land which
possessor consists in the reasonable belief that the person from whom the thing is received has defendant Fernando Cruz acquired in 1960 from the Heirs of Jorge Sarmiento; that as stated in
been the owner thereof and could thereby transmit that ownership. There is, upon the other their document (Exh. 2), the land sold to defendant Fernando Cruz contained 6,000 square
hand, just title when the adverse claimant comes into possession of the property through any of meters of ‘palayero’ or riceland and 7,856 square meters of ‘parang’ or pasture land, that
the modes recognized by law for the acquisition of ownership or other real rights, but that the defendant Fernando Cruz caused the entire parcel to be surveyed sometime in 1967 (Exhs. 3 &
grantor is neither the owner nor in a position to transmit the right. 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
PETITION for review on certiorari of a decision of the Court of Appeals. Flores (Exh. I), who thereupon occupied and cultivated it.”4

Evaluating the evidence of the contending parties, the trial court found and ratiocinated:
The facts are stated in the opinion of the Court. “The crux of the matter at issue apparently revolves on the socalled pasture
Telesforo T. Barbadillo for petitioner. land (parang) supposedly sold by the Sarmientos and Engracia dela Cruz to defendant
De Jesus, Orioste, Silvestre and Lim for private respondents. 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
VITUG, J.: 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
The reversal of the 28th November 1996 decision 1 of the Court of Appeals setting aside that of in 1961 as evidenced by the tax declaration issued in his favor (Exh. F). On the other hand, the
the Regional Trial Court (“RTC”), Branch 19, of Malolos, Bulacan, is sought in this petition said ‘parang’ is a part and parcel of plaintiffs’ property to which they had been in possession
for review on certiorari. Petitioners seek the reinstatement of the RTC decision which has thereof prior to World War II and evidenced by Tax Declaration No. 2882 (Exh. A). The plan
ordered respondents Fernando Cruz and Servando Flores to return the ownership and of Lot 3096 and Lot 3098 of the Angat Cadastre (Exhs. B and B-1) inevitably indicated that
possession of a portion of unregistered and untitled land located in Sta. Lucia, Angat, Bulacan, what has been encroached by defendants refers to the ‘parang’ of 7.540 square meters which
to herein petitioners. It would appear that on 06 October 1982, herein petitioners, heirs of the defendant Fernando Cruz declared the same in his name in 1961. This explains the unnecessary
deceased Jose Marcelo filed with the Regional Trial Court of Malolos, Bulacan, an action for increase of his property from 6,000 square meters which he purchased from the Sarmientos
the recovery of a portion of unregistered land in Sta. Lucia, Angat, Bulacan. The complaint, pursuant to an extrajudicial partition with sale and embraced under Tax Declaration No. 4882
later amended on 12 October 1983, averred that two parcels of land in Sta. Lucia, declared for (Exh. E), to 13,856 square meters.”5
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 The trial court thereupon ruled in favor of petitioners; the dispositive portion of its decision
7,5402 square meters thereof by respondents Fernando Cruz and Servando Flores. concluded:
In their answer, respondents Cruz and Flores denied the allegations of petitioners assailing “WHEREFORE, judgment is hereby rendered against the defendants ordering the following:
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). 1. “a.To return the ownership and possession of 7,540 square meters to the plaintiffs
The appellate court adopted the summary of evidence made by the trial court, thus: as indicated in the relocation survey plan; and
 2. “b.To pay attorneys fees in the amount of P5,000.00. “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,
“No actual and or moral damages (sic) is awarded for lack of factual evidence.
Engracia de la Cruz and her children Vicente, Marta, and Florentino, all surnamed Sarmiento,
“The counterclaim is hereby dismissed for lack of factual and or legal basis.” 6
sold to defendant Fernando Cruz a rice land containing an area of 6,000 square meters and
embraced under Tax Declaration No. 4482 and a pasture land (parang) containing an area of
Respondents Cruz and Flores went to the Court of Appeals; in its now assailed decision, the 7,856 square meters. x x x”9
appellate court reversed the judgment of the court a quo. Petitioners moved for a In turn, respondent Cruz sold, on 03 November 1968, the 13,856 square meters of land to
reconsideration; the motion, however, was denied. respondent Flores under a “Kasulatan ng Bilihan.” Respondent Flores immediately took
In this latest recourse petitioners assail the holding of the Court of Appeals that the action possession of the property to the exclusion of all others and promptly paid the realty taxes
initiated in 1982 by petitioners against respondent Flores would not prosper on the theory that thereon. From that time on, Flores had been in possession of the entire area in the concept of an
Flores already has acquired ownership of the disputed land by ordinary acquisitive owner and holding it in that capacity for almost fourteen (14) years before petitioners initiated
prescription. Petitioners argue that— their complaint on 06 October 1982.
Acquisitive prescription is a mode of acquiring ownership by a possessor through the
1. “1.The respondent court erred in not applying the doctrine laid down by this requisite lapse of time. In order to ripen into ownership, possession must be in the concept of
Honorable Court in Tero vs. Tero, 131 SCRA 105 considering that respondents an owner, public, peaceful and uninterrupted.10 Thus, mere possession with a juridical title,
never acquired the 7,540 square meters lawfully, as the respondent court already such as, to exemplify, by a usufructuary, a trustee, a lessee, an agent or a pledgee, not being in
stated that what was sold to respondent Cruz was the 6,800 square meters which the concept of an owner, cannot ripen into ownership by acquisitive prescription, 11 unless the
he then sold to respondent Flores, hence respondents can not account as to how juridical relation is first expressly repudiated and such repudiation has been communicated to
they acquire said lot, whereas the petitioner proved the 7,540 square meters the other party.12 Acts of possessory character executed due to license or by mere tolerance of
formed part of 19,231 square meters of their parents in their possession since the owner would likewise be inadequate. 13 Possession, to constitute the foundation of a
1939. 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
2. “2.The respondent court erred in disregarding the findings of facts of the trial court,
not start the running of the period of prescription.14
and substitute its own perception of the facts contrary to the incontrovertible Acquisitive prescription of dominion and other real rights may be ordinary or
evidence.”7 extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and
with just title for the time fixed by law 15 without good faith and just title, acquisitive
Petitioners assert that the property sold by the Sarmientos to respondent Cruz on 19 November prescription can only be extraordinary in character.
1960, under a “Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang Patuluyan,” covers As regards, real or immovable property Article 1134 of the Civil Code provides:
only the “palayero” or riceland, which measures about 6,000 square meters, and that the “ART. 1134. Ownership and other real rights over immovable property are acquired by
“parang,” containing 7,856 square meters, has not been included. ordinary prescription through possession of ten years.”
The petition must be denied.
