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OBLIGATIONS AND CONTRACTS

Text and Cases

By

MELENCIO S. STA. MARIA, JR.

Ll.B. with Honors Ateneo de Manila School of Law; Ll.M. Boston University; Professor of Law in Obligations and Contracts Law, Persons and Family Relations Law, and Public International Law at the Ateneo De Manila School of Law; Bar Reviewer at the Ateneo De Manila School of Law; Holder: 1994, 1996, 1997, 1998, 1999, 2000 Ateneo Law Alumni Foundation Professorial Chair in Civil Law and the 1992 Sasakawa Professorial Chair in International Law; 1993 United Nations Fellow at the United Nations International Law Commission, Palais de Nation, Geneva, Switzerland; Law Practitioner.

SECOND EDITION

2003

Geneva, Switzerland; Law Practitioner. SECOND EDITION 2003 Published & Distributed by: Book Store 856 Nicanor

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i

Philippine Copyright, 2003

by

MELENCIO S. STA. MARIA, JR.

ISBN 10: 971-23-3650-6 ISBN 13: 978-971-23-3650-8

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NOT TO US, O LORD, NOT TO US, BUT TO THY NAME GIVE GLORY, FOR THE SAKE OF THY STEADFAST LOVE AND THY FAITHFULNESS!

PSALMS 115.1

THIS BOOK IS LOVINGLY DEDICATED TO MY MOTHER, FLORENCIA STA. MARIA AND MY FAMILY: AMPARITA, JOSEPH EMMANUEL, PATRICIA ANNE AND THERESE MARIAN

iii

ACKNOWLEDGMENT

This edition is my project for the Ateneo de Manila Law Alumni Foundation Professorial Chair in Civil Law awarded to me for the years 1999 and 2000. This second edition was indeed long in coming. However, I have incorporated the significant jurisprudence in Obligations and Contracts which have affected the laws on the subject since 1997. I tried to maintain the simplicity of this book without necessarily sacrificing its value as a research material. The style is still the same as the first edition.

I wish to thank Fr. Joaquin G. Bernas of the Society of Jesus (SJ) for his continued support of my professorship at the Ateneo de Manila College of Law. Also, my gratitude goes to Dean Cynthia Roxas-Del Castillo who was principally the one who encouraged me to take a more serious and scholarly approach to this complex field of law. I would not have even thought of coming out with the first edition had it not for her confidence in making me teach Obligations and Contracts in 1995. Likewise, to my former esteemed professor, Dean Eduardo De Los Angeles, I extend my sincerest gratitude for inviting me, way back in 1986, to teach at the Ateneo de Manila College of Law. I did not realize then that his invitation would have a profound effect on my life today. Aside from practicing law, teaching the law has indeed become a vocation.

For volunteering to assist me, I am grateful also to a group of talented law students, namely:

1)

Ribonnette Rodriguez and Maricris Ang, who, when I learned of the unavailability of the encoded master file of the first edition, painstakingly and continuously went over the original unedited version of the first edition and made the necessary encodings to tally with the finished version of that first edition. Their assistance made the incorporations of the new matters in this second edition much easier;

2)

Evelyn Kho, Thelma Mundin, Eugene Kaw, Ma. Margarita Mallari, Vanessa Valdez, and Cristina Salvatierra who assisted me in the proofreading of this work.

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Finally, last but not the least, to my wife, Professor Amparita Sta. Maria also of the Ateneo De Manila College of Law, who has continued to be my principal critic in all my works, Iextend my dearest appreciation.

November 18, 2002 Quezon City

MELENCIO S. STA. MARIA, JR.

vi

PREFACE

For the First Edition

The objective of this volume is to give the reader a basic understanding of the law on prescription, civil obligations, contracts, natural obligations, estoppel, trusts, and quasi-contracts. In explaining them, I heavily relied on the rulings of the Supreme Court. I chose cases for their value in exemplifying the area of law under discussion, citing verbatim the relevant portions clarifying particular articles. For me, there can be no better source of enlightenment other than the opinions of the Supreme Court deciding actual relevant disputes on the said subject matters. Excerpts from the report of the 1947 Code Commission pointing out the reason for the modification or incorporation of certain provisions have also been quoted. I also relied on some treatises of foreign authorities as our law has been generally adopted from both the American and Spanish systems. Whenever necessary, I made hypothetical illustrations of the application of the law. I believe that a better understanding of the statute can be achieved by simple examples devoid of any legalistic language.

The articles are discussed and explained continuously, whether lengthily or briefly, without any heading and sub-heading. Thus, the only guides in this book are the articles themselves. My purpose in doing this is twofold: first, to provide the reader with an undivided view of the explanation of the particular provision, and, second, for him to remember an important principle or rule, not because of any heading or sub-heading, but precisely on the basis of the particular provision dealing with it. Certainly, I am critically aware of the limitations of this approach. Thus, I have been very careful in presenting the discussions in the simplest form possible without sacrificing their exegetical content. Important rules requiring important explanations have been given proper emphasis at suitable length. I believe that this over-all style appropriately serves the objective of this edition.

If there is any law designed to significantly unify and stabilize business, commercial and legal concerns, it is the law on obligations

vii

and contracts. For if one is to transact business with other people, he definitely has to make and observe binding promises, predictable commitments, documentary formalities, important conditions, limited periods and prompt payments. Breaches and defaults also occur. All these entail legal consequences. There is, therefore, a need for a basic understanding of the legal principles of obligations and contracts. This work offers a helpful and fundamental starting point in searching for the right solutions.

I wish to acknowledge, with my sincerest appreciation, the following for the valuable assistance extended to me in the preparation of this book:

1)

my alma mater, the ATENEO DE MANILA UNIVERSITY, for awarding to me the Ateneo Law Alumni Foundation Professorial Chair in Civil Law for school-years 1996-1997 and 1997-1998. This volume is my project for the professorial chair;

2)

my talented student, DOMINIQUE P. GALLEGO (Ateneo Law Class of ‘98), for patiently proofreading the part of this text dealing with the law on obligations; and

3)

my secretary, MATILDE DOLINA, for partly assisting me in the encoding and typing of this work.

Finally, I cannot end without expressing my profound gratitude to my wife, ATTY. AMPARITA S. STA. MARIA, who is teaching Legal Research and is currently the Thesis Director of the Juris Doctor (JD) Program at the Ateneo de Manila University School of Law. She assisted me in my research and patiently showed me how to maximize the use of my computer. Moreover, her enduring support and perceptive suggestions have always been a source of encouragement.

August 23, 1997 Quezon City, Metro Manila

MELENCIO S. STA. MARIA, JR.

viii

CONTENTS

Title V. Prescription

Chapter 1.

General Provisions

1

Chapter 2.

Prescription of Ownership and Other

Real Rights

18

Chapter 3.

Prescription of Actions

44

BOOK IV. OBLIGATIONS AND CONTRACTS

 

Title I. Obligations

Chapter 1.

General Provisions

68

Chapter 2.

Nature and Effect of Obligations

75

Chapter 3.

Different Kinds of Obligations

103

Section 1. Pure and Conditional Obligations

103

Section 2. Obligations with a Period

132

Section 3. Alternative Obligations

141

Section 4. Joint and Solidary Obligations

148

Section 5. Divisible and Indivisible Obligations

167

Section 6. Obligations with a Penal Clause

170

Chapter 4.

Extinguishment of Obligations

176

General Provisions

176

Section 1. Payment or Performance

179

Subsection 1. Application of Payments

207

Subsection 2. Payment By Cession

212

Subsection 3. Tender of Payment and Consignation

214

Section 2. Loss of the Thing Due

223

Section 3. Condonation or Remission of the Debt

234

Section 4. Confusion or Merger of Rights

239

Section 5. Compensation

241

Section 6. Novation

262

ix

Title II. Contracts

Chapter 1.

General Provisions

282

Chapter 2.

Essential Requisites of Contracts

322

General Provisions

322

Section 1. Consent

323

Section 2. Object of Contracts

360

Section 3. Cause of Contracts

363

Chapter 3.

Forms of Contracts

372

Chapter 4.

Reformation of Instruments

379

Chapter 5.

Interpretation of Contracts

388

Chapter 6.

Rescissible Contracts

417

Chapter 7.

Voidable Contracts

432

Chapter 8.

Unenforceable Contracts

448

Chapter 9.

Void and Inexistent Contracts

471

Title III. Natural Obligations

Title IV. Estoppel

Title V. Trusts

Chapter 1.

General Provisions

501

Chapter 2.

Express Trusts

505

Chapter 3.

Implied Trusts

507

Title XVII. Extra-Contractual Obligations

Chapter 1.

Quasi-Contracts

515

Section 1. Negotiorum Gestio

517

Section 2. Solutio Indebiti

527

Section 3. Other Quasi-Contracts

539

x

1

PRESCRIPTION

Chapter 1

GENERAL PROVISIONS

Article 1106. By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law.

In the same way, rights and actions are lost by pres- cription. (1930a)

In Sinaon vs. Sorongon 1 where the Supreme Court ruled that, in certain cases, an implied trust is subject to prescription, it stated that:

prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of witnesses.

In Morales vs. Court of First Instance of Misamis Occidental 2 where prescription was not allowed to apply to obtain ownership over a particular property due to the fact that the statutory period was not complied with, the Supreme Court discussed the difference between acquisitive and extinctive prescriptions, thus:

There are two kinds of prescription provided in the Civil Code. One is acquisitive, i.e., the acquisition of a right by the lapse of time (Art. 1106, par. 1). Other names for acquisitive prescription are adverse possession and usucapcion. The other kind is extinctive prescription whereby rights and actions are lost by the lapse of time (Arts. 1106, par. 2 and 1139). Another name for extinctive prescription is limitation of action.

1 G.R. No. L-59879, May 13, 1985, 136 SCRA 407. 2 G.R. No. L-52278, May 29, 1980, 97 SCRA 872.

1

2

ObligatiOns and COntraCts

art. 1106

Text and Cases

The differences between acquisitive and extinctive prescriptions are well-settled as follows:

“Prescription was a statute of limitations. Whereas, usucapcion expressly ‘vests the property’ and raised a new title in the occupant, prescription did nothing more than bar the right of action. The concept most fundamental to a system of title by possession is that the relationship between the occupant and the land in terms of possession is capable of producing legal consequences. In other words, it is the possessor who is the actor. Under statute of limitations, however, one does not look at the act of the possessor but at the neglect of the owner. In the former, the important feature is the claimant in possession, and in the latter it is the owner out of possession which controls.” (Mont-gomery, Prescriptive Acquisition of Land Titles, XXVI, Philippine Law Journal, 353, 356-357 [1951])

Prescription however must be differentiated from the concept of laches which is known as the doctrine of stale demands which “is based upon grounds of public policy which requires, for the peace of society, and the discouragement of stale claims.” 3 The following are the requisites of laches:

(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which com-plaint is made and for which the complaint seeks a remedy; (2) delay in asserting the complainant’s rights, the com-plainant having had knowledge or notice of the defendant’s conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. 4

Laches is different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches is equity, whereas prescription applies at law. Prescription is based on fixed time, laches is not. 5

3 Tijam vs. Sibonghanoy, G.R. No. L-21450, April 15, 1968, 32 SCRA 29. 4 Abraham vs. Recto-Kasten, G.R. No. L-16741, January 31, 1962, 4 SCRA 298; Vergara vs. Vergara, G.R. No. L-17524, May 18, 1962, 5 SCRA 53; Custodio vs. Casiano, G.R. No. L-18977, December 27, 1963, 9 SCRA 841; Go Chi Gun, et al. vs. Go Cho, et al., 96 Phil. 622. 5 Nielson & Co., Inc. vs. Lepanto Consolidated Mining Co., G.R. No. L-21601,

art. 1106

PresCriPtiOn

3

General Provisions

Laches applies independently of prescription, “so that laches has been successfully interposed even if a shorter time had elapsed” 6 and the prescriptive period has not yet expired. Laches can also bar the filing or prosecution of a suit. In Z.E. Lotho, Inc. vs. Ice and Cold Storage, 7 where plaintiff made no genuine efforts to stop the defendant from selling ice within his (plaintiff’s) franchise-area despite plaintiff’s knowledge since 1948 of the said violative practice, and where all of plaintiff’s material records were already lost by the time he filed the suit in 1957, thereby causing prejudice to the defen- dant as such loss made it more difficult for defendant to controvert the correctness of the damages sought by plaintiff, and where delay in the filing of the case only in 1957 and the failure of the plaintiff to forewarn the defendant as early as 1948 prevented the defendant from guarding against further liability for damages or at least minimize the same. The Supreme Court allowed the dismissal of the case on the ground of laches notwithstanding the fact that the practices of the defendant might, if proven, have been an invasion of plaintiff’s rights. The Supreme Court decided this case on the issue of laches, despite complainant’s contention that the complaint was within the prescriptive period of 10 years from 1948. The issue of prescription was corollarily and independently touched by the Supreme Court which also ruled that the action had prescribed as it should have been brought within four years from 1948 as the cause of action dealt with an “injury to the rights of the plaintiff.”

Likewise in the case of Catholic Bishop of Balanga vs. Court of Appeals, 8 where the alleged landowner questioned the donation of its representative to the donee who, after such donation, possessed the property peacefully and adversely for 49 years, the Supreme Court ruled that, although prescription does not apply to registered property, “a registered landowner may lose his right to recover the possession of his registered property by reason of laches.” 9

Article 1107. Persons who are capable of acquiring property or rights by the other legal modes may acquire the

same by means of prescription.

December 17, 1966, 18 SCRA 1040. 6 Z.E. Lotho, Inc. vs. Ice and Cold Storage Industries, G.R. No. L-16563, December 28, 1961, 3 SCRA 744. 7 Id. 8 G.R. No. 112549, November 14, 1996, 76 SCAD 148. 9 See also the following cases: Victoriano vs. Court of Appeals, 194 SCRA 19 (1991); Lola vs. Court of Appeals, 145 SCRA 439 (1986); Golloy vs. Court of Appeals, 173 SCRA 26; Bergado vs. Court of Appeals, 173 SCRA 500 (1989); Republic vs. Court of Appeals, 204 SCRA 160 (1991); Marcelino vs. Court of Appeals, 210 SCRA 444 (1992); De La Calzada-Cierras vs. Court of Appeals, 212 SCRA 390 (1992); Claverias vs. Quingco, 207 SCRA 66 (1992).

4

ObligatiOns and COntraCts

arts. 1107-1108

Text and Cases

Minors and other incapacitated persons may acquire property or rights by prescription, either personally or through their parents, guardians or legal representatives. (1931a)

Prescription is a mode of acquiring property or rights. A person who is of majority age and who is qualified to do all acts of civil life may acquire property by prescription. The acquisition of a minor who personally acquires property or rights without the assistance of his parents or guardian is annullable or voidable. However, when such minor comes of age, he may ratify the acquisition. If the acquisition of the minor is through his parents or guardian, the acquisition is completely valid.

Emancipation takes place by the attainment of majority. Majority age commences at the age of eighteen years. 10 Emancipation shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life, save the exceptions established by existing laws in special cases. 11

Article 1108. Prescription, both acquisitive and extinctive, runs against:

Minors and other incapacitated persons who have

(1)

parents, guardians or other legal representatives;

Absentees who have administrators, either appointed

by them before their disappearance, or appointed by the courts;

Persons living abroad, who have managers or

administrators;

(4) Juridical persons, except the State and its subdivisions.

Persons who are disqualified from administering their property have a right to claim damages from their legal representatives whose negligence has been the cause of prescription. (1932a)

(2)

(3)

Prescription may run against minors and incapacitated persons who have parents, guardians or other legal representatives. Thus, if A

10 Family Code of the Philippines, Executive Order No. 209, August 3, 1988, as amended by Republic Act 6809, Article 234. 11 Id., Article 236. 12 G.R. No. 29759, May 18, 1989, 173 SCRA 436. 13 Republic vs. Hernaez, G.R. No. L-24137, January 1970, 31 SCRA 219;

art. 1108

PresCriPtiOn

5

General Provisions

is insane, prescription does not run against him. However, if he has a legal representative or a guardian who, under the law, is supposed to take care of his affairs during his insanity, prescription will apply. In Vda. De Alberto vs. Court of Appeals, 12 an alleged illegitimate child, represented by his natural mother, filed an action for acknowledgment and partition more than four years after the agreement of partition of the surviving legitimate heirs was duly approved by the court. The Supreme Court ruled that the action filed by the illegitimate child should be dismissed on the ground of prescription considering that the prescriptive period for assailing a partition made by heirs of a deceased prescribes after four years from the time the partition was made. The Supreme Court likewise said that under Article 1108(1) of the Civil Code, the illegitimate child can not claim exemption from the effects of prescription. The illegitimate child still has a living parent, his mother, who in fact filed the complaint in the lower court for him, falls squarely under the said article.

