UNIT VI (Possession)

G.R. No. 153625 July 31, 2006

Heirs of MARCELINO CABAL, represented by VICTORIA CABAL, petitioner,

vs.
Spouses LORENZO CABAL1 and ROSITA CABAL, respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure
assailing the Decision2 of the Court of Appeals (CA) dated September 27, 2001 in CA-G.R. SP No.
64729 which affirmed in toto the Decision of the Regional Trial Court, Branch 70, Iba, Zambales (RTC)
dated August 10, 2000 in Civil Case No. RTC-1489-I; and the CA Resolution3 dated May 22, 2002
which denied the Motion for Reconsideration of Marcelino Cabal (Marcelino).

The factual background of the case is as follows:

During his lifetime, Marcelo Cabal (Marcelo) was the owner of a 4,234-square meter parcel of land
situated at Barrio Palanginan, Iba, Zambales, described as Lot G and covered by Original Certificate
of Title (OCT) No. 29 of the Registry of Deeds of Zambales.

Sometime in August 1954,4 Marcelo died, survived by his wife Higinia Villanueva (Higinia) and his
children: Marcelino, Daniel, Cecilio, Natividad, Juan, Margarita, Lorenzo, Lauro and Anacleto.5 It
appears that sometime in 1949, five years before he died, Marcelo allowed his son, Marcelino, to build
his house on a portion of Lot G, now the southernmost portion of Lot 1-E of Transfer Certificate of Title
(TCT) No. 43419.6 Since then, Marcelino resided thereon.7 Later, Marcelino's son also built his house
on the disputed property.8

On August 17, 1964, Marcelo's heirs extra-judicially settled among themselves Lot G into undivided
equal shares of 423.40-square meters each and Transfer Certificate of Title (TCT) No. T-8635 was
issued in their names.9

On September 17, 1973, Daniel sold 380 square meters of his 423.40-square meter undivided share
to spouses Oscar Merete and Clarita Ebue.10

On September 12, 1976, the heirs subdivided Lot G into Lot G-1 in favor of Marcelino, resulting in the
issuance of TCT No. T-22656;11 and Lot G-2 in favor of Higinia, Daniel, Natividad, Juan, Cecilio,
Margarita, Lorenzo, Lauro and Anacleto, resulting in the issuance of TCT No. 22657.12

On March 1, 1977, Marcelino mortgaged his share, as described under TCT No. 22656, to the Rural
Bank of San Antonio (Zambales), Inc.13 The mortgage on the property was subsequently released on
December 19, 1983.14

In the interim, based on consolidated subdivision plan (LRC) Pcd-24078, Lot G-2 was further
subdivided and the remaining portion, known as Lot 1 of the subdivision plan, comprising 3387.20
square meters, became subject of TCT No. T-24533 with Higinia, Margarita, Natividad, Lorenzo,
Daniel, Oscar Merete, Cecilio, Carmelita C. Pagar, and Anacleto as co-owners.
On August 3, 1978, the co-owners of Lot 1 executed a Deed of Agreement of Partition with Sale. Lot
1 was subdivided among the co-owners with Higinia, Margarita, Natividad, Lorenzo, Cecilio, Carmelita
C. Pagar and Anacleto, receiving 423.40 square meters each; Daniel, with 43.4 square meters; and
Oscar Merete, with 380 square meters.15 In the same deed, Lorenzo bought the shares of Higinia,
Margarita, Daniel and Natividad.16 Thus, Lorenzo's share in the co-ownership amounted to 1,737
square meters. Likewise, in the same deed, Cecilio sold his share to a certain Marcela B. Francia.17

On January 13, 1982, a land survey was conducted on Lot 1 by Geodetic Engineer Dominador L.
Santos and Junior Geodetic Engineer Eufemio A. Abay and based on the survey, they submitted
subdivision survey plan (LRC) Psd-307100, designating the shares of Carmelita C. Pagar, Marcela B.
Francia, spouses Oscar Merete and Clarita Ebue, Anacleto, and Lorenzo as Lots 1-A, 1-B, 1-C, 1-D
and 1-E, respectively.18 The subdivision survey plan of Lot 1 was approved by the Director of the
Bureau of Lands on May 7, 1982.19 On June 7, 1990, the co-owners of Lot 1 executed a Subdivision
Agreement designating their shares based on the approved subdivision plan.20 On July 13, 1993, TCT
No. 43419 covering Lot 1-E was issued in the name of Lorenzo.21

In the meantime, since the subdivision plan revealed that Marcelino and his son occupied and built
their houses on a 423-square meter area located on the southernmost portion of Lot 1-E and not the
adjacent lot designated as Lot G-1 under TCT No. T-22656,22 the spouses Lorenzo and Rosita Cabal
(respondents) confronted Marcelino on this matter which resulted to an agreement on March 1, 1989
to a re-survey and swapping of lots for the purpose of reconstruction of land titles.23 However, the
agreed resurvey and swapping of lots did not materialize24 and efforts to settle the dispute in
the barangay level proved futile.25

Hence, on August 10, 1994, respondents filed a complaint for Recovery of Possession with Damages
against Marcelino before the Municipal Trial Court of Iba, Zambales (MTC), docketed as Civil Case
No. 735. They alleged that Marcelino introduced improvements in bad faith on their land with
knowledge that the adjacent lot is titled in his name.26

On August 26, 1994, Marcelino filed his Answer with Counterclaim, contending that respondents have
no cause of action against him because he has been in possession in good faith since 1949 with the
respondents' knowledge and acquiescence. He further avers that acquisitive prescription has set in.27

On January 24, 1997, during the pendency of the trial of the case, Lorenzo died. Following trial on the
merits, the MTC rendered on November 19, 1997 its Decision28 in favor of Marcelino, the dispositive
portion of which reads:

WHEREFORE, on the basis of the foregoing premises as adduced by this Court the plaintiff
or their representatives are hereby directed to relinquish the possession of said property
subject matter of this case and deliver the peaceful possession of the same to the herein
defendant or his authorized representatives, to remove the improvements made thereon within
fifteen (15) days from the receipt of this decision, otherwise, this Court would remove and/or
destroy the same with cost against the plaintiff, further the plaintiff is hereby ordered to pay
the amount of Ten Thousand Pesos (P10,000.00), Philippine Currency representing moral
damages and exemplary damages in the amount of Five Thousand Pesos (P5,000.00),
Philippine Currency, and the amount of Twenty Thousand Pesos (P20,000.00), Philippine
Currency, representing attorney's fees.

SO ORDERED.29

The MTC reasoned that prescription or the length of time by which Marcelino has held or possessed
the property has barred the respondents from filing a claim.
On December 12, 1997, respondents filed a Motion for Reconsideration30 but the MTC denied it in its
Order dated February 5, 1998.31

Dissatisfied, respondents filed an appeal with the RTC Branch 70, Iba, Zambales, docketed as RTC-
1489-I. On August 10, 2000, the RTC rendered its Decision setting aside the Decision of the
MTC.32 The dispositive portion of the Decision states:

WHEREFORE, the appealed Decision of the Municipal Trial Court is hereby REVERSED and
SET ASIDE ordering the defendant Marcelino Cabal and all other persons claiming interest
under him to vacate and deliver peaceful possession of the disputed area of 423 sq. m. within
Lot 1-E embraced in TCT No. T-43419 to the plaintiffs-appellants; to remove all improvements
therein introduced by said defendant or by persons under his direction and authority; to pay
the plaintiffs-appellants P10,000.00 and P5,000.00 by way of moral and exemplary damages,
respectively; to pay plaintiff-appellants attorney's fee in the sum of P20,000.00 and cost of this
suit.