Contrary to the insistence of petitioners, the “Kasulatan ng Partisyon sa Labas ng Ordinary acquisitive prescription demands, as aforesaid, that the possession be “in good faith
Hukuman at Bilihang Patuluyan,” executed on 19 March 1960 by Engracia de la Cruz (widow and with just title.”16 The good faith of the possessor consists in the reasonable belief that the
of Jorge Sarmiento) and her children Vicente Sarmiento, Maria Sarmiento and Florentino person from whom the thing is received has been the owner thereof and could thereby transmit
Sarmiento, pertained not only to the “palayero” but also to the “parang” as well, this that ownership.17 There is, upon the other hand, just title when the adverse claimant comes into
agreement provided thus: possession of the property through any of the modes recognized by law for the acquisition of
“1. Na akong si Engracia de la Cruz at ang aking yumao ng asawang si Jorge Sarmiento ownership or other real rights, but that the grantor is neither the owner nor in a position to
(nuong nabubuhay ito) ay nakapagpundar ng isang lupa na ang buong description ay gaya ang transmit the right.18 In Doliendo vs. Biarnesa,19 the Supreme Court has explained the law in
sumusunod: Article 1130 of the Civil Code which states that the “title for prescription must be true and
“Isang parselang lupang PALAYERO na may kasamang PARANG (Cogonales) na valid.” Thus—
matatagpuan sa Barrio Ng Santa Lucia, Angat, Bulacan, P.I. “We think that this contention is based on a misconception of the scope and effect of the
“Ang Palayero ay may sukat na 6,000 metros cuadrados, klasipikado 2-b, amillarado provisions of this article of the Code in its application to ‘ordinary prescription.’ It is evident
P270.00 Tax No. 4482; at ang parang ay may sukat na 7,856 metros cuadrados. Humahangga that by a ‘titulo verdadero y valido’ in this connection we are not to understand a ‘titulo que
sa Norte, kay Antonio de la Rosa; Este, kina Fabian Garcia at Juan Geronimo; Sur, Kina por si solo tiene fuerza de transferir el dominio sin necesidad de la prescripcion’ (a title which
Miguel Illescas, Ciriaco Reyes y Juan de la Cruz; Oeste, Juan de la Cruz hoy Jose Marcelo y of itself is sufficient to transfer the ownership without the necessity of the lapse of the
Mariano de la Cruz hoy Felipe de Leon. Walang mejoras at ang hangganan sa paligid ay prescription period); and we accept the opinion of a learned Spanish law writer who holds that
makikilala sa pamamagitan ng mga matutuwid na sikang o pilapil na buhay. the ‘titulo verdadero y valido’ as used in this article of the code prescribes a ‘titulo colorado’
“2. Ayon sa Tax No. 4482 ay lupang palayero lamang ang nakatala, subalit ito’y and not merely ‘putativo’; a ‘titulo colorado’ being one ‘which a person has when he buys a
mayroong kasamang parang na hindi lamang naipatala niyang nakaraang pasukan ng lupa sa thing, in good faith from one whom he believes to be the owner,’ and a ‘titulo putativo’ ‘being
tanggapan ng Assessor Provincial, kaya’t ngayon ay magalang naming hinihiling na matala ang one which is supposed to have preceded the acquisition of a thing, although in fact it did not, as
naturang parang.”8 (Emphasis supplied) 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
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 The records of the case amply supports the holding of the appellate court that the requirements
Provincial Assessor and forthwith a new tax declaration was issued in his name for the entire for ordinary prescription hereinabove described have indeed been duly met; it explained:
13,856 square-meter property. The trial court itself likewise found that the sale by the “In the instant case appellant Servando Flores took possession of the controverted portion in
Sarmientos to respondent Cruz covered both the riceland and the pasture land, it said: 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’ possession of the entire
parcel which includes the portion sought to be recovered by appellees was not only in the
concept of an owner but also public, peaceful and uninterrupted. While it is true that the
possession of the entire area by his predecessor-in-interest (Fernando Cruz) may not have been
peaceful as it was indeed characterized with violence which resulted in the death of Jose
Marcelo, this cannot be said of appellant Flores’ possession of the property, in respect of which
no evidence to the contrary appears on record.”21

The Court finds no cogent reasons to reverse the above findings of the appellate court and thus
gives its affirmance to the assailed decision.
WHEREFORE, the petition for review on certiorari is DENIED. No costs.
SO ORDERED.
G.R. No. 147951. December 14, 2009.* abandoned or declined to assert it. The essential elements of laches are: (a) conduct on the part
ARSENIO OLEGARIO and HEIRS OF ARISTOTELES F. OLEGARIO, represented by of the defendant, or of one under whom he claims, giving rise to the situation complained of;
CARMELITA GUZMAN-OLEGARIO, petitioners, vs. PEDRO C. MARI, represented (b) delay in asserting complainant’s rights after he had knowledge of defendant’s acts and after
by LILIA C. MARI-CAMBA, respondent. he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that the
Ownership; Prescription; Ownership cannot be acquired by mere occupation—unless complainant will assert the right on which he bases his suit and (d) injury or prejudice to the
coupled with the element of hostility towards the true owner, occupation and use, however defendant in the event the relief is accorded to the complainant.
long, will not confer title by prescription or adverse possession.—Despite 25 years of PETITION for review on certiorari of a decision of the Court of Appeals.
occupying the disputed lots, therefore, petitioners did not acquire ownership. Firstly, they had    The facts are stated in the opinion of the Court.
no just title. Petitioners did not present any document to show how the titles over Lot Nos.   Aquino and Martinez Law Offices for petitioners.
17526 and 17533 were transferred to them, whether from respondent, his predecessor, or any   Rogelio O. Montero for respondent.
other person. Petitioners, therefore, could not acquire the disputed real property by ordinary DEL CASTILLO, J.:
prescription through possession for 10 years. Secondly, it is settled that ownership cannot be Possession, to constitute the foundation of acquisitive prescription, must be possession
acquired by mere occupation. Unless coupled with the element of hostility towards the true under a claim of title or must be adverse. Acts of a possessory character performed by one who
owner, occupation and use, however long, will not confer title by prescription or adverse holds the property by mere tolerance of the owner are clearly not in the concept of an owner
possession. In other words, possession, to constitute the foundation of a prescriptive right, must and such possessory acts, no matter how long continued, do not start the running of the period
be possession under claim of title, that is, it must be adverse. of prescription.
Same; Same; Mere material possession of land is not adverse possession as against the In the present Petition for Review on Certiorari,1 petitioners assail the April 18, 2001
owner and is insufficient to vest title, unless such possession is accompanied by the intent to Decision2 of the Court of Appeal (CA) in CA-G.R. CV No. 52124, reversing the October 13,
possess as an owner.—Petitioners’ acts of a possessory character—acts that might have been 1995 Decision3 of the Regional Trial Court (RTC) of Pangasinan, Branch 39. The CA declared
merely tolerated by the owner—did not constitute possession. No matter how long tolerated the respondent herein as the owner of Lot Nos. 17553, 17526 and 14356 of the Mangatarem
possession is continued, it does not start the running of the prescriptive period. Mere material cadastral survey.
possession of land is not adverse possession as against the owner and is insufficient to vest Factual antecedents
title, unless such possession is accompanied by the intent to possess as an owner. There should As early as 1916,4 Juan Mari, the father of respondent, declared his ownership over a
be a hostile use of such a nature and exercised under such circumstance as to manifest and give parcel of land in Nancasalan, Mangatarem for tax purposes. He took possession of the same by
notice that the possession is under a claim of right. delineating the limits with a bamboo fence, 5 planting various fruit bearing trees and
Same; Same; Tax Declarations; Tax declarations prove that the holder has a claim of bamboos6 and constructing a house thereon.7 After a survey made in 1950, Tax Declaration No.
title over the property—aside from manifesting a sincere desire to obtain title thereto, they 80488 for the year 1951 specified the subject realty as a residential land with an area of 897
announce the holder’s adverse claim against the state and other interested parties.—Peti- square meters and as having the following boundaries: North— Magdalena Fernandez; South
tioners have failed to prove that their possession was adverse or under claim of title or right. — Catalina Cacayorin; East— Camino Vecinal; and West— Norberto Bugarin. In 1974, the
Unlike respondent, petitioners did not have either the courage or forthrightness to publicly subject realty was transferred to respondent, Pedro Mari, by virtue of a deed of sale.
declare the disputed lots as owned by them for tax purposes. Tax declarations “prove that the Meanwhile, in 1947, Wenceslao Olegario, the husband of Magdalena Fernandez and
holder has a claim of title over the property. Aside from manifesting a sincere desire to obtain father of petitioner Arsenio Olegario, filed a new tax declaration 9 for a certain 50-square meter
title thereto, they announce the holder’s adverse claim against the state and other interested parcel of land, indicating the following boundaries: North— Cesario and Antonio Fernandez;
parties.” Petitioners’ omission, when viewed in conjunction with respondent’s continued South— Juan Mari; East— Barrio Road; and West— Norberto Bugarin. Then on May 14,
unequivocal declaration of ownership over, payment of taxes on and possession of the subject 1961, Wenceslao Olegario executed a “Deed of Quit-Claim of Unregistered Property” 10 in
realty, shows a lack of sufficient adverseness of the formers’ possession to qualify as being one favor of Arsenio Olegario transferring to the latter inter alia the aforementioned 50-square
in the concept of owner. meter property.
