G.R. No.
126568 April 30, 2003 allegedly executed, and having physically received the tractors and
QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO
GONAZALES and EUFEMIA GONZALES, petitioners, vs. CA, and
REPUBLIC PLANTERS BANK, respondents.
Topic: Deficiency Judgment; Prescription of an Action to Recover Deficiency
Doctrine: A complaint which seeks the recovery of the deficient amount of
the obligation after the foreclosure of the mortgage is in the nature of a
mortgage action as its purpose is precisely to enforce the mortgage contract.
A mortgage action prescribed after ten years from the time the right of action
accrued.
Facts:
1. Petitioner QGLC, through its proprietor and general manager,
Quirino Gonzales (Gonzales), applied for credit accommodations
with Republic Planters Bank (Bank) on October 15, 1962.
2. The Bank approved the application, granting QGLC a credit line of
P850,000.00, broken into a P450,000.00 overdraft line and a
P400,000.00 Letter of Credit (LC) line. Secured by a REM on four
parcels of land (Manila, Makati and QC).
3. QGLC, to secure advances from the Bank, executed a PN in 1964,
and will execute three more in 1967.
4. In 1977, the Bank foreclosed the mortgage and bought the properties
covered for QGLCs default in the payment. Upon sale of the
mortgaged properties, there was still a balance left unpaid. Hence,
the Bank filed a complaint for sum of money.
5. The complaint listed 10 causes of action:
a. First Cause of Action: Overdraft Line under which QGLC
withdrew and were which were unpaid at maturity
b. Second to Fifth Causes of Action: Letter of Credit Line
where beneficiaries drew and presented sight drafts to which
the Bank paid the beneficiaries, in exchange for tractors and
equipment for QGLC. Such drafts were not pad either in full
or in part by QGLC.
c. Sixth to Ninth Causes of Action: Promissory Notes issued
by QGLC to secure certain advances from the Bank in
connection with the exportation of logs. Such PNs were
payable after 30 days, and provided for the solidary liability
of QGLC, Gonzales and Eufemia.
d. Tenth Cause of Action: Accounts Receivable from QGLC.
6. Petitioners admit that they applied for the credit accommodations, as
well as the foreclosure of the properties. However, they deny having
availed of the credit accommodations, receiving the value of the PNs
equipment subject of the Letter of Credit line. Hence, they argue that
the complaint states no cause of action, and assuming it does, the
same is barred by prescription, or null and void for want of
consideration.
7. RTC Ruling: in favor of QGLC. According to Art. 1144, in relation
with Art. 1150, the obligations allegedly created by the written
contracts under the First to Sixth Causes of Action were
demandable at the latest in 1964. The Bank only filed the
complaint on 1977. Regarding the Seventh and Eighth Causes of
Action, the authenticity of the documents was in doubt as according
to Gonzales, QGLC has already terminated its logging concession
pursuant to government orders in 1965. It was unclear how QGLC
could have executed PNs two years after its termination or in 1967.
As to the Ninth Cause of Action, the testimony of Gonzales is given
credit stating that the documents were signed in blank, and that the
loan was never released. There was a total absence of consent. As
to the Tenth Cause of Action, Bank did not present evidence to
support its claims. Hence, QGLC has 1 year to redeem the
foreclosed property from when it was foreclosed, or 10 years from
issuance of title in favor of the Bank, on the ground that the
obligation was fictitious.
8. CA Ruling: In favor of Bank. As to the First to Sixth Causes of
Action, the notices of foreclosure sale sent by the Bank were
tantamount to demand letters which interrupted the running of
the prescriptive period. As to the Seventh to Ninth Cause of Action,
written agreements and the PNs prevail over the oral testimony of
Gonzales. Also, since the RTC failed to pass upon the authenticity of
the Banks documentary evidence, it was wrong for them to conclude
that the obligations were fictitious. Further, QGLCs counterclaim
was an action for conveyance, which has also prescribed.
Issue: W/N the action for the first to sixth causes of action has already
prescribed
Held: YES!
1. The Civil Code provides that an action upon written contract. An
obligation created by law, and a judgment must be brought within ten
years from the time the right of action accrues. Such prescription is
interrupted when they are field before the court, when there is an
extrajudicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.
 2. In this case, the law specifically requires a WRITTEN extrajudicial
demand by the creditors. Such is absent in this case as the content
of the alleged notices of foreclosure was not disclosed.
3. Even assuming that the prescriptive period was interrupted, the
complaint of the Bank as to the First to Fifth Causes of Action 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 as its purpose is precisely to enforce the mortgage contract. A
mortgage action prescribed after ten years from the time the right of
action accrued. The prescriptive period started to run against the
Bank in 1965, when they foreclosed the properties. Hence, when it
filed the action in 1977, the action on its First to Fifth Cause of Action
has already prescribed.
4. As regards to the Sixth Cause of Action, the period of prescription
could not have been interrupted by the notices of foreclosure sale as,
not only because such was not tantamount to a demand, but also
because it does not appear that the said note is covered by the
mortgage contract.

[not relevant Nego Issue]: W/N the PNs were validly executed by QGCL

Held: Yes!
1. As to the Seventh to Ninth Cause of Action, the genuineness and
due execution of the PNs had been deemed admitted by petitioners,
as they failed to deny such under oath.
2. Petitioners still argue that there was want of consideration. However,
the PNs appear to be negotiable as they meet the requirements of
Sec. 1 of the Negotiable Instruments Law. Such being the case, the
PNs are premi facie deemed to have been issued for consideration.
3. In any case, it is no defense that the notes were signed in blank
since according to Sec. 14 of the NIL, there is prima facie authority of
the person in possession of the negotiable instruments to fill in such
blanks.
4. Also, the foreclosure proceedings was valid as there was nothing
irregular that attended such proceedings. Only the Banks action for
deficiency is barred by prescription, but the foreclosure proceedings
were valid. Hence, there can be no reconveyance of the properties.

WHEREFORE, the CA decision is AFFIRMED with MODIFICATION.

Republic Banks complaint with respect to its first to sixth causes of action is
hereby DISMISSED. Its complaint with respect to its seventh to ninth causes
of action is REMANDED to the court of origin for it to determine the amounts
due the Bank thereunder.