SO ORDERED.33

In reversing the MTC, the RTC held that Marcelino's possession was in the concept of a co-owner and
therefore prescription does not run in his favor; that his possession, which was tolerated by his co-
owners, does not ripen into ownership.

On August 30, 2000, Marcelino filed a Motion for Reconsideration34 but the RTC denied it in its Order
dated May 3, 2001.35

On May 18, 2001, Marcelino filed a petition for review with the CA, docketed as CA-G.R. SP No.
64729.36Marcelino, however, died during the pendency of the case. On September 27, 2001, the CA
rendered its Decision affirming in toto the Decision of the RTC.37

In sustaining the RTC, the CA held that Marcelino may have been in good faith when he started to
occupy the disputed portion in 1949 but his occupation in good faith diminished after Lot G was
surveyed when he was apprised of the fact that the portion he was occupying was not the same as
the portion titled in his name; that from the tenor of the petition for review Marcelino would like to hold
on to both the lot he occupies and Lot G-1, which cannot be allowed since it will double his inheritance
to the detriment of his brother Lorenzo.

On November 13, 2001, Marcelino's counsel filed a Motion for Reconsideration38 but the CA denied it
in its Resolution dated May 22, 2002.39

On June 6, 2002, the heirs of Marcelino (petitioners), represented by his widow, Victoria Cabal, filed
the present petition anchored on the following grounds:

I. CONTRARY TO THE COURT OF APPEALS' FINDINGS AND CONCLUSION,

PETITIONER NEVER INTENDED AND NEITHER DOES HE INTEND TO HOLD ON TO
BOTH THE 423 SQUARE METER WITHIN LOT 1-E WHICH HE IS OCCUPYING AND LOT
1-G (sic). PETITIONER IS ONLY INTERESTED IN THE DISPUTED PROPERTY, THAT IS,
A PORTION OF LOT 1-E BECAUSE THIS IS WHERE HE INTRODUCED CONSIDERABLE
IMPROVEMENTS IN GOOD FAITH.
 II. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN
IT RULED THAT THE GOOD FAITH OF PETITIONER ON THE DISPUTED PROPERTY
BEGAN TO DIMINISH AFTER LOT-G WAS SURVEYED.40

Anent the first ground, petitioners contend that since 1949 Marcelino has claimed no other portion as
his inheritance from Marcelo, except the disputed lot; that Marcelino believed in good faith that the
disputed lot is Lot G-1; that Marcelino never intended to hold on to both lots since he did not introduce
any improvement on Lot G-1 and he even agreed to a resurvey, swapping of lots and reconstruction
of title after discovery of the mistake in 1989; that Marcelino wanted the disputed lot because he has
introduced considerable improvements thereon.

On the second ground, petitioners maintain that Marcelino became aware of the flaw in his title only
before the execution of the swapping agreement in March 1, 1989, long after he had introduced
considerable improvements in the disputed lot; that Marcelino should not be faulted for believing that
the disputed lot is his titled property because he is a layman, not versed with the technical description
of properties; that Marcelino should be adjudged a builder in good faith of all the improvements built
on the disputed property immediately prior to the execution of the swapping agreement and accorded
all his rights under the law or, alternatively, the swapping of lots be ordered since no improvements
have been introduced on Lot G-1.

Respondents, on the other hand, submit that Marcelino cannot be adjudged a builder in good faith
since he exhibited blatant and deliberate bad faith in dealing with respondents.

The Court rules in favor of the petitioners.

As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from
the CA is limited to reviewing questions of law which involves no examination of the probative value
of the evidence presented by the litigants or any of them.41 The Supreme Court is not a trier of facts;
it is not its function to analyze or weigh evidence all over again.42 Accordingly, findings of fact of the
appellate court are generally conclusive on the Supreme Court.43

Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be
resolved by this Court, such as: (1) when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its
findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of
both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; (11) when the CA manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.44 The Court finds that exceptions (1), (2), (4) and (11) apply to the present petition.

It is undisputed that Marcelino built his house on the disputed property in 1949 with the consent of his
father. Marcelino has been in possession of the disputed lot since then with the knowledge of his co-
heirs, such that even before his father died in 1954, when the co-ownership was created, his
inheritance or share in the co-ownership was already particularly designated or physically segregated.
Thus, even before Lot G was subdivided in 1976, Marcelino already occupied the disputed portion and
even then co-ownership did not apply over the disputed lot. Elementary is the rule that there is no co-
ownership where the portion owned is concretely determined and identifiable, though not technically
described,45 or that said portion is still embraced in one and the same certificate of title does make
said portion less determinable or identifiable, or distinguishable, one from the other, nor that dominion
over each portion less exclusive, in their respective owners.46

Thus, since Marcelino built a house and has been occupying the disputed portion since 1949, with the
consent of his father and knowledge of the co-heirs,47 it would have been just and equitable to have
segregated said portion in his favor and not one adjacent to it. Undoubtedly, the subdivision survey
effected in 1976 spawned the dilemma in the present case. It designated Lot G-1 as Marcelino's share
in the inheritance notwithstanding his possession since 1949 of a definite portion of Lot G, now the
southernmost portion of Lot 1-E.

Marcelino raised the defense of acquisitive prescription, in addition to possession in good faith, in his
Answer to the Complaint in the MTC. Prescription, in general, is a mode of acquiring or losing
ownership and other real rights through the lapse of time in the manner and under conditions laid down
by law, namely, that the possession should be in the concept of an owner, public, peaceful,
uninterrupted and adverse.48 Acquisitive prescription is either ordinary or extraordinary.49 Ordinary
acquisitive prescription requires possession in good faith and with just title50for ten years.51 In
extraordinary prescription ownership and other real rights over immovable property are acquired
through uninterrupted adverse possession thereof for thirty years, without need of title or of good
faith.52

In the present case, the evidence presented during the trial proceedings in the MTC were sorely
insufficient to prove that acquisitive prescription has set in with regards to the disputed lot. The tax
declaration53 and receipts54presented in evidence factually established only that Marcelino had been
religiously paying realty taxes on Lot G-1. Tax declarations and receipts can only be the basis of a
claim of ownership through prescription when coupled with proof of actual possession.55 Evidently,
Marcelino declared and paid realty taxes on property which he did not actually possess as he took
possession of a lot eventually identified as the southernmost portion of Lot 1-E of subdivision plan
(LRC) Psd-307100.

Furthermore, the Court notes that Marcelino no longer invoked prescription in his pleadings before the
RTC56 and CA;57 neither did herein petitioners raise prescription in their petition58 and
memorandum59 before this Court. They only extensively discussed the defense of possession in good
faith. They are thus deemed to have abandoned the defense of prescription.

The Court shall now delve on the applicability of the principle of possession in good faith.

