G.R. No. 242570 , September 18, 2019
PHILIPPINE NATIONAL BANK, PETITIONER, VS. ELENITA V. ABELLO, MA. ELENA ELIZABETH A. FIDER, JONATHAN V. ABELLO, MANUEL V. ABELLO, JR. AND VINCENT EDWARD V. ABELLO, RESPONDENTS.

FACTS

Respondents Elenita V. Abello and her children, heirs of the late Manuel V. Abello, filed a Complaint for Cancellation/Discharge of Mortgage/Mortgage Liens against petitioner Philippine National Bank (PNB) before the Regional Trial Court (RTC) of Bacolod City. The complaint sought the cancellation of various real estate mortgage (REM) encumbrances annotated on Transfer Certificates of Title (TCT) Nos. T-127632, T-82974, and T-58311, all registered in the names of spouses Manuel and Elenita Abello. The annotations on TCT No. T-127632 were for mortgages dated from 1963 to 1974, while TCT Nos. T-82974 and T-58311 contained an annotation for an REM dated October 30, 1975. Respondents argued that since PNB had taken no action to enforce the mortgages since 1975, the right to foreclose had prescribed, and the encumbrances should be cancelled. The RTC ruled in favor of the respondents, ordering the cancellation of the encumbrances on the ground of prescription, reckoning the prescriptive period from the dates of inscription. The Court of Appeals affirmed the RTC decision. PNB filed the present petition, arguing that the complaint should have been dismissed for failure to state a cause of action and that, even assuming a cause of action existed, respondents had waived the defense of prescription by admitting liability.

ISSUE

Whether the Court of Appeals erred in ordering the cancellation of the annotated encumbrances on the subject TCTs.

RULING

The Supreme Court granted the petition and reversed the decisions of the lower courts. The Court held that the complaint failed to state a cause of action. For an action to cancel a mortgage annotation based on prescription to prosper, it is crucial to allege the terms and conditions of the mortgage contract, particularly the maturity date of the loan it secures, as the prescriptive period for foreclosure runs from the time the loan becomes due and demandable, not from the date of the mortgage’s execution or inscription. The respondents’ complaint merely listed the dates and amounts of the mortgages but did not allege when the principal loan obligations became due. Without such an allegation, it could not be determined when the right to foreclose accrued and when the prescriptive period began to run. Consequently, the respondents failed to establish a vital element of their cause of action—the act or omission (i.e., PNB’s failure to foreclose within the prescriptive period) violative of their right to have the encumbrances cancelled. The complaint was therefore dismissible for failure to state a cause of action. The Court did not find it necessary to rule on the issue of prescription.