Prescription does not run against absentees. A person who is absent cannot manage his affairs as he can not go back to his domicile. However, if he leaves an administrator or the court appoints an administrator for him, prescription will run against him. If the absentee can go back to his domicile but he intentionally does not want to return, prescription will lie against him. Relevantly, according to Article 381 of the Civil Code:

Article 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired.

Prescription run against persons living abroad who have managers or administrators. If they do not have any manager or administrator, prescription will not run against them. However, it must be shown that they can not return to their domicile within the period when prescription should have run.

Juridical persons are those endowed by law of the attributes of a natural person and hence can acquire and lose properties and rights. The State and its subdivisions however, acting in their sovereign capacity, cannot be the subject of prescription. 13 Hence, in

Republic vs. Grijaldo, G.R. No. L-20240, December 31, 1965, 15 SCRA 681; Republic

6

ObligatiOns and COntraCts

art. 1108

Text and Cases

Republic vs. Philippine National Bank, 14 where the Armed Forces of the Philippines as plaintiff filed a case for recovery of a sum of money which the defendant-bank negligently paid to unauthorized persons. The lower court dismissed the suit on the ground that the action had already prescribed. The Supreme Court ruled that:

since the statute of limitations does not run against the State and it is neither alleged nor shown that plaintiff, in making the deposit of its funds in question with the defendant, did so other than an instrumentality of the Republic, the pleas of prescription cannot be maintained.

However, if the political subdivision is acting in its proprietary character, prescription will lie against it. Likewise, if the instru- mentality of the government is not acting in a sovereign capacity, prescription will apply to such entity. In National Development Company vs. Tobia, 15 where the plaintiff National Development Corporation, a government-owned and controlled corporation, filed a collection case which was dismissed on the ground that the claim had prescribed, the Supreme Court upheld the applicability of the rules on prescription by stating:

x x x Plaintiff herein is neither the Government of the Republic nor a branch or subdivision thereof. It is true that the plaintiff is an instrumentality of such Government, but as this Court has held in the case of Associacion Cooperative de Credito Agricola de Miagao vs. Monteclaro (74 Phil. 281), “even the Agricultural and Industrial Bank, which is a government-owned and controlled corporation and which has been created to promote agriculture and industry on a larger scale than agricultural credit cooperative associations, cannot be said to exercise a sovereign function. It is, like all other corporations capitalized by the Government, a business corporation,” and, as such, its causes of action are subject to the statute of limitation. x x x

Article 1109. Prescription does not run between husband and wife, even though there be a separation of property agreed upon in the marriage settlements or by judicial decree.

Neither does prescription run between parents and

vs. Rodriguez, G.R. No. L-18967, January 31, 1966, 16 SCRA 53. 14 G.R. No. L-16485, January 30, 1965, 13 SCRA 24. 15 G.R. No. L-17467, April 23, 1963, 7 SCRA 692. 16 G.R. No. L-15088, January 31, 1961, 1 SCRA 384. 17 Executive Order No. 209 which took effect on August 3, 1988. 18 Id., Article 57.

art. 1109

PresCriPtiOn

7

General Provisions

children, during the minority or insanity of the latter, and between guardian and ward during the continuance of the guardianship. (n)

Marriage is a special contract of permanent union between a man and a woman. Generally, prescription does not apply to husband and wife unless the law otherwise provides. This is true even though there be a separation of property agreed upon in the marriage settlement or by judicial decree. Thus in Pacio vs. Billion, 16 where a husband made a donation to his first wife and that, in order to resist the claim of the children of the said husband from his second wife, the children of the first wife contended that, though the donation was invalid, the first wife nevertheless acquired the same through acquisitive prescription considering that the void donation constituted a title and that the first wife possessed the property for about 29 years. The Supreme Court rejected such contention on the ground that there was no proof of an adverse possession on the part of the first wife. Moreover, under Article 1109 of the 1950 Civil Code “prescription by adverse possession cannot exist between husband and wife.”

However, notwithstanding the provisions of the Civil Code, a law may validly provide that prescription applies between husband and wife. Thus, the Family Code of the Philippines 17 provides that a case of legal separation between husband and wife must be filed within 5 years from the occurrence of the cause. 18 For annulment, it is generally 5 years from the particular starting point provided by law, such as from the marriage ceremony if the ground is im-potency. 19

No prescription lies between parent and child during the latter’s insanity or minority. The natural bond of filiation is the basis of this rule. Moreover, while the child is a minor, the parents are his natural guardians without the need of a court appointment. If the daughter or son has attained the age of majority and is not insane, prescription will apply. However, in special cases, the law may provide for a prescriptive period between parent and child. Thus, the Family Code of the Philippines provides that a husband may impugn the legitimacy of the child of her wife on grounds provided by law within one year, two years or three years from his knowledge of the birth of the child or its recording in the civil registry, depending on the residence of the husband and the place of birth of the child. 20

19 Id., Article 47(5). 20 Id., Article 170. 21 Article 484 of the 1950 Civil Code. 22 G.R. No. L-48889, May 11, 1989, 161 SCRA 307.

8

ObligatiOns and COntraCts

arts. 1110-1112

Text and Cases

Due to the fiduciary relationship between the guardian and the

ward, prescription will not lie during the period of guardianship. This

is to give adequate remedy to the ward for the abuses of the guardian.

Article 1110. Prescription, acquisitive and extinctive, runs in favor of, or against a married woman. (n)

Whether married or unmarried, prescription runs in favor of or against a married woman.

Article 1111. Prescription obtained by a co-proprietor or a co-owner shall benefit the others. (1933)

There is co-ownership whenever the ownership of an undivided

thing or right belongs to different persons. 21 Prescription obtained by a co-proprietor or a co-owner shall benefit the others. For example, A,

B and C co-own a particular land and, by virtue of such co-ownership

they all reside in the same. If B occupies, as a co-owner with A and C,

a portion of land adjoining the co-owned property, and he adversely

and publicly holds such adjacent portion of land continuously to the exclusion of all others who are not in the co-ownership for the required period of time, there can be a valid acquisition not only in his favor but also in favor of A and C even though they do not actually possess the said portion.

Article 1112. Persons with capacity to alienate property may renounce prescription already obtained, but not the right to prescribe in the future.

Prescription is deemed to have been tacitly renounced when the renunciation results from acts which imply the abandonment of the right acquired. (1935)

The case of Development Bank of the Philippines vs. Adil 22 is an illustrative case where the Supreme Court based its decision on, among others, Article 1112. The pertinent portions of the decision are as follows:

On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan from the Agricultural and Industrial Bank (AIB), now the Development Bank of the Philippines (DBP), in the sum of P2,000.00, Philippine Currency,

23 G.R. No. L-36827, December 10, 1990, 192 SCRA 121. 24 G.R. No. L-17821, November 29, 1963, 9 SCRA 557; Mateo vs. Moreno, G.R.

art. 1112

PresCriPtiOn

9

General Provisions

as evidenced by a promissory note of said date whereby they bound themselves jointly and severally to pay the account in ten (10) equal yearly amortizations. As the obligation remained outstanding and unpaid even after the lapse of the aforesaid ten- year period, Confesor, who was by then a member of the Congress of the Philippines, executed a second promissory note on April 11, 1961 expressly acknowledging said loan and promising to pay the same on or before June 15, 1961. The new promissory note reads as follows —

“I hereby promise to pay the amount covered by my promissory note on or before June 15, 1961. Upon my failure to do so, I hereby agree to the foreclosure of my mortgage. It is understood that if I can secure a certificate of indebtedness from the government of my back pay I will be allowed to pay the amount out of it.”

Said spouses not having paid the obligation on the specified date, the DBP filed a complaint dated September 11, 1970 in the City Court of Iloilo City against the spouses for the payment of the loan.

The right to prescription may be waived or renounced. Article 1112 of Civil Code provides:

“Art. 1112. Persons with capacity to alienate property may renounce prescription already obtained, but not the right to prescribe in the future.

Prescription is deemed to have been tacitly renounced when the renunciation results from acts which imply the abandonment of the right acquired.”

There is no doubt that prescription has set in as to the first promissory note of February 10, 1940. However, when respondent Confesor executed the second promissory note on April 11, 1961 whereby he promised to pay the amount covered by the previous promissory note on or before June 15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said respondent thereby effectively and expressly renounced and waived his right to the prescription of the action covering the first promissory note.

This Court had ruled in a similar case that —

“x x x when a debt is already barred by prescription, it cannot be enforced by the creditor. But a new contract recognizing and assuming the prescribed debt would be valid and enforceable x x x.”

No. L-21024, July 28, 1969, 28 SCRA 796.

10

ObligatiOns and COntraCts

art. 1113

Text and Cases

Thus, it has been held that —

“Where, therefore, a party acknowledges the correctness of

a debt and promises to pay it after the same has prescribed and

with full knowledge of the prescription he thereby waives the

benefit of prescription.”

This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to pay the debt. The consideration of the new promissory note is the pre-existing obligation under the first promissory note. The statutory limitation bars the remedy but does not discharge the debt.

“A new express promise to pay a debt barred x x x take the case from the operation of the statute of limitations as this proceeds upon the ground that as a statutory limitation merely bars the remedy and does not discharge the debt, there is something more than a mere moral obligation to support a promise, to wit — a pre-existing debt which is a sufficient consideration constitutes, in fact, a new cause of action.”

“x x x It is this new promise, either made in express terms or deduced from an acknowledgment as a legal implication, which is to be regarded as reanimating the old promise, or as imparting vitality to the remedy (which by lapse of time had become extinct) and thus enabling the creditor to recover upon his original contract.”

Article 1113. All things which are within the commerce of men are susceptible of prescription, unless otherwise provided. Property of the State or any of its subdivisions not patrimonial in character shall not be the object of prescription. (1936a) In Director of Forest Administration vs. Fernandez, 23 where an application was filed for the registration of a particular forest and timber on the ground of prescription, the Supreme Court rejected such claim and stated that:

it is axiomatic that forest lands of the public domain cannot be

acquired by prescription, its possession however long cannot ripen into private ownership (Amunategui vs. Director of Forestry, 126 SCRA 69 [1983]; Bureau of Forestry vs. Court of Appeals, 153

SCRA 351 [1987]; Republic vs. Court of Appeals, 154 SCRA 476 [1987]). Forest land cannot be owned by private persons. It is not registerable whether the title is a Spanish title or a torrens title (Director of Lands vs. Court of Appeals, 133 SCRA 701 [1984]; Republic vs. Court of Appeals, 135 SCRA 156 [1985]; Vallanta vs. IAC, 151 SCRA 679 [1987]). A tax declaration secured over

a land that is forested does not vest ownership to the declarant (Republic vs. Court of Appeals, 116 SCRA 505 [1982]).

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11

General Provisions

In Lovina vs. Moreno, 24 it was likewise held that “the ownership of a navigable stream or of its bed is not acquired by prescription.” However in Republic vs. Court of Appeals, 25 where a particular area adjacent to a bay, was at times covered by water due to rain and not due to the rising of the tide, the Supreme Court said that such area can be registered and can be subject to prescription, thus:

Property, which includes parcels of land found in Philippine territory, is either of public dominion or of private ownership. Public lands, or those of public dominion, have been described as those which, under existing legislation are not the subject of private ownership, and are reserved for public purposes. The New Civil Code enumerates properties of public dominion in Articles 420 and 502 thereof.

Article 240 provides:

“The following things are property of public dominion:

Those intended for public use, such as roads, canals,

rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;

Those which belong to the State without being for

public use, and are intended for some public service or for the

development of the national wealth.”

(1)

(2)

Article 502 adds to the above enumeration, the following:

“(1)

Rivers and their natural beds;

(2)

Continuous or intermittent waters of springs and

brooks running in their natural beds and the beds themselves;

(3)

Waters rising continuously or intermittently on lands

of public dominion;

(4)

Lakes and lagoons formed by Nature on public lands

and their beds;

x x x

The Director of Lands would like Us to believe that since a portion of the land sought to be registered is covered with water four to five months a year, the same is part of the lake bed of Laguna de Bay, or is at least, a foreshore land, which brings it within the enumeration in Art. 502 of the New Civil Code quoted above and therefore it cannot be the subject of registration.

x x x

x x x”

25 G.R. No. L-43105, August 31, 1984, 131 SCRA 532. 26 G.R. No. L-70615, October 28, 1986, 145 SCRA 268. 27 See Development Bank of the Philippines vs. Ozarraga, G.R. No. L-16631, September 20, 1965. 28 See also Alvero vs. Reas, G.R. No. L-28337, September 30, 1970, 35 SCRA 210;

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art. 1113

Text and Cases

The extent of a lake bed is defined in Art. 74 of the Law of Waters of 1866, as follows:

“The natural bed or basin of lakes, ponds, or pools, is the ground covered by their waters when at their highest ordinary depth.”

The phrase “highest ordinary depth” in the above definition has been interpreted in the case of Government of P.I. vs. Colegio de San Jose, as the highest depth of the waters of Laguna de Bay during the dry season, such depth being the “regular, common, natural, which occurs always or most of the time during the year.” The foregoing interpretation was the focal point in the Court of Appeals decision sought to be reviewed. We see no reason to disturb the same.

Laguna de Bay is a lake. While the waters of a lake are also subject to the same gravitational forces that cause the formation of tides in seas and oceans, this phenomenon is not a regular daily occurrence in the case of lakes. Thus, the alternation of high tides and low tides, which is an ordinary occurrence, could hardly account for the rise in the water level of the Laguna de Bay as observed four to five months a year during the rainy season. Rather, it is the rains which bring about the inundation of a portion of the land in question. Since the rise in the water level which causes the submersion of the land occurs during a shorter period (four to five months a year) than the level of the water at which the land is completely dry, the latter should be considered as the “highest ordinary depth” of Laguna de Bay. Therefore, the land sought to be registered is not part of the bed or basin of Laguna de Bay. Neither can it be considered as foreshore land. The Brief for the Petitioner Director of Lands cites an accurate definition of a foreshore land, to wit:

that part of (the land) which is between high and low water and left dry by the flux and reflux of the tides x x x”

“The strip of land that lies between the high and low water marks and that is alternately wet and dry according to the flow of the tide.”

As aptly found by the Court a quo, the submersion in water of a portion of the land in question is due to the rains “falling directly on or flowing into Laguna de Bay from different sources.” Since the inundation of a portion of the land is not due to “flux and reflux of tides” it cannot be considered a foreshore land within the meaning of the authorities cited by petitioner Director of Lands. The land sought to be registered not being part of the bed or basin of Laguna de Bay, nor a foreshore land as claimed by the Director of Lands, is not a property of public dominion. However, the applicant must prove that he has a registerable

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General Provisions

title. This brings us to the second issue, which is whether or not applicant-private respondent has registerable title to the land.

The purpose of land registration under the Torrens System is not the acquisition of lands but only the registration of title which applicant already possesses over the land. Registration under the Torrens Law was never intended to be a means of acquiring ownership. Applicant in this case asserts ownership over the parcel of land he seeks to register and traces the roots of his title to a public instrument of sale (Exh. G) in favor of his father from whom he inherited said land. In addition to this muniment of title, he presents a tax declaration (Exhs. F, G, H, I) covering the land since 1918 and as well as tax receipts (Exhs. J, J-1, J-2, J-3, J-4, K, K-1, K-2, K-3) dating back to 1948. While it is true that tax receipts are declarations of ownership, they become strong evidence of ownership acquired by prescription when accompanied by proof of actual possession of the property. The Court of Appeals found that the applicant and his father, have been in open, continuous, public, peaceful, exclusive and adverse possession of the disputed land for more than thirty (30) years, which began on April 19, 1909, when the land was acquired from a third person by purchase. The record does not show any circumstance to note which is sufficient enough to overthrow said findings of facts which is binding upon Us. Since applicant has been in possession of the subject parcel of the land in the concept of owner with just title and in good faith, his possession need only last for ten years in order for ordinary acquisitive prescription to set in. Applicant has more than satisfied this legal requirement. Hence, even if the land sought to be registered is public land as claimed by the petitioners, applicant remains to be entitled to a judicial confirmation of his imperfect title, since he has also satisfied the requirements of the Public Land Act (Commonwealth Act No. 141 as amended by Republic Act No. 1942). Sec. 48 of said Act enumerates as among the persons entitled to judicial confirmation of imperfect title, the following:

“(a) x x x

(b) Those who, by themselves or through their predecessors-in-interest, have been in the open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under bona fide claim of ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title. x x x”

The claim of private oppositors, petitioners in G.R. No. L-43190, that they have reclaimed the land from the waters of Laguna de Bay and that they have possessed the same for more than twenty (20) years does not improve their position. In the first place, private persons cannot, by themselves reclaim land

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ObligatiOns and COntraCts

art. 1113

Text and Cases

from water bodies belonging to the public domain without proper permission from government authorities. Moreover, even if such reclamation had been authorized, the reclaimed land does not automatically belong to the party reclaiming the same, as they may still be subject to the terms of the authority earlier granted. Private oppositors-petitioners failed to show proper authority for the alleged reclamation, therefore their claimed title to the litigated parcel must fail. In addition to that, their alleged possession can never ripen into ownership. This is due to the fact that only possession acquired and enjoyed in the concept of owner can serve as the root of a title acquired by prescription. As correctly found by the appellate court, the private oppositors- petitioners entered into possession of the land with the permission of, and as tenants of, the applicant del Rio. The fact that some of them at one time or another, did not pay rent cannot be considered in their favor. Their use of the land and their non-payment of rentals thereon, were merely tolerated by the applicant and they cannot affect the character of the latter’s possession which has already ripened into ownership at the time of the filing of this application for registration.