It has been said that good faith is always presumed, and upon him who alleges bad faith on the part
of the possessor rests the burden of proof.60 Good faith is an intangible and abstract quality with no
technical meaning or statutory definition, and it encompasses, among other things, an honest belief,
the absence of malice and the absence of design to defraud or to seek an unconscionable advantage.
An individual's personal good faith is a concept of his own mind and, therefore, may not conclusively
be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge
of circumstances which ought to put the holder upon inquiry.61The essence of good faith lies in an
honest belief in the validity of one's right, ignorance of a superior claim, and absence of intention to
overreach another.62 Applied to possession, one is considered in good faith if he is not aware that
there exists in his title or mode of acquisition any flaw which invalidates it.63

In the present case, Marcelino's possession of the disputed lot was based on a mistaken belief that
Lot G-1 is the same lot on which he has built his house with the consent of his father. There is no
evidence, other than bare allegation, that Marcelino was aware that he intruded on respondents'
property when he continued to occupy and possess the disputed lot after
partition was effected in 1976.

Moreover, the fact that in 1977 Marcelino mortgaged Lot G-1 subject of TCT No. 22656 is not an
indication of bad faith since there is no concrete evidence that he was aware at that time that the
property covered by the title and the one he was occupying were not the same. There is also no
evidence that he introduced improvements on Lot G-1. In fact, the agreement on March 1, 1989 to a
resurvey and swapping of lots for the purpose of reconstructing the land titles is substantial proof of
Marcelino's good faith, sincerity of purpose and lack of intention to hold on to two lots.

Thus, the CA's conclusion that Marcelino intended to hold on to both the disputed lot and Lot G-1 is
pure speculation, palpably unsupported by the evidence on record. Marcelino is deemed a builder in
good faith64 at least until the time he was informed by respondents of his encroachment on their
property.65

When a person builds in good faith on the land of another, the applicable provision is Article 448, which
reads:

Article 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after payment
of the indemnity provided for in Articles 54666 and 548,67 or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is considerably more than that
of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court shall fix the terms
thereof.

Thus, the owner of the land on which anything has been built, sown or planted in good faith shall have
the right to appropriate as his own the building, planting or sowing, after payment to the builder, planter
or sower of the necessary and useful expenses, and in the proper case, expenses for pure luxury or
mere pleasure. The owner of the land may also oblige the builder, planter or sower to purchase and
pay the price of the land. If the owner chooses to sell his land, the builder, planter or sower must
purchase the land, otherwise the owner may remove the improvements thereon. The builder, planter
or sower, however, is not obliged to purchase the land if its value is considerably more than the
building, planting or sowing. In such case, the builder, planter or sower must pay rent to the owner of
the land. If the parties cannot come to terms over the conditions of the lease, the court must fix the
terms thereof. The right to choose between appropriating the improvement or selling the land on which
the improvement stands to the builder, planter or sower, is given to the owner of the land.68

In accordance with Depra v. Dumlao, 69 this case must be remanded to the trial court to determine
matters necessary for the proper application of Article 448 in relation to Articles 546 and 548. Such
matters include the option that respondents would take and the amount of indemnity that they would
pay, should they decide to appropriate the improvements on the lots.

The Court notes that petitioners' alternative prayer that swapping of lots be ordered because no
improvements have been introduced on Lot G-1. This cannot be granted. Respondents and Marcelino,
petitioners' predecessor-in-interest, did not pray for swapping of lots in all their pleadings below. Both
parties also did not allege the existence of a swapping agreement in their initial pleadings, much less
pursue the enforcement of the swapping agreement. They are deemed to have renounced or
abandoned any enforceable right they had under the swapping agreement and the parties cannot be
compelled to a swapping of lots.
WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 64729 are REVERSED and SET ASIDE. The case is REMANDED to
the court of origin for further proceedings to determine the facts essential to the proper application of
Article 448 in relation to Articles 546 and 548 of the Civil Code.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 193426 September 29, 2014

SUBIC BAY LEGEND RESORTS AND CASINOS, INC., Petitioner,

vs.
BERNARD C. FERNANDEZ, Respondent.

D E C I S I O N

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the April 27, 2010 Decision2 and August 24, 2010
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 91758, entitled "Bernard C. Fernandez,
Plaintiff-Appellee, versus Subic Bay Legend Resorts and Casinos, Inc., Defendant-Appellant," which
affirmed in toto the May 17, 2006 Decision4 of the Regional Trial Court (RTC) of Olongapo City, Branch
74, in Civil Case No. 237-0-97.

Factual Antecedents

Petitioner Subic Bay Legend Resorts d Casinos, Inc., a duly organized and e)(isting corporation
operating under Philippine laws, operates the Legenda Hotel and Casino (Legenda) located in the
Subic Bay Freeport Zone in Zambales. On the other hand, respondent Bernard C. Fernandez is the
plaintiff in Civil Case No. 237-0-97 prosecuted against petitioner in Olongapo RTC.

As determined by the CA, the facts of the case are as follows:

At around eleven o'clock in the evening of 6 June 1997, the appellee's5 brother[,] Ludwin Fernandez[,]
visited the Legenda Hotel and Casino x x x owned and operated by the appellant6 and located along
the Waterfront Road, Subic Bay Freep011 Zone. Legenda had strategically installed several
closedcircuit television (CCTV) cameras as part of security measures required by its business. The
monitors revealed that Ludwin changed x x x $5,000.00 w011h of chips into smaller denominations.
Legenda admitted in its brief that its surveillance staff paid close attention to Ludwin simply because
it was "wmsual" for a Filipino to play using dollar-denominated chips. After Ludwin won $200.00 in a
game of baccarat, he redeemed the value of chips worth $7,200.00. A review of the CCTV recordings
showed that the incident was not the first time Ludwin visited the Casino, as he had also been there
on 5 June 1997.

An operation was launched by Legenda to zero-in on Ludwin whose picture was furnished its security
section. Thus, unbeknownst to him, he was already closely watched on 13 June 1997 when he went
with another brother, Deoven[,] to the casino at around the same time or at 11: 17 p.m. After playing
(and losing $100.00) only one round of baccarat, the siblings had their chips encashed at two separate
windows. Since the cashiers were apprised of a supposed irregularity, they "froze" the transaction.

Shortly thereafter, Legenda's internal security officers accosted Ludwin and Deoven and ordered them
to return the cash and they complied without ado because they were being pulled away. The two were
eventually escorted to private rooms where they were separately interrogated about the source of the
chips they brought. They were held for about seven hours w1til the wee hours of the morning, without
food or sleep. The ultimaturn was simple: they confess that the chips were given by a certain
employee, Michael Cabrera, or they would not be released from questioning. The same line of
questioning confronted them when they were later twned-over for blotter preparation to the Intelligence
and Investigation Office of the Subic Bay Metropolitan Authority (IIO SBMA). Finally, the brothers
succwnbed to Legenda's instruction to execute a joint statement implicating Cabrera as the illegal
source of the chips. Due to hunger pangs and fatigue, they did not disown the statement even when
they subscribed the same before the prosecutor in whose office they were [later] brought. On the other
hand, they signed for basically the san1e reason a document purporting to show that they were
"released to [their] brother's custody in good condition." At the time, Deoven was about 21 years old,
in his second year of engineering studies and was not familiar with the so-called "estafa" with which
the security personnel threatened to sue him for; although he was quite aware of the consequences
of a crime such as direct assault because he had previously been convicted thereof. About two weeks
later, Deoven exec ted a retraction in Baguio City where he took up his engineering course.7

On July 1, 1997, respondent filed Civil Case No. 237-0-97 for recovery of sum of money with damages
against petitioner, on the premise that on June 13, 1997, he went to Legenda with his brothers Ludwin
and Deoven; that he handed over Legenda casino chips worth US$6,000.00, which belonged to him,
to his brothers for the latter to use at the casino; that petitioner accosted his brothers and unduly and
illegally confiscated his casino chips equivalent to US$5,900.00; and that petitioner refused and
continues to refuse to return the same to him despite demand. His Complaint8 prayed for the return of
the casino chips and an award of 50,000.00 moral damages, 50,000.00 exemplary damages,
30,000.00 attorney's fees, 20,000.00 litigation expenses, and costs.

