G.R. No.

192971 3) The other claims and counter-claims are hereby denied

for lack of merit.9
FLORO MERCENE, Petitioner
Aggrieved, GSIS appealed before the CA.
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent The CA Ruling

DECISION In its 30 January 2015 decision, the CA reversed the RTC decision.
The appellate court posited that the trial court erred in declaring that
GSIS' right to foreclose the mortgaged properties had prescribed. It
MARTIRES, J.:
highlighted that Mercene's complaint neither alleged the maturity date
of the loans, nor the fact that a demand for payment was made. The
This petition for review on certiorari seeks to reverse and set aside the CA explained that prescription commences only upon the accrual of
29 April 2010 Decision1 and 20 July 2010 Resolution2 of the Court of the cause of action, and that a cause of action in a written contract
Appeals (CA) in CA-G.R. CV No. 86615 which reversed the 15 accrues only when there is an actual breach or violation. Thus, the
September 2005 Decision3 of the Regional Trial Court, Branch 220, appellate court surmised that no prescription had set in against GSIS
Quezon City (RTC). because it has not made a demand to Mercene. It ruled:

THE FACTS WHEREFORE, the appeal is GRANTED. The decision appealed from
is REVERSED and SET ASIDE. The complaint for Quieting of Title is
hereby DISMISSED.10
On 19 January 1965, petitioner Floro Mercene (Mercene) obtained a
loan from respondent Government Service Insurance System (GSIS) in
the amount of ₱29,500.00. As security, a real estate mortgage was Mercene moved for reconsideration, but the same was denied by the
executed over Mercene's property in Quezon City, registered under CA in its assailed 7 April 2011 resolution.
Transfer Certificate of Title No. 90535. The mortgage was registered
and annotated on the title on 24 March 1965.4
Hence, this present petition raising the following:

On 14 May 1968, Mercene contracted another loan with GSIS for the
ISSUES
amount of ₱14,500.00. The loan was likewise secured by a real estate
mortgage on the same parcel of land. The following day, the loan was
registered and duly annotated on the title.5 I

On 11 June 2004, Mercene opted to file a complaint for Quieting of WHETHER THE COURT OF APPEALS ERRED IN
Title6 against GSIS. He alleged that: since 1968 until the time the CONSIDERING ISSUES NOT RAISED BEFORE THE TRIAL
complaint was filed, GSIS never exercised its rights as a mortgagee; COURT;
the real estate mortgage over his property constituted a cloud on the
title; GSIS' right to foreclose had prescribed. In its answer, 7 GSIS
II
assailed that the complaint failed to state a cause of action and that
prescription does not run against it because it is a government entity.
WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING
THE JUDICIAL ADMISSION ALLEGEDLY MADE BY GSIS; AND
During the pre-trial conference, Mercene manifested that he would file
a motion for judgment on the pleadings. There being no objection, the
RTC granted the motion for judgment on the pleadings.8 III

The RTC Decision WHETHER THE COURT OF APPEALS ERRED IN RULING THAT
THE REAL ESTATE MORTGAGES HAD YET TO PRESCRIBE.
In its 15 September 2005 decision, the RTC granted Mercene's
complaint and ordered the cancellation of the mortgages annotated on THE COURTS RULING
the title. It ruled that the real estate mortgages annotated on the title
constituted a cloud thereto, because the annotations appeared to be
The petition has no merit.
valid but was ineffective and prejudicial to the title. The trial court
opined that GSIS' right as a mortgagee had prescribed because more
than ten (10) years had lapsed from the time the cause of action had Related issues addressed by the trial courts
accrued. The RTC stated that prescription ran against GSIS because it
is a juridical person with a separate personality, and with the power to
sue and be sued. The dispositive portion reads: Mercene assails the CA decision for entertaining issues that were not
addressed by the trial court. He claims that for the first time on appeal,
GSIS raised the issue on whether the loans were still effective in view
WHEREFORE, premises considered, judgment is hereby rendered: of his nonpayment. A reading of the CA decision, however, reveals that
the appellate court did not dwell on the issue of nonpayment, but
instead ruled that prescription had not commenced because the cause
1) Declaring the Real Estate Mortgage dated January 19,
of action had not yet accrued. Hence, it concluded that the complaint
1965, registered on March 24, 1965 and Real Estate
failed to state a cause of action. The appellate court did not focus on
Mortgage dated May 14, 1965 registered on May 15, 1968,
the question of payment precisely because it was raised for the first
both annotated at the back of Transfer Certificate of Title No.
time on appeal. It is noteworthy that, in its answer, GSIS raised the
90435 of the Registry of Deeds of Quezon City, registered in
affirmative defense that Mercene's complaint failed to state a cause of
the name of plaintiff Floro Mercene married to Felisa
action.
Mercene, to be ineffective.

