Cando v. Olazo
REITERATIONFacts
The Antecedents: Respondents Aurora and Claudio Olazo mortgaged a parcel of land with improvements to petitioner Herminia Cando on April 27, 1987, to secure a ₱240,000.00 loan. The mortgage agreement stipulated that should the mortgagors fail to pay within one year, the mortgage would be foreclosed. Procedural History: Petitioner filed a complaint for judicial foreclosure on February 16, 1998, alleging non-payment despite demands. Respondents moved for dismissal, claiming prescription, laches, and payment. The Regional Trial Court (RTC) dismissed the complaint, ruling that the action prescribed ten years from the mortgage date (April 27, 1987), as the complaint was filed on February 16, 1998. The Court of Appeals (CA) dismissed petitioner's appeal, finding it raised a pure question of law, which under Rule 50, Section 2 of the Rules of Civil Procedure, warrants dismissal of an appeal to the CA. The Petition: Petitioner sought review, arguing the CA erred in dismissing her appeal and that the ten-year prescriptive period should be counted from April 27, 1988 (one year after the mortgage date), not April 27, 1987. Respondents maintained the ten-year period should be counted from the mortgage deed's execution date.
Issue(s)
Whether the Court of Appeals erred in dismissing the appeal on the ground of lack of jurisdiction. Whether the action for judicial foreclosure of mortgage has prescribed.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals dated November 13, 2003, is REVERSED. The case is REMANDED to the Regional Trial Court of Olongapo City for further proceedings with deliberate dispatch.
Ratio Decidendi
On the issue of the Court of Appeals' dismissal for lack of jurisdiction: The Court acknowledged that the appeal to the CA indeed raised a pure question of law, which, under strict adherence to procedural rules (Rule 50, Section 2 of the Rules of Civil Procedure), would warrant dismissal. The issue of when the ten-year prescriptive period for foreclosure begins to run is a question of law, determinable without reviewing evidence. However, the Supreme Court, invoking equity jurisdiction, found that a strict application of the rules would result in grave injustice to the petitioner due to the egregious error of the lower courts. On the issue of prescription of the action for judicial foreclosure: The Court found that the RTC committed an "appalling blunder" in ruling that the action for foreclosure prescribes ten years from the date of the mortgage contract. Citing Article 1142 of the Civil Code, the Court clarified that jurisprudence holds that a mortgage action prescribes ten years from the time the right of action accrues. This right of action accrues when the mortgagor defaults in the payment of their obligation to the mortgagee, not from the date of the mortgage instrument itself. Therefore, the RTC's dismissal based on its erroneous computation of the prescriptive period was incorrect.
Main Doctrine
An action for judicial foreclosure of mortgage prescribes ten (10) years from the time the right of action accrues, which is when the mortgagor defaults in the payment of his obligation, not from the date of the mortgage contract itself. The Court may, in the interest of equity and substantial justice, disregard procedural lapses and errors of lower courts to resolve the merits of a case.