FIRST DIVISION
[ G.R. No. 213014, October 14, 2015 ]
MAYBANK PHILIPPINES, INC. (FORMERLY PNB-REPUBLIC BANK[1]),
PETITIONER, VS. SPOUSES OSCAR AND NENITA TARROSA,
RESPONDENTS.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[2] are the Decision[3] dated
November 29, 2013 and the Resolution[4] dated May 13, 2014 of the Court of
Appeals (CA) in CA-G.R. CV No. 02211, which affirmed the Decision [5] dated
June 16, 2005 of the Regional Trial Court of Bacolod City, Branch 41 (RTC)
in Civil Case No. 98-10451 declaring the extrajudicial foreclosure sale of the
property covered by Transfer Certificate of Title (TCT) No. T-5649 as null
and void for being barred by prescription.
The Facts
On December 15, 1980, respondents-spouses Oscar and Nenita Tarrosa
(Sps. Tarrosa) obtained from then PNB-Republic Bank, now petitioner
Maybank Philippines, Inc. (Maybank), a loan in the amount of P91,000.00.
The loan was secured by a Real Estate Mortgage[6]dated January 5, 1981
(real estate mortgage) over a 500-square meter parcel of land situated in
San Carlos City, Negros Occidental (subject property), covered by TCT No.
T-5649,[7] and the improvements thereon.[8]
After paying the said loan, or sometime in March 1983, Sps. Tarrosa
obtained another loan from Maybank in the amount of P60,000.00 (second
loan),[9] payable on March 11, 1984.[10] However, Sps. Tarrosa failed to settle
the second loan upon maturity.[11]
Sometime in April 1998, Sps. Tarrosa received a Final Demand
Letter[12] dated March 4, 1998 (final demand letter) from Maybank
requiring them to settle their outstanding loan in the aggregate amount of
P564,579.91, inclusive of principal, interests, and penalty charges. [13] They
offered to pay a lesser amount, which Maybank refused. [14] Thereafter, or on
June 25, 1998, Maybank commenced extrajudicial foreclosure
proceedings[15] before the office of Ex-Officio Provincial Sheriff Ildefonso
Villanueva, Jr. (Sheriff Villanueva). The subject property was eventually
sold in a public auction sale held on July 29, 1998[16] for a total bid price of
P600,000.00, to the highest bidder, Philmay Property, Inc. (PPI), which
was thereafter issued a Certificate of Sale[17] dated July 30, 1998.[18]
On September 7, 1998, Sps. Tarrosa filed a complaint[19] for declaration of
nullity and invalidity of the foreclosure of real estate and of public auction
sale proceedings and damages with prayer for preliminary injunction
against Maybank, PPI, Sheriff Villanueva, and the Registry of Deeds of San
Carlos City, Negros Occidental (RD-San Carlos), before the RTC, docketed
as Civil Case No. 98-10451. They averred, inter alia, that: (a) the second
loan was a clean or unsecured loan; (b) after receiving the final demand
letter, they tried to pay the second loan, including the agreed interests and
charges, but Maybank unjustly refused their offers of payment; and (c)
Maybank's right to foreclose had prescribed or is barred by laches. [20]
On the other hand, Maybank and PPI countered[21] that: (a) the second loan
was secured by the same real estate mortgage under a continuing security
provision therein; (b) when the loan became past due, Sps. Tarrosa
promised to pay and negotiated for a restructuring of their loan, but failed
to pay despite demands; and (c) Sps. Tarrosa's positive acknowledgment
and admission of their indebtedness controverts the defense of
prescription.
The RTC Ruling
In a Decision[23] dated June 16, 2005, the RTC held that the second loan
was subject to the continuing security provision in the real estate mortgage.
[24]
However, it ruled that Maybank's right to foreclose, reckoned from the
time the mortgage indebtedness became due and payable on March 11,
1984, had already prescribed, considering the lack of any timely judicial
action, written extrajudicial demand or written acknowledgment by the
debtor of his debt that could interrupt the prescriptive period.
[25]
Accordingly, it declared the extrajudicial foreclosure proceedings
affecting the subject property as null and void, and ordered Maybank to pay
Sps. Tarrosa moral and exemplary damages, as well as attorney's fees and
litigation expenses.[26]
Maybank filed a motion for reconsideration[27] which was, however, denied
in an Order[28] dated December 9, 2005, prompting it to appeal[29] to the CA.
