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Civil Code Volume IV Obligations Contracts .pdf

Original filename: Civil_Code__Volume_IV__Obligations___Contracts_.pdf
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Chapter 1

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 prescription.
(1) Definition of Prescription
Prescription is a mode of acquiring (or losing) ownership
and other real rights thru the lapse of time in the manner and
under the conditions laid down by law, namely, that the possession should be:

in the concept of an owner






uninterrupted. (Arts. 1106, 1118, Civil Code).


adverse. In order that a possession may really be adverse,
the claimant must clearly, definitely, and unequivocally
notify the owner of his (the claimant’s) intention to avert
an exclusive ownership in himself. (Clendenin v. Clendenin,
181 N.C. 465 and Director of Lands v. Abiertas, CA-GR
91-R, Mar. 13, 1947, 44 O.G. 923).


Art. 1106


(2) Proof Needed
Because prescription is an extraordinary mode of acquiring
ownership, all the essential ingredients, particularly the period
of time, must be shown clearly. (Boyo v. Makabenta, CA-GR
7941-R, Nov. 24, 1952).
(3) Reasons or Bases for Prescription

Economic necessity (otherwise, property rights would remain unstable).
Director of Lands, et al. v. Funtillar, et al.
GR 68533, May 23, 1986
FACTS: Where the land sought to be registered was
declared alienable and disposable 33 years ago, and is no
longer a forest land, and the same has been possessed and
cultivated by the applicants and their predecessors for at
least three generations.
HELD: The attempts of humble people to have
disposable lands they have been tilling for generations
titled in their names should not only be viewed with an
understanding attitude but should, as a matter of policy,
be encouraged.

(b) Freedom from judicial harassment (occasioned by claims
without basis).
(c) Convenience in procedural matters (in certain instances,
juridical proof is dispensed with).
(d) Presumed abandonment or waiver (in view of the owner’s
indifference or inaction).
(4) Classification of Prescription

as to whether rights are acquired or lost:

acquisitive prescription (prescription of ownership
and other real rights).

ordinary prescription


extraordinary prescription



Art. 1106

extinctive prescription (“liberatory prescription;’’ prescription of actions); (“Statute of Limitations’’).

as to the object or subject matter:


prescription of property

prescription of real property


prescription of personal rights

prescription of rights

(5) Laches
Laches (or “estoppel by laches”) is unreasonable delay in the
bringing of a cause of action before the courts of justice. Thus, if
an action prescribes say in ten (10) years, it should be brought
to court as soon as possible, without waiting for 8 or 9 years,
unless the delay can be justifiably explained (as when there is
a search for evidence). Note therefore, that while an action has
not yet prescribed, it may no longer be brought to court because
of laches.
As defined by the Supreme Court, “laches is failure or
neglect, for an unreasonable and unexplained length of time,
to do that which, by exercising due diligence, could or should
have been done earlier; it is negligence or omission to assert a
right within a reasonable time, warranting a presumption that
the party entitled thereto either has abandoned it or declined to
assert it. However, courts will not be bound by strictures of the
statute of limitations or laches when manifest wrong or injuries
would result thereby.” (Cristobal v. Melchor, 78 SCRA 175).
Arradaza, et al. v. CA & Larrazabal
GR 50422, Feb. 8, 1989
The principle of laches is a creation of equity. It is applied,
not really to penalize neglect or sleeping upon one’s right, but
rather to avoid recognizing a right when to do so would result
in a clearly inequitable situation.
(6) Rationale for Laches
If a person fails to act as soon as possible in vindication
of an alleged right, it is possible that the right does not really

Art. 1106


(7) ‘Prescription’ Distinguished from ‘Laches’
Mapa III v. Guanzon
77 SCRA 387
While prescription is concerned with the FACT of delay,
laches deals with the EFFECT of unreasonable delay.
David v. Bandin
GR 48322, Apr. 8, 1987
FACTS: A and B, husband and wife, died intestate, leaving
two children, X and Y. X had been administering the property
until her death in Feb. 15, 1955. Plaintiffs, the children of Y,
were given their shares of the fruits of the property, though
irregular and at times little, depending on the amount of the
harvest. On April 23, 1963, plaintiffs, the children of Y, sent a
letter of demand to the heirs of X for partition, and on June 14,
1963, or within a period of approximately 8 years from X’s death,
filed their complaint against X’s heirs.
HELD: Plaintiffs cannot be held guilty of laches, nor is
their claim barred by prescription. Plaintiffs were not guilty of
negligence nor did they sleep on their rights.
Prescription generally does not run in favor of a co-heir or
co-owner as long as he expressly or impliedly recognizes the coownership. While implied or constructive trust prescribes in 10
years, the rule does not apply where a fiduciary relation exists
and the trustee recognizes the trust.
Gallardo v. Intermediate Appellate Court
GR 67742, Oct. 29, 1987
In determining whether a delay in seeking to enforce a right
constitutes laches, the existence of a confidential relationship
between the parties is an important circumstance for consideration. A delay under such circumstance is not as strictly regarded
as where the parties are strangers to each other. The doctrine
of laches is not strictly applied between near relatives, and the
fact that parties are connected by ties of blood or marriage tends
to excuse an otherwise unreasonable delay.