Petitioner's Answer with Compulsory Counterclaim9 essentially alleged that right after Ludwin and
Deoven's transactions with the Legenda cashier were frozen on June 13, 1997, they voluntarily agreed
to proceed to the Legenda security office upon invitation, where Ludwin voluntarily informed security
officers that it was a certain Michael Cabrera (Cabrera) - a Legenda table inspector at the time - who
gave him the casino chips for encashment, taught him how to play baccarat and thereafter encash the
chips, and rewarded him with Pl,000.00 for every $1,000.00 he encashed; that Ludwin pointed to a
picture of Cabrera in a photo album of casino employees shown to him; that Ludwin and Deoven were
then brought to the IIO SBMA, where they reiterated their statements made at the Legenda security
office; that they volunteered to testify against Cabrera; that respondent himself admitted that it was
Cabrera who gave him the casino chips; that Ludwin and Deoven voluntarily executed a joint affidavit
before the Olongapo City Prosecutor's Office, which they subsequently recanted; that respondent had
no cause of action since the confiscated casino chips worth US$5,900.00 were stolen from it, and thus
it has the right to retain them. By way of counterclaim, petitioner sought an award of P 1 million moral
damages, 1 million exemplary damages, and P.5 million attorney's fees and litigation expenses.

Respondent filed his Answer10 to petitioner's counterclaim.

Ruling of the Regional Trial Court

After pre-trial and trial, the trial court rendered its May 17, 2006 Decision, which decreed as follows:
WHEREFORE, finding that the evidence preponderates in favor of the plaintiff, judgment is rendered
against the defendant ordering it to:

1) Return to plaintiff casino chips worth USD $5,900.00 or its equivalent in Philippine Peso at
the rate of 38.00 to USD $1 in 1997.

2) Pay plaintiff attorney's fees in the amount of 30,000.00 3) [Pay] [c]ost of this suit.

SO DECIDED.11

In arriving at the above conclusion, the trial court held:

The primordial issue is whether or not plaintiff can be considered the lawful owner of the USD $5,900
worth of casino chips that were confiscated.

There is no dispute that the subject chips were in the possession of the plaintiff. He claims he got hold
of them as payment for car services he rendered to a Chinese individual. Defendant however,
contends that said chips were stolen from the casino and it is the lawful owner of the same.

The onus fell on defendant to prove that the casino chips were stolen. The proof adduced however, is
wanting. The statements of Deoven and Ludwin C. Fernandez, confessing to the source of the chips
were recanted hence, have little probative value. The testimony of defendant's witnesses narrated
defendant's action responding to the suspicious movements of the Fernandez brothers based on
surveillance tapes. The tapes, however, do not show how these persons got hold of the chips. The
alleged source in the person of Mike Cabrera, a table inspector of the casino[,] was based on the
recanted declarations of the brothers. No criminal charge was shown to have been filed against him
nor the plaintiff and his brothers. Neither was there an explanation given as to how those chips came
into the possession of Mike Cabrera much less that he passed them on to the brothers for the purpose
of encashing and dividing the proceeds amongst themselves. All told therefore, there is no direct
evidence to prove the theory of the defendant and the circumstantial evidence present is, to the mind
of the court, not sufficient to rebut the legal presw11ption that a person in possession of personal
property is the lawful owner of the same (Art. 559, Civil Code of the Philippines).12

Ruling of the Court of Appeals

Petitioner appealed the May 1 7, 2006 Decision of the trial court, arguing that Ludwin and Deoven's
admission in their joint affidavit before the Olongapo City Prosecutor's Office that it was Cabrera who
gave them the casino chips strongly indicates that the chips were stolen from Legenda; that the
subsequent recantation by Ludwin and Deoven of their joint affidavit should be looked upon with
disfavor, given that recanted testimony is unreliable and recantations can be easily secured from poor
and ignorant witnesses and for monetary consideration or through intimidation; that respondent's
explanation that he gave the chips to his brothers Ludwin and Deoven for them to play in the casino
is highly doubtful; that the true purpose of Ludwin and Deoven was to encash the stolen chips; that no
force or intimidation attended the treatment accorded Ludwin and Deoven when they were accosted
and asked to explain their possession of the chips; and that the trial court erred in awarding attorney's
fees and costs for the filing of a baseless suit solely aimed at unjustly enriching respondent at
petitioner's expense.

On April 27, 2010, the CA issued the assailed Decision which affirmed the trial court's May 17, 2006
Decision. Petitioner's Motion for Reconsideration was rebuffed as well.
In deciding against petitioner, the CA held that, applying Article 559 of the Civil Code,13 respondent
had the legal presumption of title to or ownership of the casino chips. This conclusion springs from
respondent's admission during trial that the chips represented payment by a Chinese customer for
services he rendered to the latter in his car shop. The CA added that since respondent became the
owner of the chips, he could very well have given them to Ludwin and Deoven, who likewise held them
as "possessors in good faith and for value" and with "presumptive title" derived from the respondent.
On the other hand, petitioner failed to convincingly show that the chips were stolen; for one, it did not
even file a criminal case against the supposed mastermind, Cabrera - nor did it charge Ludwin or
Deoven - for the alleged theft or taking of its chips.

The CA likewise held that Ludwin' s and Deoven' s statements and admissions at the Legenda security
office are inadmissible because they were obtained in violation of their constitutional rights: they were
held in duress, denied the right to counsel and the opportunity to contact respondent, and deprived of
sleep, which is one of the "more subtler [sic] techniques of physical and psychological torture to coerce
a confession."14 It found that the actions and methods of the Legenda security personnel in detaining
and extracting confessions from Ludwin and Deoven were illegal and in gross violation of Ludwin's
and Deoven's constitutional rights.15

Finally, the CA held that petitioner was guilty of bad faith in advancing its theory and claim against
respondent by unduly accusing him of dealing in stolen casino chips, which thus entitles respondent
to the reduced award of attorney's fees in the amount of 30,000.00

Issues

Petitioner raises the following issues:

a) The Honorable Court seriously erred in ruling that the recanted statements of Deoven
Fernandez and Ludwin C. Fernandez have [no] probative value;

b) The Honorable Court seriously erred in ruling that the circumstantial evidence present is not
sufficient to rebut the legal presumption that a person in possession of personal property is
the lawful owner of the same;

c) The Honorable Court seriously erred in finding that the evidence preponderates in favor of
the herein respondent; [and]

d) The Honorable Court seriously erred in awarding attorney's fees and costs of suit I favor of
the respondent.16

