GR L 16485; (January, 1965) (Digest)
G.R. No. L-16485; January 30, 1965
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK, defendant-appellee.
FACTS
The Armed Forces of the Philippines (AFP), an instrumentality of the Republic of the Philippines, opened a current account with the Philippine National Bank (PNB) in July 1947. On December 27, 1949, PNB, allegedly through negligence, paid the sum of P37,553.32 to an unnamed person. This amount was covered by two checks drawn against the AFP account, which bore fictitious payee names and forged signatures of the officers authorized to make withdrawals. When an authorized officer noticed the debit from the account statement, the AFP, by letter dated April 15, 1950, called PNB’s attention to the mistake. Despite repeated demands, PNB refused to refund the amount. Consequently, the Republic of the Philippines filed an action against PNB on November 6, 1959. PNB moved to dismiss the complaint on the ground of prescription. The Court of First Instance of Manila dismissed the complaint, not on prescription, but on the rationale that the Republic and PNB are essentially the same entity (with the Government owning 97% of PNB), and the suit was a waste of time and resources, akin to “unrobing an image to clothe another.”
ISSUE
1. Whether the Republic of the Philippines is the proper party-plaintiff.
2. Whether the action has prescribed.
3. Whether the suit is barred because the plaintiff and defendant are essentially the same government entity.
RULING
The Supreme Court set aside the order of dismissal and remanded the case for further proceedings.
1. On the Proper Party: The Republic of the Philippines is the proper party-plaintiff. The AFP is a constituent instrumentality of the Republic through which it exercises essential governmental functions (preservation of state security). The funds involved are government funds.
2. On Prescription: The statute of limitations does not run against the State. Since the Republic is the real party in interest and the deposit was made by its instrumentality, the defense of prescription cannot be maintained.
3. On Identity of Parties: The lower court erred in holding that the plaintiff and defendant are the same. While PNB is a government-owned or controlled corporation, it is endowed with proprietary functions and governed by its charter (Republic Act No. 1300) and the Corporation Law. It has a separate and distinct juridical personality from the Republic of the Philippines and can sue and be sued independently. A suit between them is legally permissible.
Costs were awarded against defendant-appellee PNB.