Same; Same; Open, exclusive and undisputed possession of alienable public land for In the cadastral survey conducted from 1961 to 1962, the subject realty was identified as
the period prescribed by law creates the legal fiction whereby the land, upon completion of the Lot Nos. 17526, 17553 and 14356 of the Mangatarem Cadastre. At this time, Wenceslao
requisite period, ipso jure and without the need of judicial or other sanction, ceases to be Olegario disputed Juan Mari’s claim over Lot Nos. 17526 and 17553. Hence, on the two
public land and becomes private property.—On the other hand, being the sole transferree of his corresponding survey notification cards dated September 28, 1968, 11 the claimant appeared as
father, respondent showed through his tax declarations which were coupled with possessory “Juan Mari v. Wenceslao Olegario”. With regard to Lot No. 14356, the survey notification card
acts that he, through his predecessor, had been in possession of the land for more than 30 years named Juan Mari as the claimant.
since 1916. “Open, exclusive and undisputed possession of alienable public land for the period Sometime around 1988, respondent filed with the Department of Environment and Natural
prescribed by law creates the legal fiction whereby the land, upon completion of the requisite Resources Regional Office in Pangasinan a protest against the petitioners because of their
period—ipso jure and without the need of judicial or other sanction, ceases to be public land encroachment into the disputed realty. After investigation, said office decided in favor of the
and becomes private property.” Ownership of immovable property is acquired by extraordinary respondent and found the latter to be the owner of Lot Nos. 17526, 17553 and 14356.
prescription through possession for 30 years. For purposes of deciding the instant case, Petitioners did not appeal and the said decision became final and executory.
therefore, the possession by respondent and his predecessor had already ripened into ownership In 1989, Arsenio Olegario caused the amendment of his tax declaration 12 for the 50-square
of the subject realty by virtue of prescription as early as 1946. meter property to reflect 1) an increased area of 341 square meters; 2) the Cadastral Lot No. as
Same; Laches; Elements; The essence of laches is the failure or neglect, for an 17526, Pls-768-D;13 and 3) the boundaries as: North-NE Lot 16385 & Road; South-NW-Lots
unreasonable and unexplained length of time, to do that which, through due diligence, could or 14363 & 6385, Pls-768-D; East-SE-Lot 17552, Pls-768-D and West-SW-Lot 14358, Pls-768-
should have been done earlier, thus giving rise to a presumption that the party entitled to D.
assert it had earlier abandoned or declined to assert it.—Petitioners Proceedings before the Regional Trial Court
136cannot find refuge in the principle of laches. It is not just the lapse of time or delay In 1990, after discovering the amended entries in Arsenio Olegario’s Tax Declaration No.
that constitutes laches. The essence of laches is the failure or neglect, for an unreasonable and 4107-R, respondent filed a complaint 14 with the RTC of Lingayen, Pangasinan, for Recovery of
unexplained length of time, to do that which, through due diligence, could or should have been Possession and Annulment of Tax Declaration No. 4107-R. Respondent alleged, inter alia, that
done earlier, thus giving rise to a presumption that the party entitled to assert it had earlier
Juan Mari, and subsequently his successor, was deprived by the Olegarios of the possession of Petitioners’ Evidence is Weak
portions of subject realty which respondent owned. Trial thereafter ensued. Considering the conflicting findings of the RTC and the CA, a circumstance that
On October 13, 1995, the RTC rendered judgment in favor of the petitioners, viz: constitutes an exception18 to the general rule that only questions of law are proper subjects of a
“WHEREFORE, in the light of the foregoing considerations, judgment is hereby rendered petition under Rule 45, we shall assess and weigh the evidence adduced by the parties and shall
as follows: resolve the questions of fact raised by petitioners.
1. Declaring the defendants-Olegario the owners of Lots 17553 and 17526 of the A study of the evidence presented by petitioners shows that the CA did not err in finding
Mangatarem cadastral survey. such evidence weaker than that of respondent. Arsenio Olegario testified that as early as 1937
2.  Dismissing the plaintiff’s Complaint on the ground of prescription of action and on their family had built a nipa house on the land where they lived. Yet he also testified that the
the further ground that [he] failed to prove [his] ownership of any portion of the two lots former owner of the land was his mother, Magdalena Fernandez. 19 Significantly, Magdalena
mentioned in the next preceding paragraph (assuming arguendo that [his] action has not Fernandez has never claimed and was never in possession or ownership of Lot Nos. 17553,
prescribed); 17526 and 14356. Petitioners’ evidence thus supports the conclusion that in 1937 they were in
3. Ordering the plaintiff to pay the costs of this suit. No damages are awarded by the possession, not of Lot No. 17526, but of their mother’s land, possibly 50 square meters of it,
Court. which is the approximate floor area of the house. Conversely, petitioners’ evidence fails to
SO ORDERED.”15 clearly prove that in 1937 they were already occupying the disputed lots. The records, in fact,
Proceedings before the Court of Appeals do not show exactly when the Olegarios entered and started occupying the disputed lots.
Respondent appealed to the CA which reversed the trial court’s findings. The CA found The evidence shows that a hollow block fence, an improvement introduced by the
respondent to have adduced stronger evidence of prior possession and ownership of the Olegarios in 1965, now exists somewhere along the disputed lots. Petitioners’ claim that they
disputed realty. The dispositive portion of the CA Decision states: were in possession of the disputed lots even prior to 1965 based on the existence of the bamboo
“WHEREFORE, the trial court’s Decision dated October 13, 1995 is REVERSED and fence on the boundary of their land preceding the existence of the hollow block fence,
SET ASIDE and a new one is hereby entered declaring appellant Pedro C. Mari represented by however, holds no water. The testimony of Marcelino Gutierrez shows that formerly there was
Lilia C. Mari-Camba the lawful owner of Lot Nos. 17526, 17553 and 14356 of the a bamboo fence demarcating between the land of the Olegarios and the Maris and that in 1964
Mangatarem Cadastre, without pronouncement as to costs. or 1965 a hollow block fence was constructed. He did not say, however, that the place where
      SO ORDERED.”16 the hollow block fence was constructed was the exact same place where the bamboo boundary
Petitioners, without filing a motion for reconsideration of the CA Decision, thereafter filed fence once stood. Even the testimony of Arsenio Olegario was ambiguous on this matter, viz:
the present petition for review. Q  When was the [concrete] hollow block [fence]            separating   your property [from]
the property of Juan Mari constructed?
Issues         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
Petitioners raise the following issues: land of Juan Mari?
1. Whether or not there was failure on [the part of] the Court of Appeals to appreciate A   Bamboo fence, sir.20
and give weight to the evidence presented by the petitioners;   Arsenio merely testified that a bamboo fence was formerly the visible boundary between
2. Whether or not the Court of Appeals erred in its decision in adjudicating ownership of his land and the land of Juan Mari; and that a concrete hollow block fence was constructed in
the said lots in favor of the respondent and [in] giving great weight to the respondent’s 1965. His testimony failed to show that the concrete hollow block fence was constructed in the
evidence; same position where the bamboo boundary fence once stood.
3. Whether or not the Court of Appeals erred in its failure to declare the action as barred On the other hand, there is ample evidence on record, embodied in Tax Declaration No.
by laches; 9404 for the year 1947; the survey sketch plan of 1961; and the survey plan of 1992, that the
4.  Whether or not the Court of Appeals failed to find an[d] declare the petitioners as boundary claimed by the Olegarios kept moving in such a way that the portion they occupied
having acquired ownership of the disputed lots by acquisitive prescription; expanded from 50 square meters (in the land of his mother) to 377 square meters. 21 Viewed in
5. Whether or not the Court of Appeals erred in adjudicating the lot in favor of relation to the entire body of evidence presented by the parties in this case, these documents
respondent and also [in] denying award of damages to petitioners.17 cannot plausibly all be mistaken in the areas specified therein. As against the bare claim of
Petitioners’ Arguments Arsenio22 that his predecessor merely made an inaccurate estimate in providing 50 square
Petitioners contend that they have been in possession of the disputed lots since 1948 or meters as the area claimed by the latter in 1947 in the tax declaration, 23 we find it more
thereabouts, or for more than 30 years already. Hence, they acquired ownership thereover by plausible to believe that each of the documents on record stated the true area measurements of
virtue of prescription. They also impute negligence or failure on the part of respondent to assert the parties’ claims at the particular time each document was executed.
his alleged rights within a reasonable time. As correctly found by the CA, the earliest that petitioners can be considered to have
Respondent’s Arguments occupied the disputed property was in 1965 when the concrete hollow block fence was
On the other hand, respondent asserts that petitioners claim ownership over only a certain constructed on the disputed lots.