The CA Ruling
In a Decision[30] dated November 29, 2013, the CA affirmed the RTC ruling
that Maybank's right to foreclose the real estate mortgage over the subject
property is already barred by prescription. It held that the prescriptive
period should be reckoned from March 11, 1984 when the second loan had
become past due and remained unpaid since demand was not a
condition sine qua non for the accrual of the latter's right to foreclose under
paragraph 5 of the real estate mortgage. It observed that Maybank failed to
present evidence of any timely written extrajudicial demand or written
acknowledgment by the debtors of their debt that could have effectively
interrupted the running of the prescriptive period. [31]
Undaunted, Maybank moved for reconsideration, [32] which was denied in a
Resolution[33] dated May 13, 2014; hence this petition.
The Issues Before the Court
The essential issue for the Court's resolution is whether or not the CA
committed reversible error in finding that Maybank's right to foreclose the
real estate mortgage over the subject property was barred by prescription.
The Court's Ruling
The petition is meritorious.
An action to enforce a right arising from a mortgage should be
enforced within ten (10) years from the time the right of action
accrues, i.e., when the mortgagor defaults in the payment of his
obligation to the mortgagee; otherwise, it will be barred by
prescription and the mortgagee will lose his rights under the
mortgage.[34] However, mere delinquency in payment does not necessarily
mean delay in the legal concept. To be in default is different from mere
delay in the grammatical sense, because it involves the beginning of a
special condition or status which has its own peculiar effects or results. [35]
In order that the debtor may be in default, it is necessary that: (a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially,[36] unless demand is not necessary - i.e., when there is an
express stipulation to that effect; where the law so provides; when the
period is the controlling motive or the principal inducement for the
creation of the obligation; and where demand would be useless. Moreover,
it is not sufficient that the law or obligation fixes a date for performance; it
must further state expressly that after the period lapses, default will
commence.[37] Thus, it is only when demand to pay is unnecessary in
case of the aforementioned circumstances, or when required,
such demand is made and subsequently refused that the
mortgagor can be considered in default and the mortgagee
obtains the right to file an action to collect the debt or foreclose
the mortgage.[38]
In the present case, both the CA and the RTC reckoned the accrual of
Maybank's cause of action to foreclose the real estate mortgage over the
subject property from the maturity of the second loan on May 11, 1984. The
CA further held that demand was unnecessary for the accrual of the cause
of action in light of paragraph 5 of the real estate mortgage, which
pertinently provides:
5. In the event that the Mortgagor herein should fail or refuse to pay any of
the sums of money secured by this mortgage, or any part thereof, in
accordance with the terms and conditions herein set forth, or should he/it
fail to perform any of the conditions stipulated herein, then and in any such
case, the Mortgagee shall have the right, at its election to foreclose this
mortgage, [x x x].[39]
However, this provision merely articulated Maybank's right to elect
foreclosure upon Sps. Tarrosa's failure or refusal to comply with the
obligation secured, which is one of the rights duly accorded to mortgagees
in a similar situation.[40] In no way did it affect the general parameters of
default, particularly the need of prior demand under Article 1169 [41] of the
Civil Code, considering that it did not expressly declare: (a) that demand
shall not be necessary in order that the mortgagor may be in default; or (b)
that default shall commence upon mere failure to pay on the maturity date
of the loan. Hence, the CA erred in construing the above provision as one
through which the parties had dispensed with demand as a condition sine
qua non for the accrual of Maybank's right to foreclose the real estate
mortgage over the subject property, and thereby, mistakenly reckoned such
right from the maturity date of the loan on March 11, 1984. In the absence
of showing that demand is unnecessary for the loan obligation to become
due and demandable, Maybank's right to foreclose the real estate mortgage
accrued only after the lapse of the period indicated in its final demand letter
for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days from receipt of
the final demand letter dated March 4, 1998.[42] Consequently, both the CA
and the RTC committed reversible error in declaring that Maybank's right
to foreclose the real estate mortgage had already prescribed.
Thus, considering that the existence of the loan had been admitted, the
default on the part of the debtors-mortgagors had been duly established,
and the foreclosure proceedings had been initiated within the prescriptive
period as afore-discussed, the Court finds no reason to nullify the
extrajudicial foreclosure sale of the subject property.
WHEREFORE, the petition is GRANTED. The Decision dated
November 29, 2013 and the Resolution dated May 13, 2014 of the Court of
Appeals in CA-G.R. CV No. 02211 are hereby REVERSED AND SET
ASIDE. The complaint in Civil Case No. 98-10451 is DISMISSED.
SO ORDERED.
Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Perez,
JJ., concur.