Art. 1106

Narciso Buenaventura & Maria Buenaventura
v. CA & Manotok Realty, Inc.
GR 50837, Dec. 28, 1992
The defense of laches applies independently of prescription.
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 the same change in the
condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas
prescription applies at law. Prescription is based on fixed time;
laches is not.
(8) Constitutional Provision
The right of the State to recover properties unlawfully
acquired by public officials or employees, from them or from
their nominees or transferees, shall not be barred by prescription, laches, or estoppel. (Sec. 15, Art. XI, The 1987 Philippine
(9) Cases
Republic v. Animas
56 SCRA 871
Prescription does not run against the State, especially because the recovery of unlawfully acquired properties has become
a State policy.
Aldovino v. Alunan III
49 SCAD 340
Prescription must yield to the higher interest of justice.
Francisco v. CA
122 SCRA 538
Philippine jurisprudence shows that the filing of the complaint, even if merely for purposes of preliminary examination

Art. 1106


or investigation, suspends and interrupts the running of the
prescriptive period.
(10) Prescriptive Period on Registered Land covered by Torrens System
Quirino Mateo & Matias v.
Dorotea Diaz, et al.
GR 137305, Jan. 17, 2002
FACTS: The land involved is registered under the Torrens system in the name of petitioners’ father Claro Mateo.
There is no question raised with respect to the validity of the
title. Immediately after petitioners discovered the existence of
OCT 206 in 1977 or 1978, they took steps to assert their rights
thereto. They divided the land between the two of them in an
extrajudicial partition. Then petitioners filed the case below to
recover ownership and possession as the only surviving children
of original owners, the late Claro Mateo.
The Regional Trial Court (RTC), Bulacan, at Malolos, ruled
that prescription and laches are applicable against petitioners,
that real actions over an immovable prescribe after 30 years,
that ownership can be acquired thru possession in good faith
and with just title for a period of 10 years, and that ownership
may be acquired thru uninterrupted adverse possession for 30
years without need of just title or of good faith. The Court of
Appeals (CA) affirmed that of the trial court, thus, this petition
for review on certiorari.
ISSUE: Whether or not the equitable doctrine of laches
may override a provision of the Land Registration Act on imprescriptibility of title to registered land. Otherwise put, the issue
raised is whether prescription and the equitable principle of
laches are applicable in derogation of the title of the registered
HELD: A party who had filed immediately a case as soon
as he discovered that the land in question was covered by a
transfer certificate in the name of another person is not guilty
of laches. (St. Peter Memorial Park, Inc. v. Cleofas, 92 SCRA
389 [1979]). An action to recover possession of a registered land
never prescribe in view of the provision of Sec. 44 of Act 496 (now


Art. 1106

Sec. 47 of PD 1529) to the effect that no title to registered land
in derogation to that of a registered owner shall be acquired
by prescription or adverse possession. (J.M. Tuason & Co. v.
Aquirre, 7 SCRA 109 [1963]).
In fact, there is a host of jurisprudence that hold that prescription and laches could not apply to registered land covered by
the Torrens system. (Bishop v. CA, 208 SCRA 636 [1992] and St.
Peter Memorial Park, Inc. v. Cleofas, supra). With more reason
are these principles applicable to laches, which is an equitable
principle. Laches may not prevail against a specific provision of
law, since equity, which has been defined as “justice outside legality” is applied in the obscene of and not against statutory law
or rules of procedure. (Causapin v. CA, 233 SCRA 615 [1994]).
Upon the other hand, the heirs of the registered owner are
not estopped from claiming their father’s property, since they
merely stepped into the shoes of the previous owners. Prescription is unavailing not only against the registered owner, but
also against his hereditary successors because the latter merely
step into the shoes of the decedent by operation of law and are
merely the continuation of the personality of their predecessorin-interest. (Teofila de Guinoo v. CA [97 Phil. 235] and Gil Atun
v. Eusebio Nuñez [97 Phil. 762]).
The CA erred in ordering the Register of Deeds to cancel
OCT 206 of Claro Mateo and issue new titles to those who are
occupying the subject land. This violates the indefeasibility of
a Torrens title. The title of Claro Mateo could be cancelled only
if there is competent proof that he had transferred his rights
over the parcel of land to another party, otherwise title would
pass to his heirs only by testate or intestate succession.
The fallo: The Supreme Court thereupon reverses the CA’s
decision. In lieu thereof, the Court remands the case to the trial
court for determination of the heirs of Claro Mateo in a proper
Far East Bank & Trust Co. v. Estrella O. Querimit
GR 148582, Jan. 16, 2002
FACTS: Respondent deposited her savings with petitionerbank. She did not withdraw her deposit even after maturity date

