G.R. No. 192971 January 10, 2018
Floro Mercene, Petitioner vs. Government Service Insurance System, Respondent

FACTS

Petitioner Floro Mercene obtained two loans from respondent GSIS in 1965 and 1968, secured by real estate mortgages annotated on his property’s title. In 2004, Mercene filed a complaint for Quieting of Title, alleging that GSIS never exercised its mortgage rights and that its right to foreclose had prescribed, constituting a cloud on his title. The Regional Trial Court (RTC) granted the complaint, ruling the mortgages were ineffective as GSIS’s right to foreclose had prescribed after more than ten years, and ordered the cancellation of the annotations.
GSIS appealed. The Court of Appeals (CA) reversed the RTC, dismissing the complaint. The CA held that Mercene failed to allege crucial facts in his complaint—specifically, the maturity dates of the loans or any demand for payment by GSIS. It ruled that without these facts, the accrual of the cause of action for foreclosure could not be determined, and thus prescription could not be deemed to have commenced.

ISSUE

Whether the Court of Appeals erred in ruling that the real estate mortgages had not prescribed.

RULING

The Supreme Court denied the petition and affirmed the CA. The core legal principle is that prescription of an action to foreclose a mortgage commences only from the time the cause of action accrues. For a written contract, a cause of action accrues only upon an actual breach, typically when the obligation becomes due and demandable. The Court emphasized that the petitioner’s complaint was fatally defective for failing to allege the essential ultimate facts of when the loans matured or when GSIS made a demand for payment. Mere allegations that decades had passed without foreclosure action were insufficient, as they were conclusions of law, not factual assertions that could trigger the running of prescription.
The Court also addressed ancillary arguments. It found no error in the CA considering the issue of prescription, as GSIS had raised the failure to state a cause of action as an affirmative defense from the outset. Furthermore, there was no judicial admission by GSIS regarding prescription, as the allegations in the complaint pertaining to prescription were legal conclusions, not factual averments that required a specific denial under the rules of pleading. Consequently, with the accrual date of the cause of action unpleaded, prescription did not run, and the complaint for quieting title was correctly dismissed for failing to state a cause of action.