G.R. No. L-84841 October 30, 1992
SPS. SALUSTIANO OCA and FLORA O. OCA, petitioners, vs. COURT OF APPEALS, REPUBLIC PLANTERS BANK (formerly Republic Bank) and the PROVINCIAL SHERIFF OF RIZAL, respondents.

FACTS

On February 12, 1963, petitioners Spouses Salustiano and Flora Oca executed a real estate mortgage in favor of Republic Planters Bank over two parcels of land to secure a loan of P200,000.00 and “those that the mortgagee may extend to the mortgagors, including interest and expenses or other obligations owing to the mortgagee” as well as “the credit accommodations obtained from the mortgagee by S.R. Oca Logging Industry, Inc.” On April 27, 1966, the Board of Directors of S.R. Oca Logging Industry, Inc. passed a resolution authorizing Salustiano Oca to consolidate all credit accommodations extended by the Bank to him and/or the corporation into one promissory note. On May 11, 1966, petitioners and the corporation jointly and severally signed a promissory note (Time Loan No. 043) for P3,017,721.66, payable on or before May 11, 1967. The corporation subsequently obtained additional credit accommodations from the Bank. After demands for payment, the Bank foreclosed one mortgaged property in May 1978 and applied for the extrajudicial foreclosure of the other, which was restrained by the trial court upon the filing by the spouses of a complaint for damages with preliminary injunction. The trial court ruled in favor of the petitioners, holding the mortgage secured only their personal obligations and that the right to foreclose had prescribed. The Court of Appeals reversed the trial court.

ISSUE

1. Whether the real estate mortgage constituted a continuing security for obligations of both the petitioners and S.R. Oca Logging Industry, Inc.
2. Whether the additional conditions (Addendum) on the dorsal portion of the mortgage deed are binding on the petitioners.
3. Whether the right of the Bank to extrajudicially foreclose the mortgage had prescribed.

RULING

1. Yes. The Supreme Court held that the real estate mortgage was converted into a continuing security for the obligations of S.R. Oca Logging Industry, Inc. This was evidenced by the corporate resolution of April 27, 1966, and more importantly, by the promissory note of May 11, 1966, wherein the petitioners bound themselves jointly and severally with the corporation. By signing the note in their personal capacities, they made their properties security for the corporation’s obligations, giving effect to the mortgage clause covering “any other obligation owing to the Mortgagee.”
2. The Court found it unnecessary to rule definitively on the Addendum’s binding effect. It held that even assuming the mortgage initially secured only personal obligations and the Addendum was not binding, the petitioners’ subsequent execution of the May 11, 1966 promissory note as solidary co-debtors with the corporation effectively secured the corporate obligations with their mortgaged properties.
3. No, the right to foreclose had not prescribed. The action to foreclose a mortgage prescribes in ten years. The obligation matured on May 11, 1967, starting the prescriptive period. However, the Bank made written extrajudicial demands on August 12, 1971, March 13, 1973, and July 13, 1977. These written demands, along with a written acknowledgment from Salustiano Oca, effectively interrupted the running of the prescriptive period under Article 1155 of the Civil Code. Therefore, the foreclosure proceedings initiated in 1977 were not barred by prescription.
The Supreme Court affirmed the decision of the Court of Appeals, authorizing the foreclosure and holding the petitioners solidarily liable for the debt.