Only ultimate facts need be specifically denied

2) Ordering the Registry of Deeds of Quezon City to cancel
the following entries annotated on the subject title 1) Entry
No. 4148/90535: mortgage to GSIS and; 2) Entry No. Further, Mercene insists that GSIS had judicially admitted that its right
4815/90535: mortgage to GSIS. to foreclose the mortgage had prescribed. He assails that GSIS failed
to specifically deny the allegations in his complaint, particularly
paragraphs 11.1 and 11.2 which read:
Commencement of the prescriptive period for real estate
11.1. The right of the defendant GSIS, to institute the necessary action mortgages material in determining cause of action
in court, to enforce its right as a mortgagee, under Real Estate
Mortgages dated January 19, 1965 and May 14, 1968, respectively, by
In its answer, GSIS raised the affirmative defense, among others, that
filing a complaint for judicial foreclosure of Real Estate Mortgage, with
the complaint failed to state a cause of action.1âwphi1 In turn, the CA
the Regional Trial Court of Quezon City, against the plaintiff, as the
ruled that Mercene's complaint did not state a cause of action because
mortgagor, pursuant to Rule 68 of the 1997 Rules of Civil Procedures
the maturity date of the loans, or the demand for the satisfaction of the
(Rules, for brevity); or by filing a petition for extra-judicial foreclosure of
obligation, was never alleged.
real estate mortgage, under Act. 3135, as amended, with the Sheriff, or
with the Notary Public, of the place where the subject property is
situated, for the purpose of collecting the loan secured by the said real In order for cause of action to arise, the following elements must be
estate mortgages, or in lieu thereof, for the purpose of consolidating present: (1) a right in favor of the plaintiff by whatever means and
title to the parcel of land xxx in the name of the defendant GSIS, has under whatever law it arises or is created; (2) an obligation on the part
already prescribed, after ten (10) years from May 15, 1968. More of the named defendant to respect or not to violate such right; and (3)
particularly, since May 15, 1968, up to the present, more than thirty-five an act or omission on the part of such defendant violative of the right of
(35) years have already elapsed, without the mortgagee defendant the plaintiff or constituting a breach of obligation of the defendant to the
GSIS, having instituted a mortgage action[s] against the herein plaintiff- plaintiff.17
mortgagor.
In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et
xxx al., 18 the Court clarified that prescription runs in mortgage contract
from the time the cause of action arose and not from the time of its
execution, to wit:
11.2. Since the defendant GSIS has not brought any action to
foreclose either the first or the second real estate mortgage on the
subject real property, so as to collect the loan secured by the said real The prescriptive period neither runs from the date of the execution of a
estate mortgages, or in lieu thereof, to consolidate title to the said contract nor does the prescriptive period necessarily run on the date
parcel of land, covered by the documents entitled, first and second real when the loan becomes due and demandable. Prescriptive period runs
estate mortgages, in the name of the defendant GSIS, notwithstanding from the date of demand, subject to certain exceptions.
the lapse of ten (10) years from the time the cause of action accrued,
either then (10) years after May 15, 1968, or after the alleged violation
In other words, ten (10) years may lapse from the date of the execution
by the plaintiff of the terms and conditions of his real estate mortgages,
of contract, without barring a cause of action on the mortgage when
therefore, the said defendant GSIS, has lost its aforesaid mortgagee's
there is a gap between the period of execution of the contract and the
right, not only by virtue of Article 1142, N.C.C., but also under Article
due date or between the due date and the demand date in cases when
476, N.C.C., which expressly provides that there may also be an action
demand is necessary.
to quiet title, or remove a cloud therefrom, when the contract,
instrument or other obligation has been extinguished or has
terminated, or has been barred by extinctive prescription;11 The mortgage contracts in this case were executed by Saturnino
Petalcorin in 1982. The maturity dates of FISLAI's loans were
repeatedly extended until the loans became due and demandable only
The Court agrees with Mercene that material averments not specifically
in 1990. Respondent informed petitioner of its decision to foreclose its
denied are deemed admitted. 12 Nonetheless, his conclusion that GSIS
properties and demanded payment in 1999.
judicially admitted that its right to foreclose had prescribed is
erroneous. It must be remembered that conclusions of fact and law
stated in the complaint are not deemed admitted by the failure to make The running of the prescriptive period of respondent's action on the
a specific denial.13 This is true considering that only ultimate facts must mortgages did not start when it executed the mortgage contracts with
be alleged in any pleading and only material allegation of facts need to Saturnino Petalcorin in 1982.1âwphi1
be specifically denied.14
The prescriptive period for filing an action may run either (1) from 1990
A conclusion of law is a legal inference on a question of law made as a when the loan became due, if the obligation was covered by the
result of a factual showing where no further evidence is required.15 The exceptions under Article 1169 of the Civil Code; (2) or from 1999 when
allegation of prescription in Mercene's complaint is a mere conclusion respondent demanded payment, if the obligation was not covered by
of law. In Abad v. Court of First Instance of Pangasinan, 16 the Court the exceptions under Article 1169 19 of the Civil Code. [emphasis
ruled that the characterization of a contract as void or voidable is a supplied]
conclusion of law, to wit:
In Maybank Philippines, Inc. v. Spouses Tarrosa, 20 the Court
A pleading should state the ultimate facts essential to the rights of explained that the right to foreclose prescribes after ten (10) years from
action or defense asserted, as distinguished from mere conclusions of the time a demand for payment is made, or when then loan becomes
fact, or conclusions of law. General allegations that a contract is valid due and demandable in cases where demand is unnecessary, viz:
or legal, or is just, fair and reasonable, are mere conclusions of law.
Likewise, allegations that a contract is void, voidable, invalid,
illegal, ultra vires, or against public policy, without stating facts showing An action to enforce a right arising from a mortgage should be
its invalidity, are mere conclusions of law. enforced within ten (10) years from the time the right of action
accrues, i.e., when the mortgagor defaults in the payment of his
obligation to the mortgagee; otherwise, it will be barred by prescription
In the same vein, labelling-an obligation to have prescribed without and the mortgagee will lose his rights under the mortgage. However,
specifying the circumstances behind it is a mere conclusion of law. As mere delinquency in payment does not necessarily mean delay in the
would be discussed further, the fact that GSIS had not instituted any legal concept. To be in default is different from mere delay in the
action within ten (10) years after the loan had been contracted is grammatical sense, because it involves the beginning of a special
insufficient to hold that prescription had set in. Thus, even if GSIS' condition or status which has its own peculiar effects or results.
denial would not be considered as a specific denial, only the fact that
GSIS had not commenced any action, would be deemed admitted at
the most. This is true considering that the circumstances to establish In order that the debtor may be in default, it is necessary that: (a) the
prescription against GSIS have not been alleged with particularity. obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially, unless demand is not necessary - i.e., when there is an
express stipulation to that effect; where the law so provides; when the
period is the controlling motive or the principal inducement for the
creation of the obligation; and where demand would be useless.
Moreover, it is not sufficient that the law or obligation fixes a date for
performance; it must further state expressly that after the period
lapses, default will commence. Thus, it is only when demand to pay is
unnecessary in case of the aforementioned circumstances, or when
required, such demand is made and subsequently refused that the
mortgagor can be considered in default and the mortgagee obtains the
right to file an action to collect the debt or foreclose the mortgage.

