G.R. No. 146972 - B and I Realty Co., Inc. vs. Spouses Caspe

Spouses Arsenio and Consorcia L. Venegas originally owned a parcel of land in Barrio Bagong-Ilog, Pasig, Rizal, covered by Transfer Certificate of Title (TCT) No. 247434.
Consorcia Venegas executed a simulated deed of sale to Arturo G. Datuin to secure a loan with Rizal Commercial Banking Corporation (RCBC), with the understanding that the sale was a mere device for collateralizing the loan.
Datuin, however, prepared an absolute deed of sale and, through forgery, had the title transferred to his name by canceling TCT No. 247434 and having TCT No. 377734 issued.

Upon learning of Datuin’s fraudulent act, Consorcia Venegas sold the lot through a conditional deed of sale to respondents (spouses Teodoro and Purificacion Aguilar Caspe).
The compromise agreement stipulated that the respondents would assume and settle Datuin’s mortgage debt to petitioner B & I Realty Co., Inc., with the unpaid mortgage amount deducted from the purchase price of PhP160,000.
Datuin executed a deed of absolute sale in favor of the respondents, and they began making payments on the assumed mortgage obligation starting February 12, 1976.

Venegas and her husband initially filed a complaint in the Court of First Instance (CFI) for recovery of the property and nullification of TCT No. 377734, as well as for damages. This case was eventually dismissed when Venegas’ counsel failed to appear at the pre-trial.
A further action for annulment of the transfer and the nullification of transactions (including the mortgage) was filed by Venegas in the CFI of Pasig.
On January 10, 1986, the trial court ruled in favor of the respondents by:

Declaring the sale between Venegas and Datuin void and the transfer of title invalid.
Confirming the validity of the conditional deed of sale to the respondents.
Ordering the cancellation of the mortgage and directing petitioner to deliver the title upon full settlement of the outstanding financing balance.

On May 12, 1993, petitioner (B & I Realty Co., Inc.) sent a demand letter to the respondents for the payment of their loan, which was refused.
Petitioner then instituted an action for judicial foreclosure of the mortgage on August 27, 1993, at the Regional Trial Court (RTC) in Pasig City (docketed as SCA 447).
Although the RTC initially ruled in favor of petitioner by rejecting the prescription defense, the Court of Appeals (CA) reversed this decision, holding that the action had prescribed and that the prescription defense was not waived despite being raised later in the pleadings.
Petitioner appealed the CA decision, contesting both the waived prescription defense under the old omnibus motion rule (1964 Rules of Court) and the retroactive application of the 1997 Rules of Court.

Determining if the cause of action accrued from the last payment made by the respondents (January 14, 1980), thereby invoking the ten-year prescriptive period under Article 1142 of the Civil Code.
Assessing whether petitioner’s filing on August 27, 1993, fell outside the prescribed period.

Whether respondents waived their defense of prescription by not raising it in their initial motion to dismiss under the 1964 Rules versus the later allowance under the 1997 Rules of Court.
Evaluating the legal impact of invoking the prescription defense in the answer and subsequent motions when it was not included in the motion to dismiss.

Whether applying the provisions of the 1997 Rules of Court retroactively to an action that was already pending (institution of foreclosure) was proper.
The effect such retroactive application had on procedural defenses and on the overall disposition of the case.