The applicant private-respondent having satisfactorily established his registerable title over the parcel of land described in his application, he is clearly entitled to register the said land in his favor.

Article 1114. Creditors and all other persons interested in making the prescription effective may avail themselves thereof notwithstanding the express or tacit renunciation by the debtor or proprietor. (1937)

An illustration of this article is as follows: A is indebted to B in the amount of P50,000. C guarantees the said indebtedness and waives his benefit of excussion. This means that should A fail to pay B, B need not exhaust all remedies against A for collection before he could demand payment from C, the guarantor. In the event that the time within which to pay has already prescribed but A nevertheless waives the prescription such that B can still collect from him, and should A again fail to pay, thereby prompting B to demand payment from C, the guarantor, the latter can resist payment by invoking that the collection of the debt of A has already prescribed. C will not be prejudiced by the act of A in waiving the prescription.

Article 1115. The provisions of the present Title are understood to be without prejudice to what in this Code or in special laws is established with respect to specific cases of prescription. (1938)

arts. 1114-115

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15

General Provisions

There are other provisions in the Civil Code which provide for prescriptive periods in specific cases. For example, Article 1391 provides that the prescriptive period for annulling a contract in case it is defective due to fraud perpetuated by one of the parties is four years from the time the fraud is discovered. This is true whether the contract is written or oral. Chapter Three of the present Title however, provides that an action on a written contract prescribes in 10 years and on an oral contract in 6 years. In this case, the prescriptive period in Article 1391 will apply. Article 1391 provides for a specific case on fraud. Other statutes likewise provide for certain prescriptive periods. In case of conflict between the period provided in this Title and the period provided in another portion of the Civil Code, the more specific provision will prevail. However, if different statutes are involved providing for different prescriptive periods, as well as the types of cause of action contemplated by them are apparently conflicting, they do not exclude each other from being availed of by the aggrieved parties. Thus, in Callanta vs. Carnation Philippines, Inc., 26 the Supreme Court ruled that, while a claim for money in labor cases prescribes in three years under the Labor Code, it will not bar the aggrieved party from availing of the four-year prescriptive period for “injury to the plaintiff” provided, under Article 1146 of the Civil Code, that the claim also arises from illegal dismissal which results to an injury to the plaintiff.

Article 1116. Prescription already running before the effectivity of this Code shall be governed by laws previously in force; but if since the time this Code took effect the entire period herein required for prescription should elapse, the present Code shall be applicable, even though by the former laws a longer period might be required. (1939)

The 1950 Civil Code took effect on August 30, 1950. Article 1116 is a transitory provision and the rules are as follows:

If the prescriptive period provided under the old law

has already lapsed before the effectivity of the 1950 Civil Code, such prescriptive period shall apply; 27

2) If the prescriptive period under the old law is still running upon the effectivity of the 1950 Civil Code which however provides for a different period for the same situation, the 1950 Civil Code shall prevail provided that such period counted from the effectivity of the 1950 Civil Code has already lapsed, although

1)

Ongsiaco vs. Dallo, G.R. No. L-27451, February 28, 1969, 27 SCRA 161; Joaquin vs. Cojuangco, G.R. No. L-18060, July 25, 1967, 20 SCRA 769; Laurel-Manila vs. Galvan,

16

ObligatiOns and COntraCts

art. 1116

Text and Cases

under the old law the period has not yet lapsed. Thus, if under an old law previous to the effectivity of the Civil Code in 1950, X has thirty years within which to file a particular suit and by the time the 1950 Civil Code takes effect his remaining time, pursuant to the period provided by the old law, is only 12 years, he cannot file the case on the 12th or even on the 11th year if the 1950 Civil Code provides only 10 years as prescriptive period for exactly the same kind of case. This is so because by the 11th year or 12th year, the prescriptive period of 10 years counted from the effectivity of the 1950 Civil Code has already lapsed;

3) If the prescriptive period under the old law is still running upon the effectivity of the 1950 Civil Code and the remaining balance of such period since the effectivity of the 1950 Civil Code is shorter than that provided in the 1950 Civil Code for exactly the same situation, the old prescriptive period will apply. Thus, in the example given in No. 2, if the balance of the period which started under the old law is 12 years counted from the time of the effectivity of the 1950 Civil Code and the latter provides for 15 years as the prescriptive period for exactly the same case, the prescriptive period under the old law will prevail. 28

G.R. No. L-23507, May 24, 1967, 20 SCRA 198; Carillo vs. De Paz, L-22601, October 28, 1966, 18 SCRA 467.

art. 1116

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17

General Provisions

18

ObligatiOns and COntraCts

Text and Cases

Chapter 2

PRESCRIPTION OF OWNERSHIP AND OTHER REAL RIGHTS

Article 1117. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary.

Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law. (1940a)

Acquisitive prescription may be ordinary or extraordinary. Ordinary prescription requires uninterrupted possession for the required statutory period of years in good faith and with a just title. Extraordinary prescription likewise requires an uninterrupted possession for the statutory period of years but without need of just title and good faith on the part of the possessor. Godinez vs. Court of Appeals 1 is an example of the application of acquisitive prescription, thus:

This case is about the acquisition of land by prescription. Felix Bergado owned Lot 655 with an area of 11,001 square meters. It is located in Punta Rizal, Barrio Gunob, Opon, now Lapu-lapu City. It was inherited by his seven children named Tomas, Teodora, Ambrosia, Florencia, Aniceto, Macario and Vicente.

Cadastral Judge Guillermo F. Pablo on January 31, 1929 ordered the registration of Lot 655 in the names of the seven sets of transferees, to each of whom he adjudicated a 1/6 share instead of 1/7. Because of that error and other clerical errors, no decree was issued nor did the adjudicatees obtain any Torrens title. The land remained unregistered.

Two-sevenths of Lot 655, pertaining to Macario Bergado and Vicente Bergado, were transferred to Maximo Patalinhug

1 G.R. No. L-46768, March 18, 1985, 135 SCRA 351.

18

art. 1117

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19

Prescription of Ownership and Other Real Rights

while the 5/7 share of the other five children were transferred in 1929 and 1930 to the spouses Domingo Magsumbol and Susana Magsumbol.

Lot 655 was subdivided on January 30, 1934 with the approval of the Director of Lands, into Lot 655-A (5/7) and Lot 655-B (2/7). The Bergado heirs ceased to have possession of any portion of Lot 655 which was occupied by the Magsumbol spouses and Patalinhug.

In the guardianship proceeding for the children of Miguel Magsumbol, who inherited Lot 655-A from Domingo, Sr., Judge Jose M. Mendoza adjudicated to Domingo, Jr. on October 30, 1962 said lot with an area of 7,344 square meters. Domingo, Jr. then sold Lot 655-A on November 2, 1962, to the brothers Mamerto and Lorenzo Igot for P10,000 (Exh. D or 2). The Igots continued the Magsumbols’ possession of Lot No. 655-A.

On May 10, 1967, or 38 years after Judge Pablo rendered his

decision, Judge Mendoza, the same judge who granted Lot 655-

A to Domingo Magsambol, Jr., at the instance of some Bergado

heirs, corrected the clerical errors in Judge Pablo’s decision. As

a result, a decree was issued regarding this matter. Finally on December 19, 1967, OCT No. 8 was issued for Lot 655. The land became registered land at last.

In 1970 the Igot brothers sued some Bergado heirs for

the reconveyance of Lot 655-A or 5/7 portion of Lot 655 which

is covered by OCT No. 8. The trial court upheld their claim.

The appellate Court, through Justice Gatmaitan, affirmed said decision.

In its decision, the court ruled that the Magsumbols had

acquired Lot 655-A by prescription under section 41 of the Code of Civil Procedure. The right was in turn, transmitted to the Igots. The petitioners herein, or defendants Godinez and Jayme, had only acquired a paper title in 1967 when they obtained OCT No.

8.

The petitioners filed an appeal contending that the Appellate Court erred by not recognizing OCT No. 8 as indefeasible and by not considering the action of the Igots as barred by res judicata.

The Supreme Court in its decision, held that the Appellate Court did not err in dismissing the claim of the petitioners for Lot 655-A which has been in the adverse, continuous, uninterrupted and notorious possession of the Magsumbols and the Igots, in the concept of owner for more than half a century. The laws as well as the canons of common sense favored the Igots.

Thus, OCT No. 8 did not nullify the sales made by the five Bergado children to the Magsumbol spouses in 1929 and 1930.

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ObligatiOns and COntraCts

art. 1118

Text and Cases

Article 1118. Possession has to be in the concept of an owner, public, peaceful and uninterrupted. (1941)

Possession must be in the concept of an owner. This means that the possessor asserts dominion on the property to the exclusion of all others. It must be an adverse possession. 2 Thus, a mere lessee or a mere mortgagee does not hold the property in the concept of an owner. Also, possession of cash dividends by an agent on behalf of the owner, cannot be the subject of prescription, as there is no holding of the property in concepto de dueño. 3

Thus, mere possession with a juridical title, such as, to exemplify, by a usufructuary, a trustee, a lessee, an agent or a pledgee, not being in the concept of an owner, cannot ripen into ownership by acquisitive prescription, unless the juridical relation is first expressly repudiated and such repudiation has been communicated to the other party. Acts of possessory character executed due to license or by mere tolerance of the owner would likewise be inadequate. Possession, to constitute a foundation of a prescriptive right, must be en concepto dueno, or, to use the common law equivalent of the term, that possession should be adverse, if not, such possessory acts, no matter how long, do not start the running of the period of prescription. 4

In Ramirez vs. Court of Appeals 5 where it was proven that the possessor of the property held the property by virtue of a contract of antichresis, the Supreme Court ruled thus:

This court has on several occasions held that the anti- chretic creditor cannot ordinarily acquire by prescription the land surrendered to him by the debtor (Trillana vs. Manansala, et al., 96 Phil. 865; Valencia vs. Acala, 42 Phil. 177; Barreto vs. Barreto, 3 Phil. 234). The petitioners are not possessors in the concept of owners. Thus, their possession cannot serve as a title for acquiring dominion (See Art. 540, Civil Code).

In Republic vs. Court of Appeals, 6 involving the possession of the United States Navy of a particular property for recreational purposes only, the Supreme Court rejected any contention for prescription to

2 Cuayong vs. Benedicto, G.R. No. 9989, March 13, 1918, 37 Phil. 781. 3 Harden vs. Harden, G.R. No. L-22174, July 21, 1967, 20 SCRA 706. 4 Marcelo, et al. vs. Court of Appeals, G.R. No. 131803, April 14, 1999, 105 SCAD 561, 305 SCRA 800. 5 G.R. No. L-38185, September 24, 1986, 144 SCRA 292.

art. 1118

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21

Prescription of Ownership and Other Real Rights

apply. The pertinent portions of the decision are as follows:

The finding of respondent court revealed that, during the interim of 57 years from November 26, 1902 to December 17,

1959 (when the U.S. Navy possessed the area), the possessory

rights of Baloy or his heirs were merely suspended and not lost

by prescription, is supported by Exhibit “U,” a communication or letter No. 1108-63, dated June 24, 1963, which contains an

official statement regarding the position of the Republic of the Philippines with regard to the status of the land in question. Said letter recognizes the fact that Domingo Baloy and/or his heirs, have been in continuous possession of said land since

1894 as attested by an “Informacion Possessoria” Title, which

was granted by the Spanish Government. Hence, the disputed property is private land and this possession was only interrupted only by the occupation of the land by the U.S. Navy in 1945 for recreational purposes. However, the U.S. Navy eventually abandoned the premises. The heirs of the late Domingo P. Baloy, are presently in actual possession, and has been in possession since the abandonment by the U.S. Navy. A new recreation area is presently being used by the U.S. Navy personnel and such place is remote from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept of owner. It partakes of the character of commodatum. It cannot therefore militate against the title of Domingo Baloy and his successors-in-interest. One’s ownership of a thing may be lost through prescription by reason of another’s possession, provided that such possession is under a claim of ownership, and not where the possession is only intended to be transient, as in the case of the U.S. Navy’s occupation of the land concerned, in which case the owner is not divested of his title, however, it cannot be exercised in the meantime.

In Ramos vs. Court of Appeals, 7 the Supreme Court likewise ruled that acquisitive prescription has set in especially when the claimant has undertaken acts clearly showing his claim of ownership, thus:

Even from the standpoint of acquisitive prescription, which seems to be more decisive, it appears too clear that private respondents have acquired title to the land in suit by virtue of possession in the concept of an owner. It is of record that private respondents have been in continuous possession of the litigated parcel of land since they bought the same in 1934. In addition to that they have been paying the real estate taxes due thereon and have declared said property in their name for taxation

6 G.R. No. L-46145, November 26, 1986, 146 SCRA 15. 7 G.R. No. L-52741, March 15, 1982, 112 SCRA 542.

22

ObligatiOns and COntraCts

art. 1118

Text and Cases

purposes. As correctly ruled by the Appellate Court, that “while tax declaration and tax receipts are not necessarily evidence of title, they are considered as a strong evidence of possession for no one in his right mind would be paying taxes year after year for a property that is not in his actual possession.”

The records of the case further disclose that petitioner’s complaint for reconveyance was filed in the lower court only on March 13, 1973, 39 years after the registration of the deed of absolute sale in favor of private respondents. The issuance of a certificate of title in their name exclusively on May 12, 1934, from which latter date petitioner’s cause of action, if any, is deemed to have commenced, since the registration of the aforesaid deed of sale in the Office of the Registry of Deeds constitutes a constructive notice to the whole world of its contents and all interests, legal and equitable, included therein.

Since the prescriptive period in this case had already run since May 12, 1934 prior to the effectivity of the new Civil Code on August 30, 1950, there can be no doubt that the former laws on prescription applies, pursuant to Article 1116 of the Civil Code. Under Section 40 of the Code of Civil Procedure formerly in force, adverse possession ripened into ownership after the lapse of ten (10) years, good or bad faith of the possessor being immaterial for purposes of acquisitive prescription. In the like manner, an action to recover title or the possession of immovable property, prescribe in the same period of 10 years. The instant case, not having been filed within 10 years from the time the cause of action accrued on May 12, 1934, have already prescribed in 1944 because the complaint was filed only on March 13, 1973, about 39 years later. Consequently, the possession by the private respondents over the litigated property ripened into full ownership in 1944, ten years after May 12, 1934, when their possession which was actual, open, public and continuous, under a claim of title exclusive of any other right and adverse to all other claims, commenced.

Possession must be public. This means that there must be a notorious holding of the property known to the community. It must not be of a surreptitious character because it must be in the concept of an owner. It must likewise be peaceful in that, for the period of years required by law for acquisitive prescription to apply, there must be no valid interference from others claiming or asserting their rights to the property. It must likewise be uninterrupted. This is defined in the subsequent sections.

