Case Summary (G.R. No. 192971)
Key Dates and Procedural Posture
Loans and mortgages: executed 1965 and 1968 and annotated accordingly. Complaint filed: June 11, 2004. Regional Trial Court (Branch 220, Quezon City) decision: September 15, 2005 (granted quieting of title and ordered cancellation of mortgage annotations). Court of Appeals decision and resolution: April 29, 2010 decision and July 20, 2010 resolution (reversed RTC and dismissed complaint for failure to state a cause of action). Supreme Court disposition: petition for review denied; appellate ruling affirmed in full (Supreme Court decision dated January 10, 2018). Applicable constitutional framework: 1987 Philippine Constitution (decision rendered in 2018).
Applicable Law and Authorities Cited
Civil Code provisions (as applied): Article 1142 (extinctive prescription), Article 476 (actions to quiet title or remove cloud where obligation extinguished or barred), Article 1169 (delay/default and when demand is unnecessary). Procedural authorities: Rules of Court, Rule 8 (pleadings — allegations to be made and specific denials). Controlling jurisprudence cited: Abad v. Court of First Instance of Pangasinan; University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas; Maybank Philippines, Inc. v. Spouses Tarrosa; Philippine Long Distance Telephone Company v. Pingol; Cua v. Wallem Philippines Shipping, Inc.
Facts Material to Decision
Mercene alleged that GSIS had not exercised its mortgagee rights since 1968, creating a cloud on title and that foreclosure rights had prescribed. GSIS, in its answer, asserted among other defenses that the complaint failed to state a cause of action and that prescription does not run against it because it is a government entity. At pretrial, Mercene sought judgment on the pleadings; the RTC granted the motion. The RTC concluded the mortgages were ineffective and ordered their cancellation on the ground that GSIS’s right to foreclose had prescribed after more than ten years.
Issue Framing on Appeal and to the Supreme Court
Primary issues presented to the Supreme Court (as raised by Mercene): (1) Whether the Court of Appeals considered issues not raised before the trial court; (2) Whether the CA disregarded an alleged judicial admission by GSIS that its right to foreclose had prescribed; and (3) Whether the CA erred in ruling that the mortgages had not yet prescribed.
Supreme Court’s Disposition — Summary
The Supreme Court denied the petition and affirmed the CA decision in toto. The Court agreed with the CA that Mercene’s complaint failed to state a cause of action because it omitted essential ultimate facts necessary to determine whether GSIS’s right to foreclose had prescribed — specifically, the loan maturity date and whether demand for payment had been made or was necessary under the contracts. The Court held that the RTC erred in declaring prescription without such factual allegations.
Pleading and Judicial Admission Principles Applied
The Court reiterated that pleadings must allege ultimate facts and that conclusions of law or mere conclusions of fact are not treated as admitted by failure to specifically deny. Citing Rule 8 (Sections 1 and 10) and precedent (Abad; Cua), the Court explained that an allegation that an obligation has prescribed is a conclusion of law. Therefore, even if GSIS’s answer did not formally and specifically deny the legal conclusion that its right had prescribed, such omission could not be treated as a judicial admission of prescription. At most, Mercene’s complaint established only the dates of execution and annotation; those dates, without more, amount to factual assertions that do not prove the factual circumstances necessary to declare prescription.
Accrual of Cause of Action and Prescription in Mortgage Foreclosure Context
The Court applied established doctrine that prescription for enforcement of mortgage rights does not run from the date of contract execution but from the time the cause of action accrues — i.e., when the obligation becomes due and demandable or, if demand is necessary, when demand is made and refused. The Court relied on University of Mindanao (prescription runs from accrual, not execution) and Maybank (right to foreclose prescribes ten years from accrual; default requires demand when demand is necessary, with stated exceptions). The Court emphasized exceptions under Article 1169 where demand is unnecessary (express stipulation, law so provides, where the period is the controlling motive for the contract, or when demand would be useless). Because Mercene’s complaint did not allege maturity dates, demand, or any contractual stipulations making demand unnecessary, the prescriptive period could not be found to have begun — and therefore GSIS’s foreclosure right could n
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Procedural History
- Petition for review on certiorari filed before the Supreme Court seeking to reverse and set aside the Court of Appeals (CA) decisions: the 29 April 2010 Decision and the 20 July 2010 Resolution in CA-G.R. CV No. 86615 which had reversed the Regional Trial Court (RTC), Branch 220, Quezon City, 15 September 2005 Decision.
