B & I Realty v. Caspe
REITERATIONFacts
The Antecedents: This case originated from a fraudulent scheme perpetrated by Arturo G. Datuin against Spouses Arsenio and Consorcia L. Venegas. Consorcia Venegas delivered her land title to Datuin, intending to use it as collateral for a loan from Rizal Commercial Banking Corporation (RCBC). Datuin, however, forged a deed of absolute sale, transferred the title to his name, and subsequently obtained a P75,000 loan from petitioner B & I Realty Co., Inc., mortgaging the property. Later, Consorcia Venegas sold the property to respondents Teodoro and Purificacion Aguilar Caspe under a deed of conditional sale, with the condition that respondents would assume and settle Datuin's mortgage debt to B & I Realty. Procedural History: Initially, the Venegases filed a complaint against Datuin, B & I Realty, and the Caspes for recovery of property and nullification of the title and mortgage. This case was dismissed without prejudice due to the Venegases' counsel's failure to appear. Subsequently, the Venegases, respondents, and Datuin entered into a compromise agreement, formalizing the sale to the Caspes and their assumption of the mortgage. The Venegases later filed another action seeking to annul the transfer to Datuin and all subsequent transactions, including the mortgage to B & I Realty. The trial court declared the sale to Datuin void, cancelled Datuin's title, declared the conditional sale to the Caspes valid, and ordered B & I Realty to deliver the title to the Caspes upon payment of the remaining balance. B & I Realty appealed to the Court of Appeals (CA), which affirmed the trial court's decision but stated that its pronouncements regarding B & I Realty had no binding effect due to a violation of due process. The CA denied the respondents' motion for reconsideration. Years later, B & I Realty filed an action for judicial foreclosure of the mortgage against the Caspes, who raised the defense of prescription. The Regional Trial Court (RTC) ruled in favor of B & I Realty, but the CA reversed this, holding that the action had prescribed. The Petition: Petitioner B & I Realty Co., Inc. filed this petition for review on certiorari under Rule 45 of the Rules of Court, seeking to set aside the Court of Appeals' decision that dismissed its action for judicial foreclosure of mortgage. Petitioner argues that the CA erred in applying the 1997 Rules of Court retroactively and in holding that the defense of prescription was not waived, even though it was not raised in the motion to dismiss. Petitioner also contends that the filing of the Venegases' earlier annulment case should have interrupted the prescriptive period for its foreclosure action. The Supreme Court, however, found that the CA correctly applied the 1997 Rules of Court and that the action had indeed prescribed, as the evidence showed the last payment was made on January 14, 1980, and the foreclosure action was filed on August 27, 1993, exceeding the ten-year prescriptive period for mortgage actions.
Issue(s)
Whether the Court of Appeals erred in holding that the defense of prescription was not waived by the respondents. Whether the Court of Appeals erred in applying the 1997 Rules of Civil Procedure retroactively to the case. Whether the action for judicial foreclosure of mortgage had already prescribed.
Ruling
The petition is denied. The February 7, 2001 decision of the Court of Appeals in CA-G.R. C.V. No. 57273 is affirmed. Costs against petitioner.
Ratio Decidendi
On the waiver of the defense of prescription: The Court held that while the defense of prescription was not raised in the motion to dismiss, it was pleaded in the answer and in the motion to set case for hearing on special affirmative defenses. The Court clarified that under Section 1, Rule 9 of the 1997 Rules of Civil Procedure, the court shall dismiss a claim if it appears from the pleadings or evidence on record that the action is barred by the statute of limitations, even if the defense was not pleaded in a motion to dismiss. This provision was correctly applied by the CA. Furthermore, even under the old rule (1964 Rules of Court), jurisprudence established exceptions to the omnibus motion rule, allowing the consideration of prescription if the evidence clearly showed that the cause of action was barred. In this case, the evidence of the petitioner itself demonstrated that prescription had set in. On the retroactive application of the 1997 Rules of Civil Procedure: The Court affirmed the CA's ruling that the 1997 Rules of Civil Procedure could be given retroactive application. Procedural laws may be given retroactive effect in cases pending and undetermined at the time of their passage. Since the action was still pending in the RTC when the 1997 Rules were promulgated on July 1, 1997, and the RTC decided the case on August 26, 1997, the retroactive application was proper. The CA correctly applied the 1997 Rules. On whether the action had prescribed: The Court agreed with the CA that the action had prescribed. The mortgage was executed on May 17, 1973, with a maturity date of May 17, 1974. However, the written acknowledgment and assumption of the mortgage obligation by respondents in the deed of absolute sale dated October 30, 1975, interrupted the prescriptive period under Article 1155 of the Civil Code. Payments made by respondents from February 12, 1976, to January 14, 1980, meant that the prescriptive period should be reckoned from the last payment. Thus, the ten-year prescriptive period for the mortgage action should be counted from January 14, 1980. Petitioner had until January 14, 1990, to file suit. Since the complaint for judicial foreclosure was filed on August 27, 1993, the action had clearly prescribed. The filing of the Venegases' civil case for annulment of title did not interrupt the prescriptive period for the foreclosure action, as it was not an action for foreclosure contemplated by Article 1155 of the Civil Code. Petitioner could have filed a cross-claim for judicial foreclosure in that case.
Main Doctrine
The ten-year prescriptive period for an action for judicial foreclosure of mortgage, under Article 1142 of the Civil Code, commences from the last payment made by the debtor or his successor-in-interest, as per Article 1151 of the Civil Code, and is interrupted by written acknowledgment of the debt by the debtor or any written extrajudicial demand by the creditor, as provided in Article 1155 of the Civil Code. Furthermore, the defense of prescription, even if not raised in a motion to dismiss, may be considered by the court if it appears from the pleadings or evidence on record that the action is barred by the statute of limitations, particularly under the 1997 Rules of Civil Procedure.