G.R. No. 104662 - People vs. Lopez, Jr. y Mancilla

Case Summary (G.R. No. 104662)

Petitioner

Provident Savings Bank sought relief by certiorari from the Supreme Court to reverse the Court of Appeals’ conclusion that prescription barred the bank from foreclosing the mortgage securing the Guarins’ indebtedness, asserting that the period of receivership imposed by the Central Bank constituted a caso fortuito (force majeure) that should not be counted against the bank for purposes of prescription.

Respondent (Private) and Real-Party-in-Interest Status

Wilson Chua claimed to be successor-in-interest to the Guarins, having acquired the mortgaged property by a Deed of Absolute Sale with assumption of mortgage dated 10 July 1986. The Court of Appeals treated Chua as a real party in interest entitled to the realty against the mortgagee’s asserted right to foreclose, reasoning that the mortgage had become stale through lapse of time.

Key Dates

16 February 1967: Loan extended to the Guarins and a real estate mortgage executed as security (TCT No. 177014); loan payable on or before 20 June 1967.
20 June 1967: Maturity date of the loan.
September 1972 – 27 July 1981: Provident Savings Bank placed under receivership and forbidden to transact business by the Monetary Board; the receivership was later set aside by the Supreme Court decision in Central Bank v. Court of Appeals (106 SCRA 143 [1981]).
11 December 1984, 26 February 1986, 27 February 1986, 20 May 1986, 5 August 1986, 3 August 1987, 10 August 1987: Correspondence between the parties regarding payment, recomputation of account, and release of the owner’s duplicate of the title.
10 July 1986: Deed of Absolute Sale with Assumption of Mortgage executed in favor of plaintiff-appellant (Chua).
21 August 1986: Chua filed a complaint to compel release of the mortgage and delivery of the owner’s duplicate, and sought damages and attorney’s fees.
29 September 1988: Regional Trial Court (Malabon, Branch CLXIX) decision in Civil Case No. 977-NW (trial court’s disposition described in the record).
31 August 1990: Court of Appeals decision (CA-G.R. CV No. 21312) barring the bank from foreclosing on prescription grounds (subject of the petition).
17 May 1993: Supreme Court decision resolving the petition for certiorari.

Applicable Law and Authorities

Constitutional basis: 1987 Philippine Constitution (applicable because decision date is after 1990).
Civil Code: Article 1142 (prescription for actions upon written contracts or real rights over immovables — ten-year period), Article 1154 (cases of force majeure excluding period from computation), Article 1155 (acknowledgment interrupts prescription).
Corporation Code: Sections 36(11) and 45 (corporate powers and enforcement of securities).
General Banking Act: Section 29 and Section 34 (bank powers and restrictions).
Monetary Board Resolution No. 1766 (prohibition against Provident Savings Bank from transacting business and imposition of receivership).
Precedents and authorities cited in the record: Central Bank v. Court of Appeals (106 SCRA 143 [1981]); Teal Motor Co. v. Court of First Instance of Manila (51 Phil. 549 [1928]); Mentholatum Co., Inc. v. Mangaliman (72 Phil. 524 [1941]); The Philippine Trust Co. v. HSBC (67 Phil. 204 [1939]); Osmeña v. Rama (14 Phil. 99 [1909]); and commentaries (Tolentino, Martin, Fletcher, Agbayani, Vitug).

Facts Relevant to the Dispute

The Guarins obtained a loan on 16 February 1967 secured by mortgage over TCT No. 177014; the loan matured on 20 June 1967. Provident was placed under receivership and prohibited from doing business from September 1972 until the prohibition was set aside in 1981. Various correspondences between the Guarins, Chua and Provident show repeated communications about recomputation, offers to pay, and the availability or release of the title. Chua purchased the mortgaged property by deed dated 10 July 1986 and repeatedly sought to have the mortgage released and the owner’s duplicate returned; Provident conditioned release and payment on satisfaction of related corporate obligations. Chua filed suit on 21 August 1986 to compel release and to recover damages.

Procedural History

At trial, judgment (29 September 1988) directed the plaintiff-appellant (Chua) to pay defendant-appellant (the bank) the personal obligation of the Guarins in the amount of P62,500 and ordered the bank to release the mortgage, surrender the owner’s duplicate to Chua (as successor-in-interest), and pay attorney’s fees and costs. Both parties appealed. The Court of Appeals, in CA-G.R. CV No. 21312, concluded that the bank’s right to foreclose had prescribed and barred foreclosure, reversing the trial court insofar as it ordered Chua to pay the bank P591,088.80 and affirming other dispositions. Provident Savings Bank then filed a petition for certiorari with the Supreme Court challenging the Court of Appeals’ conclusion on prescription and related findings.

