Philippine National Bank v. Abello
REITERATIONFacts
The Antecedents: Respondents filed a Complaint for Cancellation/Discharge of Mortgage/Mortgage Liens against petitioner Philippine National Bank (PNB) before the RTC of Bacolod City. The complaint involved parcels of land covered by TCT Nos. T-127632, T-82974, and T-58311, registered under the names of Spouses Manuel and Elenita Abello. Various encumbrances, all in favor of PNB, were inscribed on these titles, including real estate mortgages (REMs) executed in 1963, 1968, 1973, 1974, and 1975. Manuel Abello died in 1998, and his heirs (respondents) executed a Declaration of Heirship authorizing Elenita to administer the estate. Respondents sought cancellation of the inscriptions, claiming the action had prescribed due to PNB's inaction since 1975. Procedural History: The RTC ruled in favor of the respondents, ordering the cancellation of the encumbrances based on prescription, reckoning the period from the date of inscription. The CA affirmed the RTC's decision, finding that PNB's accounting notice and demand sent in 2002, after the debtor stopped paying in 1985, indicated prescription. The CA found the allegations sufficient and the loan terms immaterial. The Petition: PNB filed a petition for review on certiorari, arguing that the CA and RTC erred in ordering the cancellation of encumbrances. PNB contended that the complaint should have been dismissed for failure to state a cause of action and that respondents waived the defense of prescription by admitting liability.
Issue(s)
Whether the respondents' complaint stated a cause of action for the cancellation of real estate mortgage encumbrances, considering the necessity of alleging the loan's maturity date. Whether the action for foreclosure of the real estate mortgages had prescribed, requiring evidence of when the loan became due and demandable. Whether the Court of Appeals erred in affirming the Regional Trial Court's decision ordering the cancellation of the annotated encumbrances, given the respondents' failure to establish the maturity date of the loans and the commencement of the prescriptive period.
Ruling
The Supreme Court granted the petition, reversed and set aside the decision of the Court of Appeals, and ordered the dismissal of the respondents' complaint.
Ratio Decidendi
On the issue of failure to state a cause of action and lack of cause of action: The Court clarified the distinction between "failure to state a cause of action" (insufficiency of allegation in the pleading) and "lack of cause of action" (insufficiency of factual basis for the action). A complaint for cancellation of REM encumbrances is dependent on whether the action for REM has already prescribed. Therefore, an allegation of the date of maturity of the loan is vital as it signifies the commencement of the running of the prescriptive period for an action for foreclosure of REM. Without these crucial details, the information supplied is insufficient to enable the court to grant relief to the respondents, rendering the action dismissible for failure to state a cause of action. However, since the parties proceeded to trial, the dismissal should be based on "lack of cause of action" if the plaintiff fails to substantiate their claim by preponderance of evidence. On the prescription of the action for foreclosure: The Court reiterated that prescription for REMs runs not from the time of execution, but from when the loan became due and demandable, or from the date of demand. A REM is an accessory contract, and its enforcement is dependent on the violation of the principal obligation, which is the debtor's failure to pay. Prior to such failure, the creditor-mortgagee has no right to speak of under the REM. In this case, the respondents failed to allege and adduce evidence to establish when the loan became due, and consequently, when the right to foreclose the mortgage accrued. The contracts evidencing the loan and mortgage were necessary to establish this fact. Thus, the respondents failed to establish that prescription had set in. On the CA's ruling and the cancellation of encumbrances: The Court found that the CA erred in finding the allegations sufficient and the loan terms immaterial. The respondents' failure to allege, much less prove, the maturity date of the loans meant they could not establish that the debt had become due and that the prescriptive period had begun to run. Consequently, they could not establish their right to pray for the cancellation of the encumbrances. The Court held that the complaint should have been dismissed for want of cause of action, as the respondents failed to substantiate their claim by preponderance of evidence.
Main Doctrine
The Supreme Court reversed the Court of Appeals and ordered the dismissal of the respondents' complaint, holding that the respondents failed to establish their cause of action for the cancellation of real estate mortgage encumbrances due to their failure to allege and prove the maturity date of the loans, which is crucial for determining prescription.