Petitioner's Arguments

In its Petition and Reply,17 petitioner mainly argues that the assailed dispositions are grounded entirely
on speculation, and the inferences made are manifestly mistaken and based on a misappreciation of
the facts and law; that the CA failed to consider the testimonial and documentary evidence it presented
to prove the fact that the casino chips were missing and were stolen by Cabrera, who thereafter gave
them to respondent's brothers, Ludwin and Deoven. Petitioner maintains that the presumption of title
under Article 559 cannot extend to respondent's brothers, who admitted during the investigation at the
Legenda security office and in their Joint Affidavit18 that the chips came from Cabrera, and not
responcient; that the subsequent Sworn Statement19 recanting the Joint Affidavit should not be given
credence, as affidavits of recantation can easily be secured - which thus makes them unreliable; and
that no duress attended the taking of the brothers' Joint Affidavit, which was prepared by Henry Marzo
of the Intelligence and Investigation Office (IIO) of the Subic Bay Metropolitan Authority (SBMA).
Petitioner asserts that it is unbelievable that respondent would give US$6,000.00 worth of casino chips
to his brothers with which to play at the casino; that with the attending circumstances, the true intention
of respondent's brothers was to encash the stolen chips which Cabrera handed to them, and not to
play at the casino. Petitioner thus concludes that no coercion could have attended the investigation of
Ludwin and Deoven; that their subsequent recantation should not be given weight; and that for suing
on a baseless claim, respondent is not entitled to attorney's fees and costs of litigation.

Petitioner thus prays for the reversal of the assailed dispositions and the corresponding dismissal of
Civil Case No. 237-0-97.

Respondent's Arguments

In his Comment,20 respondent generally echoes the pronouncement of the CA. He likewise notes that
petitioner has raised only questions of fact; that the Petition is being prosecuted to delay the
proceedings; that the trial and appellate courts are correct in finding that petitioner failed to prove its
case and show that the casino chips were stolen; that petitioner failed to rebut the presumption that a
person in possession of personal property is the lawful owner of the same, pursuant to Article 559 of
the Civil Code; and that the 30,000.00 award of attorney's fees should be increased to 100,000.00.

Our Ruling

The Petition is denied.

Petitioner's underlying theory is that the subject casino chips were in fact stolen by its employee
Cabrera, then handed over to respondent's brothers, Ludwin and Deoven, for encashment at the
casino; that Ludwin and Deoven played at the casino only for show and to conceal their true intention,
which is to encash the chips; that respondent's claim that he owned the chips, as they were given to
him in payment of services he rendered to a Chinese client, is false. These arguments require the
Court to examine in greater detail the facts involved. However, this may not be done because the
Court is not a trier of facts and does not normally undertake the re-examination of the evidence
presented during trial; the resolution of factual issues is the function of lower courts, whose findings
thereon are received with respect and are binding on the Court subject only to specific exceptions.21 In
tum, the factual findings of the Court of Appeals carry even more weight when they are identical to
those of the trial court's.22

Besides, a question of fact cannot properly be raised in a petition for review on certiorari.23 Moreover,
if petitioner should stick to its theory that Cabrera stole the subject casino chips, then its failure to file
a criminal case against the latter -including Ludwin and Deoven for that matter - up to this point
certainly does not help to convince the Court of its position, especially considering that the supposed
stolen chips represent a fairly large amount of money. Indeed, for purposes of this proceeding, there
appears to be no evidence on record - other than mere allegations and suppositions - that Cabrera
stole the casino chips in question; such conclusion came unilaterally from petitioner, and for it to use
the same as foundation to the claim that Ludwin, Deoven and respondent are dealing in stolen chips
is clearly irregular and unfair.

Thus, there should be no basis to suppose that the casino chips found in Ludwin's and Deoven's
possession were stolen; petitioner acted arbitrarily in confiscating the same without basis. Their Joint
Affidavit - which was later recanted - does not even bear such fact; it merely states that the chips came
from Cabrera. If it cannot be proved, in the first place, that Cabrera stole these chips, then there is no
more reason to suppose that Ludwin and Deoven were dealing in or possessed stolen goods; unless
the independent fact that Cabrera stole the chips can be proved, it cannot be said that they must be
confiscated when found to be in Ludwin's and Deoven's possession.
It is not even necessary to resolve whether Ludwin's and Deoven's Joint Affidavit was obtained by
duress or otherwise; the document is irrelevant to petitioner's cause, as it does not suggest at all that
Cabrera stole the subject casino chips. At most, it only shows that Cabrera gave Ludwin and Deoven
casino chips, if this fact is true at all - since such statement has since been recanted.

The fact that Ludwin and Deoven appear to be indecisive as to who gave them the casino chips does
not help petitioner at all. It cannot lead to the conclusion that Cabrera stole the chips and then gave
1wphi1

them to the two; as earlier stated, petitioner had to prove this fact apart from Ludwin's and Deoven's
claims, no matter how incredible they may seem.

Though casino chips do not constitute legal tender,24 there is no law which prohibits their use or trade
outside of the casino which issues them. In any case, it is not unusual nor is it unlikely that
respondent could be paid by his Chinese client at the former' s car shop with the casino chips in
question; said transaction, if not common, is nonetheless not unlawful. These chips are paid for
anyway; petitioner would not have parted with the same if their corresponding representative
equivalent - in legal tender, goodwill, or otherwise was not received by it in return or exchange. Given
this premise - that casino chips are considered to have been exchanged with their corresponding
representative value - it is with more reason that this Court should require petitioner to prove
convincingly and persuasively that the chips it confiscated from Ludwin and Deoven were indeed
stolen from it; if so, any Tom, Dick or Harry in possession of genuine casino chips is presumed to have
paid for their representative value in exchange therefor. If petitioner cannot prove its loss, then Article
559 cannot apply; the presumption that the chips were exchanged for value remains.

Finally, the Court sustains the award of attorney's fees. Under Article 2208 of the Civil
Code,25 attorney's fees may be recovered when the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff's plainly valid, just and demandable claim, or in any other case where
the court deems it just and equitable that attorney's fees and expenses of litigation should be
recovered. Petitioner's act of arbitrarily confiscating the casino chips and treating Ludwin and Deoven
the way it did, and in refusing to satisfy respondent's claim despite the fact that it had no basis to
withhold the chips, confirm its bad faith, and should entitle respondent to an award.

With the foregoing view of the case, a discussion of the other issues raised is deemed irrelevant and
unnecessary.

WHEREFORE, the Petition is DENIED. The assailed April 27, 2010 Decision and August 24, 2010
Resolution of the Court of Appeals in CA-G.R. CV No. 91758 are AFFIRMED.

SO ORDERED.

G.R. No. 123498 November 23, 2007

BPI FAMILY BANK, Petitioner,

vs.
AMADO FRANCO and COURT OF APPEALS, Respondents.

D E C I S I O N

NACHURA, J.:

Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost fidelity.
We reiterate this exhortation in the case at bench.

Before us is a Petition for Review on Certiorari seeking the reversal of the Court of Appeals (CA)
Decision1 in CA-G.R. CV No. 43424 which affirmed with modification the judgment2 of the Regional
Trial Court, Branch 55, Manila (Manila RTC), in Civil Case No. 90-53295.

This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI Family Bank (BPI-
FB) allegedly by respondent Amado Franco (Franco) in conspiracy with other individuals,3 some of
whom opened and maintained separate accounts with BPI-FB, San Francisco del Monte (SFDM)
branch, in a series of transactions.

On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a savings and
current account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro Investment
Corporation (FMIC) also opened a time deposit account with the same branch of BPI-FB with a deposit
of 100,000,000.00, to mature one year thence.

