SPOUSES CESAR AND VIRGINIA LARROBIS VS PHILIPPINE VETERANS BANK

G.R. NO. 135706, OCTOBER 1, 2004

DOCTRINE:

FACTS:
In 1980, petitioner spouses contracted a loan with respondent secured by a real estate mortgage. In March
1985, respondent went bankrupt and was placed under receivership/liquidation. In August 1985, the bank, through
Francisco Go, sent the spouses a demand letter for A/R which pertains to the insurance premiums advanced by
respondent bank over the mortgaged property of petitioners.
In 1995, more than 14 years from the time the loan became due and demandable, respondent bank filed a
petition for extrajudicial foreclosure of mortgage of petitioners’ property. It was sold the respondent as the loan
bidder. Less than 1 year thereafter, petitioners filed a complaint before the RTC to declare the extra-judicial
foreclosure and the subsequent sale thereof to respondent bank null and void. In the pre-trial conference, the parties
agreed to limit the issue to whether or not the period within which the bank was placed under receivership and
liquidation was a fortuitous event which suspended the running of the 10-year prescriptive period in bringing
actions.
The RTC dismissed the complaint ruling that the period by which the respondent was placed under
receivership was a fortuitous event which suspended the running of the 10-year prescriptive period in bringing
actions. The RTC reasoned out that the respondent was restrained from doing its business; hence, respondent was
not prohibited to foreclose the mortgaged property.

ISSUE: WON the period within which the respondent bank was placed under receivership and liquidation
proceedings may be considered a fortuitous event which interrupted the running of the prescriptive period in
bringing actions

RULING:
No, the SC held that though “foreclosure” falls within the contemplation of “doing business”, it should not
be considered included, however, in the acts prohibited whenever banks are "prohibited from doing business" during
receivership and liquidation proceedings. This is consistent with the purpose of receivership proceedings, i.e., to
receive collectibles and preserve the assets of the bank in substitution of its former management, and prevent the
dissipation of its assets to the detriment of the creditors of the bank.
When a bank is declared insolvent and placed under receivership, the Central Bank, through the Monetary
Board, determines whether to proceed with the liquidation or reorganization of the financially distressed bank. A
receiver, who concurrently represents the bank, then takes control and possession of its assets for the benefit of the
bank’s creditors. In both receivership and liquidation proceedings, the bank retains its juridical personality
notwithstanding the closure of its business and may even be sued as its corporate existence is assumed by the
receiver or liquidator. The receiver or liquidator meanwhile acts not only for the benefit of the bank, but for its
creditors as well.

ISSUE: WON the demand letter sent by respondent bank’s representative on August 23, 1985 is sufficient to
interrupt the running of the prescriptive period.

RULING:
No, the SC held that prescription of actions is interrupted when they are filed before the court, when there
is a written extra-judicial demand by the creditors, and when there is any written acknowledgment of the debt by the
debtor.
In Quirino Gonzales Logging Concessionaire vs. Court of Appeals, it was held that the notices of
foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial
demands, which may validly interrupt the running of the prescriptive period, where it does not appear from the
records that the notes are covered by the mortgage contract. In this case, considering that the mortgage contract and
the promissory note refer only to the loan of petitioners in the amount of Php 135T, there is no reason to hold that
the insurance premiums which were the subject of the August 1985 demand letter should be considered as pertaining
to the entire obligation of petitioners. Hence, said letter cannot not be considered as an extra-judicial demand which
may validly interrupt the running of the prescriptive period.