Article 1119. Acts of possessory character executed in virtue of license or by mere tolerance of the owner shall not be

art. 1119

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23

Prescription of Ownership and Other Real Rights

available for the purposes of possession. (1942)

The fact that the possessor holds the property by virtue of the consent of the owner shows that such possessor acknowledges that somebody else owns the property. Possession by tolerance therefore does not imply an assertion of ownership, 8 and thus produces no effect with respect to possession or prescription. 9 In Coronado vs. Court of Appeals, 10 where the statutory period for ordinary acquisitive prescription passed, the Supreme Court rejected the application of prescription because the possession was merely one of tolerance. Pertinently, the Supreme Court said:

As found by the respondent appellate court, Monterola never claimed ownership over the property in question. As a matter of fact, one of the deeds of donation executed by Monterola in favor of Leonida Coronado acknowledged that the boundary owner of the property conveyed to her is JUANA. This is precisely the reason why during the lifetime of the late Dalmacio Monterola, JUANA had always been allowed to enter and reap the benefits or the produce of the said property. It was only after the death of said Monterola in 1970 that Leonida Coronado prohibited JUANA from entering it (Ibid., p. 18).

Even assuming arguendo that Monterola was indeed in continuous possession of the said property for over ten years since 1934, said possession is insufficient to constitute the fundamental basis of the prescription. Possession, under the Civil Code, to constitute the foundation of a prescriptive right, must be possession under claim of title (en concepto de dueño), or through the use of common law equivalent to the term, it must be adverse. Acts of possessory character performed by one who holds by mere tolerance of the owner are clearly not en concepto de dueño, and such possessory acts, no matter how long so continued, do not start the running of the period of pres-cription (Manila Electric Company v. Intermediate Appellate Court, G.R. No. 71393, June 28, 1989).

In this case, Monterola, as found by the respondent appellate court as well as the lower court, never categorically claimed ownership over the property in question, much less his possession thereof en concepto de dueño. Accordingly, he could not have acquired said property by acquisitive prescription.

Article 1120. Possession is interrupted for the purposes of

8

Ordoñez vs. Court of Appeals, G.R. No. 84046, July 30, 1990, 188 SCRA 109. 9 Manila Electric Company vs. Intermediate Appellate Court, G.R. No. L-71393, June 28, 1989, 174 SCRA 313. 10 G.R. No. L-78778, December 3, 1990, 191 SCRA 814.

24

ObligatiOns and COntraCts

arts. 1120-1122

Text and Cases

prescription, naturally or civilly. (1943)

Possession must be uninterrupted. This means that there must be continuity in the holding of the property. An uninterrupted possession strengthens the adverse right of the possessor. Possession can however be interrupted naturally or civilly.

Article 1121. Possession is naturally interrupted when through any cause it should cease for more than one year.

The old possession is not revived if a new possession should be exercised by the same adverse claimant. (1944a)

Article 1122. If the natural interruption is for only one year or less, the time elapsed shall be counted in favor of the prescription. (n)

For example, A is in possession of an unregistered property in the concept of an owner in good faith and with a just title. The land is

formerly owned by B. The property is sold in a public auction to satisfy B’s indebtedness from the government. A is the successful bidder. The document evidencing the title has not yet been finished and registered with the Government. A however is already in possession for a period of 4 years. Z appears and claims that the property is his.

Z requests A to vacate the premises so that he will not be entangled

in a possible suit. To avoid complications, A left the place. It turns out however, that Z is a defrauder, and it is M who has previously bought the property from B before A made his purchase. Upon learning that

Z is a defrauder, A returns to the property after two years. He stays

there for another 7 years. M now claims the property and requests A to leave the place. A cannot invoke acquisitive prescription. While he may have possession of the property for a total period of 11 years, it is interrupted. When he left the property for two years, his subsequent possession of seven years cannot be added to his previous four years. In effect, the period which is material for purposes of prescription is the subsequent 7 years. Obviously, said seven-year period have not yet complied with the 10-year period required by law for ordinary

acquisitive prescription. However, if the interruption is not two years but only one year or less, acquisitive prescription will have already set in, in favor of A because the law clearly provides that if the natural interruption is for only one year or less, the time elapsed shall be counted in favor of the prescription.

Article 1123. Civil interruption is produced by judicial

arts. 1123-1124

PresCriPtiOn

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Prescription of Ownership and Other Real Rights

summons to the possessor. (1945a)

Article 1124. Judicial summons shall be deemed not to have been issued and shall not give rise to interruption:

(1)

If it should be void for lack of legal solemnities;

(2)

If the plaintiff should desist from the complaint or

should allow the proceedings to lapse;

(3) If the possessor should be absolved from the complaint.

In all these cases, the period of the interruption shall be counted for the prescription. (1946a)

It is not the filing of the complaint in court which interrupts the possession. It is interrupted upon receipt of the possessor of the judicial summons after the filing of the complaint. When the possessor receives the judicial summons and the copy of the complaint, it is only during that time that jurisdiction is acquired by the court of the person of the possessor and it is at that time that possession is interrupted.

However there are instances provided by law that judicial summons shall be deemed not to have been issued, thereby not giving rise to interruption. The first case is when the judicial summons is void for lack of legal solemnities. Hence, if the judicial summons as well as the copy of the complaint have been served by a person not authorized by the court, it shall be deemed as not issued, thereby allowing the possession to run uninterrupted.

Second is when the plaintiff should desist from the complaint or should allow the proceedings to lapse. Desistance from the complaint by the plaintiff means voluntarily having the case dismissed, while allowing the proceeding to lapse clearly manifests the lack of interest to prosecute the case. In both cases, the possessor should not be prejudiced. There will be no interruption.

Third is when the possessor is absolved from the complaint. Absolution means that the complaint have not been fully substantiated to support any adverse claim by the complainant and therefore this should not prejudice the possessor who must always be presumed to be in good faith.

Article 1125. Any express or tacit recognition which the possessor may make of the owner’s right also interrupts possession. (1948)

26

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art. 1125

Text and Cases

Express or tacit recognition interrupts the possession because possession must always be in the concept of an owner to the exclusion of all others. Hence, one cannot consider himself possessing a property adversely in the concept of an owner if he recognizes somebody else as having a superior right as an owner. Thus in Corpus vs. Padilla, 11 the Supreme Court ruled that

one cannot recognize the right of another and at the same time claim adverse possession which can ripen to ownership, thru acquisitive prescription. For prescription to set in, the possession must be adverse, continuous, public and to the exclusion of all.

Similarly, in Diñoso vs. Court of Appeals, 12 where the seller and the buyer executed a contract of sale in April 6, 1940 giving the seller the right to repurchase the property on or before April 6, 1950 and where the buyer immediately took possession of the property, the Supreme Court, in resolving the issue of whether or not acquisitive prescription can be availed of by the buyer, agreed with the Court of Appeals’ decision stating:

that the possession of petitioner Dinoso under the sale a retro did not actually become hostile or adverse until the expiration of the redemption period, since until then he recognized the superior right of the vendor to oust him, and his claim of ownership was not absolute. Authorities are to the effect that —

“Where the sale is subject to the owner’s right of redemption, the purchaser’s possession has been held in subordination to the title of the owner prior to the expiration of the redemption period, although it may become hostile thereafter.” (2 C.J.S. P. 664, Sec. 113; Morse vs. Seibold, 35 N.W. 471).

It was incumbent upon the petitioner to show when his vendor’s right of redemption expired, and that he had held adversely for ten years thereafter. In truth, his own deed (Exhibit “1”) recites that Feria’s right of repurchase would expire only on 6 April 1950, so that the present suit for recovery have begun, in 1952, well within the prescriptive period.

Article 1126. Against a title recorded in the Registry of Property, ordinary prescription of ownership or real rights shall not take place to the prejudice of a third person, except in virtue of another title also recorded; and the time shall begin

11 G.R. Nos. L-18099 and L-18136, July 31, 1962, 5 SCRA 814. 12 G.R. No. L-17738, April 22, 1963, 7 SCRA 666.

art. 1126

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27

Prescription of Ownership and Other Real Rights

to run from the recording of the latter.

As to lands registered under the Land Registration Act, the provisions of that special law shall govern. (1949a)

In Dimayuga vs. Court of Appeals, 13 where the deceased spouses acquired a thirteen-hectare homestead, registered under the Torrens System in 1928. The illegitimate children claimed one-half of the same on the ground that they acquired it by acquisitive prescription having been in the property since 1948, the Supreme Court rejected such contention by stating:

That contention is devoid of merit. It may be morally plausible but it is legally indefensible. No portion of the homestead, a registered land, may be acquired by prescription. “No title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession.” (Sec. 46, Act No. 496; Sec. 47, Property Registration Decree, P.D. No. 1529; Art. 1126, Civil Code)

In Reyes vs. Court of Appeals, 14 where the registered property was acquired through a forged document by the petitioner, and where such petitioner claimed acquisitive prescription against the heirs of the original owners, the Supreme Court said:

Moreover, this Court agrees with the private respondents that there can be no acquisitive prescription considering that the parcel of land in dispute is titled property, i.e., titled in the name of the late Bernardino Reyes, the father of both the petitioner Florentino and the private respondents. This fact, petitioners do not deny. Hence, even if they allege adverse possession that would ripen into ownership due to acquisitive prescription, their title cannot defeat the real rights of private respondents who stepped into the shoes, as it were, of their father as successors-in-interest. As it is, petitioners cannot even claim adverse possession as they admit that the private respondents likewise resided and continue to reside on the subject property.

However, although prescription will not apply to registered property, the doctrine of laches is applicable. Laches is the rule of in effectivity of stale demands. In Catholic Bishop of Balanga vs. Court of Appeals, 15 where the petitioner donated registered property to a person who, including his successors-in-interest, took possession of the same adversely, continuously, publicly and peacefully for forty-

13 G.R. No. L-148433, April 30, 1984, 129 SCRA 110. 14 G.R. No. L-110207, July 11, 1996, 72 SCAD 126, 258 SCRA 651.

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art. 1126

Text and Cases

nine (49) years, and where, thereafter, the petitioner filed a case to recover the property contending that the donation is invalid, the Supreme Court, despite the fact the property was registered, rejected the assertion of imprescriptibility of registered property and decided against the petitioner on the ground that it was guilty of laches. The Supreme Court pertinently ruled:

The time honored rule (on laches) anchored on public policy is that relief will be denied to a litigant whose claim or demand has become “stale” or who has acquiesced for an unreasonable length of time, or who has not been vigilant or who has slept on his right either by negligence, folly or inattention. In other words, public policy requires, for the peace of society, the discourage- ment of claims grown stale for non-assertion; thus laches is an impediment to the assertion or enforcement of a right which has become, under the circumstances, inequitable or unfair to permit.

xxx

In this case, the petitioner filed its complaint in court only after forty-nine (49) years had lapsed since the donation in its behalf of the subject property to private respondent’s prede- cessor-in-interest. There is nary an explanation for the long delay in the filing by petitioner of the complaint in the case at bench, and that inaction for an unreasonable and unexplained length of time constitutes laches. As such, petitioner cannot claim nullity of the donation as an excuse to avoid the consequences of its own unjustified inaction and as a basis for the assertion of a right on which they had slept for so long.

xxx

Finally, we agree with the respondent Court of Appeals that, while petitioner is admittedly still the registered owner of the donated property, and jurisprudence is settled as to the imprescriptibility and indefeasibility of a Torrens Title, there is equally an abundance of cases in the annals of our jurisprudence where we categorically ruled that a registered landowner may lose his right to recover the possession of his registered property by reason of laches.

xxx

xxx

xxx

xxx

Article 1127. The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership.

(1950a)

arts. 1127-1128

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Prescription of Ownership and Other Real Rights

Article 1128. The conditions of good faith required for possession in Articles 526, 527, 528 and 529 of this Code are likewise necessary for the determination of good faith in the prescription of ownership and other real rights. (1951)

The following provisions of the 1950 Civil Code on possession shall likewise be necessary in determining good faith on matters of prescription:

Article 526. He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

Article 527. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.

Article 528. Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.

Article 529. It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved.

In Negrete vs. Court of First Instance of Marinduque, 16 where a person claimed a particular property by virtue of ordinary acquisitive prescription of ten years based on a deed of sale which he knew involved a different property, the Supreme Court rejected the same on the ground that, aside from the period required by law, there must also be good faith and just title in the possession which was not present in the case, thus:

The crucial issue therefore is whether the deed of sale executed by Tito Oriendo on August 30, 1954 in favor of the late Igmedio Maderazo could be considered as a valid basis for good faith and as a just title, in order to justify the acquisition of the disputed parcel of about 9 hectares by ordinary prescription thru adverse possession of only 10 years.

The law defines a possessor in good faith as one who is

30

ObligatiOns and COntraCts

arts. 1127-1128

Text and Cases

not aware of any flaw in his title or mode of acquisition; and conversely, one who is aware of such flaw is a possessor in bad faith (Art. 526, Civil Code of the Philippines).

WE ruled that “the essence of the bona fides or good faith, therefore, lies in the honest belief in the validity of one’s right, ignorance of a superior claim, and absence of intention to overreach another.”

A deed of sale, to constitute a just title and to generate good faith for the ordinary acquisitive prescription of ten (10) years, should refer to the same parcel of land, which is adversely possessed. In the case at bar, the deed of sale in favor of the deceased Igmedio Maderazo covers a parcel of land patently different from the disputed land owned by plaintiff-appellant as to area, location, and boundary owners.

xxx

xxx

xxx

Hence, defendant-appellee Catalino Maderazo, along with his late father Igmedio Maderazo, could not claim good faith in occupying said land of plaintiff-appellant on the basis of the said instrument of sale. If said appellee’s position were to be sustained, it would be easy for anyone to acquire ownership of an untitled land belonging to another person by adverse possession of only ten (10) years on the basis of a document of sale covering a distinct parcel executed by a person who is a stranger to the land. This could not have been intended by the legislature; because forged deeds of conveyance could be conveniently interposed to oust the true owner from a land by adverse possession of only ten (10) years. To spawn such a monstrosity in the law was never contemplated by the statute, which is designed to engender social quietude.

In Reyes vs. Court of Appeals (Ninth Division), 17 the Supreme

Court ruled that knowingly using a forged document to base one’s just title for purposes of acquisitive prescription is an act of bad faith, thus:

With respect to the second assignment of error, petitioners contend that even assuming that there was forgery, they have become absolute owners of the subject property by virtue of acquisitive prescription citing Articles 1117 and 1134 of the Civil Code as follows:

“Art. 1117. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary.

Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law.

17 G.R. No. L-110207, July 11, 1996, 72 SCAD 126, 258 SCRA 651.

arts. 1127-1128

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Prescription of Ownership and Other Real Rights

x x x

Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years.

By virtue of said articles, they claim that they have been possessors of the contested parcel of land in good faith, for ten years and with a just title for the period required by law.

This Court is not impressed with this argument. Petitioners cannot justify their ownership and possession of the subject parcel of land since they could not meet the requisites provided by the provisions they have cited. Regarding the requirement of good faith, the first paragraph of Article 526 states, thus:

“He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.”

From the above-cited provision, petitioners could not have been possessors in good faith of the subject parcel of land considering the finding that at the very inception they forged the Deed of Extrajudicial Partition and Settlement which they claim to be the basis for their just title.

Having forged the Deed and simulated the signatures of private respondents, petitioners, in fact, are in bad faith. The forged Deed containing private respondents’ simulated signatures is a nullity and cannot serve as a just title.

Moreover, this Court agrees with the private respondents that there can be no acquisitive prescription considering that the parcel of land in dispute is titled property, i.e., titled in the name of the late Bernardino Reyes, the father of both petitioner Florentino and the private respondents. This fact, the petitioners do not deny. Hence, even if they allege adverse possession that should ripen into ownership due to acquisitive prescription, their title cannot defeat the real rights of the private respondents who stepped into the shoes, as it were, of their father as successors-in-interest. As it is, petitioners cannot even claim adverse possession as they have admitted that the private respondents likewise resided and continue to reside on the subject property.

Good faith cannot likewise be invoked if the claimant has actual or constructive notice of the legal and valid rights of possession of another during the prescriptive period. Thus in Magtira vs. Court of Appeals, 18 the Supreme Court allowed prescription because the claimant had constructive notice of the possession of another, thus:

x x x

x x x

Additionally, acquisitive prescription operates to bar any

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ObligatiOns and COntraCts

arts. 1129-1131

Text and Cases

action by SOFIA. From the date of the filing of the Affidavit for Consolidation of Ownership by ZACARIAS with the Register of Deeds on August 23, 1945 up to the date of the filing of the complaint by SOFIA on June 18, 1956, or for almost eleven (11) years, ZACARIAS enjoyed an uninterrupted, adverse, public and peaceful possession of the litigated property in the concept of owner, which under Article 1134 of the Civil Code ripened into ownership by ordinary prescription through possession of at least ten years. Contrary to SOFIA’s claim, the period of prescription should be reckoned not merely from the time when she allegedly came to know of the claim of ownership of ZACARIAS during the cadastral survey in 1955, but from the date of registration of the Affidavit for Consolidation with the Register of Deeds because registration of an instrument in the Office of the Register of Deeds constitutes constructive notice to the whole world.