50-square meter parcel of land, as evidenced by their tax declaration which consistently Ownership and Prescription
declared only such area. It was only in September 1989 that petitioners sought to expand the As previously mentioned, respondent’s predecessor, Juan Mari, had declared the disputed
area of their claim to 341 square meters by virtue of a letter to the Provincial Assessor of realty24 for tax purposes as early as 1916. The tax declarations show that he had a two storey
Pangasinan. Hence, respondent asserts that prescription has not set in. Respondent also house on the realty. He also planted fruit bearing trees and bamboos thereon. The records 25 also
contends that petitioners’ occupancy has been illegal from the point of inception and thus, such show that the 897-square meter property had a bamboo fence along its perimeter. All these
possession can never ripen into a legal status. 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
Our Ruling sometime in 1965.
Based on Article 538 of the Civil Code,26 the respondent is the preferred possessor
The petition has no merit. 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 the date of the cards, until 1989 there was nothing to indicate any change in the position of any
possession only sometime in 1965. of the parties. Moreover, that respondent had not conceded ownership and possession of the
Despite 25 years of occupying the disputed lots, therefore, petitioners did not acquire land to petitioners is clear also from the fact that Pedro Mari continued to declare the entire
ownership. Firstly, they had no just title. Petitioners did not present any document to show how 897-square meter property in his name and pay taxes for the entire area after his father
the titles over Lot Nos. 17526 and 17533 were transferred to them, whether from respondent, transferred the property to him.
his predecessor, or  any other person. 27 Petitioners, therefore, could not acquire the disputed On the other hand, it was petitioners who suddenly changed their position in 1989 by
real property by ordinary prescription through possession for 10 years. Secondly, it is settled changing the area of the property declared in their name from 50 square meters to 341 square
that ownership cannot be acquired by mere occupation. Unless coupled with the element of meters and specifying the details to make it appear that the tax declaration for the 50-square
hostility towards the true owner, occupation and use, however long, will not confer title by meter property pertained to Lot No. 17526. As previously discussed, it was only at this point,
prescription or adverse possession.28 In other words, possession, to constitute the foundation of in 1989, that it can be clearly stated that petitioners were making their claim of ownership
a prescriptive right, must be possession under claim of title, that is, it must be adverse.29 public and unequivocal and converting their possession over Lot No. 17526 into one in the
Petitioners’ acts of a possessory character—acts that might have been merely tolerated by concept of owner.
the owner—did not constitute possession. No matter how long tolerated possession is Upon discovery of this clear and unequivocal change in status of petitioners’ position over
continued, it does not start the running of the prescriptive period. 30 Mere material possession of the disputed land respondent immediately acted. He filed in 1990 the complaint for recovery of
land is not adverse possession as against the owner and is insufficient to vest title, unless such possession and nullification of tax declaration. Hence, we find no laches in the instant case.
possession is accompanied by the intent to possess as an owner. There should be a hostile use In conclusion, we find no reversible error on the part of the CA in recognizing the
of such a nature and exercised under such circumstance as to manifest and give notice that the ownership and right of possession of respondent over Lot Nos. 17526, 17553 and 14356. There
possession is under a claim of right.31 is, thus, also no basis for an award of damages and attorney’s fees in favor of petitioners.
Petitioners have failed to prove that their possession was adverse or under claim of title or WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of
right. Unlike respondent, petitioners did not have either the courage or forthrightness to Appeals dated April 18, 2001 is AFFIRMED.
publicly declare the disputed lots as owned by them for tax purposes. Tax declarations “prove SO ORDERED.
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.”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 ripened 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,
G.R. No. 135602. April 28, 2000.* may be transferred by the sale or assignment of the property, and the transferee can maintain
HEIRS OF QUIRICO SERASPI AND PURIFICACION R. SERASPI, such action against the wrongdoer.
petitioners, vs. COURT OF APPEALS AND SIMEON RECASA, respondents.
Ownership; Prescription; The contention of a party of having acquired ownership of a PETITION for review on certiorari of a decision of the Court of Appeals.
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 MENDOZA, J.:
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 prescription through adverse This case is here for review of the decision1 of the Court of Appeals, dated May 15, 1998,
possession for ten (10) years. The contention has no merit, because he has neither just title nor reversing the decision of Branch 1 of the Regional Trial Court, Kalibo, Aklan and dismissing,
good faith. As Art. 1129 provides: For the purposes of prescription, there is just title when the on the ground of prescription, the complaint filed by petitioners for the recovery of possession
adverse claimant came into possession of the property through one of the modes recognized by and ownership of two parcels of land in Banga, Aklan.
law for the acquisition of ownership or other real rights, but the grantor was not the owner or The facts are as follows:
could not transmit any right. In the case at bar, private respondent did not acquire possession of Marcelino Recasa was the owner of two parcels of land described as follows:
the property through any of the modes recognized by the Civil Code, to wit: (1) occupation, (2) PARCEL I: A parcel of cocal land located at Barangay Lapnag, Banga, Aklan, with an area of
intellectual creation, (3) law, (4) donation, (5) succession, (6) tradition in consequence of 770 square meters, more or less; bounded North by Lazaro Navarra, now Flocerfina Ibit; South
certain contracts, and (7) prescription. by Celsa Retis; East by Banga-Libacao Provincial Road; and West by Aklan River, which
Same;  Occupation; Succession; Co-Ownership; While as heir to the intestate estate of parcel of land declared in the name of Marcelino Recasa under Tax Declaration No. 3721,
his deceased parent is a co-owner of all of the latter’s properties, such co-ownership rights Series of 1984, with an assessed value of P2,440.00;
were effectively dissolved by the partition agreed upon by the heirs.—Private respondent could PARCEL II: A parcel of cocal land with an area of 3,648 square meters, more or less,
not have acquired ownership over the property through occupation since, under Art. 714 of the located in Barangay Lapnag, Banga, Aklan; bounded North by Concepcion Navarra; South by
Civil Code, the ownership of a piece of land cannot be acquired by occupation. Nor can he Diosdado Navarra; East by Gabriel Reloj; and West by National Road; covered by Tax
base his ownership on succession for the property was not part of those distributed to the heirs Declaration No. 11079 in the name of Purificacion Seraspi, Series of 1984, and having an
of the third marriage, to which private respondent belongs. It must be remembered that in the assessed value of P1,650.00.
partition of the intestate estate of Marcelino Recasa, the properties were divided into three During his lifetime, Marcelino contracted three (3) marriages. At the time of his death in 1943,
parts, each part being reserved for each group of heirs belonging to one of the three marriages he had fifteen (15) children from his three marriages. In 1948, his intestate estate was
Marcelino entered into. Since the contested parcels of land were adjudicated to the heirs of the partitioned into three parts by his heirs, each part corresponding to the share of the heirs in each
first and second marriages, it follows that private respondent, as heir of the third marriage, has marriage.
no right over the parcels of land. While, as heir to the intestate estate of his father, private In the same year, Patronicio Recasa, representing the heirs of the first marriage, sold the
respondent was co-owner of all of his father’s properties, such co-ownership rights were share of the heirs in the estate to Dominador Recasa, an heir of the second marriage. On June
effectively dissolved by the partition agreed upon by the heirs of Marcelino Recasa. 15, 1950, Dominador, representing the heirs of the second marriage, in turn sold the share of
Good Faith; Words and Phrases; Good faith consists in the reasonable belief that the the heirs to Quirico and Purificacion Seraspi whose heirs are the present petitioners. Included
person from whom the possessor received the thing was its owner but could not transmit the in this sale was the property sold by Patronicio to Dominador.
ownership thereof.—Neither can private respondent claim good faith in his favor. Good faith In 1958, the Seraspis obtained a loan from the Kalibo Rural Bank, Inc. (KRBI) on the
consists in the reasonable belief that the person from whom the possessor received the thing security of the lands in question to finance improvements on the lands. However, they failed to
was its owner but could not transmit the ownership thereof. Private respondent entered the pay the loan for which reason the mortgage was foreclosed and the lands were sold to KRBI as
property without the consent of the previous owner. For all intents and purposes, he is a mere the highest bidder. Subsequently, the lands were sold by KRBI to Manuel Rata, brother-in-law
usurper. of Quirico Seraspi. It appears that Rata, as owner of the property, allowed Quirico Seraspi to
Sales; While a contract of sale is perfected by the meeting of minds upon the thing administer the property.