Subsequently, on August 31, 1989, Franco opened three accounts, namely, a current,4 savings,5 and
time deposit,6with BPI-FB. The current and savings accounts were respectively funded with an initial
deposit of 500,000.00 each, while the time deposit account had 1,000,000.00 with a maturity date
of August 31, 1990. The total amount of 2,000,000.00 used to open these accounts is traceable to a
check issued by Tevesteco allegedly in consideration of Francos introduction of Eladio Teves,7 who
was looking for a conduit bank to facilitate Tevestecos business transactions, to Jaime Sebastian,
who was then BPI-FB SFDMs Branch Manager. In turn, the funding for the 2,000,000.00 check was
part of the 80,000,000.00 debited by BPI-FB from FMICs time deposit account and credited to
Tevestecos current account pursuant to an Authority to Debit purportedly signed by FMICs officers.

It appears, however, that the signatures of FMICs officers on the Authority to Debit were forged.8 On
September 4, 1989, Antonio Ong,9 upon being shown the Authority to Debit, personally declared his
signature therein to be a forgery. Unfortunately, Tevesteco had already effected several withdrawals
from its current account (to which had been credited the 80,000,000.00 covered by the forged
Authority to Debit) amounting to 37,455,410.54, including the 2,000,000.00 paid to Franco.

On September 8, 1989, impelled by the need to protect its interests in light of FMICs forgery claim,
BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus Arangorin10 to debit
Francos savings and current accounts for the amounts remaining therein.11 However, Francos time
deposit account could not be debited due to the capacity limitations of BPI-FBs computer.12

In the meantime, two checks13 drawn by Franco against his BPI-FB current account were dishonored
upon presentment for payment, and stamped with a notation "account under garnishment." Apparently,
Francos current account was garnished by virtue of an Order of Attachment issued by the Regional
Trial Court of Makati (Makati RTC) in Civil Case No. 89-4996 (Makati Case), which had been filed by
BPI-FB against Franco et al.,14 to recover the 37,455,410.54 representing Tevestecos total
withdrawals from its account.

Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB prior to
Francos receipt of notice that his accounts were under garnishment.15 In fact, at the time the Notice
of Garnishment dated September 27, 1989 was served on BPI-FB, Franco had yet to be impleaded in
the Makati case where the writ of attachment was issued.

It was only on May 15, 1990, through the service of a copy of the Second Amended Complaint in Civil
Case No. 89-4996, that Franco was impleaded in the Makati case.16 Immediately, upon receipt of such
copy, Franco filed a Motion to Discharge Attachment which the Makati RTC granted on May 16, 1990.
The Order Lifting the Order of Attachment was served on BPI-FB on even date, with Franco
demanding the release to him of the funds in his savings and current accounts. Jesus Arangorin, BPI-
FBs new manager, could not forthwith comply with the demand as the funds, as previously stated,
had already been debited because of FMICs forgery claim. As such, BPI-FBs computer at the SFDM
Branch indicated that the current account record was "not on file."

With respect to Francos savings account, it appears that Franco agreed to an arrangement, as a favor
to Sebastian, whereby 400,000.00 from his savings account was temporarily transferred to Domingo
Quiaoits savings account, subject to its immediate return upon issuance of a certificate of deposit
which Quiaoit needed in connection with his visa application at the Taiwan Embassy. As part of the
arrangement, Sebastian retained custody of Quiaoits savings account passbook to ensure that no
withdrawal would be effected therefrom, and to preserve Francos deposits.

On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the amount of
63,189.00 from the remaining balance of the time deposit account representing advance interest
paid to him.

These transactions spawned a number of cases, some of which we had already resolved.

FMIC filed a complaint against BPI-FB for the recovery of the amount of 80,000,000.00 debited from
its account.17The case eventually reached this Court, and in BPI Family Savings Bank, Inc. v. First
Metro Investment Corporation,18 we upheld the finding of the courts below that BPI-FB failed to
exercise the degree of diligence required by the nature of its obligation to treat the accounts of its
depositors with meticulous care. Thus, BPI-FB was found liable to FMIC for the debited amount in its
time deposit. It was ordered to pay 65,332,321.99 plus interest at 17% per annum from August 29,
1989 until fully restored. In turn, the 17% shall itself earn interest at 12% from October 4, 1989 until
fully paid.

In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica (Buenaventura, et
al.),19 recipients of a 500,000.00 check proceeding from the 80,000,000.00 mistakenly credited to
Tevesteco, likewise filed suit. Buenaventura et al., as in the case of Franco, were also prevented from
effecting withdrawals20 from their current account with BPI-FB, Bonifacio Market, Edsa, Caloocan City
Branch. Likewise, when the case was elevated to this Court docketed as BPI Family Bank v.
Buenaventura,21 we ruled that BPI-FB had no right to freeze Buenaventura, et al.s accounts and
adjudged BPI-FB liable therefor, in addition to damages.

Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to be the perpetrators
of the multi-million peso scam.22 In the criminal case, Franco, along with the other accused, except for
Manuel Bienvenida who was still at large, were acquitted of the crime of Estafa as defined and
penalized under Article 351, par. 2(a) of the Revised Penal Code.23 However, the civil case24 remains
under litigation and the respective rights and liabilities of the parties have yet to be adjudicated.

Consequently, in light of BPI-FBs refusal to heed Francos demands to unfreeze his accounts and
release his deposits therein, the latter filed on June 4, 1990 with the Manila RTC the subject suit. In
his complaint, Franco prayed for the following reliefs: (1) the interest on the remaining balance25 of his
current account which was eventually released to him on October 31, 1991; (2) the balance26 on his
savings account, plus interest thereon; (3) the advance interest27 paid to him which had been deducted
when he pre-terminated his time deposit account; and (4) the payment of actual, moral and exemplary
damages, as well as attorneys fees.

BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts of Franco and
refusing to release his deposits, claiming that it had a better right to the amounts which consisted of
part of the money allegedly fraudulently withdrawn from it by Tevesteco and ending up in Francos
accounts. BPI-FB asseverated that the claimed consideration of 2,000,000.00 for the introduction
facilitated by Franco between George Daantos and Eladio Teves, on the one hand, and Jaime
Sebastian, on the other, spoke volumes of Francos participation in the fraudulent transaction.

On August 4, 1993, the Manila RTC rendered judgment, the dispositive portion of which reads as
follows:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of [Franco] and
against [BPI-FB], ordering the latter to pay to the former the following sums:

1. 76,500.00 representing the legal rate of interest on the amount of 450,000.00 from May
18, 1990 to October 31, 1991;

2. 498,973.23 representing the balance on [Francos] savings account as of May 18, 1990,
together with the interest thereon in accordance with the banks guidelines on the payment
therefor;

3. 30,000.00 by way of attorneys fees; and

4. 10,000.00 as nominal damages.

The counterclaim of the defendant is DISMISSED for lack of factual and legal anchor.

Costs against [BPI-FB].

SO ORDERED.28

Unsatisfied with the decision, both parties filed their respective appeals before the CA. Franco confined
his appeal to the Manila RTCs denial of his claim for moral and exemplary damages, and the
diminutive award of attorneys fees. In affirming with modification the lower courts decision, the
appellate court decreed, to wit:

WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with modification
ordering [BPI-FB] to pay [Franco] 63,189.00 representing the interest deducted from the time deposit
of plaintiff-appellant. 200,000.00 as moral damages and 100,000.00 as exemplary damages,
deleting the award of nominal damages (in view of the award of moral and exemplary damages) and
increasing the award of attorneys fees from 30,000.00 to 75,000.00.
Cost against [BPI-FB].