Article 1129. For the purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. (n)

Article 1130. The title for prescription must be true and valid. (1953)

Article 1131. For the purposes of prescription, just title must be proved; it is never presumed. (1954a) In Doliendo vs. Biarnesa, 19 where a person bought property in a valid public auction , took and continued possession of the property thereafter for more than ten years, and where, prior to the sale made in the public auction, there was a first purchaser of the property previous to the death of the original owner, the Supreme Court ruled that the person who bought the property at the public auction already acquired the property by acquisitive prescription as he was able to show by concrete evidence the holding of such public auction from which he based his just title. Pertinently, the Supreme Court said:

Counsel for the plaintiff contended that since he had purchased the land in question prior to the alleged sale at public auction, the commissioner had no lawful authority to include it in the list of property of the vendor which could be subjected to the payment of his debts, and that the sale, therefore, was invalid and of no effect; also insisted that a prescriptive title could not

18 G.R. No. L-27547, March 31, 1980, 96 SCRA 680.

arts. 1129-1131

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be based on such transaction because the title for prescription must be valid and true.

We think that this contention is based on a misconception of the scope and effect of the provisions of the code as applied to

“ordinary prescription.” It is evident that by a “true and valid title” in this connection we are not to understand “a title which of itself is sufficient to transfer the ownership without the neces-sity of the lapse of the prescriptive period;” and we accept the opinion of

a learned Spanish law writer who holds that the “titulo verdadero

y valido” as used in this article of the code prescribes a “titulo colorado” and not merely “putative,” a “titulo colorado” being one “which a person has when he buys a thing, in good faith, from one whom he believes to be the owner,” and a “titulo putativo” being one “which is supposed to have preceded the acquisition of

a thing, although in fact it did not, as might happen when one is

in possession of a thing in the belief that it had been bequeathed to him.” (Viso, Derecho Civil, Parte Segunda, page 541).

Hence, even should it be prove that the land in question was not lawfully included in the list of property subject to the payment of debts, x x x still the defendant’s title by prescription must be sustained, since it is clear that the sale at public auction did in fact take place, that the transaction was in good faith, and that the defendant bought the land from one whom he believed to have the right to sell.

In Solis vs. Court of Appeals, 20 where the Supreme Court, in rejecting the contention of the petitioners that a donacion propter nuptias was not sufficient to create or establish the just title of the possessors of the land as donees, ruled:

This contention of the petitioners is not meritorious.

Suffice it to state that even a void donation may be the basis of

a claim of ownership which may ripen into title by prescription

(Pensador vs. Pensador, 47 Phil. 959, 961). It is the essence of the statute of limitations that, whether the party has a right to the possession or not, if he entered under the claim of such right and remained in possession for the period (ten years) named in the statute of limitations, the right of action of the plaintiff who has the better title is barred by that adverse possession. The right given by the statute of limitations does not depend upon, and has no necessary connection, (with) the validity of the claim under which the possession is held. x x x. (Vda. De Lima vs. Tio, L-27181, April 30, 1970, citing Conspecto vs. Fruto, 129 US 182 [1889]). The “just title” required for acquisitive prescription to set in is not “titulo verdadero y valido” — or such title which by itself

is19 sufficient to transfer ownership without necessity of letting the

G.R. No. L-2765, December 27, 1906, 7 Phil. 232.

20 G.R. Nos. 46753-54, August 25, 1989, 176 SCRA 678.

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art. 1132

Text and Cases

prescriptive period elapse but only “titulo colorado” — or such title where, although there was a mode of transferring ownership, still something is wrong because the grantor is not the owner (See Doliendo vs. Biarnesa, 7 Phil. 232).

Article 1132. The ownership of movables prescribes through uninterrupted possession for four years in good faith.

The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition.

With regard to the right of the owner to recover personal property lost or of which he has been illegally deprived, as well as with respect to movables acquired in a public sale, fair, or market, or from a merchant’s store the provisions of Articles 559 and 1505 of this Code shall be observed. (1955a)

The period for ordinary acquisitive prescription for movables is four years coupled with good faith. Possession must likewise be in the concept of an owner, adverse, public and uninterrupted. For extraordinary prescription, a period of eight years is required without need of any other condition. In Dira vs. Tanega, 21 where an active partner conducted himself as the absolute owner of the printing equipment of the partnership after the delinquent partner ignored the demand to pay his obligations, and where such active partner also assumed ownership of the shares of stock pledged by the delinquent partner in connection with his obligations, and where such delinquent partner filed a case for accounting of the partnership only after 14 years from the time the active partner conducted himself as owner of the shares and equipment of the partnership, the Supreme Court rejected the claim of the delinquent partner that a trust relationship existed between him and the active partner by stating that the latter had already acquired the movables by acquisitive prescription, to wit:

x x x In bad faith or in good faith, after eight years of actual adverse possession, appellee acquired clear ownership of appellant’s share by acquisitive prescription. According to Art. 1132 of the Civil Code, “The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition.” So, appellee became the undisputed owner of appellant’s share since 1955 or six years before this action was filed and since said year, the allegation of trusteeship had already lost any basis whatsoever. x x x

art. 1132

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The law likewise provides that, with regard to the right of the owner to recover personal property lost or of which he has been illegally deprived, as well as with respect to movables acquired in a public sale, fair or market, or from a merchant’s store the provisions of Articles 559 and 1505 of this Code shall be observed.

Article 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has

been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

Article 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.

Nothing in this Title, however, shall affect:

(1)

The provisions of any factors’ acts, recording laws, or any other provisions of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;

(2)

The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;

(3)

Purchases made in a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.

Article 1133. Movables possessed through a crime can never be acquired through prescription by the offender. (1956a)

No one must benefit from an evil act. Hence, if A stole B’s car, A cannot acquire title to it even if the prescriptive period have already lapsed and even if B did not make a demand for the return of the car. This is true in ordinary and extraordinary prescriptions. In Tan vs. Court of Appeals, 22 where the petitioner claimed that, through bad faith and fraud, he was led to assign his shares of stocks in 1977 to three corporate entities, and where the case to reconvey the same was filed only in 1987, the Supreme Court ruled that the action was barred by prescription by stating, among others, that Article 1133 did not apply, thus:

36

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arts. 1133-1134

Text and Cases

crime, the offender can not acquire ownership by prescription under Article 1133, which we quote:

Art. 1133. Movables possessed through a crime can never be acquired through prescription by the offender.

Please note that under the above Article, the benefits of prescription are denied to the offender; nonetheless, if the thing was in the meanwhile passed to a subsequent holder, pres-cription begins to run (four or eight years, depending on the existence of good faith) x x x.

It is difficult to say, in this regard, that the petitioners’ action is after all, imprescriptible pursuant to the provisions of Article 1133 of the Civil Code, governing actions to recover loss by means of a crime. For one thing, the complaint was not brought upon this theory. For another, there is nothing there that suggests that the loss of the shares was indeed made possible by a criminal act, other than simple bad faith and probably abuse of right.

Article 1134. Ownership and other rights over immovable property are acquired by ordinary prescription through possession of ten years. (1957a)

Only 10 years of possession by the adverse claimant are needed for ordinary acquisitive prescription. The possession, however, must be by virtue of a just and valid title, in the concept of an owner, uninterrupted, adverse, and public.

Article 1135. In case the adverse claimant possesses by mistake an area greater, or less, than that expressed in his title, prescription shall be based on the possession. (n)

The extent of property subject to the prescription shall be the one actually possessed or held by the claimant regardless of the size indicated or described in the title. For instance, it has been ruled that

when one sells or buys real property — a piece of land, for example — one sells or buys the property as he sees it, in its actual setting and in its physical metes and bounds, and not by the mere lot number assigned to it in the certificate of title. 23

Article 1136. Possession in wartime, when the civil courts are not open, shall not be counted in favor of the adverse claimant. (n)

During wartime where the civil courts are closed, there is no

way by which any person claiming title over a certain property can

23

Atilano vs. Atilano, G.R. No. L-22487, May 21, 1969, 28 SCRA 231.

arts. 1135-1137

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file a case to recover the same from the person in adverse possession

of the property. Hence, the possession of the adverse claimant during

that time shall not be counted. However, it must be observed that the civil courts must be closed. Therefore, even if there is war but the civil courts are functioning, the possession of the adverse claimant may be counted in his favor.

Article 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. (1959a)

In Parcotilo vs. Parcotilo 24 where a person had adverse possession of a particular land by virtue of an invalid will for thirty years, the Supreme Court ruled that extraordinary prescription had set in thus:

We agree with the trial court that even if the document Exh. “1-a” was not executed with all the requisites of a valid will or of a valid donation mortis causa the said document supplied the basis for the claim of ownership by the defendant Demetrio Parcotilo of the two parcels of land in question after the death of the spouses. The ownership by Demetrio Parcotilo, coupled with his open, continuous and adverse possession for a period of thirty- eight years had ripened into a title by prescription (Pensader vs. Pensader, 47 Phil. 959, 961) x x x.

Even the provisions of Article 1137 of the New Civil Code on extraordinary prescription through uninterrupted adverse possession for thirty years, regardless of whether there was title or good faith, uphold the right of the defendant Pablo Parcotilo as owner through adverse possession in this present case.

In the case of Heirs of Celso Amarante vs. Court of Appeals 25

where it was shown that, even previous to the war, a person occupied

a particular alienable public land where he planted various coconut

trees, mango trees and bamboo trees and that his grandchildren and descendants continued occupying the place until the trees were already 70 years of age, the Supreme Court ruled that acquisitive

prescription had already set in, to wit:

We should consider next the character of the rights held by petitioners in respect of Lot 1236. The testimony of Celso Amarante showed that in 1974, the coconut trees planted by petitioners and their predecessors-in-interest were already

24 G.R. No. L-17249, November 28, 1964, 12 SCRA 435. 25 G.R. No. L-76386, May 21, 1990, 185 SCRA 585.

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art. 1137

Text and Cases

approximately seventy (70) years of age. The mango trees had trunks with circumferences of about three (3) arm lengths; indicating once more that those trees were old. Thus, it was clearly shown that Malonis Infiel had begun occupying Lot No. 1236 a very long time ago. When the possession of Malonis Infiel of the land is tacked on to that of petitioners, there is no question that that possession exceeded thirty (30) years which is the period for extraordinary prescription provided for in Article 1137 of the Civil Code.

More importantly, there is Section 48(b) of Commonwealth Act No. 141, as amended by Republic Act No. 1942, otherwise known as the Public Land Act, which provides as follows:

“Section 48. The following described citizens of Philippines occupying lands of public domain or claiming to own any such land or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for con-firmation of their claims and the issuance of a certi-ficate of title thereof, under the Land Registration Act, to wit:

x x x

x x x

x x x

(b)

Those who by themselves or through

their predecessors in interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at least thirty years immediately preceding the filing of the application for confirmation of the title except when prevented by war or force majeure. These shall be conclusively presumed to have per-formed all the conditions essential to a Government grant, and shall be entitled to a certificate of title under the provisions of this Chapter.”

There is no question that petitioners, at the time they were forcibly driven off the Sitio Campulay parcel of land, had through their possession and that of their predecessors-in-interest have complied with the requirements of long continued (at least 30 years), bona fide, open, exclusive and notorious possession and occupation of Lot 1236 which was of course, originally agri- cultural land of the public domain. As such, they have become owners of Lot 1236 even before formal confirmation of their title under Section 48(b) of the Public Land Act. In Director of Lands vs. Intermediate Appellate Court, et al., the Supreme Court, in overruling the earlier case of Manila Electric Company vs. Castro

26 G.R. No. L-76564, May 25, 1990, 185 SCRA 693.

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Bartolome, et al., said:

“Nothing can more clearly demonstrate the logical inevitability of considering possession of public land which is of the character and duration prescribed by statute as the equivalent of an express grant from the State than the dictum of the statute itself that the possessor(s) ‘x x x shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title x x x.’ No proof being admissible to overcome a conclusive presumption, confirmation proceedings would, in truth, be little more than a formality, at the most limited to ascertaining whe-ther the possession claimed is of the required character and length of time; and registration there-under would not confer title, but simply recognize a title already vested. The proceedings would not originally convert the land from public to private land, but only confirm such a conversion already effected by operation of law from the moment the required period of possession became complete. As was so well put in Cariño, ‘x x x (T)here are indi-cations that registration was expected from all, but none sufficient to show that, for want of it, ownership actually gained would be lost. The effect of the proof, wherever made, was not to confer title, but simply to establish it, as already conferred by the decree, if not by earlier law.

x x x

The court, in the light of the foregoing, is of the view, and so holds, that the majority ruling in Meralco must be reconsidered and no longer deemed to be binding precedent. The correct rule, as enunciated in the line of cases already referred to, is that alienable public land held by a possessor, personally or through his predecessors-in-interest, openly continuously for the prescribed statutory period (30 years under The Public Land Act, as amended) is converted to private property by the mere lapse or completion of said period, ipso jure.”

x x x

x x x

Article 1138. In the computation of time necessary for prescription the following rules shall be observed:

The present possessor may complete the period

(1)

necessary for prescription by tacking his possession to that of his grantor or predecessor in interest;

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art. 1138

(2)

Text and Cases

It is presumed that the present possessor who was

also the possessor at a previous time, has continued to be in possession during the intervening time, unless there is proof to the contrary;

(3) The first day shall be excluded and the last day included. (1960a)

The first rule provides that the present possessor may complete

the period necessary for prescription by tacking his possession to that of his grantor or predecessor in interest. The words “grantor” and “predecessor in interest” connote a transfer in a manner provided by law of property from one person to another. Thus, if A donated to B

a property which was previously in the possession of B for 8 years, A

can make use of the said 8 years for purposes of prescription. Hence,

if A already was in possession of the property for three years, the

period of his possession may be considered to have been for 11 years already. For purposes of ordinary acquisitive prescription, he has already complied with the statutory period. Also, in South City Homes, Inc. vs. Republic, 26 where a possessor of a strip of land designated as Lot No. 5005 claimed the same despite the fact that such land was not transferred to him when he bought two adjacent lands, Lot No. 2381 and Lot No. 2386-A, and where he claimed that his possession should be tacked in with the possession of the previous possessors, the Supreme Court rejected such contention and said:

But the more telling consideration, as the Court sees it, is this. By the testimony of the two witnesses, the petitioner obviously meant to tack the possession of the two lots by the previous owners to its own possession. There was no need for this because the petitioner acquired ownership of Lot No. 2381 by assignment and Lot No. 2386-A by purchase; and such ownership includes the right of possession. The petitioner is not claiming prescriptive rights to these two lots, which have previously been registered in the name of the transferors. The lot he is claiming by prescription is Lot No. 5005, which he did not acquire from the owner of the two other lots, or from any previous private registered owner of the lot, as there was none.

Neither of the owners of Lots No. 2381 nor 2386-A, in their respective deeds, transferred Lot No. 5005 to the petitioner; as already explained, Lot No. 5005 was not part of either of the two lots. The petitioner merely occupied the disputed strip of land believing it to be included in the two lots it had acquired from Koo Jun Eng and the Garcia spouses. However, even if it be conceded that the previous owners of the other two lots possessed the

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disputed lot, their possession cannot be tacked to the possession of the petitioner. The simple reason is that the possession of the said lot was not and could not have been transferred to the petitioner when it acquired Lots Nos. 2381 and 2386-A because these two lots did not include the third lot.

Article 1138 of the Civil Code provides that —

(1) The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor-in- interest. x x x

However, tacking possession is allowed only when there is a privity of contract or relationship between the previous and present possessors. In the absence of such privity, the possession of the new occupant should be counted only from the time it actually began and cannot be lengthened by connecting it with the possession of the former possessors. Thus, it has been held:

The deed, in itself, creates no privity as to land outside it calls. Nor is privity created by the bare taking of possession of land previously occupied by the grantor. It is therefore the rule, although sharply limited, that a deed does not of itself create privity between the grantor and the grantee as to land not described in the deed but occupied by the grantor in connection therewith, although the grantee enters into possession of the land not described and uses it in connection with that conveyed.