which is the object of the contract and upon the price, the ownership of the thing sold is not In 1974, private respondent Simeon Recasa, Marcelino’s child by his third wife, taking
transferred to the vendee until actual or constructive delivery of the property.—Like private advantage of the illness of Quirico Seraspi, who had been paralyzed due to a stroke, forcibly
respondent, petitioners have not acquired the property through any of the modes recognized by entered the lands in question and took possession thereof.
law for the acquisition of ownership. The basis of petitioners’ claim of ownership is the In 1983, the Seraspis purchased the lands from Manuel Rata and afterwards filed a
contract of sale they had with Rata, but this by itself is insufficient to make them owners of the complaint against Simeon Recasa for recovery of possession of the lands.
property. For while a contract of sale is perfected by the meeting of minds upon the thing The trial court ruled in favor of the Seraspis, stating that they had acquired the property
which is the object of the contract and upon the price, the ownership of the thing sold is not through a sale and acquisitive prescription. However, on appeal, the Court of Appeals reversed
transferred to the vendee until actual or constructive delivery of the property. Hence, the on the ground that the action of the Seraspis was barred by the statute of limitations. Hence,
maxim non nudis pactis, sed traditione dominia dominica rerum transferuntur (not mere this petition filed by Quirico Seraspi who, in the meantime, had passed away and was thus
agreements but tradition transfers the ownership of things). substituted by his heirs.
Actions; Ownership; Reconveyance; When the property belonging to a person is Two issues are presented: (1) whether petitioners’ action is barred by extinctive
unlawfully taken by another, the former has the right of action against the latter for the prescription; and (2) whether private respondent Simeon Recasa acquired ownership of the
recovery of the property, and such right may be transferred by the sale or assignment of the properties in question through acquisitive prescription.
property, and the transferee can maintain such action against the wrongdoer.—This does not We rule for petitioners.
give private respondent a right to remain in possession of the property. Petitioners’ title to the The Court of Appeals, while ruling that petitioners were able to establish the identity of
property prevails over private respondents’ possession in fact but without basis in law. As held the property as well as the credibility of their title—the elements required to prove one’s claim
in Waite v. Peterson, when the property belonging to a person is unlawfully taken by another, for recovery of property2—nonetheless held that the action was barred by prescription.
the former has the right of action against the latter for the recovery of the property. Such right 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 thing sold is not transferred to the vendee until actual or constructive delivery of the
petitioners only on April 12, 1987, i.e., thirteen (13) years after their predecessor-in-interest property.8 Hence, the maxim non nudis pactis, sed traditione dominia dominica rerum
had been allegedly deprived of the possession of the property by private respondent, it was held transferuntur (not mere agreements but tradition transfers the ownership of things).
that the action had prescribed. Consequently, petitioners are not the owners of the property since it has not been delivered to
Arradaza involves acquisitive, not extinctive, prescription. What is more, the facts in that them. At the time they bought the property from Rata in 1983, the property was in the
case arose before the effectivity of the Civil Code. Accordingly, what was applied was §41 of possession of private respondent.
the Code of Civil Procedure which provides that title by prescription is acquired after ten (10) However, this does not give private respondent a right to remain in possession of the
years, in whatever manner possession may have been commenced or continued, and regardless property. Petitioners’ title to the property prevails over private respondents’ possession in fact
of good faith or with just title. On the other hand, what is involved here is extinctive but without basis in law. As held in Waite v. Peterson,9 when the property belonging to a
prescription, and the applicable law is Art. 1141 of the Civil Code which provides: person is unlawfully taken by another, the former has the right of action against the latter for
Real actions over immovables prescribe after thirty years. the recovery of the property. Such right may be transferred by the sale or assignment of the
This provision is without prejudice to what is established for the acquisition of ownership property, and the transferee can maintain such action against the wrongdoer.
and other real rights by prescription. WHEREFORE, the decision of the respondent Court of Appeals is hereby REVERSED,
The question, therefore, is whether private respondent has acquired the ownership of the two and private respondent Simeon Recasa is ordered to return the possession of the contested
lands by prescription. On this point, the Civil Code provides: parcels of land to petitioners as heirs of Quirico and Purificacion Seraspi.
Art. 1117. Acquisitive prescription of dominion and other real rights may be ordinary or SO ORDERED.
extraordinary.
Ordinary acquisitive prescription requires possession of things in good faith and with just
title for the time fixed by law.
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
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, 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
G.R. No. 123498. November 23, 2007.* requisites of due process. Franco was entitled, as a matter of right, to notice, if the requirements
BPI FAMILY BANK, petitioner, vs. AMADO FRANCO and COURT OF APPEALS, of due process are to be observed. Yet, he received a copy of the Notice of Garnishment only
respondents. on September 27, 1989, several days after the two checks he issued were dishonored by BPI-
Civil Law; Property; The movable property mentioned in Article 559 of the Civil Code FB on September 20 and 21, 1989. Verily, it was premature for BPI-FB to freeze Franco’s
pertains to a specific or determinate thing—a determinate or specific thing is one that is accounts without even awaiting service of the Makati RTC’s Notice of Garnishment on Franco.
individualized and can be identified or distinguished from others of the same kind.—BPI-FB’s Civil Law; Damages; Moral Damages; In the absence of fraud or bad faith, moral
argument is unsound. To begin with, the movable property mentioned in Article 559 of the damages cannot be awarded; and that the adverse result of an action does not per se make the
Civil Code pertains to a specific or determinate thing. A determinate or specific thing is one action wrongful, or the party liable for it. One may err, but error alone is not a ground for
that is individualized and can be identified or distinguished from others of the same kind. granting such damages.—We have had occasion to hold that in the absence of fraud or bad
Same;  Same; In this case, the deposit in Franco’s accounts consists of money which, faith, moral damages cannot be awarded; and that the adverse result of an action does not per
albeit characterized as a movable, is generic and fungible.—In this case, the deposit in se make the action wrongful, or the party liable for it. One may err, but error alone is not a
Franco’s accounts consists of money which, albeit characterized as a movable, is generic and ground for granting such damages.
fungible. The quality of being fungible depends upon the possibility of the property, because of Same;  Exemplary Damages; As there is no basis for the award of moral damages,
its nature or the will of the parties, being substituted by others of the same kind, not having a neither can exemplary damages be granted.—We also deny the claim for exemplary damages.
distinct individuality. Franco should show that he is entitled to moral, temperate, or compensatory damages before
Mercantile Law; Banking Laws; Money as a Medium of Exchange;  Money, which had the court may even consider the question of whether exemplary damages should be awarded to
passed through various transactions in the general course of banking business, even if of him. As there is no basis for the award of moral damages, neither can exemplary damages be
traceable origin, bears no earmarks of peculiar ownership.—It bears emphasizing that money granted.
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 PETITION for review on certiorari of a decision of the Court of Appeals.
