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On 14 May 1968, Floro Mercene executed a deed of mortgage in favor of the Government Service Insurance System. GSIS loaned the amount of Php14,500.00 to Mercene and Mercene secured the loan with titled land. The next day, the mortgage was annotated on the title.
Mercene failed to pay the loan but GSIS did nothing to enforce the mortgage. After many years or in June 2004, Mercene filed a quieting of title case against GSIS. He alleged that GSIS failed to enforce its rights under the mortgage. Mercene wanted to remove the annotation as the mortgage constituted a cloud over his property.
In his complaint, Mercene alleged that the deed of mortgage was executed on 14 May 1968 and was annotated the next day. He theorized that GSIS’ right to foreclose the property lapsed in 1978 or after ten years from the execution of the mortgage.
1. Whether or not Mercene’s cause of action was properly pleaded.
2. Whether or not GSIS’ right to foreclose the property has prescribed.
1. No. All Mercene alleged was the date of execution of the mortgage and its annotation. Prescription of the right to foreclose a mortgaged property does not run from the date of execution or annotation.
SIDE ISSUE: GSIS, in its Answer, did not specifically deny the allegation that its right to foreclose has prescribed. Is GSIS deemed to have admitted such allegation by Mercene?
No. It is true that material averments or ultimate facts not specifically denied are deemed admitted. However, the allegation in a complaint which states that a particular right has prescribed is not an ultimate fact but rather a conclusion of law or a conclusion of fact. Conclusions of fact and law stated in the complaint are not deemed admitted by the failure to make a specific denial. A conclusion of law is a legal inference on a question of law made as a result of a factual showing where no further evidence is required. Labelling an obligation to have prescribed without specifying the circumstances behind it is a mere conclusion of law.
2. No. In foreclosure, the prescriptive period neither runs from the date of the execution of a contract nor does the prescriptive period necessarily run on the date when the loan becomes due and demandable. Prescriptive period runs from the date of demand, subject to certain exceptions, which are: 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.
Here, since the allegations in the complaint were incomplete, the court cannot determine when prescription began to run.