Maybank Philippines v. Tarrosa
REITERATIONFacts
The Antecedents: Respondents-spouses Oscar and Nenita Tarrosa (Sps. Tarrosa) obtained a loan from PNB-Republic Bank (now Maybank Philippines, Inc.) secured by a real estate mortgage. After paying the first loan, they obtained a second loan in March 1983, payable on March 11, 1984. Sps. Tarrosa failed to settle the second loan. In April 1998, Maybank sent a final demand letter for an outstanding loan of ₱564,579.91. Sps. Tarrosa offered to pay a lesser amount, which Maybank refused. On June 25, 1998, Maybank commenced extrajudicial foreclosure proceedings. The property was sold at public auction on July 29, 1998, to Philmay Property, Inc. (PPI). Procedural History: Sps. Tarrosa filed a complaint for the declaration of nullity of the foreclosure sale, averring that the second loan was unsecured, Maybank refused their payment offers, and Maybank's right to foreclose had prescribed or was barred by laches. Maybank and PPI countered that the second loan was secured by the same mortgage under a continuing security provision and that Sps. Tarrosa's acknowledgment of the debt negated prescription. The RTC ruled that while the second loan was covered by the mortgage, Maybank's right to foreclose had prescribed, reckoning from the March 11, 1984 maturity date of the second loan. The RTC declared the foreclosure sale void and awarded damages. The CA affirmed the RTC's ruling on prescription, holding that demand was not a condition sine qua non for the accrual of the right to foreclose under paragraph 5 of the mortgage, and Maybank failed to show any interruption to the prescriptive period. The Petition: Maybank filed a petition for review on certiorari assailing the CA's decision and resolution, arguing that the CA erred in finding that its right to foreclose was barred by prescription.
Issue(s)
Whether or not the Court of Appeals committed reversible error in finding that Maybank’s right to foreclose the real estate mortgage over the subject property was barred by prescription.
Ruling
The petition is meritorious. 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 REVERSED AND SET ASIDE. The complaint in Civil Case No. 98-10451 is DISMISSED.
Ratio Decidendi
On the issue of prescription of Maybank's right to foreclose: The Court held that an action to enforce a right arising from a mortgage must be filed within ten (10) years from the time the right of action accrues, which is when the mortgagor defaults. However, mere delinquency in payment does not equate to legal default. For a debtor to be in default, the obligation must be demandable and liquidated, the debtor must delay performance, and the creditor must require performance judicially or extrajudicially, unless demand is expressly waived or unnecessary under specific circumstances. The CA and RTC erred in reckoning the accrual of Maybank's cause of action from the maturity date of the second loan (March 11, 1984). Paragraph 5 of the real estate mortgage, which states the mortgagee's right to foreclose upon the mortgagor's failure or refusal to pay, merely articulates an existing right and does not dispense with the requirement of demand as a condition for default. The provision did not expressly state that demand was unnecessary or that default would commence upon mere failure to pay on the maturity date. Therefore, Maybank's right to foreclose accrued only after the lapse of the period indicated in its final demand letter, which was five (5) days from the receipt of the demand letter dated March 4, 1998. Since the foreclosure proceedings were initiated after a demand was made and within the prescriptive period, the foreclosure sale was valid. The Court found no reason to nullify the extrajudicial foreclosure sale as the loan's existence, the debtors' default, and the timely initiation of foreclosure proceedings were established.
Main Doctrine
The right to foreclose a real estate mortgage accrues only after the mortgagor defaults in payment, which requires a demand (judicial or extrajudicial) unless demand is expressly waived or is rendered unnecessary by law or stipulation. Mere delinquency in payment does not automatically constitute legal default.