Development Bank of the Philippines v. Spouses Rufo Tomeldan
REITERATIONFacts
The Antecedents: The Development Bank of the Philippines (DBP) granted a loan to the private respondents, secured by a real estate mortgage. The private respondents failed to pay, leading to the extra-judicial foreclosure of the mortgaged property. A deficiency remained after the sale. Procedural History: DBP filed a complaint for the deficiency on March 14, 1977. The respondent judge dismissed the case, ruling that the cause of action had prescribed, applying a five-year prescriptive period under Article 1149 of the Civil Code. The Petition: DBP filed a petition for certiorari, arguing that its cause of action had not prescribed.
Issue(s)
Whether the cause of action for a deficiency judgment has prescribed. Whether the prescriptive period for an action for deficiency judgment is five years or ten years.
Ruling
The Order dismissing Civil Case No. D-3888 is set aside, and the respondent judge is ordered to continue its trial. The cause of action for deficiency judgment has not prescribed.
Ratio Decidendi
On Whether the cause of action for a deficiency judgment has prescribed: The Supreme Court held that the cause of action had not prescribed. The Court agreed that the cause of action accrued on September 16, 1967, and the case was filed on March 14, 1977. Less than ten years had elapsed between these dates. On Whether the prescriptive period for an action for deficiency judgment is five years or ten years: The Court disagreed with the trial court's application of the five-year prescriptive period under Article 1149 of the Civil Code. The Court found that specific provisions of the Civil Code were applicable. It cited Article 1144 of the Civil Code, which provides a ten-year prescriptive period for actions upon a written contract and upon an obligation created by law. The Court reasoned that the mortgagee's right to claim for a deficiency after foreclosure is a right created by law, and thus falls under Article 1144(2). Furthermore, the Court stated that the action to recover the deficiency is in the nature of a mortgage action, which is governed by Article 1142 of the Civil Code, prescribing after ten years. The Court also noted that the action could be considered as enforcing the written promissory note, thus falling under Article 1144(1). The case cited by the trial court, Commissioner of Internal Revenue vs. Iligan Electric and Ice Plant, Inc., was distinguished as it involved a specific provision in the Tax Code, a special law, which prevailed over a general law.
Main Doctrine
An action for deficiency judgment after extra-judicial foreclosure of a mortgage is governed by the ten-year prescriptive period under Article 1144 of the Civil Code, either as an obligation created by law or as an enforcement of the mortgage contract, and not by the five-year period under Article 1149.