G.R. No. 196323 , February 08, 2021
PNB-REPUBLIC BANK (MAYBANK PHILIPPINES, INCORPORATED), PETITIONER, VS. REMEDIOS SIAN-LIMSIACO, RESPONDENT.

FACTS

Respondent Remedios Sian-Limsiaco obtained several sugar crop loans from petitioner Maybank (formerly PNB-Republic Bank) in 1979 (P142,500.00), 1982 (P307,700.00 with her son Roy), and 1984 (P110,000.00). These loans were secured by Real Estate Mortgages (REMs) executed through Special Powers of Attorney on parcels of land owned by third parties: Sian Agricultural Corporation, spouses Sebastian and Marina de la Pena, and spouses Jerome Gonzales and Perla Sian-Gonzales. Maybank never demanded payment nor initiated any collection or foreclosure case on these loans. On June 29, 2001, after 17 years, Remedios and Roy filed a Petition before the Regional Trial Court (RTC) to cancel the mortgage liens annotated on the titles, citing prescription and extinction of the loan obligation. Maybank argued the case involved assigned assets, first to the Philippine National Bank (PNB) and later to the Bangko Sentral ng Pilipinas (BSP), and sought substitution of parties, which the RTC denied due to insufficient proof. The RTC granted the petition, declaring the mortgage contracts unenforceable due to prescription and ordering the cancellation of the annotations. The Court of Appeals affirmed the RTC’s decision. Maybank filed the instant Petition for Review on Certiorari.

ISSUE

1. Whether the CA erred in affirming the RTC’s judgment despite respondent not being the real party-in-interest and having no cause of action.
2. Whether the CA erred in affirming the RTC’s judgment despite respondents lacking authority to institute the suit, hence lacking legal capacity to sue.
3. Whether the CA erred in affirming the RTC’s judgment cancelling the mortgage liens despite the non-inclusion of an indispensable party, the BSP.

RULING

The Supreme Court DENIED the Petition and AFFIRMED the CA Decision.
1. On the issue of real party-in-interest and cause of action: Remedios, as the principal debtor, is a real party-in-interest. A cause of action exists in her favor to seek the cancellation of the mortgage liens because the annotation on the titles constitutes a cloud on her ownership interest in the properties, which she seeks to remove. The action is one to quiet title, which she can institute as the person interested in the property.
2. On the issue of authority and legal capacity to sue: The owners of the mortgaged properties (the corporations and spouses) are not indispensable parties. The action is directed against the mortgagee, Maybank, to cancel the liens based on prescription. The relief sought does not require a determination of the owners’ rights against Maybank, as the action is in personam against Maybank. The owners’ rights are not prejudiced by the cancellation, as they retain their ownership and the mortgages are deemed extinguished due to prescription.
3. On the issue of the BSP as an indispensable party: The BSP is not an indispensable party. The Deed of Assignment to PNB, and subsequently to BSP, pertained only to Maybank’s receivables (the loan credits), not the mortgage contracts themselves. The mortgage contracts, as accessory obligations, were not validly assigned because the principal obligation had already prescribed. Since the principal obligation was extinguished by prescription, the accessory mortgage was also extinguished. Therefore, BSP had no legal interest in the mortgage liens, and its non-inclusion did not render the judgment void.
The Court also held that the petition raised questions of law, such as the application of legal definitions to undisputed facts, which are reviewable. Furthermore, the Court emphasized that rules of procedure should not be applied rigidly to frustrate substantial justice, and no severe procedural infirmity deprived the parties of due process in this nearly two-decades-old dispute.