Facts:
Petitioners applied for credit accommodations with respondent bank, which the bank approved granting a credit line of Php900,000.00. Petitioner’s obligations were secured by a real estate mortgage on four parcels of land. Also, petitioners had made certain advances in separate transactions from the bank in connection with QGLC’s exportation of logs and executed a promissory note in 1964.
Due to petitioner’s long default in the payment of their obligations under the credit line, the bank foreclosed the mortgage and sold the properties covered to the highest bidder in the auction. Respondent bank, alleging non-payment of the balance of QGLC’s obligation after the proceedings of the foreclosure sale were applied and non-payment of promissory notes despite repeated demands, filed a complaint for sum of money against petitioners.
Petitioners, on the other hand, asserted that the complaint states no cause of action and assuming that it does, the same is barred by prescription or void for want of consideration.
Issue:
Whether or not the cause of action is barred by prescription.
Held:
An action upon a written contract, an obligation created by law, and a judgment must be brought within 10 years from the time the right of action accrues.
The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Bank’s first to sixth causes had arisen is not disputed. The Bank contends, however, that the notices of foreclosure sale in the foreclosure proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their past due loan obligations with the Bank; hence, said notices of foreclosure sale interrupted the running of the prescriptive period.
The Bank’s contention has no merit. Prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.
The law specifically requires a written extrajudicial demand by the creditor which is absent in the case at bar. The contention that the notices of foreclosure are tantamount to a written extrajudicial demand cannot be appreciated, the contents of said notices not having been brought to light.
But even assuming that the notices interrupted the running of the prescriptive period, the argument would still not lie for the following reasons:
The Bank seeks the recovery of the deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage action because its purpose is to enforce the mortgage contract. A mortgage action prescribes after ten years from the time the right of action accrued.
The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the property at public auction and the outstanding obligation proceedings. In the present case, the Bank, as mortgagee, had the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965. as it filed the complaint only on January 27, 1977, more than ten years had already elapsed, hence, the action had then prescribed.