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. NACHURA, J.:
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 Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost
depositors with meticulous care, always having in mind the fiduciary nature of the relation- fidelity. We reiterate this exhortation in the case at bench.
ship.—In every case, the depositor expects the bank to treat his account with the utmost Before us is a Petition for Review on Certiorari seeking the reversal of the Court of
fidelity, whether such account consists only of a few hundred pesos or of millions. The bank Appeals (CA) Decision1 in CA-G.R. CV No. 43424 which affirmed with modification the
must record every single transaction accurately, down to the last centavo, and as promptly as judgment2 of the Regional Trial Court, Branch 55, Manila (Manila RTC), in Civil Case No. 90-
possible. This has to be done if the account is to reflect at any given time the amount of money 53295.
the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI Family Bank
whomever directs. A blunder on the part of the bank, such as the dishonor of the check without (BPI-FB) allegedly by respondent Amado Franco (Franco) in conspiracy with other
good reason, can cause the depositor not a little embarrassment if not also financial loss and individuals,3 some of whom opened and maintained separate accounts with BPI-FB, San
perhaps even civil and criminal litigation. The point is that as a business affected with public Francisco del Monte (SFDM) branch, in a series of transactions.
interest and because of the nature of its functions, the bank is under obligation to treat the On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a
accounts of its depositors with meticulous care, always having in mind the fiduciary nature of savings and current account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro
their relationship. x x x. Investment Corporation (FMIC) also opened a time deposit account with the same branch of
Remedial Law; Civil Procedure;  Amendment to Conform to Evidence;  When issues not BPI-FB with a deposit of P100,000,000.00, to mature one year thence.
raised by the pleadings are tried with the express or implied consent of the parties, they shall Subsequently, on August 31, 1989, Franco opened three accounts, namely, a
be treated in all respects as if they had been raised in the pleadings—such amendment of the current,4 savings,5 and time deposit,6 with BPI-FB. The current and savings accounts were
pleadings as may be necessary to cause them to conform to the evidence and to raise these respectively funded with an initial deposit of P500,000.00 each, while the time deposit account
issues may be made upon motion of any party at anytime, even after judgment, but failure to had P1,000,000.00 with a maturity date of August 31, 1990. The total amount of P2,000,000.00
amend does not affect the result of the trial of these issues.—Section 5. Amendment to conform used to open these accounts is traceable to a check issued by Te-vesteco allegedly in
to or authorize presentation of evidence.—When issues not raised by the pleadings are tried consideration of Franco’s introduction of Eladio Teves, 7 who was looking for a conduit bank to
with the express or implied consent of the parties, they shall be treated in all respects as if they facilitate Tevesteco’s business transactions, to Jaime Sebastian, who was then BPI-FB SFDM’s
had been raised in the pleadings. Such amendment of the pleadings as may be necessary to Branch Manager. In turn, the funding for the P2,000,000.00 check was part of the
cause them to conform to the evidence and to raise these issues may be made upon motion of P80,000,000.00 debited by BPI-FB from FMIC’s time deposit account and credited to
any party at any time, even after judgment; but failure to amend does not affect the result of the Tevesteco’s current account pursuant to an Authority to Debit purportedly signed by FMIC’s
trial of these issues. If evidence is objected to at the trial on the ground that it is now within the officers.
issues made by the pleadings, the court may allow the pleadings to be amended and shall do so It appears, however, that the signatures of FMIC’s officers on the Authority to Debit were
with liberality if the presentation of the merits of the action and the ends of substantial justice forged.8 On September 4, 1989, Antonio Ong, 9 upon being shown the Authority to Debit,
will be subserved thereby. The court may grant a continuance to enable the amendment to be personally declared his signature therein to be a forgery. Unfortunately, Tevesteco had already
made. effected several withdrawals from its current account (to which had been credited the
Service of Court Papers; It should be noted that the strict requirement on the service of P80,000,000.00 covered by the forged Authority to Debit) amounting to P37,455,410.54,
papers upon the parties affected is designed to comply with the elementary requisite of due including the P2,000,000.00 paid to Franco.
process.—In this argument, we perceive BPI-FB’s clever but transparent ploy to circumvent On September 8, 1989, impelled by the need to protect its interests in light of FMIC’s
Section 4, Rule 13 of the Rules of Court. It should be noted that the strict requirement on forgery claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus
service of court papers upon the parties affected is designed to comply with the elementary 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 October 31, 1991; (2) the balance 26 on his savings account, plus interest thereon; (3) the
limitations of BPI-FB’s computer.12 advance interest27 paid to him which had been deducted when he pre-terminated his time
In the meantime, two checks13 drawn by Franco against his BPI-FB current account were deposit account; and (4) the payment of actual, moral and exemplary damages, as well as
dishonored upon presentment for payment, and stamped with a notation “account under attorney’s fees.
garnishment.” Apparently, Franco’s current account was garnished by virtue of an Order of BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts of
Attachment issued by the Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89- Franco and refusing to release his deposits, claiming that it had a better right to the amounts
4996 (Makati Case), which had been filed by BPI-FB against Franco et al.,14 to recover the which consisted of part of the money allegedly fraudulently withdrawn from it by Tevesteco
P37,455,410.54 representing Tevesteco’s total withdrawals from its account. and ending up in Franco’s accounts. BPI-FB asseverated that the claimed consideration of
Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB P2,000,000.00 for the introduction facilitated by Franco between George Daantos and Eladio
prior to Franco’s receipt of notice that his accounts were under garnishment. 15 In fact, at the Teves, on the one hand, and Jaime Sebastian, on the other, spoke volumes of Franco’s
time the Notice of Garnishment dated September 27, 1989 was served on BPI-FB, Franco had participation in the fraudulent transaction.
yet to be impleaded in the Makati case where the writ of attachment was issued. On August 4, 1993, the Manila RTC rendered judgment, the dispositive portion of which
It was only on May 15, 1990, through the service of a copy of the Second Amended reads as follows:
Complaint in Civil Case No. 89-4996, that Franco was impleaded in the Makati “WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of [Franco]
case.16 Immediately, upon receipt of such copy, Franco filed a Motion to Discharge Attachment and against [BPI-FB], ordering the latter to pay to the former the following sums:
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
1. 1.P76,500.00 representing the legal rate of interest on the amount of P450,000.00
his savings and current accounts. Jesus Arangorin, BPI-FB’s new manager, could not forthwith
from May 18, 1990 to October 31, 1991;
comply with the demand as the funds, as previously stated, had already been debited because
2. 2.P498,973.23 representing the balance on [Franco’s] savings account as of May
of FMIC’s forgery claim. As such, BPI-FB’s computer at the SFDM Branch indicated that the
18, 1990, together with the interest thereon in accordance with the bank’s
current account record was “not on file.”
guidelines on the payment therefor;
With respect to Franco’s savings account, it appears that Franco agreed to an arrangement,
3. 3.P30,000.00 by way of attorney’s fees; and
as a favor to Sebastian, whereby P400,000.00 from his savings account was temporarily
4. 4.P10,000.00 as nominal damages.
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 The counterclaim of the defendant is DISMISSED for lack of factual and legal anchor.
Quiaoit’s savings account passbook to ensure that no withdrawal would be effected therefrom, Costs against [BPI-FB].
and to preserve Franco’s deposits. SO ORDERED.”28
On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the Unsatisfied with the decision, both parties filed their respective appeals before the CA. Franco
amount of P63,189.00 from the remaining balance of the time deposit account representing confined his appeal to the Manila RTC’s denial of his claim for moral and exemplary damages,
advance interest paid to him. and the diminutive award of attorney’s fees. In affirming with modification the lower court’s
These transactions spawned a number of cases, some of which we had already resolved. decision, the appellate court decreed, to wit:
FMIC filed a complaint against BPI-FB for the recovery of the amount of P80,000,000.00 “WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with
debited from its account.17 The case eventually reached this Court, and in BPI Family Savings modification ordering [BPI-FB] to pay [Franco] P63,189.00 representing the interest deducted
Bank, Inc. v. First Metro Investment Corporation,18 we upheld the finding of the courts below from the time deposit of plaintiff-appellant. P200,000.00 as moral damages and P100,000.00 as
that BPI-FB failed to exercise the degree of diligence required by the nature of its obligation to exemplary damages, deleting the award of nominal damages (in view of the award of moral
treat the accounts of its depositors with meticulous care. Thus, BPI-FB was found liable to and exemplary damages) and increasing the award of attorney’s fees from P30,000.00 to
FMIC for the debited amount in its time deposit. It was ordered to pay P65,332,321.99 plus P75,000.00.
interest at 17% per annum from August 29, 1989 until fully restored. In turn, the 17% shall Cost against [BPI-FB].
itself earn interest at 12% from October 4, 1989 until fully paid. SO ORDERED.”29
In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a better
(Buenaventura, et al.),19 recipients of a P500,000.00 check proceeding from the P80,000,000.00 right to the deposits in the subject accounts which are part of the proceeds of a forged
mistakenly credited to Tevesteco, likewise filed suit. Buenaven-tura et al., as in the case of Authority to Debit; (2) Franco is entitled to interest on his current account; (3) Franco can
Franco, were also prevented from effecting withdrawals20 from their current account with BPI- recover the P400,000.00 deposit in Quiaoit’s savings account; (4) the dishonor of Franco’s
FB, Bonifacio Market, Edsa, Caloocan City Branch. Likewise, when the case was elevated to checks was not legally in order; (5) BPI-FB is liable for interest on Franco’s time deposit, and
this Court docketed as BPI Family Bank v. Buenaventura,21 we ruled that BPI-FB had no right for moral and exemplary damages; and (6) BPI-FB’s counter-claim has no factual and legal
to freeze Buenaventura, et al.’s accounts and adjudged BPI-FB liable therefor, in addition to anchor.
damages. The petition is partly meritorious.
Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to be the We are in full accord with the common ruling of the lower courts that BPI-FB cannot
perpetrators of the multimillion peso scam.22 In the criminal case, Franco, along with the other unilaterally freeze Franco’s accounts and preclude him from withdrawing his deposits.
accused, except for Manuel Bienvenida who was still at large, were acquitted of the crime of However, contrary to the appellate court’s ruling, we hold that Franco is not entitled to
Estafa as defined and penalized under Article 351, par. 2(a) of the Revised Penal unearned interest on the time deposit as well as to moral and exemplary damages.
Code.23 However, the civil case24 remains under litigation and the respective rights and First. On the issue of who has a better right to the deposits in Franco’s accounts, BPI-FB
liabilities of the parties have yet to be adjudicated. urges us that the legal consequence of FMIC’s forgery claim is that the money transferred by
Consequently, in light of BPI-FB’s refusal to heed Franco’s demands to unfreeze his BPI-FB to Tevesteco is its own, and considering that it was able to recover possession of the
accounts and release his deposits therein, the latter filed on June 4, 1990 with the Manila RTC same when the money was redeposited by Franco, it had the right to set up its ownership
the subject suit. In his complaint, Franco prayed for the fol-lowing reliefs: (1) the interest on thereon and freeze Franco’s accounts.
the remaining balance25 of his current account which was eventually released to him on
 BPI-FB contends that its position is not unlike that of an owner of personal property who not hesitated to entrust his life’s savings to the bank of his choice, knowing that they will be
regains possession after it is stolen, and to illustrate this point, BPI-FB gives the following safe in its custody and will even earn some interest for him. The ordinary person, with equal
example: where X’s television set is stolen by Y who thereafter sells it to Z, and where Z faith, usually maintains a modest checking account for security and convenience in the settling
unwittingly entrusts possession of the TV set to X, the latter would have the right to keep of his monthly bills and the payment of ordinary expenses. x x x.
possession of the property and preclude Z from recovering possession thereof. To bolster its In every case, the depositor expects the bank to treat his account with the utmost fidelity,
position, BPI-FB cites Article 559 of the Civil Code, which provides: whether such account consists only of a few hundred pesos or of millions. The bank must
“Article 559. The possession of movable property acquired in good faith is equivalent to a title. record every single transaction accurately, down to the last centavo, and as promptly as
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may possible. This has to be done if the account is to reflect at any given time the amount of money
recover it from the person in possession of the same. the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to
If the possessor of a movable lost or of which the owner has been unlawfully deprived, whomever directs. A blunder on the part of the bank, such as the dishonor of the check without
has acquired it in good faith at a public sale, the owner cannot obtain its return without good reason, can cause the depositor not a little embarrassment if not also financial loss and
reimbursing the price paid therefor.” perhaps even civil and criminal litigation.
BPI-FB’s argument is unsound. To begin with, the movable property mentioned in Article 559 The point is that as a business affected with public interest and because of the nature of its
of the Civil Code pertains to a specific or determinate thing. 30 A determinate or specific thing is functions, the bank is under obligation to treat the accounts of its depositors with meticulous
one that is individualized and can be identified or distinguished from others of the same kind.31 care, always having in mind the fiduciary nature of their relationship. x x x.”
In this case, the deposit in Franco’s accounts consists of money which, albeit Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the
characterized as a movable, is generic and fungible. 32 The quality of being fungible depends signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in
upon the possibility of the property, because of its nature or the will of the parties, being the process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift
substituted by others of the same kind, not having a distinct individuality.33 liability thereon to Franco and the other payees of checks issued by Tevesteco, or prevent
Significantly, while Article 559 permits an owner who has lost or has been unlawfully withdrawals from their respective accounts without the appropriate court writ or a favorable
deprived of a movable to recover the exact same thing from the current possessor, BPI-FB final judgment.
simply claims ownership of the equivalent amount of money, i.e., the value thereof, which it Further, it boggles the mind why BPI-FB, even without delving into the authenticity of the
had mistakenly debited from FMIC’s account and credited to Tevesteco’s, and subsequently signature in the Authority to Debit, effected the transfer of P80,000,000.00 from FMIC’s to
traced to Franco’s account. In fact, this is what BPI-FB did in filing the Makati Case against Tevesteco’s account, when FMIC’s account was a time deposit and it had already paid advance
Franco, et al. It staked its claim on the money itself which passed from one account to another, interest to FMIC. Considering that there is as yet no indubitable evidence establishing Franco’s
commencing with the forged Authority to Debit. participation in the forgery, he remains an innocent party. As between him and BPI-FB, the
It bears emphasizing that money bears no earmarks of peculiar ownership, 34 and this latter, which made possible the present predicament, must bear the resulting loss or
characteristic is all the more manifest in the instant case which involves money in a banking inconvenience.
transaction gone awry. Its primary function is to pass from hand to hand as a medium of Second. With respect to its liability for interest on Franco’s current account, BPI-FB
exchange, without other evidence of its title.35 Money, which had passed through various argues that its noncompliance with the Makati RTC’s Order Lifting the Order of Attachment
transactions in the general course of banking business, even if of traceable origin, is no and the legal consequences thereof, is a matter that ought to be taken up in that court.
exception. The argument is tenuous. We agree with the succinct hold-ing of the appellate court in this
Thus, inasmuch as what is involved is not a specific or determinate personal property, respect. The Manila RTC’s order to pay interests on Franco’s current account arose from BPI-
BPI-FB’s illustrative example, ostensibly based on Article 559, is inapplicable to the instant FB’s unjustified refusal to comply with its obligation to pay Franco pursuant to their contract
case. of mutuum. In other words, from the time BPI-FB refused Franco’s demand for the release of
There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but the deposits in his current account, specifically, from May 17, 1990, interest at the rate of 12%
not as a legal consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s began to accrue thereon.39
account. BPI-FB conveniently forgets that the deposit of money in banks is governed by the Undeniably, the Makati RTC is vested with the authority to determine the legal
Civil Code provisions on simple loan or mutuum.36 As there is a debtor-creditor relationship consequences of BPI-FB’s noncompliance with the Order Lifting the Order of Attachment.
between a bank and its depositor, BPI-FB ultimately acquired ownership of Franco’s deposits, However, such authority does not preclude the Manila RTC from ruling on BPI-FB’s liability
but such ownership is coupled with a corresponding obligation to pay him an equal amount on to Franco for payment of interest based on its continued and unjustified refusal to perform a
demand.37 Although BPI-FB owns the deposits in Franco’s accounts, it cannot prevent him contractual obligation upon demand. After all, this was the core issue raised by Franco in his
from demanding payment of BPI-FB’s obligation by drawing checks against his current complaint before the Manila RTC.
account, or asking for the release of the funds in his savings account. Thus, when Franco issued Third. As to the award to Franco of the deposits in Quiaoit’s account, we find no reason to
checks drawn against his current account, he had every right as creditor to expect that those depart from the factual findings of both the Manila RTC and the CA.
checks would be honored by BPI-FB as debtor. Noteworthy is the fact that Quiaoit himself testified that the deposits in his account are
More importantly, BPI-FB does not have a unilateral right to freeze the accounts of actually owned by Franco who simply accommodated Jaime Sebastian’s request to temporarily
Franco based on its mere suspicion that the funds therein were proceeds of the multi-million transfer P400,000.00 from Franco’s savings account to Quiaoit’s account. 40 His testimony
peso scam Franco was allegedly involved in. To grant BPI-FB, or any bank for that matter, the cannot be characterized as hearsay as the records reveal that he had personal knowledge of the
right to take whatever action it pleases on deposits which it supposes are derived from shady arrangement made between Franco, Sebastian and himself. 41 BPI-FB makes capital of Franco’s
transactions, would open the floodgates of public distrust in the banking industry. belated allegation relative to this particular arrangement. It insists that the transaction with
Our pronouncement in Simex International (Manila), Inc. v. Court of Appeals 38 continues Quiaoit was not specifically alleged in Franco’s complaint before the Manila RTC. However, it
to resonate, thus: appears that BPI-FB had impliedly consented to the trial of this issue given its extensive cross-
“The banking system is an indispensable institution in the modern world and plays a vital role examination of Quiaoit.
