GR 240277; (October, 2020) (Digest)
G.R. No. 240277, October 14, 2020
Active Wood Products Co., Inc., represented by its President and Chairman, Chua Tiong Sio, Petitioner, vs. State Investment House, Inc., Respondent. Heirs of Rodriguez, Intervenor.
FACTS
On June 7, 1982, Active Wood Products Co., Inc. (AWP) filed a Complaint for Injunction to prevent State Investment House, Inc. (SIHI) from extrajudicially foreclosing real estate mortgages securing credit accommodations. AWP alleged that SIHI, by accepting payments after the maturity dates of the promissory notes, had novated the original loan terms, thereby nullifying the acceleration clause that would make the entire obligation due. The RTC issued a preliminary injunction. Despite this, the sheriff proceeded with a foreclosure sale on November 29, 1983, which the RTC later nullified. The case underwent protracted litigation, reaching the Supreme Court on prior incidents. On January 25, 1999, SIHI moved to set the case for pre-trial. In response, on June 7, 1999, AWP filed an Omnibus Motion seeking declarations that the mortgages were fully paid or, alternatively, barred by prescription.
ISSUE
The core issue is whether SIHI’s action to foreclose the real estate mortgage had prescribed.
RULING
The Supreme Court denied the petition, affirming the CA and RTC rulings that the action had not prescribed. The Court applied Article 1155 of the Civil Code, which states that prescription is interrupted by the filing of an action in court. The ten-year prescriptive period for a mortgage action (Article 1142) commenced on January 13, 1982, the last maturity date of AWP’s restructured obligation. This period was interrupted when SIHI filed its Answer with Compulsory Counterclaim on December 13, 1982, which included a prayer for the foreclosure of the mortgage. This judicial demand effectively tolled the running of the prescriptive period. Upon the filing of the counterclaim, the prescriptive period began to run anew. SIHI’s subsequent motion to set the case for pre-trial on January 25, 1999, was well within the new ten-year period reckoned from December 1982. The Court found no merit in AWP’s claim of novation or full payment, as the evidence showed the obligation remained outstanding. The Court emphasized the need to end the litigation, which had been pending for nearly four decades.