GR 162074; (July, 2009) (Digest)
G.R. No. 162074 ; July 13, 2009
CECILLEVILLE REALTY AND SERVICE CORPORATION, Petitioner, vs. SPOUSES TITO ACUÑA and OFELIA B. ACUÑA, Respondents.
FACTS
Petitioner Cecilleville Realty lent its land titles to respondent spouses in 1981 to secure a credit line. The spouses, through a forged secretary’s certificate, instead used the properties as collateral for a personal loan from Prudential Bank. Upon the spouses’ default, Prudential threatened foreclosure. To protect its properties, Cecilleville settled the spouses’ obligation with the bank in 1996, amounting to ₱3,367,474.42. After the spouses refused reimbursement demands, Cecilleville filed a complaint in June 1996.
The trial court dismissed the complaint on grounds of prescription, ruling the action, being based on fraud discovered in 1981, was filed beyond the four-year prescriptive period. The Court of Appeals initially reversed, holding the action was for reimbursement with a five-year prescriptive period. However, upon reconsideration, the appellate court affirmed the dismissal, agreeing the action was based on fraud and had prescribed.
ISSUE
Whether Cecilleville’s action to claim reimbursement from the Acuña spouses has prescribed.
RULING
The Supreme Court granted the petition and reversed the appellate court’s amended decision. The Court clarified that Cecilleville’s cause of action was not one for damages arising from fraud, which prescribes in four years, but for reimbursement based on quasi-contract or solutio indebiti. By paying the spouses’ debt to Prudential to prevent the foreclosure of its own properties, Cecilleville made a payment not owed by it but by the respondents. This payment, made by a party with a material interest in the obligation, resulted in legal subrogation under Article 1302 of the Civil Code. Cecilleville was subrogated to the rights of Prudential against the spouses.
Consequently, the prescriptive period applicable is ten years for actions based upon a written contract, pursuant to Article 1144 of the Civil Code, as Cecilleville was subrogated to the bank’s rights under the promissory notes and real estate mortgage executed by the spouses. The action, filed in 1996, was well within this period. The Court thus ordered the spouses to reimburse Cecilleville the amount paid to the bank, plus interest and attorney’s fees.