SO ORDERED.29

In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a better right to the
deposits in the subject accounts which are part of the proceeds of a forged Authority to Debit; (2)
Franco is entitled to interest on his current account; (3) Franco can recover the 400,000.00 deposit
in Quiaoits savings account; (4) the dishonor of Francos checks was not legally in order; (5) BPI-FB
is liable for interest on Francos time deposit, and for moral and exemplary damages; and (6) BPI-FBs
counter-claim has no factual and legal anchor.

The petition is partly meritorious.

We are in full accord with the common ruling of the lower courts that BPI-FB cannot unilaterally freeze
Francos accounts and preclude him from withdrawing his deposits. However, contrary to the appellate
courts ruling, we hold that Franco is not entitled to unearned interest on the time deposit as well as to
moral and exemplary damages.

First. On the issue of who has a better right to the deposits in Francos accounts, BPI-FB urges us that
the legal consequence of FMICs forgery claim is that the money transferred by BPI-FB to Tevesteco
is its own, and considering that it was able to recover possession of the same when the money was
redeposited by Franco, it had the right to set up its ownership thereon and freeze Francos accounts.

BPI-FB contends that its position is not unlike that of an owner of personal property who regains
possession after it is stolen, and to illustrate this point, BPI-FB gives the following example: where Xs
television set is stolen by Y who thereafter sells it to Z, and where Z unwittingly entrusts possession
of the TV set to X, the latter would have the right to keep possession of the property and preclude Z
from recovering possession thereof. To bolster its position, BPI-FB cites Article 559 of the Civil Code,
which provides:

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

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

BPI-FBs argument is unsound. To begin with, the movable property mentioned in Article 559 of the
Civil Code pertains to a specific or determinate thing.30 A determinate or specific thing is one that is
individualized and can be identified or distinguished from others of the same kind.31

In this case, the deposit in Francos accounts consists of money which, albeit characterized as a
movable, is generic and fungible.32 The quality of being fungible depends upon the possibility of the
property, because of its nature or the will of the parties, being substituted by others of the same kind,
not having a distinct individuality.33

Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived of a
movable to recover the exact same thing from the current possessor, BPI-FB simply claims ownership
of the equivalent amount of money, i.e., the value thereof, which it had mistakenly debited from FMICs
account and credited to Tevestecos, and subsequently traced to Francos account. In fact, this is what
BPI-FB did in filing the Makati Case against Franco, et al. It staked its claim on the money itself which
passed from one account to another, commencing with the forged Authority to Debit.

It bears emphasizing that money bears no earmarks of peculiar ownership,34 and this characteristic is
all the more manifest in the instant case which involves money in a banking transaction gone awry. Its
primary function is to pass from hand to hand as a medium of exchange, without other evidence of its
title.35 Money, which had passed through various transactions in the general course of banking
business, even if of traceable origin, is no exception.

Thus, inasmuch as what is involved is not a specific or determinate personal property, BPI-FBs
illustrative example, ostensibly based on Article 559, is inapplicable to the instant case.

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal
consequence of its unauthorized transfer of FMICs deposits to Tevestecos account. BPI-FB
conveniently forgets that the deposit of money in banks is governed by the Civil Code provisions on
simple loan or mutuum.36 As there is a debtor-creditor relationship between a bank and its depositor,
BPI-FB ultimately acquired ownership of Francos deposits, but such ownership is coupled with a
corresponding obligation to pay him an equal amount on demand.37Although BPI-FB owns the deposits
in Francos accounts, it cannot prevent him from demanding payment of BPI-FBs obligation by
drawing checks against his current account, or asking for the release of the funds in his savings
account. Thus, when Franco issued checks drawn against his current account, he had every right as
creditor to expect that those checks would be honored by BPI-FB as debtor.

More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on
its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was
allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it
pleases on deposits which it supposes are derived from shady transactions, would open the floodgates
of public distrust in the banking industry.

Our pronouncement in Simex International (Manila), Inc. v. Court of Appeals38 continues to resonate,
thus:

The banking system is an indispensable institution in the modern world and plays a vital role in the
economic life of every civilized nation. Whether as mere passive entities for the safekeeping and
saving of money or as active instruments of business and commerce, banks have become an
ubiquitous presence among the people, who have come to regard them with respect and even
gratitude and, most of all, confidence. Thus, even the humble wage-earner has not hesitated to entrust
his lifes savings to the bank of his choice, knowing that they will be safe in its custody and will even
earn some interest for him. The ordinary person, with equal faith, usually maintains a modest checking
account for security and convenience in the settling of his monthly bills and the payment of ordinary
expenses. x x x.

In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether
such account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if
the account is to reflect at any given time the amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and to whomever directs. A blunder on the part of the
bank, such as the dishonor of the check without good reason, can cause the depositor not a little
embarrassment if not also financial loss and perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the nature of its functions,
the bank is under obligation to treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship. x x x.

Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the signatures
of its customers. Having failed to detect the forgery in the Authority to Debit and in the process
inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon to Franco
and the other payees of checks issued by Tevesteco, or prevent withdrawals from their respective
accounts without the appropriate court writ or a favorable final judgment.

Further, it boggles the mind why BPI-FB, even without delving into the authenticity of the signature in
the Authority to Debit, effected the transfer of 80,000,000.00 from FMICs to Tevestecos account,
when FMICs account was a time deposit and it had already paid advance interest to FMIC.
Considering that there is as yet no indubitable evidence establishing Francos participation in the
forgery, he remains an innocent party. As between him and BPI-FB, the latter, which made possible
the present predicament, must bear the resulting loss or inconvenience.

Second. With respect to its liability for interest on Francos current account, BPI-FB argues that its
non-compliance with the Makati RTCs Order Lifting the Order of Attachment and the legal
consequences thereof, is a matter that ought to be taken up in that court.

The argument is tenuous. We agree with the succinct holding of the appellate court in this respect.
The Manila RTCs order to pay interests on Francos current account arose from BPI-FBs unjustified
refusal to comply with its obligation to pay Franco pursuant to their contract of mutuum. In other words,
from the time BPI-FB refused Francos demand for the release of the deposits in his current account,
specifically, from May 17, 1990, interest at the rate of 12% began to accrue thereon.39

Undeniably, the Makati RTC is vested with the authority to determine the legal consequences of BPI-
FBs non-compliance with the Order Lifting the Order of Attachment. However, such authority does
not preclude the Manila RTC from ruling on BPI-FBs liability to Franco for payment of interest based
on its continued and unjustified refusal to perform a contractual obligation upon demand. After all, this
was the core issue raised by Franco in his complaint before the Manila RTC.

Third. As to the award to Franco of the deposits in Quiaoits account, we find no reason to depart from
the factual findings of both the Manila RTC and the CA.