Where a grantor conveys a specific piece of property, the grantee may not tack onto the period of his holding an additional piece of property the period of his grantor’s occupancy thereof to make up the statutory period. His grantor did not convey such property or his interest therein, and there is no privity.

It is said, in Hanlon vs. Ten Hove, supra, that this rule is not harsh, the court using the following language: “If A purchases and by adverse possession obtains title to an adjoining 40 acres, it would hardly be contended that a conveyance by him of the 40 acquired by deed, would carry with it the title to the 40 acres acquired by adverse possession. So if A acquires by deed 40 acres and obtains an adjoining strip 2 rods wide or some interest in it, his conveyance of the 40 acquired by deed does not carry with it his

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art. 1138

Text and Cases

interest in the adjoining strip. If the sole defense here was that of adverse possession, we would be obliged to hold that it have not been made out.”

It should also be noted that, according to Article 1135 of the Civil Code:

In case the adverse claimant possesses by mistake an area greater or less, than that expressed in this title, prescription shall be based on the possession.

This possession, following the above-quoted rulings, should be limited only to that of the successor-in-interest; and in the case of the herein petitioner, it should begin from 1981 when it acquired the two adjacent lots and occupied as well the lot in question thinking it to be part of the other two.

It follows that when the application for registration of the lot in the name of the petitioner was filed in 1983, the applicant have been in the possession of the property for less than three years. This was far too short of the prescriptive period required for acquisition of immovable property, which is ten years if the possession is in good faith and thirty years if in bad faith, or if the land is public.

The second rule provides the presumption that the present possessor who was also the possessor at a previous time, have continued to be in possession during the intervening time, unless there is proof to the contrary. A presumption proceeds from a set of facts. For the presumption provided in this rule to exist, there must be a prior showing of the fact that the person presently possessing the property was also the one in possession of the same property before the intervening time. Hence, if a person was in possession of the property in 1997 and it was shown that he was also in possession of the property in 1988, it shall be presumed that he was in possession from 1989 to 1996. However, this presumption can be destroyed if evidence can be adduced to show that he was not in possession during the interval.

The third rule provides that the first day shall be excluded and the last day included. For example, if a person possessed the property on January 1, 1980 up to January 15, 1990, the counting of the prescriptive period shall start on January 2, 1980 up to January 15, 1990.

art. 1138

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Text and Cases

Chapter 3

PRESCRIPTION OF ACTIONS

Article 1139. Actions prescribe by the mere lapse of time fixed by law. (1961)

The law fixes the time within which an action may be filed. If the period prescribed by law lapses, the action cannot be filed anymore. The set of provisions dealing with prescription of actions is known as the Statute of Limitations.

Article 1140. Actions to recover movables shall prescribe eight years from the time the possession thereof is lost, unless the possessor has acquired the ownership by prescription for a less period, according to Article 1132, and without prejudice to the provisions of Articles 559, 1505, and 1133. (1962a)

For example, a person can recover lost personal or movable property which he claims belong to him within a period of eight years. However, if all the requisites of an ordinary acquisitive prescription of movable property are present, the possessor of the same becomes the owner of the movable property after only four years uninterrupted possession in good faith. In Tan vs. Court of Appeals, 1 where the petitioner claimed that, through bad faith and fraud, he was led to assign his shares of stocks in 1977 to three corporate entities and where the case to reconvey the same was filed only in 1987, the Supreme Court ruled that the action had already prescribed, thus:

The next question is whether or not any action for reconveyance has nevertheless prescribed, on the bases of provisions governing reconveyance.

The rule anent prescription on recovery of movables (shares of stock in this case) is expressed in Article 1140 of the Civil Code, which we quote:

1 G.R. No. 90356, March 18, 1991, 195 SCRA 355.

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“Art. 1140. Actions to recover movables shall prescribe eight years from the time the possession thereof is lost, unless the possessor had acquired the ownership by prescription for a less period, according to Article 1132, and without prejudice to the provisions of Articles 559, 1505 and 1133.”

As it provides, Article 1140 is subject to the provisions of Articles 1132 and 1133 of the Code, governing acquisitive prescription, in relation to Articles 559 and 1505 thereof. Under Article 1132.

“Art. 1132. The ownership of movables prescribes through uninterrupted possession for four years in good faith.

The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition.

With regard to the right of the owner to recover personal property lost or of which he has been illegally deprived, as well as with respect to movables acquired in a public sale, fair, or market, or from a merchant’s store the provisions of Articles 559 and 1505 of this Code shall be observed.”

Acquisitive prescription sets in after uninterrupted possession of four years, provided there is good faith, and upon the lapse of eight years, if bad faith is present. Where, however, the thing was acquired through a crime, the offender cannot acquire ownership by prescription under Article 1133, which we quote:

“Art. 1133. Movables possessed through a crime can never be acquired through prescription by the offender.”

Please note that under the above Article, the benefits of prescription are denied to the offender; nonetheless, if the thing has meanwhile passed to a subsequent holder, prescription begins to run (four or eight years, depending on the existence of good faith).

For purposes of extinctive prescription vis-a-vis movables, we therefore understand the periods to be:

1. Four years, if the possessor is in good faith;

2. Eight years in all other cases, except where the loss

was due to a crime in which case, the offender cannot acquire the

movable by prescription, and an action to recover it from him is imprescriptible.

It is evident, for purposes of the complaint in question, that the petitioners had at most eight years within which to pursue a

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art. 1140

Text and Cases

reconveyance, reckoned from the loss of the shares in 1977, when the petitioner Vicente Tan executed the various agreements in which he conveyed the same in favor of the Executive Consultants, Inc., Orobel Property Management, Inc., and Antolum Trading Corporation.

We are hard put to say, in this regard, that the petitioners’ action is after all, imprescriptible pursuant to the provisions of Article 1133 of the Civil Code, governing actions to recover loss by means of a crime. For one thing, the complaint was not brought upon this theory. For another, there is nothing there that suggests that the loss of the shares was indeed made possible by a criminal act, other than simple bad faith and probably abuse of right.

In Dira vs. Tanega, 2 where a partner took possession of the shares of a co-partner who refused to pay his obligations and participate in the partnership prompting the possessing-partner to conduct himself publicly, openly, and adversely as the absolute owner from 1947 up to 1961 of the shares pledged by the delinquent partner and of the assets of the partnership, and where the delinquent partner contended that a trust relationship was created between him and the other partner, the Supreme Court ruled that such delinquent partner can no longer file a case to claim the shares because such action had already prescribed. The Supreme Court pertinently ruled:

x x x In bad faith or in good faith, after eight years of actual adverse possession, appellee acquired clear ownership of appellant’s share by acquisitive prescription. According to Article 1132 of the Civil Code, “the ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition.” So, appellee became un- disputed owner of appellant’s share since 1955 or six years before this action was filed and since said year the allegation of trusteeship had already lost any basis whatsoever. Under Article 1140 of the same Code, “Actions to recover movables shall prescribe eight years from the time the possession thereof is lost, unless the possessor has acquired the ownership by prescription for a less period” or for an equal period, in which latter case, the right to sue prescribes together with the title.

The action shall likewise be without prejudice to the provisions of Articles 559, 1505, and 1133. These articles provide:

Article 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who has

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Prescription of Actions

lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

Article 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.

Nothing in this Title, however, shall affect:

(1)

The provisions of any factors’ acts, recording laws, or any other provisions of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof;

(2)

The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;

(3)

Purchases made in a merchant’s store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.

Article 1133. Movables possessed through a crime can never be acquired through prescription by the offender.

Article 1141. Real actions over immovables prescribe after thirty years.

This provision is without prejudice to what is established for the acquisition of ownership and other real rights by prescription. (1963)

The prescriptive period in connection with immovables is thirty years. However if within the thirty-year period, all the requisites for ordinary acquisitive prescription are already present in favor of the possessor, then the possessor shall be considered the owner of the property after 10 years of uninterrupted, adverse, public possession of the property in the concept of an owner in good faith. In extraordinary acquisitive prescription, if the immovable property is adversely in the possession of the possessor for thirty years, the right to sue prescribes with the acquisition of the title.

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arts. 1142-1143

Text and Cases

Article 1142. A mortgage action prescribes after ten years.

(1964a)

A mortgage is an accessory contract. It is constituted to secure

a debt so that if the debtor fails to pay the principal obligation,

the creditor can foreclose on the mortgage by selling the same in

a public sale or bidding and the proceeds thereof are used to pay

off the principal debt and interest if any. If there is any deficiency, the creditor can still go against the principal debtor to collect such deficiency. In Development Bank of the Philippines vs. Tomeldan 3 where the creditor, after extra-judicially foreclosing the property of the debtor on September 15, 1967, filed on March 14, 1977 a civil case to claim the deficiency, the Supreme Court rejected the contention that the action had prescribed considering that the prescriptive period was 10 years from the time the cause of action accrued which was on September 16, 1967, to wit:

A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action because its purpose is precisely to enforce the mortgage contract.

Such being the case, Article 1142 of the Civil Code is likewise applicable to the instant case. Said provision reads: “Art. 1142. A mortgage action prescribes after ten years.”

Article 1143. The following rights, among others specified elsewhere in this Code, are not extinguished by prescription:

(1)

To demand a right of way, regulated in Article 649;

(2)

To bring an action to abate a public or private

nuisance. (n)

Aside from the right to demand a right of way regulated in Article 649 and the right to bring an action to abate a public or private nuisance, there are certain actions which do not prescribe such as an action to declare a contract null and void, 4 an action to quiet title initiated by the person having possession of the property, 5 and an action to partition a property among co-heirs. 6 Prescription does not supervene when the trust is merely an implied one 7 unless expressly

3 G.R. No. 51269, November 17, 1980, 101 SCRA 741; See also Caltex vs. Intermediate Appellate Court, G.R. No. 74730, August 25, 1989, 176 SCRA 741. 4 Bonanga vs. Soler, G.R. No. L-15717, June 30, 1961, 2 SCRA 755; Ras vs. Sua, G.R. No. L-23303, September 25, 1968, 25 SCRA 153; Garanciang vs. Garanciang, G.R. No. L-22351, May 21, 1969, 28 SCRA 229.

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repudiated by the trustee.

Article 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1)

Upon a written contract;

(2)

Upon an obligation created by law;

(3)

Upon a judgment. (n)

For a contract to fall under this article, the agreement must be in writing. For example, a purchaser of a real estate evidenced by a written contract of sale may file a case for delivery of the property to him. Barring the applicability of laches, the purchaser has ten years within which to file the case for delivery. The cause of action on a written contract accrues when a breach or violation thereof occurs. 8

In Espanol vs. Philippine Veterans Administration 9 where the pension of a veteran’s widow, which was received by her pursuant to Republic Act No. 65, was cancelled on November 1, 1951 by the Philippine Veterans Administration (PVA) on the basis of a doubtful administrative policy which however was struck down as invalid on June 27, 1973 by the Supreme Court in another case, and where the said widow, on February 25, 1974 filed a complaint against the PVA for the collection of the said pension, the Supreme Court rejected the contention of the PVA that the action had prescribed by thus ruling:

The contention of appellant PVA that the action of appellee Maria U. Espanol to compel the restoration of her monthly pension and that of her children, effective from the date of cancellation on November 1, 1951, has already prescribed, inasmuch as the same was filed more that 10 years from the date of cancellation, is without merit.

Article 1144 of the New Civil Code provides that actions based on an obligation created by law shall be brought within 10 years from the time the right of action accrues. It is important to reckon the date, when the right of action accrues, as the same is the beginning for counting the 10-year prescriptive period.

5 Gallar vs. Husain, G.R. No. L-20954, May 24 1967, 20 SCRA 186. 6 Gerona vs. De Guzman, G.R. No. L-19060, May 26, 1964, 11 SCRA 153. 7 Bueno vs. Reyes, G.R. No. L-22587, April 28, 1969, 27 SCRA 1179. 8 Lim Tay vs. Court of Appeals, G.R. No. 126891, August 5, 1998, 97 SCAD 103, 293 SCRA 634. 9 G.R. No. L-44616, June 29, 1985, 137 SCRA 314.

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art. 1144

Text and Cases

The right of action accrues when there exists a cause of action, which consists of three elements, namely: a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; b) an obligation on the part of such defendant to respect such right; and c) an act or omission on the

part of such defendant violative of the right of the plaintiff. x x x

It is only when the last element occurs or takes place that it can

be said in law that a cause of action has arisen. x x x

The appellee cannot be said to have a cause of action, in compelling the appellant to continue paying her monthly pension on November 1, 1951, because appellant’s act of cancellation,

being pursuant to an administrative policy, cannot be considered

a

violation of appellee’s right to receive her monthly pension. x

x

x x

It is only when this Court declared invalid the questioned administrative policy in the Del Mar vs. Philippine Veterans Administration, x x x, promulgated on June 27, 1973, can the appellee be said to have a cause of action to compel appellant to resume her monthly pension; because it is at that point in time, when the presumption of legality of the questioned adminis- trative policy had been rebutted and thus it can be said with certainty that appellant’s act was in violation of appellee’s right to receive her monthly pension.

The 10-year prescriptive period, therefore, should be counted from June 27, 1973 when the case of Del Mar vs. The Philippine Veterans Administration, x x x, was promulgated, and not from November 1, 1951, the date of the cancellation by appellant of appellee’s pension. The action of appellee, which was brought on February 25, 1974, is therefore well within the 10-year prescriptive period.

In Huang vs. Court of Appeals, 10 the Supreme Court ruled that an implied trust, whether a constructive or resulting trust, is normally not subject to prescription. However, if the trustee openly and adversely repudiates the trust, it is only from that time when prescription can set in. The Supreme Court said:

The prescriptive period is ten (10) years from the repu- diation of the trust. It is ten (10) years because just as a resulting trust is an offspring of the law, so is the corresponding obligation to convey the property and the title thereto to the true owner. In this context, and vis-a-vis prescription, Art. 1144 of the New Civil Code, which is the law applicable provides: “The following actions must be brought within 10 years from the time the right

of action accrues: (a) Upon a written contract; (b) Upon obligations

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Prescription of Actions

created by law; (c) Upon a judgment.”

Thus, the reckoning point is repudiation of the trust by the trustee because from that moment his possession becomes adverse, which in the present case gave rise to a cause of action by Dolores against the Huang spouses. However, before the period of prescription may start, it must be shown that: (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such positive acts of repudiation have been made known to the cestui que trust; and (c) the evidence thereon is clear and conclusive.

Article 1145. The following actions must be commenced within six years:

(1)

Upon an oral contract;

(2)

Upon a quasi-contract. (n)

An action based on an oral contract must be commenced within six years from the time the cause of action accrues. For example, A orally borrowed P2,000 from B to be paid on June 1, 1997 and B failed to pay on such date despite demand from A. A has six years from June 1, 1997 to file the case for collection against B.

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contracts to the end that no one shall be unjustly enriched or benefited at the expense of another. 11 Quasi- contracts are governed by Book IV, Title XVII, Chapter 1 of the 1950 Civil Code. One quasi-contract provided in the Civil Code is solutio indebiti. This occurs if something is received when there is no right to demand it, and it has been unduly delivered through mistake, thereby giving rise to the obligation to return what has been unduly received. 12 In Municipality of Opon vs. Caltex, 13 where a taxpayer mistakenly paid an amount which is not due, the Supreme Court, citing Gonzalo Puyat & Sons vs. City of Manila, 14 ruled that the prescriptive period was six years as it is a quasi-contract of solutio indebiti under the Civil Code.

Article 1146. The following actions must be instituted within four years:

11 Article 2142 of the 1950 Civil Code. 12 Article 2154 of the 1950 Civil Code. 13 G.R. No. L-21853, February 26, 1968, 22 SCRA 755. 14 G.R. No. L-17447, April 30, 1963, 7 Phil. 970.

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art. 1146

Text and Cases

(1)

Upon an injury to the rights of the plaintiff;

(2)

Upon quasi-delict. (n)

In Virgilio Callanta vs. Carnation Phil., Inc., 15 an employee was unjustly and illegally dismissed by his employer. He filed a case with the National Labor Relations Commissions (NLRC) for illegal dismissal, reinstatement and for back wages three years, one month and five days from the time he was illegally dismissed. The NLRC dismissed the case on the ground that it had prescribed pursuant to the Labor Code which provided that such claim should be filed within 3 years. The Supreme Court overruled the NLRC because the prescriptive period is four years as the case involved “injury to the rights of the plaintiff,” thus:

As this Court stated in Bondoc vs. People’s Bank and Trust Co., when a person has no property, his job may possibly be his only possession or means of livelihood, hence he should be protected against any arbitrary and unjust deprivation of his job. Unemployment, said the Court in Almira vs. B.F. Goodrich Philippines, brings ‘untold hardships and sorrows on those dependent on the wage earners.’ The misery and pain attendant

on the loss of jobs thus could be avoided if there be acceptance

of the view that under all circumstances of this case, petitioners

should not be deprived of their means of livelihood.