Issues Presented

Whether the period of Provident Savings Bank’s receivership and prohibition from doing business constituted a force majeure (caso fortuito) that interrupts the running of prescription against the bank’s right to foreclose.
Whether private respondent Chua could be regarded as a real party in interest entitled to the property and whether the substitution/assumption of the mortgage effected a novation that extinguished the bank’s claim.
Whether Chua’s communications constituted an express acknowledgment interrupting prescription.
Whether the Court of Appeals properly declined to treat the bank’s subsequent discovery of records as newly discovered evidence warranting relief.

Court of Appeals’ Reasoning (as reviewed by the Supreme Court)

The Court of Appeals regarded Chua as the real party in interest and concluded that Provident had not demonstrated that it was precluded from collecting debts during receivership; therefore, there was no legal interruption of the prescriptive period between 20 June 1967 (maturity) and 20 June 1977 (ten-year limit). The CA found no sufficient proof that Chua’s assumption of the mortgage on 10 July 1986 amounted to an acknowledgment interrupting prescription. Consequently, the CA barred the bank from foreclosing for prescription and reversed the trial court insofar as it ordered Chua to pay the bank the recomputed indebtedness.

Petitioner’s Contentions on Review

Provident Savings Bank argued that the Monetary Board’s prohibition and receivership rendered it unable to transact business and that this impossibility was akin to a caso fortuito (force majeure), meaning the period during receivership should not be counted against it for purposes of prescription. The bank also contended that Chua’s written offer to pay and his assumption of the mortgage amounted to an express acknowledgment that interrupted prescription. The bank challenged the CA’s treatment of the substitution/novation issue, and it invoked the duty and power of the receiver to collect assets, including foreclosing mortgages on behalf of the bank.

Supreme Court Analysis — Receivership as Force Majeure Interrupting Prescription

The Supreme Court accepted the characterization of the bank’s inability to transact business during the Monetary Board’s prohibition as legal incapacitation beyond ordinary receivership circumstances. The Court emphasized that where a bank is specifically forbidden and immobilized from doing business by directive of the Monetary Board (through Monetary Board Resolution No. 1766), foreclosure and other measures incident to collecting and preserving assets cannot be pursued by the bank itself. The Court distinguished the general rule in Teal Motor Co. (appointment of receiver does not dissolve corporation nor necessarily interfere with corporate rights) because in Provident’s case an express prohibition was imposed. The Court recognized that foreclosure is part of a bank’s business activities under statutes governing banks and corporations (General Banking Act and Corporation Code) and that the receiver is obliged to collect the bank’s debts and, where necessary, foreclose mortgages to preserve assets. Given the prohibition on doing business, the Supreme Court found the period of receivership amounted to a caso fortuito within the meaning of Article 1154, New Civil Code (time during which the obligee is prevented by fortuitous event from enforcing the right is not counted against him). Accordingly, prescription was interrupted in 1972 and, when the prohibition was set aside in 1981, the ten-year prescriptive period under Article 1142 began to run anew from 1981.

Supreme Court Analysis — Acknowledgment by Private Respondent Interrupting Prescription

The Supreme Court further found that Chua’s written communication requesting to be allowed to pay the loan (letter dated 6 August 1986 or related correspondence) constituted an express acknowledgment of the obligation under Article 1155, New Civil Code, which operates to interrupt prescription. The Court cited Osmeña v. Rama and principles in Tolentino to support that written admissions will interrupt prescription. Consequently, Chua was estopped from asserting that the bank’s right to foreclose had prescribed.

Supreme Court Analysis — Novation and Creditor Consent

The Court rejected the Court of Appeals’ view that novation had occurred by virtue of substitution of debtor without the mortgagee’s formal acquiescence. The Supreme Court pointed to evidence that the bank conditioned

Case Syllabus (G.R. No. 104662)

Procedural Posture

Petition for certiorari to the Supreme Court by Provident Savings Bank challenging the Court of Appeals’ conclusion in CA-G.R. CV No. 21312 (Javellana (P), Kalalo, Dayrit, JJ) that barred the bank from foreclosing the subject realty on account of prescription.
Underlying action: Civil Case No. 977-NW, Regional Trial Court, National Capital Judicial Region, Branch CLXIX, Malabon — judgment dated 29 September 1988 directing the bank (defendant-appellant) to pay P62,500.00 (personal obligation of the spouses Guarin) with interest, penalties and bank charges; and ordering the bank (1) to release the real estate mortgage executed on 16 February 1967; (2) to return the Owner’s Duplicate of TCT No. 177014 to the plaintiff-appellant as successor-in-interest of the Guarins; (3) to pay P20,000.00 attorney’s fees; and (4) to pay costs of suit.
Both plaintiff-appellant (Wilson Chua) and defendant-appellant (Provident Savings Bank) appealed from the trial court decision; the Court of Appeals reversed insofar as it ordered Chua to pay P591,088.80 and affirmed other dispositions. Provident filed motions for reconsideration and new trial which were denied; Provident then filed the present petition to the Supreme Court.
The Supreme Court granted the petition, set aside the Court of Appeals decision dated August 31, 1990 (and resolution dated February 6, 1991), and entered judgment dismissing Wilson Chua’s complaint. No special pronouncement as to costs.