Thus, applying the pronouncements of the Court regarding prescription

on the right to foreclose mortgages, the Court finds that the CA did not
err in concluding that Mercene's complaint failed to state a cause of
action. It is undisputed that his complaint merely stated the dates when
the loan was contracted and when the mortgages were annotated on
the title of the lot used as a security. Conspicuously lacking were
allegations concerning: the maturity date of the loan contracted and
whether demand was necessary under the terms and conditions of the
loan.

As such, the RTC erred in ruling that GSIS' right to foreclose had
prescribed because the allegations in Mercene's complaint were
insufficient to establish prescription against GSIS. The only information
the trial court had were the dates of the execution of the loan, and the
annotation of the mortgages on the title. As elucidated in the above-
mentioned decisions, prescription of the right to foreclose mortgages is
not reckoned from the date of execution of the contract. Rather,
prescription commences from the time the cause of action accrues; in
other words, from the time the obligation becomes due and
demandable, or upon demand by the creditor/mortgagor, as the case
may be.

In addition, there was no judicial admission on the part of GSIS with

regard to prescription because treating the obligation as prescribed,
was merely a conclusion of law. It would have been different if
Mercene's complaint alleged details necessary to determine when
GSIS' right to foreclose arose, i.e., date of maturity and whether
demand was necessary.

WHEREFORE, the petition is DENIED. The 29 April 2010 Decision and

20 July 2010 Resolution of the Court of Appeals (CA) in CAG. R. CV
No. 86615 are AFFIRMED in toto.

SO ORDERED.