Art. 1106


of the certificates of deposit (CDs) precisely because she wanted
to set it aside for her retirement, relying on the bank’s assurance, as reflected on the face of the instruments themselves,
that interest would “accrue” or accumulate annually even after
their maturity.
Petitioner-bank failed to prove that it had already paid respondent, bearer and lawful holder of subject CDs, i.e., petitioner
failed to prove that the CDs had been paid out of its funds, since
evidence by respondent stands unrebutted that subject CDs
until now remain unindorsed, undelivered, and unwithdrawn
by her.
ISSUE: Would it be unjust to allow the doctrine of laches
to defeat the right of respondent to recover her savings which
she deposited with the petitioner?
HELD: Yes, it would be unjust not to allow respondent to
recover her savings which she deposited with petitioner-bank.
For one, Petitioner failed to exercise that degree of diligence
required by the nature of its business. (Art. 1173). Because the
business of banks is impressed with public interest, the degree
of diligence required of banks is more than that of a good father
of the family or of an ordinary business firm.
The fiduciary nature of their relationship with their depositors requires banks to treat accounts of their clients with the
highest degree of care. (Canlas v. CA, 326 SCRA 415 [2000]).
A bank is under obligation to treat accounts of its depositors
with meticulous care whether such accounts consist only of a
few hundred pesos or of millions of pesos. Responsibility arising
from negligence in the performance of every kind of obligation
is demandable. (Prudential Bank v. CA, 328 SCRA 264 [2000]).
Petitioner failed to prove payment of the subject CDs issued to
respondent and, therefore, remains liable for the value of the
dollar deposits indicated thereon with accrued interest.
A certificate of deposit is defined as a written acknowledgment by a bank or banker of the receipt of a sum of money on
deposit which the bank or banker promises to pay to the depositor, to the order of the depositor, or to some other person or his
order, whereby the relation of debtor and creditor between the
bank and the depositor is created. Principles governing other


Art. 1106

types of bank deposits are applicable to CDs (10 AM Juri 2d
Sec. 455), as are the rules governing promissory notes when
they contain an unconditional promise to pay a sum certain of
money absolutely. (Ibid., Sec. 457).
The principle that payment, in order to discharge a debt,
must be made to someone authorized to receive it is applicable
to the payment of CDs. Thus, a bank will be protected in making payment to the holder a certificate indorsed by the payee,
unless it has notice of the invalidity of the indorsement or the
holder’s want of title. (10 Am Jur 2d Sec. 461). A bank acts at
its peril when it pays deposits evidenced by a CD, without its
production and surrender after proper indorsement. (Clark v.
Young, 21 So. 2d 331 [1994]).
The equitable principle of laches is not sufficient to defeat
the rights of respondent over the subject CDs. Laches is the
failure or neglect, for an unreasonable length of time, to do
that which, by exercising due diligence, could or should have
been done earlier. It is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to
assert it. (Felizardo v. Fernandez, GR 137509, Aug. 15, 2001).
There is no absolute rule as to what constitutes laches
or staleness of demand; each case is to be determined according to its particular circumstances. The question of laches is
addressed to the sound discretion of the court and, being an
equitable doctrine, its application is controlled by equitable
considerations. It cannot be used to defeat justice or perpetrate
fraud and injustice. Courts will not be guided or bound strictly
by the Statute of Limitations or the doctrine of laches when to
do so manifest wrong or injustice would result. (Rosales v. CA,
GR 137566, Feb. 28, 2001).
Respondent is entitled to moral damages because of the
mental anguish and humiliation she suffered as a result of the
wrongly refusal of petitioner to pay her even after she had delivered the CDs. (Arts. 2217 and 2219). In addition, petitioner
should pay respondent exemplary damages which the trial court
imposed by way of example or correction for the public good (Art.
2229). Finally, respondent is entitled to attorney’s fees since
petitioner’s act or omission compelled her to incur expenses to

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