Established Facts (as synthesized by the Court of Appeals and accepted by parties)

16 February 1967: Spouses Lorenzo K. Guarin and Liwayway J. Guarin obtained a loan from Provident Savings Bank in the amount of P62,500.00, payable on or before 20 June 1967, secured by a real estate mortgage over the parcel covered by TCT No. 177014 (Exhs. C and D).
September 1972 – 27 July 1981: Provident Savings Bank was placed under receivership by the Central Bank of the Philippines; the receivership was set aside by the Supreme Court on 27 July 1981.
11 December 1984: Lorenzo K. Guarin replied to counsel’s letter informing him of a foreclosure sale scheduled for 27 December 1984, stating that he and his wife intended to pay, and requesting recomputation and postponement of the foreclosure (Exh. 1).
10 February 1986: The Guarins received a Statement of Account from the bank showing two outstanding accounts as of 15 February 1986: Lorenzo K. Guarin – P591,088.80; L.K. Guarin Manufacturing Co., Inc. – P6,287,380.27 (Attachment to Exh. 2).
26 February 1986: Lorenzo K. Guarin wrote the bank stating readiness to pay the recomputed obligation of P591,088.80 whenever the bank was ready to receive payment and inquiring when the mortgaged title would be available (Exh. 2).
27 February 1986: The bank replied that Lorenzo could make payment at its Makati office but that the mortgaged title could not be released even after payment of P591,088.80 because the title also served as security for the indebtedness of L.K. Guarin Manufacturing Co., Inc., undertaken by Lorenzo in his personal capacity and as president of the corporation (Exh. 3).
20 May 1986: Wilson Chua (plaintiff-appellant) wrote the bank saying the mortgaged property had been offered to him as payment of a judgment he obtained against Lorenzo K. Guarin in Civil Case No. Q-47465, requested the bank’s concurrence to the assignment, and expressed willingness to pay the Guarin obligation so the title could be released (Exh. 4).
10 July 1986: The Guarins and Wilson Chua executed a Deed of Absolute Sale With Assumption of Mortgage whereby the Guarins sold the mortgaged property to Chua for P250,000.00 and Chua undertook to assume the mortgage obligation which, "as of 15 February 1985," amounted to P591,088.80 (Exh. B).
5 August 1986: Chua informed the bank of the sale and requested permission to pay the loan secured by the mortgage, warning he would bring the matter to court if denied (Exh. 5).
11 August 1986: The bank replied that Chua’s request could be granted only if he also settled the obligation of L.K. Guarin Manufacturing Co., Inc.; the bank enclosed its letter to Mr. Guarin dated 27 February 1986 (Exh. 6).
3 August 1987: Counsel for Chua wrote the bank requesting release of the owner’s copy of TCT No. 177014 and asserting that the bank had lost whatever right of action it had against the Guarins because of prescription (Exh. E).
10 August 1987: The bank replied stating reasons why it could not comply with Chua’s demands (Exh. F).
21 August 1986: Plaintiff-appellant (Chua) filed a complaint to compel the bank to release the mortgage, surrender the owner’s duplicate of TCT No. 177014, and to pay P2,750,000.00 as damages plus attorney’s fees of P50,000.00. Defendant-bank answered, pleading defenses and special/affirmative defenses. After trial, judgment as earlier stated was rendered; both parties appealed.

Issues Presented and Raised

Whether Wilson Chua is the real party in interest entitled to compel release of the mortgage and delivery of the owner’s duplicate title as successor-in-interest of the Guarins.
Whether the bank’s right to foreclose the mortgage had been extinguished by prescription, given that the mortgage matured on or before 20 June 1967.
Whether the period during which the bank was under receivership by the Central Bank (September 1972 to July 1981) constitutes a caso fortuito / fuerza mayor that interrupts or suspends prescription for purposes of foreclosure.
Whether the Deed of Sale and Chua’s subsequent communications constituted novation (substitution of debtor) without the mortgagee’s acquiescence, and whether the bank’s conduct amounted to consent.
Whether Chua’s written request to be allowed to pay the loan (August 1986) constituted an express acknowledgment of the obligation that would interrupt prescription.

Court of Appeals’ Conclusions (as summarized in the source)

Wilson Chua is a real-party-in-interest as successor-i