in the economic life of every civilized nation. Whether as mere passive entities for the Section 5, Rule 10 of the Rules of Court provides:
safekeeping and saving of money or as active instruments of business and commerce, banks “Section 5. Amendment to conform to or authorize presentation of evidence.—When issues
have become an ubiquitous presence among the people, who have come to regard them with not raised by the pleadings are tried with the express or implied consent of the parties,
respect and even gratitude and, most of all, confidence. Thus, even the humble wage-earner has 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 We find, as the trial court did, that BPI-FB acted out of the impetus of self-protection and not
evidence and to raise these issues may be made upon motion of any party at any time, out of malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in
even after judgment; but failure to amend does not affect the result of the trial of these Article 2201 and should not be held liable for all damages now being imputed to it for its
issues. If evidence is objected to at the trial on the ground that it is now within the issues made breach of obligation.
by the pleadings, the court may allow the pleadings to be amended and shall do so with For the same reason, it is not liable for the unearned interest on the time deposit.
liberality if the presentation of the merits of the action and the ends of substantial justice will Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
be sub-served thereby. The court may grant a continuance to enable the amendment to be purpose or some moral obliquity and conscious doing of wrong; it partakes of the nature of
made.” (Emphasis supplied) fraud.44 We have held that it is a breach of a known duty through some motive of interest or ill
In all, BPI-FB’s argument that this case is not the right forum for Franco to recover the will.45 In the instant case, we cannot attribute to BPI-FB fraud or even a motive of self-
P400,000.00 begs the issue. To reiterate, Quiaoit, testifying during the trial, unequivocally enrichment. As the trial court found, there was no denial whatsoever by BPI-FB of the
disclaimed ownership of the funds in his account, and pointed to Franco as the actual owner existence of the accounts. The computer-generated document which indicated that the current
thereof. Clearly, Franco’s action for the recovery of his deposits appropriately covers the account was “not on file” resulted from the prior debit by BPI-FB of the deposits. The remedy
deposits in Quiaoit’s account. of freezing the account, or the garnishment, or even the outright refusal to honor any
Fourth. Notwithstanding all the foregoing, BPI-FB continues to insist that the dishonor of transaction thereon was resorted to solely for the purpose of holding on to the funds as a
Franco’s checks respectively dated September 11 and 18, 1989 was legally in order in view of security for its intended court action, 46 and with no other goal but to ensure the integrity of the
the Makati RTC’s supplemental writ of attachment issued on September 14, 1989. It posits that accounts.
as the party that applied for the writ of attachment before the Makati RTC, it need not be We have had occasion to hold that in the absence of fraud or bad faith, 47 moral damages
served with the Notice of Garnishment before it could place Franco’s accounts under cannot be awarded; and that the adverse result of an action does not per se make the action
garnishment. wrongful, or the party liable for it. One may err, but error alone is not a ground for granting
The argument is specious. In this argument, we perceive BPI-FB’s clever but transparent such damages.48
ploy to circumvent Section 4,42 Rule 13 of the Rules of Court. It should be noted that the strict An award of moral damages contemplates the existence of the following requisites: (1)
requirement on service of court papers upon the parties affected is designed to comply with the there must be an injury clearly sustained by the claimant, whether physical, mental or
elementary requisites of due process. Franco was entitled, as a matter of right, to notice, if the psychological; (2) there must be a culpable act or omission factually established; (3) the
requirements of due process are to be observed. Yet, he received a copy of the Notice of wrongful act or omission of the defendant is the proximate cause of the injury sustained by the
Garnishment only on September 27, 1989, several days after the two checks he issued were claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219
dishonored by BPI-FB on September 20 and 21, 1989. Verily, it was premature for BPI-FB to of the Civil Code.49
freeze Franco’s accounts without even awaiting service of the Makati RTC’s Notice of Franco could not point to, or identify any particular circumstance in Article 2219 of the
Garnishment on Franco. Civil Code,50 upon which to base his claim for moral damages.
Additionally, it should be remembered that the enforcement of a writ of attachment cannot Thus, not having acted in bad faith, BPI-FB cannot be held liable for moral damages
be made without including in the main suit the owner of the property attached by virtue under Article 2220 of the Civil Code for breach of contract.51 We also deny the claim for
thereof. Section 5, Rule 13 of the Rules of Court specifically provides that “no levy or exemplary damages. Franco should show that he is entitled to moral, temperate, or
attachment pursuant to the writ issued x x x shall be enforced unless it is preceded, or compensatory damages before the court may even consider the question of whether exemplary
contemporaneously accompanied, by service of summons, together with a copy of the damages should be awarded to him. 52 As there is no basis for the award of moral damages,
complaint, the application for attachment, on the defendant within the Philippines.” neither can exemplary damages be granted.
Franco was impleaded as party-defendant only on May 15, 1990. The Makati RTC had yet While it is a sound policy not to set a premium on the right to litigate, 53 we, however, find
to acquire jurisdiction over the person of Franco when BPI-FB garnished his that Franco is entitled to reasonable attorney’s fees for having been compelled to go to court in
accounts.43 Effectively, therefore, the Makati RTC had no authority yet to bind the deposits of order to assert his right. Thus, we affirm the CA’s grant of P75,000.00 as attorney’s fees.
Franco through the writ of attachment, and consequently, there was no legal basis for BPI-FB Attorney’s fees may be awarded when a party is compelled to litigate or incur expenses to
to dishonor the checks issued by Franco. protect his interest,54 or when the court deems it just and equitable. 55 In the case at bench, BPI-
Fifth. Anent the CA’s finding that BPI-FB was in bad faith and as such liable for the FB refused to unfreeze the deposits of Franco despite the Makati RTC’s Order Lifting the
advance interest it deducted from Franco’s time deposit account, and for moral as well as Order of Attachment and Quiaoit’s unwavering assertion that the P400,000.00 was part of
exemplary damages, we find it proper to reinstate the ruling of the trial court, and allow only Franco’s savings account. This refusal constrained Franco to incur expenses and litigate for
the recovery of nominal damages in the amount of P10,000.00. However, we retain the CA’s almost two (2) decades in order to protect his interests and recover his deposits. Therefore, this
award of P75,000.00 as attorney’s fees. Court deems it just and equitable to grant Franco P75,000.00 as attorney’s fees. The award is
In granting Franco’s prayer for interest on his time deposit account and for moral and reasonable in view of the complexity of the issues and the time it has taken for this case to be
exemplary damages, the CA attributed bad faith to BPI-FB because it (1) completely resolved.56
disregarded its obligation to Franco; (2) misleadingly claimed that Franco’s deposits were Sixth. As for the dismissal of BPI-FB’s counter-claim, we uphold the Manila RTC’s
under garnishment; (3) misrepresented that Franco’s current account was not on file; and (4) ruling, as affirmed by the CA, that BPI-FB is not entitled to recover P3,800,000.00 as actual
refused to return the P400,000.00 despite the fact that the ostensible owner, Quiaoit, wanted the damages. BPI-FB’s alleged loss of profit as a result of Franco’s suit is, as already pointed out,
amount returned to Franco. of its own making. Accordingly, the denial of its counter-claim is in order.
In this regard, we are guided by Article 2201 of the Civil Code which provides: WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision
“Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in dated November 29, 1995 is AFFIRMED with the MODIFICATION that the award of
good faith is liable shall be those that are the natural and probable consequences of the breach unearned interest on the time deposit and of moral and exemplary damages is DELETED.
of the obligation, and which the parties have foreseen or could have reasonable foreseen at the No pronouncement as to costs.
time the obligation was constituted. SO ORDERED.
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.)