It is a principle in American jurisprudence, which undoubtedly, is well-recognized in this jurisdiction that one’s employment, profession, trade or calling is a “property right,” and the wrongful interference therewith is an actionable wrong. The right is considered to be property within the protection of

a constitutional guaranty of due process of law. Clearly then, when one is arbitrarily and unjustly deprived of his job or

means of livelihood, the action instituted to contest the legality

of one’s dismissal from employment constitutes, in essence, an

action predicated “upon injury to the rights of the plaintiff,” as contemplated under Art. 1146 of the New Civil Code, which must be brought within four [4] years.

In the instant case, the action for illegal dismissal was filed by petitioners on July 5, 1982, or three [3] years, one [1] month and five [5] days after the alleged effectivity dated of his dismissal on June 1, 1979 which is well-within the four [4]-year prescriptive period under Article 1146 of the New Civil Code. x x x

More so, in the instant case, where the delay in filing the

15 G.R. No. L-70615, October 28, 1986, 145 SCRA 268; See also Nemenzo vs. Sabillano, G.R. No. L-20977, September 7, 1968, 25 SCRA 1.

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case was with justifiable cause. The threat to petitioner that he would be charged with estafa if he filed a complaint for illegal dismissal, which private respondent did after all on June 22, 1981, justifies the delayed filing of the action for illegal dismissal with the Regional Office No. X, MOLE on July 5, 1982. Laches will not in that sense strengthen the cause of private respondent. Besides, it is deemed waived as it was never alleged before the Labor Arbiter nor the NLRC.

Article 2176 of the Civil Code provides that “whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called quasi-delict.” Quasi-delict is governed by Book IV, Title XVII, Chapter 2 of the 1950 Civil Code. An example of a quasi-delict is the fault or negligence resulting in the liability of manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods. They shall be liable for death or injuries caused by any noxious or harmful substances used, although no contractual relations exists between them and the consumer. 16 In Coca-Cola Bottlers Philippines, Inc. vs. Court of Appeals 17 where a complaint filed on May 7, 1990 makes reference to the reckless and negligent manufacture of “adulterated food items intended to be sold for public consumption” in that the soft drinks sold to the private respondent “contained fiber-like matter and other foreign substances or particles” causing damage to the private respondent’s business when he sold sometime in August 1989 the soft drinks to students who suffered sickness, the Supreme Court rejected the contention of the petitioner that the action had prescribed on the ground that the prescriptive period to file such action was six months from the delivery of the thing sold pursuant to Article 1571 of the Civil Code, and ruled that the allegations in the complaint clearly established a quasi-delict which prescribes in four (4) years pursuant to Article 1146 of the New Civil Code. In the case of Diocosa vs. Sarabia, 18 the Supreme Court held that:

an action based on quasi-delict is governed by Article 1150 of the Civil Code as to the question of when the prescriptive period of four years shall begin to run, that is, “from the day (the action) may be brought,” which means from the day the quasi-delict occurred or was committed.

In Kramer, Jr. vs. Court of Appeals, 19 it was held that an action

16 Article 2187 of the 1950 Civil Code. 17 G.R. No. L-110295, October 18, 1993, 45 SCAD 390, 227 SCRA 292. 18 G.R. No. L-10542, July 31, 1958, cited in Capuno vs. Pepsi Cola Bottling Company, G.R. No. L-19331, April 30, 1965, 13 SCRA 658; See also Corpuz vs. Paje, G.R. No. L-26737, July 31, 1969, 28 SCRA 1062.

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art. 1147

Text and Cases

for damages based on quasi-delict resulting from the collision of two vessels has a prescriptive period of four years from the day of the collision and

the aggrieved party need not wait for a determination by an administrative body like a Board of Marine Inquiry, that the collision was caused by the fault or negligence of the other party before he can file an action for damages. x x x Immediately after the collision the aggrieved party can seek relief from the courts by alleging such negligence or fault of the owners, agents or personnel of the other vessel.

In Allied Banking Corporation vs. Court of Appeals, 20 where in his third-party complaint filed on June 17, 1987, the debtor alleged that “by reason of the tortious interference by the Central Bank with the affairs of GENBANK, private respondent was prevented from performing his obligation under the loan such that he should not be held liable,” and where the “tortious interference” referred to was the Central Bank’s ordering GENBANK on March 25, 1980 to desist from doing business, the Supreme Court ruled that such third party complaint was barred by prescription, because quasi-delicts prescribe after four years from the time the cause of action accrues, which in this case was on March 25, 1980.

Article 1147. The following actions must be filed within one year:

(1)

For forcible entry and detainer;

(2)

For defamation. (n)

In Vda. De Borromeo vs. Pogoy, 21 the Supreme Court explained that the prescriptive period for forcible entry and detainer is long enough to comply with prerequisites provided by law for the filing of such case, thus:

Unable to secure a reconsideration of said order, petitioner came to this court through this petition for certiorari. In both his comment and memorandum, private respondent admitted not having availed himself of the barangay conciliation process, but justified such omission by citing paragraph 4, Section 6 of PD 1508 which allows the direct filing of an action in court where the same may otherwise be barred by the Statute of Limitations,

19 G.R. No. L-83542, October 13, 1989, 178 SCRA 518; see also Paulan vs. Sarabia, G.R. No. L-10542, July 31, 1952. 20 G.R. No. 85868, October 13, 1989, 178 SCRA 526. 21 G.R. No. L-63277, November 29, 1983, 126 SCRA 217.

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as applying to the case at bar.

The excuse advanced by private respondent is unsatisfactory. Under Article 1147 of the Civil Code, the period for filing actions for forcible entry and detainer is one year, and this period is counted from demand to vacate the premises.

In the case at bar, the letter-demand was dated August 28, 1982, while the complaint for ejectment was filed in court on September 16, 1982. Between these two dates, less than a month had elapsed, thereby leaving at least eleven (11) full months of the prescriptive period provided for in Article 1147 of the Civil Code. Under the procedure outlined in Section 4 of PD 1508, the time needed for the conciliation proceeding before the Barangay Chairman and the Pangkat should take no more than 60 days. Giving private respondent nine (9) months ample time indeed — within which to bring his case before the proper court should conciliation efforts fail. Thus, it cannot be truthfully asserted, as private respondent would want us to believe, that his case would be barred by the Statute of Limitations if he had to course his action to the Barangay Lupon.

Article 1148. The limitations of action mentioned in Articles 1140 to 1142, and 1144 to 1147 are without prejudice to those specified in other parts of this Code, in the Code of Commerce, and in special laws. (n)

The phrase “without prejudice” means that, in proper cases, the prescriptive period in this chapter may be availed of notwithstanding other special provisions in other parts of the Civil Code, in the Code of Commerce and in special laws. Thus, in the case of Virgilio Callanta vs. Carnation Phil., Inc., 22 the Supreme Court applied Article 1146 even though the claim falls under the prescriptive period provided for in the Labor Code because the illegal and unlawful dismissal suffered by the plaintiff in the said case falls within the ambit of “injury to the rights of the plaintiff,” thus:

Even on the assumption that an action for illegal dismissal falls under the category of “offense” or “money claims” under Articles 291 and 292, Labor Code, which provide for a three-year prescriptive period, still a strict application of said provisions will not destroy the enforcement of fundamental rights of the employees. As a statutory provision on limitation of actions, Articles 291 and 292 go to matters of remedy and not to the destruction of fundamental rights. As a general rule, a statute of limitation extinguishes the remedy only. Although the remedy

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Text and Cases

to enforce a right may be barred, that right may be enforced by some other available remedy which is not barred.

Article 1149. All other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the time the right of action accrues. (n)

Article 1150. The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought.

(1969)

In Tolentino vs. Court of Appeals, 23 the present spouse of a divorced man filed an action in 1971 against the former spouse to prevent the latter from using the surname of the husband. The present spouse knew since 1951 that the former spouse had been using the surname of the husband. The lower court issued a decision in favor of the present spouse but the Supreme Court reversed the decision on the ground, among others, that the action had prescribed. Pertinently, the Supreme Court said:

The petitioner’s contention that her cause of action is

imprescriptible is without merit. In fact, it is contradictory to her own claim. The petitioner insists that the use by respondent Consuelo David of the surname Tolentino is a continuing action- able wrong and states that every use of the surname constitutes

a new crime. The contention cannot be countenanced because the

use of a surname by a divorced wife for a purpose not criminal in nature is certainly not a crime. The rule on prescription in civil cases such as the case at bar is different. Art. 1150 of the Civil Code provides: “The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall

be counted from the day they may be brought.”

All actions, unless an exception is provided, have a pres-

criptive period. Unless the law makes an action imprescriptible,

it is subject to bar by prescription and the period of prescription

is five (5) years from the time the right of action accrues when no other period is prescribed by law (Civil Code, Art. 1149). The Civil Code provides for some rights which are not extinguished by prescription but an action as in the case before us is not among them. Neither is there a special law providing for impres- criptibility.

Moreover, the mere fact that the supposed violation of the petitioner’s right may be a continuous one does not change the

arts. 1151-1152

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principle that the moment the breach of right or duty occurs, the right of action accrues and the action from that moment can be legally instituted (Soriano vs. Sternberg, 41 Phil. 210).

The respondent Court of Appeals, on the other hand, is of the opinion that the period of prescription should be four (4) years, since it appears to be an action based on quasi-delict. Whatever the period, it cannot be denied that the action has long prescribed whether the cause accrued on April 21, 1945 when the petitioner and Arturo Tolentino got married, or on August 30, 1950, when the present Civil Code took effect, or in 1951 when Constancia Tolentino came to know of the fact that Consuelo David was still using the surname Tolentino. It is the legal possibility of bringing the action which determines the starting point for the computation of the period of prescription (Espanol v. Phil. Veterans Administration, 137 SCRA 314).

The petitioner should have brought legal action immediately against the private respondent after she gained knowledge of the use by the private respondent of the surname of her former husband. The action was brought only in November 23, 1971 with only verbal demands in between and an action to reconstitute the divorce case. The petitioner should have filed her complaint at once when it became evident that the private respondent would not accede to her demands instead of waiting for twenty (20) years.

As aptly stated by the Court of Appeals, “where the plaintiff fails to go to the court within the prescriptive period, he loses his cause, but not because the defendant had acquired ownership by adverse possession over his name but because the plaintiff’s cause of action had lapsed thru the statute of limitations.”

Article 1151. The time for the prescription of actions which have for their object the enforcement of obligations to pay principal with interest or annuity runs from the last payment of the annuity or of the interest. (1970a)

Article 1152. The period for prescription of actions to demand the fulfillment of obligations declared by a judgment commences from the time the judgment became final. (1971)

It is only when the judgment becomes final that the same can be effectively enforced. Hence, the prescriptive period is not counted from the time the judgment was rendered but from the time it became final. 24 In Philippine National Bank vs. Bondoc, 25 the Supreme Court stated that “the purpose of the revival of judgment is to give a creditor a new right of enforcement from the date of revival” and “the rule seeks to protect judgment creditors from wily and unscrupulous debtors who, in order to evade attachment and execution, cunningly

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conceal their assets and wait until the statute of limitations set in.”

Article 1153. The period for prescription of actions to demand accounting runs from the day the persons who should render the same cease in their functions.

The period for the action arising from the result of the accounting runs from the date when said result was recognized by agreement of the interested parties. (1972)

In Dira vs. Tanega 26 where one of the partners demanded payment of the accountabilities of another partner who ignored such demand, and where the demanding partner, since 1947 and after having been ignored by the other partner, managed, operated and administered the affairs and assets of the partnership not as a partner but as absolute owner of the same without any participation from the delinquent partner, the Supreme Court ruled that the action filed on February 10, 1961 by the delinquent partner-appellant against the other partner-appellee for an accounting of his share in the partnership had already prescribed, thus:

Under these circumstances, it would be giving premium to inaction and indifference to still hold that appellant could sue appellee, almost fourteen years after the latter, with prior notice to the former, had openly and publicly taken over exclusive control of the partnership business as if it were his own and only a little short of ten years after the expiration of the stipulated term of the partnership. His claims for salaries accrued after each month they were unpaid. Whether we assume that these claims lost basis in 1947 when appellee took over the business of the printing press and the newspaper or in 1951, upon the expiration of the term of the agreements, by all standards, these claims had already prescribed when the present suit was filed. On the other hand, under Article 1153 of the Civil Code, a demand for “accounting runs from the day the persons who should render the same ceases in their functions,” which in this case was in 1947, when the appellee began to operate the business as exclusively his own. Again, inasmuch as the longest period in the chapter on prescription of the Civil Code is ten years, it is evident that appellant’s action for accounting is already barred. The same is true with the claim for rentals and recovery of proportional ownership of the printing equipment and accessories, as to which,

24 Philippine National Bank (PNB) vs. Monroy, G.R. No. L-19374, June 30, 1964, 11 SCRA 433. 25 G.R. No. L-20236, July 30, 1965, 14 SCRA 770. 26 G.R. No. L-23232, June 17, 1970, 33 SCRA 479.

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appellant’s period to bring his actions accrued also in 1947, fourteen years before this suit was filed.

Article 1154. The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him. (n)

In Provident Savings Bank vs. Court of Appeals, 27 a loan was granted to debtors by a bank collateralized by their properties. Thereafter the bank was placed under receivership in 1972 and pro- hibited by the Monetary Board from transacting business including the foreclosure of properties. For failure of the debtors to pay, the bank informed the debtors that the property might be sold at public auction. This was not done because the debtors promised to pay. However the debtors sold the property to a purchaser who assumed the mortgage. In 1981, the receivership was lifted. Subsequently, the purchaser informed the bank that he is a judgment creditor of the original debtors, that the property was sold to him, and that he was willing to pay the indebtedness to release the mortgage. In rejecting the notion that the foreclosure of the mortgage might have already prescribed, the Supreme Court ruled:

Having arrived at the conclusion that a foreclosure is part of a bank’s business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account of the prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the Board against petitioner from transacting business was nullified in 1981. Indeed, the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him (Article 1154, New Civil Code). When prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a new one. This concept should not be equated with suspension where the past period after prescription is resumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 1991 ed., pp. 18-19). Consequently, when the closure of petitioner was set aside in 1981, the period of ten years within which to foreclose under Article 1142 of the New Civil Code began to run again and, therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage

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carried with it the mistaken notion that petitioner’s own suit for foreclosure had prescribed. What exacerbates the situation is the letter of private respondent requesting the petitioner on August 6, 1986 that private respondent be allowed to pay the loan secured by the mortgage as a result of the Deed of Sale executed by the Guarins in his favor on July 10, 1986 (pp. 36-37, Rollo). In point of law, this written communication is synonymous to an express acknowledgment of the obligation and had the effect of interrupting the period of prescription for the second time (Article 1155, New Civil Code; Osmeña vs. Rama, 14 Phil. 99 [1909]; 4 Tolentino, supra at p. 50). And this piece of document necessarily estops private respondent from setting up prescription vis-a-vis his unfounded supposition that acknowledgment of the debt is of no moment because the right of petitioner to foreclose had long prescribed in 1977 (p. 13, Petition; p. 7, Comment; pp. 19 and 58, Rollo).

In Tan vs. Court of Appeals 28 where, during the Marcos Regime, the petitioner was arrested and detained for various offenses, and where he sold his shares in a particular bank in 1977 and sought to recover them by filing a suit for reconveyance only in 1987, the Supreme Court ruled that the action had already prescribed and rejected his claim of legal standing based on fortuitous event, thus:

We cannot accept the petitioners’ contention that the period during which authoritarian rule was in force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino government took over. It is true that under Article 1154:

“Article 1154. The period during which the obligee was prevented by fortuitous event from enforcing his right is not reckoned against him.”

Fortuitous events have the effect of tolling the period of prescription. However, we can not say, as a universal rule, that the period from September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, we can not box in the “dictatorial” period within the term without distinction, and without, by necessity, suspending all liabilities, however demandable, incurred during that period, including perhaps those ordered by this Court to be paid. While this Court is cognizant of acts of the last regime, especially political acts, that might have indeed precluded the enforcement of liability against that regime and its minions, the Court is not inclined to make quite a

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sweeping pronouncement, considering especially the unsettling effects such a pronouncement is likely to bring about. It is our opinion that claims should be taken on a case-to-case basis. This selective rule is compelled, among others, by the fact that not all those imprisoned or detained by the past dictatorship were true political oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not a few of them were manipulators and scoundrels.

