GR 24137; (January, 1970) (Digest)
G.R. No. L-24137 January 30, 1970
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PEDRO C. HERNAEZ and RAMON M. DE LA RAMA, defendants-appellees.
FACTS
The Republic of the Philippines, through the Board of Liquidators, filed a complaint on March 30, 1962, against Pedro C. Hernaez and Ramon M. de la Rama for the collection of loans totaling P14,786.61 (reduced to P10,652.49 under the Ballantyne Schedule) plus interest. The loans were obtained by defendant Ramon M. de la Rama, as negotiorum gestor for his co-defendant Pedro C. Hernaez, from the Bank of Taiwan, Ltd., during the Japanese occupation in 1943. The loans were evidenced by promissory notes and secured by chattel mortgages on standing crops. The assets of the Bank of Taiwan, including these promissory notes and chattel mortgages, were transferred to the Government of the Republic of the Philippines pursuant to transfer agreements between the U.S. and Philippine governments in 1954 and 1957. Despite demands, the amount remained unpaid. The Court of First Instance of Manila dismissed the complaint on the ground that the action had prescribed, calculating that from the last promissory note’s due date (October 27, 1944) to the filing of the complaint (March 30, 1962), 17 years, 5 months, and 3 days had elapsed. Even after deducting the moratorium period of 3 years, 4 months, and 16 days, a period of 14 years and 17 days remained, exceeding the 10-year prescriptive period for actions based on written contracts.
ISSUE
Whether or not the action of the Republic to collect the loans had prescribed.
RULING
No, the action has not prescribed. The Supreme Court reversed the trial court’s decision.
1. Prescription does not run against the State. Under Article 1108(4) of the Civil Code, prescription, both acquisitive and extinctive, does not run against the State. The Republic filed the suit in the exercise of its sovereign functions to protect public property.
2. The running of the prescriptive period was interrupted by the Moratorium Laws. Executive Orders Nos. 25 and 32 and Republic Act No. 342 suspended the enforcement of debt payments. Although these laws were later declared unconstitutional in Rutter vs. Esteban on May 18, 1953, the Supreme Court ruled that they suspended the prescriptive period until that date. Following the computation in Republic vs. Grijaldo, the prescriptive period was suspended from November 18, 1944 (effectivity of Executive Order No. 25) until May 18, 1953—a period of 8 years and 6 months.
3. Application to the case. From the last due date (October 27, 1944) to the filing of the complaint (March 30, 1962), 17 years, 5 months, and 3 days elapsed. Deducting the suspension period of 8 years and 6 months leaves 8 years, 11 months, and 3 days. Therefore, the 10-year prescriptive period had not yet fully run when the complaint was filed.
The case was remanded to the trial court for judgment on the merits and to resolve other issues between the parties.