- RTC rendered judgment on 15 September 2005 granting plaintiff Mercene's complaint for Quieting of Title and ordering cancellation of mortgages annotated on Transfer Certificate of Title No. 90435 (or 90535 as variously referenced), and denied other claims and counterclaims.
- GSIS appealed to the CA. The CA (referred to in the source both as issuing a 29 April 2010 Decision and, elsewhere in the text, a 30 January 2015 decision) reversed the RTC and dismissed Mercene's complaint for Quieting of Title.
- Mercene moved for reconsideration before the CA; the CA denied the motion by its 7 April 2011 resolution (as described in the source).
- Petition brought to the Supreme Court raising three issues challenging the CA ruling.
Facts
- On 19 January 1965, petitioner Floro Mercene obtained a loan from respondent Government Service Insurance System (GSIS) in the amount of P29,500.00.
- A real estate mortgage was executed as security over Mercene’s property in Quezon City, registered under Transfer Certificate of Title No. 90535; the mortgage was registered and annotated on the title on 24 March 1965.
- On 14 May 1968, Mercene contracted another loan with GSIS for P14,500.00, likewise secured by a real estate mortgage over the same parcel; the loan was registered and annotated on the title on 15 May 1968.
- On 11 June 2004, Mercene filed a complaint for Quieting of Title against GSIS, alleging: GSIS never exercised its rights as mortgagee since 1968 until filing; the mortgages constituted a cloud on the title; and GSIS’s right to foreclose had prescribed.
- In its answer, GSIS pleaded failure to state a cause of action and asserted that prescription does not run against it because it is a government entity.
- During pre-trial, Mercene manifested he would file a motion for judgment on the pleadings; no objection was raised and the RTC granted the motion for judgment on the pleadings.
RTC Decision (15 September 2005) — Findings and Disposition
- RTC granted Mercene’s complaint for Quieting of Title and ordered cancellation of the mortgages annotated on the title.
- The RTC characterized the annotated real estate mortgages as a cloud on the title because the annotations appeared valid yet were ineffective and prejudicial to the title.
- The trial court concluded GSIS’s right as mortgagee had prescribed because more than ten (10) years had elapsed from the time the cause of action accrued.
- RTC reasoned prescription ran against GSIS because GSIS is a juridical person with a separate personality and with the power to sue and to be sued.
- Dispositive portion of RTC decision (as set out in the source):
- Declared the Real Estate Mortgages dated January 19, 1965 (registered March 24, 1965) and May 14, 1968 (registered May 15, 1968), annotated on Transfer Certificate of Title No. 90435 (registered in the name of plaintiff Floro Mercene married to Felisa Mercene), to be ineffective.
- Ordered the Registry of Deeds of Quezon City to cancel the annotations: Entry No. 4148/90535: mortgage to GSIS; Entry No. 4815/90535: mortgage to GSIS.
- Denied other claims and counter-claims for lack of merit.
CA Ruling — Grounds and Holding
- The Court of Appeals reversed the RTC decision and dismissed Mercene’s complaint for Quieting of Title.
- The CA held the trial court erred in declaring GSIS’s right to foreclose had prescribed.
- The CA emphasized Mercene’s complaint did not allege the maturity date of the loans nor that a demand for payment was made.
- The CA explained that prescription commences only upon accrual of the cause of action and that, for a written contract, a cause of action accrues only when there is an actual breach or violation.
- The CA concluded no prescription had set in against GSIS because GSIS had not made any demand on Mercene; hence the complaint failed to state a cause of action.
- CA’s dispositive ruling (as quoted in the source): “WHEREFORE, the appeal is GRANTED. The decision appealed from is REVERSED and SET ASIDE. The complaint for Quieting of Title is hereby DISMISSED.”
- Mercene’s motion for reconsideration to the CA was denied (CA’s 7 April 2011 resolution).
Issues Presented to the Supreme Court
- I. Whether the Court of Appeals erred in considering issues not raised before the trial court.
- II. Whether the Court of Appeals erred in disregarding the judicial admission allegedly made by GSIS.
- III. Whether the Court of Appeals erred in ruling that the real estate mortgages had yet to prescribe.
The Supreme Court’s Disposition
- The petition was denied; the Supreme Court found no merit in Mercene’s contentions.
- The 29 April 2010 Decision and 20 July 2010 Resolution of the Court of Appeals in CA-G.R. CV No. 86615 were affirmed in toto.
- The Supreme Court issued a per curiam decision authored by Justice Martires, with Velasco, Jr. (Chairperson), Bersamin, Leonen, and Gesmundo, JJ., concurring.