G.R. No. L-5009
TOMAS SUNICO, liquidator of Chuidian, Buenaventura & Co., plaintiff-appellee, vs. MANUEL RAMIREZ, defendant-appellant.
November 26, 1909

FACTS:
On October 29, 1884, Manuel Ramirez (defendant-appellant) obtained a simple loan (préstamo mutuo) of 10,000 pesos from Chuidian, Buenaventura & Co. (plaintiff-appellee’s predecessor), securing it with a mortgage (hipoteca) on his property. Ramirez obligated himself to pay the amount in sugar in early 1885, with 10% annual interest.

On August 14, 1885, they executed a second instrument acknowledging an increased indebtedness of 10,125.01 7/8 pesos, also secured by an amplified mortgage, with payment due in February and March 1886.

Ramirez made partial payments totaling 1,192.23 pesos in 1886, 1887, and 1888, with the last remittance on October 6, 1888. No further payments were made.

On January 14, 1908, Tomas Sunico, as liquidator, instituted an acción hipotecaria (action to foreclose the mortgage) to recover the unpaid balance. Ramirez contended that the action had prescribed, arguing that the personal action to recover the debt, whether under the Mercantile Code or Civil Code, had already prescribed, and consequently, the mortgage action, being merely accessory, also prescribed.

The trial court ruled in favor of Sunico, finding that the foreclosure action had not prescribed, but computed the amount due to be 15,365.68 pesos plus P30,099.44 in interest, which included compound interest and other items not originally in the mortgage.

ISSUE:
1. Can an acción hipotecaria (real action to foreclose a mortgage) be instituted even if the personal action to recover the indebtedness secured by the mortgage has already prescribed?
2. Had the acción hipotecaria itself prescribed at the time of its institution?
3. What is the correct amount of indebtedness secured by the mortgage that can be foreclosed?

RULING:
1. Yes, an acción hipotecaria can be instituted even if the personal action has prescribed. The mere lapse of the period within which a personal action to recover a debt or enforce an obligation prescribes does not extinguish or discharge the debt or obligation itself. It merely takes away the remedy by a personal action. The acción hipotecaria (real action to foreclose a mortgage) is distinct from a personal action and has its own, generally longer, period of prescription under the law.
2. No, the acción hipotecaria had not prescribed. The cause of action accrued around April 1, 1886 (when the payment became due). Under the legislation existing prior to the Civil Code, an action to foreclose a mortgage prescribed in 30 years (thus, by April 1, 1916). Under the Civil Code (effective December 8, 1889), actions to foreclose mortgages (acciones hipotecarias) prescribed in 20 years (thus, by December 8, 1909). Since the action was instituted on January 14, 1908, it was well within either period. The Court applied the Civil Code’s 20-year period as it was shorter and came into effect after the cause of action accrued.
3. The trial court erred in computing the amount due under the mortgage. Only the original indebtedness and simple interest as expressly agreed upon in the mortgage instrument, less payments, can be recovered through foreclosure. Compound interest and other new and additional items of account not contemplated in the original mortgage instrument cannot be included in the amount secured by the mortgage, in the absence of an express agreement. The amount due and secured by the lien was determined to be the original principal of 10,125.01 7/8 pesos, local currency, plus simple interest thereon at 10% annually from April 1, 1888, less the total payments of 1,192.23 pesos.