G.R. No. 233774 April 10, 2019
MA. LUISA A. PINEDA, Petitioner vs. VIRGINIA ZUÑIGA VDA. DE VEGA, Respondent

FACTS

Petitioner Ma. Luisa Pineda filed a complaint for judicial foreclosure of a real estate mortgage against respondent Virginia Zuñiga. Pineda alleged that on March 25, 2003, Zuñiga borrowed ₱500,000.00, payable within one year with 8% monthly interest, secured by a mortgage over a property. Upon maturity, Zuñiga failed to pay despite demand. In her Answer, Zuñiga denied the material allegations, argued the interest was unconscionable, and claimed the amount represented a consolidation of a prior ₱200,000.00 loan. The Regional Trial Court (RTC) ruled in favor of Pineda, ordering Zuñiga to pay the ₱200,000.00 loan with 12% annual interest from the date of demand, plus damages, and authorizing foreclosure in case of default.
The Court of Appeals (CA) reversed the RTC and dismissed the complaint. The CA found that Pineda failed to prove she made a valid extrajudicial demand on Zuñiga as required under Article 1169 of the Civil Code for the debtor to be in default. While Pineda presented a copy of a demand letter and a photocopy of a registry return card, the registry return card itself was not formally offered in evidence. The CA held that without competent proof like the original registry receipt or a postman’s certification, there was no sufficient evidence that Zuñiga actually received the demand.

ISSUE

Whether the Court of Appeals erred in dismissing the complaint based on the petitioner’s failure to prove a valid extrajudicial demand.

RULING

The Supreme Court granted the petition, reversed the CA Decision, and reinstated the RTC Decision with modification on the interest rate. The legal logic is that the absence of a formal demand does not preclude the accrual of interest or the right to foreclose when the obligation is already due and demandable by its own terms. The Court clarified that demand in this context is not a condition precedent for the enforcement of the obligation itself, but only for the incurrence of delay (mora solvendi) which triggers liability for damages. The principal obligation to pay a sum of money at a stipulated date exists independently.
The loan agreement specified a one-year term. Upon the lapse of that period without payment, the obligation to pay the principal became due and enforceable. The filing of the complaint for collection and foreclosure constituted a judicial demand, which is sufficient to place the debtor in default from the date of such filing. Consequently, Pineda’s cause of action for payment and foreclosure accrued upon the loan’s maturity, and her failure to prove extrajudicial demand was not fatal. The Court applied the legal interest rate of 12% per annum from the judicial demand (filing of the complaint) until June 30, 2013, and 6% per annum from July 1, 2013, until finality, after which the total amount shall earn 6% interest until full payment.