G.R. No. L-5052 - Obras Pias De La Sagrada Del Arzobispado De Manila vs. Ignacio

On December 23, 1905, the plaintiff, Obras Pias de la Sagrada Mitra del Arzobispado de Manila, initiated an action in the Court of First Instance of Manila to foreclose a mortgage for P5,000 with interest.
The mortgage, executed on August 16, 1861, by Antonio Enriquez, and its nonpayment, were admitted as facts by both parties.

The mortgage was originally recorded in the older system (Contaduria, Anotaduria, or Receptoria) before the implementation of the new Mortgage Law.
Under Paragraph 2 of Article 397 of the new Mortgage Law, records in the old system had to be transferred to the new registry within one year upon the request of an interested party.
Paragraph 3 of the same article indicated that if the request for transfer was filed later, it would not prejudice third persons.
Article 29 of the Mortgage Law provided that certain property rights, though not separately entered, would be effective against third persons from the date the instrument was presented for registration.

The property subject to the mortgage was transferred multiple times by Antonio Enriquez and his subsequent transferees.
Each deed of transfer included a statement that the property was encumbered with a mortgage in favor of the plaintiff for the sum of P5,000.
The deed transferring the property to the present defendant also contained the typical statement indicating the existence of the aforementioned mortgage, thereby informing the defendant of the lien on the property.

An exhibit (Exhibit B) was introduced, appearing as a document recorded on May 25, 1902, in the new registry, complete with the amount, interest rate, mortgagee’s name, and a description of the property.
The registration in the new system was considered to have met the essential requirements of the new Mortgage Law.
Because the defendant had the statement in the deed of transfer regarding the mortgage, he was deemed to have actual notice of the lien—even though the mortgage was not transferred to the new registry in strict compliance with the law.

The defendants argued that the cause of action was prescribed, noting that interest on the mortgage paid up until 1881 put the commencement of prescription in that year.
Referencing Article 1939 of the Civil Code and law 5, book 11, title 8 of the Novisima Recopilacion (Law 63 of Toro), it was established that the prescription period for such actions was thirty years.
Since the action commenced in December 1905, the prescription period had not yet expired.
Additionally, the defendants contended that under Articles 114 and 145 of the Mortgage Law, the plaintiff could only recover interest for the two years immediately preceding the judgment—a concession also admitted by the plaintiff.

Whether the failure of the plaintiff to transfer the mortgage record from the old registry system to the new registry, as required by the Mortgage Law, precluded the enforcement of the mortgage against subsequent transferees who had actual notice of the encumbrance.
Whether the defendant’s assertion of prescription, based on the period from the last payment of interest in 1881, could serve as a valid defense against the foreclosure action.
The proper computation of interest on the mortgage considering the provisions of Articles 114 and 145 of the Mortgage Law, which limit the recovery of interest to the two years immediately preceding the judgment.