Provident Savings Bank v. Court of Appeals
REITERATIONFacts
The Antecedents: Spouses Lorenzo K. Guarin and Liwayway J. Guarin obtained a loan of P62,500.00 from Provident Savings Bank (PSB) on February 16, 1967, secured by a real estate mortgage over a parcel of land covered by TCT No. 177014. The loan was payable on or before June 20, 1967. In September 1972, PSB was placed under receivership by the Central Bank until July 27, 1981. On December 11, 1984, Lorenzo K. Guarin requested a postponement of the foreclosure sale. On February 10, 1986, the Guarins received a statement of account showing outstanding balances. On February 26, 1986, Lorenzo K. Guarin expressed willingness to pay his obligation. On May 20, 1986, Wilson Chua, having obtained a judgment against the Guarins in another case, offered to pay the Guarin's obligation to PSB in exchange for the mortgaged property. On July 10, 1986, the Guarins executed a Deed of Absolute Sale with Assumption of Mortgage in favor of Wilson Chua, who assumed the mortgage obligation. On August 5, 1986, Chua informed PSB of the sale and his assumption of the mortgage, requesting to pay the loan. PSB replied that Chua could pay if he also settled the corporate indebtedness of L.K. Guarin Manufacturing Co., Inc. On August 3, 1987, Chua's counsel informed PSB that the bank had lost its right to foreclose due to prescription. Procedural History: Wilson Chua filed a complaint against PSB to compel the release of the mortgage and the surrender of the owner's duplicate title, and for damages. The Regional Trial Court (RTC) ordered PSB to pay the personal obligation of the Guarins, release the mortgage, surrender the title, and pay attorney's fees and costs. Both parties appealed. The Court of Appeals (CA) reversed the RTC decision, barring PSB from foreclosing the realty due to prescription and reversing the order for Chua to pay the P591,088.80. PSB filed a motion for reconsideration and a motion for new trial, which were denied. The Petition: Petitioner Provident Savings Bank seeks to rectify the CA's decision barring foreclosure on the ground of prescription, arguing that the period of receivership should be considered caso fortuito and not be reckoned against it.
Issue(s)
Whether the period during which Provident Savings Bank was under receivership legally interrupted the prescriptive period for foreclosure. Whether Wilson Chua has the personality to initiate the action to compel the release of the mortgage and title. Whether the assumption of the mortgage by Wilson Chua constituted novation or an acknowledgment of the debt. Whether the action to foreclose the mortgage had prescribed.
Ruling
The petition is GRANTED. The decision of the Court of Appeals dated August 31, 1990, and its resolution dated February 6, 1991, are set aside, and a new one is entered dismissing Wilson Chua's complaint. No costs.
Ratio Decidendi
On the interruption of the prescriptive period due to receivership: The Court held that the period during which PSB was under receivership and prohibited from transacting business by the Central Bank (September 1972 to July 1981) constitutes caso fortuito and legally interrupts the prescriptive period for foreclosure. The Court clarified that while a receiver's appointment does not dissolve a corporation, a specific prohibition against transacting business immobilizes the bank. Foreclosure is considered part of "doing business." Therefore, the period from June 20, 1967 (maturity date) to June 20, 1977 (last day to foreclose if no interruption) was interrupted by the receivership. When the receivership was set aside in 1981, the ten-year period to foreclose under Article 1142 of the Civil Code began to run anew. On Wilson Chua's personality to initiate the action: The Court noted that the CA considered Wilson Chua a real-party-in-interest as the successor-in-interest of the Guarins, entitled to the realty. However, the ultimate resolution of the case focused on the prescription of the bank's right to foreclose, rendering this issue secondary to the main dispute. On novation and acknowledgment of debt: The Court disagreed with the CA's finding of novation. It reasoned that PSB's condition for Chua to pay the corporate indebtedness along with the personal obligation indicated that consent to a substitution of debtor was not unequivocally given. However, the Court found that Chua's letter on August 6, 1986, requesting to pay the loan secured by the mortgage, constituted an express acknowledgment of the outstanding obligation. This acknowledgment interrupted the prescription for the second time under Article 1155 of the Civil Code. On prescription of the action to foreclose: The Court concluded that the action to foreclose had not prescribed. The prescriptive period was interrupted first by the caso fortuito of the receivership (1972-1981). It began to run anew in 1981. Second, it was interrupted again by Chua's express acknowledgment of the debt in August 1986. Therefore, the foreclosure suit filed by PSB was well within the prescriptive period.
Main Doctrine
The period during which a bank is under receivership and prohibited from transacting business by the Central Bank is considered caso fortuito and legally interrupts the prescriptive period for foreclosing a mortgage. Furthermore, an offer to pay the mortgaged obligation, even by a successor-in-interest, constitutes an acknowledgment of the debt, interrupting prescription for a second time.