Bautista v. Premiere Development Bank
REITERATIONFacts
The Antecedents: Spouses Bautista (petitioners) obtained an agricultural loan from Premiere Development Bank (respondent) secured by a real estate mortgage (REM) over their property. Petitioners defaulted. Premiere Bank initiated extrajudicial foreclosure proceedings in 1995, with a sale scheduled for November 17, 1995. Petitioners requested postponement, acknowledging their debt as of December 14, 1995, but questioned the computation of charges. After exchanges of letters from December 1995 to August 1996 regarding penalties and fees, communication ceased. Another foreclosure sale was scheduled for January 15, 2002, but did not push through. A rescheduled sale on February 18, 2002, proceeded without publication and posting, and the property was sold to Premiere Bank. Petitioners attempted to redeem the property, but Premiere Bank refused the redemption price, consolidating ownership. Procedural History: Petitioners filed a complaint for annulment of sale, arguing the foreclosure sale was void for non-compliance with Act No. 3135. The RTC dismissed the complaint, finding waiver of requirements and estoppel. The CA affirmed. This Court, in its September 5, 2018 Decision, declared the February 18, 2002 foreclosure sale null and void for lack of posting and publication, but did not disturb the findings on the computation of the outstanding loan obligation. Petitioners moved for partial reconsideration, arguing the foreclosure action had prescribed. The Court granted this, modifying its decision to delete the directive for respondents to comply with posting and publication, holding that the foreclosure action had prescribed. Premiere Bank filed the present Motion for Reconsideration. The Petition: Premiere Bank sought reversal of the Court's Resolution dated July 24, 2019, arguing that its action to foreclose the REM was tolled by the filing of its application for extrajudicial foreclosure in 1995, and that the RTC and CA findings on the outstanding loan obligation were undisturbed. Petitioners argued that the foreclosure action had prescribed as the void sale did not toll the period, and that the action to collect the debt under the Promissory Note had also prescribed.
Issue(s)
Whether Premiere Bank's action to foreclose the mortgage has prescribed. Whether petitioners may be directed to pay their outstanding loan obligation to Premiere Bank.
Ruling
The Motion for Reconsideration is denied with finality. Premiere Bank's action to foreclose the mortgage has prescribed. The extrajudicial foreclosure proceedings did not interrupt the running of the prescriptive period because the Office of the Sheriff is not a court of justice, and any delay was due to Premiere Bank's fault in failing to comply with statutory requirements. Furthermore, Premiere Bank waived its right to file a separate personal action for collection by electing to pursue extrajudicial foreclosure. Since the foreclosure action has prescribed, petitioners cannot be directed to pay their outstanding loan obligation.
Ratio Decidendi
On whether Premiere Bank's action to foreclose the mortgage has prescribed: The Court reiterated that an action for foreclosure of mortgage prescribes in 10 years under Article 1142 of the Civil Code, counted from the mortgagor's default. The earliest default was noted on October 17, 1995. Article 1155 of the Civil Code provides three modes to interrupt prescription: filing an action with the court, a written extrajudicial demand, or a written acknowledgment of the debt by the debtor. Premiere Bank's filing of an application for extrajudicial foreclosure with the Office of the Sheriff does not qualify as an "action filed with the court" as the sheriff's office is not a court of justice. Moreover, the delay in the foreclosure proceedings was attributable to Premiere Bank's failure to comply with the mandatory posting and publication requirements of Act No. 3135, which renders the foreclosure proceedings ineffective and akin to abandonment, thus not interrupting prescription. The Court also clarified that petitioners' acknowledgment of the loan and mortgage in their petition was not a written acknowledgment of a subsisting debt intended to interrupt prescription, as they consistently questioned the correctness of the computation of their outstanding obligation due to unauthorized charges and exorbitant interest. Therefore, counting from October 17, 1995, more than 10 years had lapsed when Premiere Bank filed its Motion for Reconsideration, meaning the action to foreclose the mortgage had prescribed. On whether petitioners may be directed to pay their outstanding loan obligation to Premiere Bank: The Court held that Premiere Bank waived its right to pursue a separate personal action for collection of the debt when it elected to pursue extrajudicial foreclosure of the mortgage. The remedies of personal action, judicial foreclosure, and extrajudicial foreclosure are alternative, not cumulative. By opting for extrajudicial foreclosure, Premiere Bank is deemed to have waived its other remedies, except for a subsequent personal action for any deficiency if the foreclosure proceeds were insufficient. Since the action for foreclosure has prescribed, and Premiere Bank cannot split its cause of action by pursuing a separate collection suit, there is no basis to direct petitioners to pay their outstanding loan obligation. The Court emphasized that the nullity of the foreclosure sale on February 18, 2002, due to non-compliance with Act No. 3135, means that the parties are in the same position as if no action was commenced, and Premiere Bank is deemed to have abandoned its remedies. Consequently, both the action to collect on the Promissory Note and the action to foreclose the mortgage have prescribed, as the right of action accrued in 1995, approximately 29 years prior to the Court's resolution.
Main Doctrine
The extrajudicial foreclosure proceedings initiated by a bank, if declared null and void due to non-compliance with statutory requirements, do not interrupt the running of the prescriptive period for the action to foreclose the mortgage. Furthermore, the election of extrajudicial foreclosure as a remedy waives the right to pursue a separate personal action for the collection of the debt, unless the foreclosure proceeds are insufficient.