Subrogated

What are the rights of an interested third party who has paid the debt of another? This is answered in this case of a realty company (CRS) versus the spouses Bert and Fely.

Sometime in September 1981 Bert and Fely requested their friend Resty who was the president of CRS to lend them two parcels of land owned by CRS which they would use as collateral for the credit line they were applying from a bank (PBTC). So on September 21, 1981 CRS lent to the spouses the owners’ duplicate copy of the titles to the parcels of land by virtue of a board resolution contained in a secretary’s certificate. However on September 28, 1981, CRS discovered that the signature of the corporate secretary was actually forged by Fely. Nevertheless, the spouses were still able to obtain a loan of P610,000 from PBTC after signing a Real Estate Mortgage (REM) dated September 30, 1981 and Promissory Notes dated October 7 and 15, 1981 with the use of said false secretary’s certificate.

The spouses however failed to pay their obligation. When PBTC initiated foreclosure proceedings, CRS tried to annul the REM by filing a case in the Regional Trial Court (Branch 78) alleging forgery of the signature of its corporate secretary which CRS alleged it discovered only on January 20, 1987. The foreclosure was thus initially enjoined but eventually in a ruling sustained by the Supreme Court itself, PBTC was allowed to proceed with the foreclosure after finding that CRS ratified the mortgage contract between the spouses and PBTC. To avoid foreclosure of its properties CRS was thus forced to settle the spouses’ obligation to PBTC in the amount of P3,367,474.42 including interests penalties and service charges on April 5, 1994.

On April 9 and 20, 1996, CRS demanded reimbursement from the spouses the amount it paid to PBTC. On June 20, 1996, when the spouses did not heed its demand, CRS filed a complaint against the spouses before another branch of the RTC to claim reimbursement of said amount. In a resolution dated February 14, 1997, the RTC dismissed CRS’ complaint upon motion of the spouses Bert and Fely. The RTC found that the complaint is based on fraud or the forgery of the Secretary’s certificate which CRS discovered way back on September 28, 1981. Therefore the RTC said that CRS had only four years from discovery of the fraud within which to file the appropriate action so that the present action filed only on June 20, 1996 was clearly beyond the prescriptive period. Was the RTC correct?

No. In effect CRS became a third party accommodation mortgagor in this case. It paid PBTC to avoid foreclosure of the mortgage which it tried to annul but failed when this court ruled it has ratified said mortgage. Thus CRS paid the debt of the spouses to PBTC as an interested third party. Under Article 1236 second paragraph of the Civil Code, “whoever pays for another may demand from the debtor what he has paid except that if he paid without the knowledge or against the will of the debtor he can recover only insofar as the payment has been beneficial to the debtor”.

Even if the spouses insist that CRS’s payment was without their knowledge or against their will, CRS still has a right to reimbursement under Article 1302 (3) of the Civil Code because it is a person interested in the fulfillment of the obligation. CRS has an interest in the fulfillment of the obligation because it owns the properties mortgaged to secure the obligation of the spouses. It is subrogated to the right of the creditor. It actually steps into the shoes of PBTC and becomes entitled not only to recover what it has paid but also to exercise all the rights which PBTC could have exercised. There is, in such cases, no real extinguishment of the obligation, but a change in the active subject.

CRS’ action against the spouses Bert and Fely is on the basis of a mortgage contract ratified by the court and thus created by law. Hence it prescribes in ten years (Article 1144 CC). Prescription accrues from the date of payment by CRS to PBTC of the spouses’ debt on April 5, 1994. This present complaint was filed on June 20, 1996 which was almost two months from the extrajudicial demands on April 9, and 23, 1996. Whether the date of payment or the date of demand is used, it is clear that CRS’ cause of action has not yet prescribed. So the spouses should reimburse CRS the amount of P3,367,474.42 with 16 percent interest from April 9, 1996 plus attorney’s fees of 5 percent of the total award Cecilleville Realty etc. vs. Spouse Acuna, G.R. 162074, June 13, 2009)

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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