G.R. No. 201881 , July 15, 2024
SPOUSES FLAVIO P. BAUTISTA AND ZENAIDA L. BAUTISTA, PETITIONERS, VS. PREMIERE DEVELOPMENT BANK, SUBSTITUTED BY SECURITY BANK SAVINGS CORPORATION, AND ATTY. PACITA ARAOS, SENIOR ASSISTANT VICE PRESIDENT AND ACTING HEAD OF LEGAL AND COLLECTION GROUP, RESPONDENTS.

FACTS

Petitioners obtained an agricultural loan from Premiere Development Bank (Premiere Bank) on January 7, 1994, secured by a Real Estate Mortgage (REM). They defaulted. In 1995, Premiere Bank initiated extrajudicial foreclosure. A sale was scheduled for November 17, 1995, but postponed at petitioners’ request. From December 1995 to August 1996, the parties exchanged letters regarding petitioners’ objections to the bank’s computation of their outstanding obligation, which was PHP 451,709.38 as of December 14, 1995. Communication ceased after August 1996. A second foreclosure sale was scheduled for January 15, 2002, with proper notice. It did not proceed as the bank’s representatives did not appear. The sale was rescheduled to February 18, 2002, without the required publication and posting of notice. The sheriff proceeded with the sale on that date, and the property was sold to Premiere Bank as the lone bidder. Petitioners redeemed the property within the period, tendering PHP 401,820.00, but Premiere Bank refused, claiming the outstanding obligation was PHP 2,062,254.26. Premiere Bank consolidated ownership. Petitioners filed a Complaint for Annulment of Sale, arguing the February 18, 2002 sale was void for lack of publication and posting. The Regional Trial Court (RTC) dismissed the complaint, ruling petitioners waived the requirements and were estopped by attempting redemption. The Court of Appeals (CA) affirmed. The Supreme Court, in a Decision dated September 5, 2018, partially granted petitioners’ Petition, declaring the February 18, 2002 foreclosure sale null and void for lack of mandatory publication and posting, and ordered the bank to comply with these requirements. Petitioners filed a Motion for Partial Reconsideration, arguing the bank’s foreclosure action had already prescribed. In a Resolution dated July 24, 2019, the Court granted the motion, modifying its Decision and holding the action had prescribed.

ISSUE

Whether the action for the extrajudicial foreclosure of the real estate mortgage had already prescribed.

RULING

Yes, the action had prescribed. The Court, in its July 24, 2019 Resolution, held that the prescriptive period for a mortgage action is ten years under Article 1142 of the Civil Code. The period commenced on January 8, 1994, when the loan matured and petitioners defaulted. The ten-year period expired on January 8, 2004. The bank’s initial foreclosure application in 1995 did not toll the prescription because the proceedings were not completed; the scheduled sale was postponed and the proceedings were abandoned after August 1996. The subsequent foreclosure sale in 2002 was a separate and distinct action initiated after the parties’ communication had ceased for years. Since this 2002 action was initiated beyond the ten-year prescriptive period, it was barred. The nullity of the 2002 sale did not revive the right to foreclose. Consequently, the Court modified its September 5, 2018 Decision by deleting the order for the bank to comply with posting and publication requirements and instead declared that the bank’s right to foreclose the mortgage had prescribed.