The petitioner Vicente Tan claims that from June 1974 through December, 1977, he was under detention; that sometime in August, 1977, the Central Bank lodged six criminal cases against him, along with several others, with Military Commis- sion No. 5 in connection with alleged violation of the Central Bank Act, falsification of documents, and estafa, that while in detention, he was made to execute various agreements in which

he conveyed the shares of stock in question; and that “[u]nder the

it would be foolhardy on the part of

foregoing factual setting petitioners to institute

The records show, however, that although under detention, Vicente Tan:

1. Commenced, in July, 1976, Civil Case No. 103359 of the defunct Court of First Instance of Manila, to mandatorily enjoin the Central Bank as receiver of Continental Bank, to takeover from ‘NISA’ the control and management and assets of Vicente Tan and his affiliate corporations;

[any] action for reconveyance

.”

2. Was ably represented by competent counsel, Atty. Norberto Quisimbing, throughout;

3. Filed with this Court a petition to stop the trial of the criminal cases pending against him with the Military Commission No. 5 and succeeded in obtaining a temporary restraining order.

On top of those facts above-mentioned, he:

1. Asked the Court of First Instance to order the Central Bank to proceed to rehabilitate Continental Bank by extending to it such emergency loans and advances as may be needed for its rehabilitation

2. Wrote, on July 15, 1977, the Central Bank expressing his approval in the reopening and rehabilitation of Continental Bank.

We are, therefore, convinced, from Vicente Tan’s very behavior, that detention was not an impediment to a judicial challenge, and the fact of the matter was that he was successful

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in obtaining judicial assistance. Under these circumstances, we can not declare detention, or authoritarian rule for that matter, as a fortuitous event insofar as he was concerned, that interrupted prescription.

To be sure, there is nothing in the petition which would remotely suggest, assuming that Vicente Tan could not have freely and intelligently acted during the period of martial rule, that his co-petitioners Victan & Company, Inc., Transworld Investment Corporation, First International Investment Company, Inc., Far East Petroleum & Minerals Corporation, and Philcontrust International Corporation, could not have similarly acted during the martial law regime and shortly thereafter. As far as they are therefore concerned, the Court has even better reason to invoke prescription because none of them acted and none now claims that it could not have acted.

Article 1155. The prescription of actions is interrupted when they are filed before the court, when there is a written extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. (1973a)

In Ledesma vs. Court of Appeals, 29 the Supreme Court had occasion to explain the effect on the prescriptive period of an extra- judicial demand, an acknowledgment of a debt by the debtor, and the filing of a case in court. The case is as follows:

Petitioner had filed a motion for reconsideration of the Court’s resolution of March 24, 1993 which denied his petition for review on certiorari for failure to sufficiently show that respondent Court of Appeals had committed any reversible error in its questioned judgment.

On August 21, 1980, private respondent Rizal Commercial Banking Corporation filed Civil Case No. 38287 in the then Court of First Instance of Rizal against petitioner to enforce the terms of Trust Receipt Agreement No. 7389 executed by them on April 1, 1974 but which petitioner had failed to comply with. As summons could not be served on the latter, said case was dismissed without prejudice on March 3, 1981. On December 2, 1988, private respondent bank instituted Civil Case No. 88-2572 in the Regional Trial Court of Makati, Metro Manila, Branch 133, against petitioner on the same cause of action and subject matter.

Petitioner’s motion to dismiss on the ground of prescription was denied and judgment was rendered in favor of private

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respondent by the court a quo ordering petitioner to pay private respondent P168,000.00 with interest thereon at 12% per annum from December 2, 1988 until full payment of the obligation, P16,800.00 as attorney’s fees, and costs of suit. Said judgment was affirmed by respondent Court in CA-G.R. CV No. 2906 in its decision promulgated on January 7, 1992, and petitioner’s motion for reconsideration thereof was denied in a resolution dated August 6, 1992.

Petitioner’s petition for review on certiorari of the said judgment was denied in our aforesaid resolution, hence its present motion for reconsideration, dated May 5, 1993. Contending that the second action filed by private respondent bank had already prescribed, petitioner invokes the rulings in Vda. de Nator, et al. vs. Court of Industrial Relations, et al. and Fulton Insurance Co. vs. Manila Railroad Co., et al., and invites us “to give a second look at the apparently conflicting or divergent jurisprudence.”

Article 1155 of the Civil Code provides that the prescription of an action, involving in the present case the 10-year pres- criptive period for filing an action on a written contract under

Article 1144(1) of the Code, is interrupted by: (a) the filing of an action, (b) a written extrajudicial demand by the creditor, and (c)

a written acknowledgment of the debt by the debtor. The effects

of the last two instances have already been decided by this Court,

the rationale therein should necessarily apply to the first.

The matter of the interruption of the prescriptive period by reason of a written extra-judicial demand by the creditor was decided in Overseas of Manila vs. Geraldez, et al., in this wise:

“x x x. The interruption of the prescriptive period by written extra-judicial demand means that the said period would commence anew from the receipt of the demand. That is the correct meaning of interruption as distinguished from mere suspension or tolling of the prescriptive period.

x x x

“A written extrajudicial demand wipes out the period that

has already elapsed and starts anew the prescriptive period.

x x x.

x x x

“That the same view to the meaning of interruption was adopted in Florendo vs. Organo, 90 Phil. 483, where it was ruled

that the interruption of the ten-year prescriptive period through

a judicial demand means that the full period of prescription

commenced to run anew upon the cessation of the suspension. When prescription is interrupted by a judicial demand, the full time for the prescription must be reckoned from the cessation of

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the interruption. x x x.”

The interruption of the prescriptive period by reason of a written acknowledgment of the debt by the debtor was dealt with in Philippine National Railways vs. National Labor Relations Commission, et al., thus:

“Article 1155 of the Civil Code provides that the pres- cription of actions is interrupted inter alia, when there is any

written acknowledgment of the debt by the debtor.” This simply means that the period of prescription, when interrupted by such a written acknowledgment, begins to run anew; and whatever time of limitation might have already elapsed from the accrual of the cause of action is thereby negated and rendered inefficacious. x

x x

“x x x. The effect of the interruption spoken of in Article 1155 is to renew the obligation, to make prescription run again from the date of the interruption. x x x”

Based on the aforecited cases, Article 1155 has twice been interpreted to mean that upon the cessation of the suspension of the prescriptive period, the full period of prescription commences to run again. Petitioner, on the other hand, insists that in case of the filing of an action the prescriptive period is merely tolled and continues to run again, with only the balance of the remaining period available for the filing of another action. This postulation of petitioner, if we are to adopt it, would result in an absurdity wherein Article 1155 would be interrupted in two different ways, i.e., the prescriptive period interrupted in case of an extrajudicial demand and a written acknowledg- ment of a debt, but it is merely tolled where an action is filed in court.

In Vda. de Nator, it was held that:

“x x x The filing of the case with the CFI arrested the period of prescription (Art. 1155, NCC), and the interruption of said period lasted until the time that the dismissal for lack of jurisdiction became final. When prescription is interrupted by a judicial demand, the full time for the prescription must be reckoned from the cessation of the interruption’ x x x. The whole period during which the case had been pending cannot be counted for arriving at the prescriptive period. In other words, the running of the period of prescription in this particular case was interrupted on August 6, 1953, when the case in the CFI was filed and began to run again on August 30, 1958, when the same Court had dismissed the case. As the complaint was filed with the CIR on December 5, 1959, the action had not yet prescribed.”

This case obviously appears to have made conflicting

statements since it proceeds upon a certain premise but arrives at

a different conclusion. Hence, we cannot agree that the statements

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therein sufficiently support the thesis of petitioner.

The case of Fulton Insurance Company is not clear either on the matter of the interruption of the prescriptive period where an action is filed in court. It was there held that:

“There are two school(s) of thought as to the legal effect of the cessation of the interruption by an intervening action upon the period of prescription. There is the view expressed and perhaps, not without reasons, that the full period of prescription should start to run anew, reckoned from the date of the cessation of the interruption. The contrary view is, that the cessation of the interruption merely tolls the running of the remaining period of prescription, deducting from the full period thereof the time that has already elapsed prior to the filing of the intervening action. Nevertheless, all discussion on this point is academic; considered in the light of either view, We find that the second action is not barred.”

In the aforesaid case, the defendant therein moved for the dismissal of the second case alleging that the filing of the first case neither tolled nor interrupted the running of the pres-criptive period. This Court ruled that the filing of the first action interrupted the running of the period, and then declared that at any rate, the second action was filed within the balance of the period remaining. It concluded that the issue of whether the filing of the action merely tolled or it actually interrupted the running of the prescriptive period was moot and academic because, in either case, the second action was still filed within the prescriptive period. Consequently, the Fulton case cannot also sustain the thesis of petitioner.

On the foregoing considerations, we are convinced and so hold that the correct interpretations of Article 1155 of the Civil Code are reflected in and furnished by the doctrinal pronounce- ments in Overseas Bank of Manila and Philippine National Railways Company, not only because they are later in point of time but because the issue is squarely resolved in a decisive and logical manner therein. Petitioner’s submission would result in a bifurcated interpretation of Article 1155, aside from the irrational conclusion that a judicial action itself cannot produce the same result on the prescriptive period as a mere extra-judicial demand or an acknowledgment of the debt.

Accordingly, petitioner having failed to adduce any cogent reason or substantial argument to warrant a reconsideration of our resolution of March 24, 1993, the present motion is hereby DENIED with FINALITY.

In Cabrera vs. Tiano 30 where the sale of the real property was made on July 2, 1947 and where the action was filed on June 20, 1957

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but the summons to the defendant was only served to him on July 2, 1957, the Supreme Court rejected the contention that the action had already prescribed to wit:

When the sale of the property took place on July 2, 1947, the ten (10)-year period within which to file the action had not yet elapsed on June 20, 1957, when the complaint was presented. While it is true that the sale in question had taken place before the effectivity of the new Civil Code and the law then on matter of prescription was Act No. 190, said law, however, contained no specific provision on the interruption of the prescriptive period; and the established rule then, as it is the rule now, is that the commencement of the suit prior to the expiration of the appli- cable limitation period, interrupts the running of the statute, as to all parties to the action (34 Am. Jur., Sec. 247, pp. 202-203; Peralta, et al. vs. Alipio, G.R. No. L-8273, Oct. 24, 1955). The fact that summons was only served on defendant on July 2, 1957, which incidentally and/or coincidentally was the end of the ten (10)-year period, is of no moment, since civil actions are deemed commenced from the date of the filing and docketing of the complaint with the Clerk of Court, without taking into account the issuance and service of summons (Sotelo vs. Dizon, et al., 67 Phil. 573). The contention that the period was not interrupted until after defendant received the summons is, therefore, without legal basis.

In the case of Olympia International, Inc. vs. Court of Appeals, 31 the Supreme Court pertinently ruled that:

it is equally important to note that the right to file a new action in this case has long prescribed, for while a civil action stops the running of the statute of prescription or limitation, its dismissal or voluntary abandonment by the plaintiff leaves the parties in exactly the same position as though no action had been commenced at all. The commencement of an action, by reason of its dismissal or abandonment, takes no time out of the period of prescription.

In Philippine National Bank vs. Osete, 32 the Supreme Court ruled that under Article 1155

not all acts of acknowledgment of a debt interrupt prescription. To produce such effect, the acknowledgment must be “written” so that payment, if not coupled with a communication signed by the payor, would not interrupt the running of the period of

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prescription.

In Ramos vs. Condez, 33 where the defendant on June 25, 1952 sold to the plaintiff a particular land and where the same defendant on November 10, 1956, upon demand by the plaintiff, recognized the sale and promised to deliver the property, the Supreme Court rejected the contention that the filing of the case had already prescribed by ruling:

Under Article 1144 of the Civil Code (new), an action upon a written contract “x x x must be brought within 10 years from the time the cause of action accrues.” There is no denying that, in the instant case, the plaintiffs’ cause of action, under the deed of absolute sale, Annex A, has accrued on June 25, 1952, but in view of defendants’ letter, dated November 10, 1956, acknowledging the validity of the deed of absolute sale and promising to comply with their commitments as embodied in the deed of sale that they will deliver the land which they have sold to the plaintiffs, the running of the period of limitation of action was interrupted on that date, November 10, 1956. Considering that the action was filed on May 22, 1963, evidently, the cause of action has not prescribed, because it was filed within the period of limitation of actions (Article 1155, New Civil Code).

31 G.R. No. L-43235, December 20, 1989, 180 SCRA 353. 32 G.R. No. L-24997, July 18, 1968, 24 SCRA 63. 33 G.R. No. L-22072, August 30, 1967, 20 SCRA 1146.

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BOOK IV

OBLIGATIONS AND CONTRACTS

Title I. — OBLIGATIONS

Chapter 1

GENERAL PROVISIONS

Article 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

An obligation is a “legal bond whereby constraint is laid upon a person or group of persons to act or forbear on behalf of another person or group of persons.” 1 In Ang Yu Asuncion vs. Court of Appeals, 2 the Supreme Court spelled out the requirements for the existence of an obligation, thus:

The obligation is constituted upon the concurrence of the essential elements thereof, viz.: (a) The vinculum juris or juri- dical tie which is the efficient cause established by the various sources of obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or con-duct, required to be observed (to give, to do or not to do); and (c) subject- persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.

The word “persons” in this sense is understood as compre- hending both natural and juridical persons. The prestations are to give, to do and not to do.

Article 1157. Obligations arise from:

(1)

Law;

1 William F. Elliot, Commentaries on the Law of Contracts, Volume 1, 1913 edition, Indianapolis, The Bobbs-Merrill Company, page 6, citing Anson Cont. 5, 23. 2 G.R. No. 109125, December 2, 1994, 57 SCAD 163, 238 SCRA 602.

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(2)

Contracts;

(3)

Quasi-Contracts;

(4)

Acts or omissions punished by law; and

(5)

Quasi-delicts. (1089a)

The enumeration of the sources of obligation under this particular article is exclusive 3 which means that there can be no other sources of obligations other than those enumerated in the article.

Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. x x x 4

Article 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (1090)

Among the sources of obligation, the law is the most important one. It does not depend upon the will of the parties. It is imposed by the state and is generally imbued with some public policy consi- derations. Being thus imposed, the basis of the obligation must be clear. It cannot be presumed. Hence, the payment of taxes must be specifically directed by our tax statutes. Also, parents and children are obliged to support each other as mandated by the provisions of the Family Code of the Philippines. 5

The importance of law as a source of obligation is highlighted by the legal principle that existing law enters into and forms part of a valid contract without need for the parties expressly making reference thereto. 6 A contract is understood to incorporate therein the provision or provisions of law specifying the obligations of the parties under the contract. 7

3 Sagrado Orden vs. Nacoco, G.R. No. L-3756, June 30, 1952, 91 Phil. 503; Navales vs. Rios, G.R. No. 3489, September 7, 1907, 8 Phil. 508. 4 Article 1423 of the 1950 Civil Code. 5 Article 195 of Executive Order No. 209 which took effect on August 3, 1988. 6 Lakas ng Manggagawang Makabayan (LMM) vs. Abiera, G.R. No. L-29474,

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Text and Cases

Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)

Contracts are another source of obligations. As defined in our law, a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. 8 The statutory definition is not really accurate as contracts may likewise involve more than two persons “whereby a right is acquired by at least one of them to an act or acts, or to forbearance, on the part of other or others.” 9 A contract may likewise involve mutual and reciprocal obligations and duties between and among the parties.

In characterizing the contract as having the force of law between the parties, 10 the law stresses the obligatory nature of a binding and valid agreement. Like the law, the wilfull non-fulfillment of the provisions of a contract may involve sanctions. The parties voluntarily impose upon themselves the performance of certain duties and obligations which, in the event of breach or wilfull non-performance, can prejudice the other party or parties. Whatever stipulations, clauses, terms and conditions are included in a contract, as long as they are not contrary to law, morals, good customs, public policy or public order, such contract is the law between the parties. 11 In Perla Compania de Seguros, Inc. vs. Court of Appeals, 12 the insurance contract between the parties stipulated that the insurer’s liability for all damages arising out of death or bodily injury sustained by one person was limited to Twelve Thousand Pesos (P12,000); and it was likewise stipulated that before the insured enters into a contract with