Noteworthy is the fact that Quiaoit himself testified that the deposits in his account are actually owned
by Franco who simply accommodated Jaime Sebastians request to temporarily transfer 400,000.00
from Francos savings account to Quiaoits account.40 His testimony cannot be characterized as
hearsay as the records reveal that he had personal knowledge of the arrangement made between
Franco, Sebastian and himself.41

BPI-FB makes capital of Francos belated allegation relative to this particular arrangement. It insists
that the transaction with Quiaoit was not specifically alleged in Francos complaint before the Manila
RTC. However, it appears that BPI-FB had impliedly consented to the trial of this issue given its
extensive cross-examination of Quiaoit.

Section 5, Rule 10 of the Rules of Court provides:

Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised
by the pleadings are tried with the express or implied consent of the parties, they shall be treated in
all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but failure to amend does not affect the result of
the trial of these issues. If evidence is objected to at the trial on the ground that it is now within the
issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with
liberality if the presentation of the merits of the action and the ends of substantial justice will be
subserved thereby. The court may grant a continuance to enable the amendment to be made.
(Emphasis supplied)

In all, BPI-FBs argument that this case is not the right forum for Franco to recover the 400,000.00
begs the issue. To reiterate, Quiaoit, testifying during the trial, unequivocally disclaimed ownership of
the funds in his account, and pointed to Franco as the actual owner thereof. Clearly, Francos action
for the recovery of his deposits appropriately covers the deposits in Quiaoits account.

Fourth. Notwithstanding all the foregoing, BPI-FB continues to insist that the dishonor of Francos
checks respectively dated September 11 and 18, 1989 was legally in order in view of the Makati RTCs
supplemental writ of attachment issued on September 14, 1989. It posits that as the party that applied
for the writ of attachment before the Makati RTC, it need not be served with the Notice of Garnishment
before it could place Francos accounts under garnishment.

The argument is specious. In this argument, we perceive BPI-FBs clever but transparent ploy to
circumvent Section 4,42 Rule 13 of the Rules of Court. It should be noted that the strict requirement on
service of court papers upon the parties affected is designed to comply with the elementary requisites
of due process. Franco was entitled, as a matter of right, to notice, if the requirements of due process
are to be observed. Yet, he received a copy of the Notice of Garnishment only on September 27, 1989,
several days after the two checks he issued were dishonored by BPI-FB on September 20 and 21,
1989. Verily, it was premature for BPI-FB to freeze Francos accounts without even awaiting service
of the Makati RTCs Notice of Garnishment on Franco.

Additionally, it should be remembered that the enforcement of a writ of attachment cannot be made
without including in the main suit the owner of the property attached by virtue thereof. Section 5, Rule
13 of the Rules of Court specifically provides that "no levy or attachment pursuant to the writ issued x
x x shall be enforced unless it is preceded, or contemporaneously accompanied, by service of
summons, together with a copy of the complaint, the application for attachment, on the defendant
within the Philippines."

Franco was impleaded as party-defendant only on May 15, 1990. The Makati RTC had yet to acquire
jurisdiction over the person of Franco when BPI-FB garnished his accounts.43 Effectively, therefore,
the Makati RTC had no authority yet to bind the deposits of Franco through the writ of attachment, and
consequently, there was no legal basis for BPI-FB to dishonor the checks issued by Franco.

Fifth. Anent the CAs finding that BPI-FB was in bad faith and as such liable for the advance interest
it deducted from Francos time deposit account, and for moral as well as exemplary damages, we find
it proper to reinstate the ruling of the trial court, and allow only the recovery of nominal damages in the
amount of 10,000.00. However, we retain the CAs award of 75,000.00 as attorneys fees.

In granting Francos prayer for interest on his time deposit account and for moral and exemplary
damages, the CA attributed bad faith to BPI-FB because it (1) completely disregarded its obligation to
Franco; (2) misleadingly claimed that Francos deposits were under garnishment; (3) misrepresented
that Francos current account was not on file; and (4) refused to return the 400,000.00 despite the
fact that the ostensible owner, Quiaoit, wanted the amount returned to Franco.

In this regard, we are guided by Article 2201 of the Civil Code which provides:
Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good
faith is liable shall be those that are the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have reasonable foreseen at the time the
obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non-performance of the obligation. (Emphasis supplied.)

We find, as the trial court did, that BPI-FB acted out of the impetus of self-protection and not out of
malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in Article 2201 and
should not be held liable for all damages now being imputed to it for its breach of obligation. For the
same reason, it is not liable for the unearned interest on the time deposit.

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some
moral obliquity and conscious doing of wrong; it partakes of the nature of fraud.44 We have held that it
is a breach of a known duty through some motive of interest or ill will.45 In the instant case, we cannot
attribute to BPI-FB fraud or even a motive of self-enrichment. As the trial court found, there was no
denial whatsoever by BPI-FB of the existence of the accounts. The computer-generated document
which indicated that the current account was "not on file" resulted from the prior debit by BPI-FB of the
deposits. The remedy of freezing the account, or the garnishment, or even the outright refusal to honor
any transaction thereon was resorted to solely for the purpose of holding on to the funds as a security
for its intended court action,46 and with no other goal but to ensure the integrity of the accounts.

We have had occasion to hold that in the absence of fraud or bad faith,47 moral damages cannot be
awarded; and that the adverse result of an action does not per se make the action wrongful, or the
party liable for it. One may err, but error alone is not a ground for granting such damages.48

An award of moral damages contemplates the existence of the following requisites: (1) there must be
an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must
be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant
is the proximate cause of the injury sustained by the claimant; and (4) the award for damages is
predicated on any of the cases stated in Article 2219 of the Civil Code.49

Franco could not point to, or identify any particular circumstance in Article 2219 of the Civil
Code,50 upon which to base his claim for moral damages. 1wphi1

Thus, not having acted in bad faith, BPI-FB cannot be held liable for moral damages under Article
2220 of the Civil Code for breach of contract.51

We also deny the claim for exemplary damages. Franco should show that he is entitled to moral,
temperate, or compensatory damages before the court may even consider the question of whether
exemplary damages should be awarded to him.52 As there is no basis for the award of moral damages,
neither can exemplary damages be granted.

While it is a sound policy not to set a premium on the right to litigate,53 we, however, find that Franco
is entitled to reasonable attorneys fees for having been compelled to go to court in order to assert his
right. Thus, we affirm the CAs grant of 75,000.00 as attorneys fees.

Attorneys fees may be awarded when a party is compelled to litigate or incur expenses to protect his
interest,54 or when the court deems it just and equitable.55 In the case at bench, BPI-FB refused to
unfreeze the deposits of Franco despite the Makati RTCs Order Lifting the Order of Attachment and
Quiaoits unwavering assertion that the 400,000.00 was part of Francos savings account. This
refusal constrained Franco to incur expenses and litigate for almost two (2) decades in order to protect
his interests and recover his deposits. Therefore, this Court deems it just and equitable to grant Franco
75,000.00 as attorneys fees. The award is reasonable in view of the complexity of the issues and
the time it has taken for this case to be resolved.56

Sixth. As for the dismissal of BPI-FBs counter-claim, we uphold the Manila RTCs ruling, as affirmed
by the CA, that BPI-FB is not entitled to recover 3,800,000.00 as actual damages. BPI-FBs alleged
loss of profit as a result of Francos suit is, as already pointed out, of its own making. Accordingly, the
denial of its counter-claim is in order.

WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated
November 29, 1995 is AFFIRMED with the MODIFICATION that the award of unearned interest on
the time deposit and of moral and exemplary damages is DELETED.

No pronouncement as to costs.

SO ORDERED.