GR 144101; (September, 2005) (Digest)
G.R. No. 144101 . September 16, 2005.
ANTONIO P. TAMBUNTING, JR. and COMMERCIAL HOUSE OF FINANCE, INC., Petitioners, vs. SPOUSES EMILIO SUMABAT and ESPERANZA BAELLO, Respondents.
FACTS
Respondents mortgaged their land to petitioner Tambunting in 1973. After defaulting on payments, petitioner CHFI, as assignee, initiated foreclosure in 1977, which was restrained by a court injunction. That injunction case was later dismissed. In 1979, respondents filed an action for declaratory relief to determine the exact loan amount. Petitioners were declared in default, and in 1981, the court fixed the debt and authorized consignation, which respondents complied with.
In 1995, respondents received a notice of sheriff’s sale, as CHFI had foreclosed the mortgage. The auction proceeded, and the property was sold to CHFI. After respondents failed to redeem, title was consolidated in CHFI’s name. Respondents then sued to nullify the foreclosure. The RTC ruled in their favor, nullifying the 1995 foreclosure and sale, and ordering reconveyance, holding the mortgage was extinguished by the 1981 consignation and the right to foreclose had prescribed.
ISSUE
Whether the Regional Trial Court erred in upholding the validity of the 1981 consignation and in ruling that petitioners’ right to foreclose had prescribed.
RULING
The Supreme Court denied the petition, affirming the RTC’s outcome but on different grounds. The Court held that the 1979 action for declaratory relief was improperly filed, as a breach of the mortgage contract had already occurred upon respondents’ default prior to its filing. An action for declaratory relief is only viable before a breach. Consequently, the 1981 decision from that case was void for lack of jurisdiction, and the consignation made pursuant to it was likewise invalid.
However, the Court ruled that petitioners’ right to foreclose had indeed prescribed. The right of action accrued upon default in May 1977. The ten-year prescriptive period was interrupted by the 1977 injunction suit but recommenced upon its dismissal on November 9, 1977. The void 1979 declaratory relief case did not interrupt the period. Thus, the prescriptive period expired on November 7, 1987. The foreclosure conducted in 1995 was therefore barred by prescription. All subsequent acts, including the auction and consolidation of title, were null and void. The property must be reconveyed to respondents.