GR 213014; (October, 2015) (Digest)
G.R. No. 213014 . October 14, 2015.
MAYBANK PHILIPPINES, INC. (Formerly PNB-Republic Bank), Petitioner, vs. SPOUSES OSCAR and NENITA TARROSA, Respondents.
FACTS
On December 15, 1980, respondents Spouses Oscar and Nenita Tarrosa obtained a loan from petitioner Maybank Philippines, Inc., secured by a Real Estate Mortgage dated January 5, 1981, over a parcel of land. After paying this loan, they obtained a second loan from Maybank in March 1983 in the amount of ₱60,000.00, payable on March 11, 1984. The spouses failed to settle the second loan upon maturity. In April 1998, they received a Final Demand Letter dated March 4, 1998, from Maybank requiring settlement of the outstanding loan. After their offer to pay a lesser amount was refused, Maybank commenced extrajudicial foreclosure proceedings on June 25, 1998. The property was sold at public auction on July 29, 1998. The spouses filed a complaint for declaration of nullity of the foreclosure, arguing, among others, that Maybank’s right to foreclose had prescribed. The Regional Trial Court (RTC) ruled in favor of the spouses, declaring the foreclosure null and void for being barred by prescription, a decision affirmed by the Court of Appeals (CA). Both lower courts held that the right to foreclose accrued from the maturity date of the loan on March 11, 1984, and that the action filed beyond the ten-year prescriptive period was barred.
ISSUE
Whether or not the Court of Appeals committed reversible error in finding that Maybank’s right to foreclose the real estate mortgage was barred by prescription.
RULING
The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the Decision and Resolution of the Court of Appeals, and DISMISSED the complaint. The Court held that the CA and RTC erred in reckoning the accrual of Maybank’s cause of action from the loan’s maturity date. The provision in the real estate mortgage stating the mortgagee’s right to foreclose upon the mortgagor’s failure to pay did not expressly dispense with the need for demand to place the debtor in default, as required under Article 1169 of the Civil Code. In the absence of such stipulation, demand was necessary. Maybank’s right to foreclose accrued only after the lapse of the period given in its final demand letter dated March 4, 1998, which required payment within five days from receipt. Consequently, the extrajudicial foreclosure proceedings initiated in June 1998 were well within the ten-year prescriptive period. The foreclosure sale was therefore valid.