Maybank v. Sian-Limsiaco
REITERATIONFacts
The Antecedents: Respondent Remedios Sian-Limsiaco obtained several sugar crop loans from petitioner Maybank Philippines, Inc. (formerly PNB-Republic Bank) between 1979 and 1984. These loans were secured by real estate mortgages executed by Remedios and her son, Roy Sian-Limsiaco, on various parcels of land owned by third parties, including Sian Agricultural Corporation and spouses Sebastian and Marina de la Pena, and spouses Jerome Gonzales and Perla Sian-Gonzales. Maybank never demanded payment for these loans nor initiated foreclosure proceedings. After approximately 17 years, Remedios and Roy filed a petition to cancel the annotations of these mortgages on the titles, arguing that their loan obligations had prescribed. Procedural History: The petition to cancel the mortgage liens was filed before the Regional Trial Court (RTC) of Himamaylan, Negros Occidental. Maybank, having assigned its receivables to Philippine National Bank (PNB), sought substitution by PNB, which the RTC denied due to insufficient documentation. Subsequently, PNB filed a Motion to Dismiss on Demurrer to Evidence, which was also denied for lack of proof of authority. The receivables were later transferred to the Bangko Sentral ng Pilipinas (BSP). The RTC granted the petition, declaring the mortgage contracts unenforceable due to prescription and ordering the cancellation of the annotations. Maybank appealed to the Court of Appeals (CA), which affirmed the RTC's decision. Maybank's subsequent motion for reconsideration was denied, leading to the present petition. The Petition: Petitioner Maybank Philippines, Inc. filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to set aside the CA's decision. Maybank raises issues concerning whether the CA erred in affirming the RTC's judgment despite the respondent not being the real party in interest, lacking cause of action and legal capacity to sue, and failing to implead an indispensable party, the BSP. Maybank also questions the authority of the respondent to file the action and the RTC's jurisdiction to order the cancellation of mortgage liens. The core of Maybank's argument is that the registered owners of the mortgaged properties, or the BSP as the assignee of receivables, should have been the real parties in interest, and their non-inclusion renders the judgment void. The petition also challenges the CA's affirmation of the RTC's order to cancel the liens despite the prescription of the loan obligations.
Issue(s)
Whether the CA erred in affirming the RTC's judgment despite respondent not being the real party-in-interest and thus having no cause of action against petitioner. Whether the CA erred in affirming the RTC's judgment despite respondent lacking the authority to institute the suit, hence lacking legal capacity to sue. Whether the CA erred in affirming the RTC's judgment cancelling the mortgage liens despite the non-inclusion of an indispensable party, the BSP.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the issues raised by Maybank were questions of law, or if factual, fell under the exceptions allowing review in a Rule 45 petition. The Court found that Remedios, as an agent acting on behalf of the mortgagors-principals, was authorized to file the action to cancel the mortgage liens, as this was a personal action and not one involving the real property rights of the principals. Furthermore, the Court upheld the RTC's order for cancellation, finding that the principal loan obligations had prescribed, rendering the accessory mortgage contracts unenforceable, and that Maybank had not sufficiently objected to the issue of prescription.
Ratio Decidendi
On the issue of real parties-in-interest and cause of action: The Court held that Remedios, as an agent, was authorized to file the action in her own name for the benefit of the mortgagors-principals. The Court clarified that an action to cancel a mortgage is a personal action, not a real action involving title to or possession of real property, and thus, the principals were not indispensable parties. The Court cited Hernandez v. Rural Bank of Lucena, Inc. to support the distinction between an action for foreclosure (real action) and an action for cancellation (personal action). The Court further noted that Maybank failed to raise the issue of joining the principals at the earliest opportunity before the trial court, making it improper to raise for the first time on appeal. Moreover, the Court agreed that joining the principals would be moot as the main loan contracts had already prescribed. On the issue of authority to sue and legal capacity: The Court reiterated that Article 1882 of the Civil Code allows an agent to perform acts more advantageous to the principal than specified. Given that Remedios was authorized to mortgage the properties, it was implicit that she was also authorized to perform acts to release the encumbrance. Filing the case to cancel the mortgage liens was considered advantageous to the mortgagors-principals. The Court also pointed out that the registered owners never questioned Remedios' authority throughout the proceedings, effectively ratifying her actions. The Court emphasized again that the cancellation of mortgage liens is a personal action, not affecting real property rights, thus not requiring the principals' direct involvement in the suit. On the issue of BSP as an indispensable party: The Court deemed the issue of whether BSP was an indispensable party as a question of fact, hinging on the probative value of the Deed of Assignment. Since the lower courts found no probative value in the deed and Maybank failed to present further evidence, the Supreme Court did not disturb this factual finding. The Court also noted that even if the assignment occurred, the loans were already prescribed at the time, rendering the assignment of unenforceable receivables moot. Therefore, the non-inclusion of BSP did not invalidate the proceedings.
Main Doctrine
The action to cancel a real estate mortgage is a personal action, not a real action, and thus falls under the catch-all provision on personal actions. Furthermore, the prescription of the principal loan obligation renders the accessory mortgage contract unenforceable, irrespective of whether the action is filed before a court of general jurisdiction or a land registration court, provided that the issue of prescription is not adversely claimed or seriously objected to.