Title
Mercene vs. Government Service Insurance System
Case
G.R. No. 192971
Decision Date
Jan 10, 2018
Mercene sought to cancel GSIS mortgages, claiming prescription. SC ruled no cause of action; prescription begins when obligation becomes due, not from contract date.
A

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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