G.R. No. L-10274; February 27, 1957
PACIFIC COMMERCIAL COMPANY, plaintiff-appellant, vs. VENANCIO B. AQUINO, defendant-appellee.

FACTS

The plaintiff-appellant, Pacific Commercial Company, filed an action to recover the sum of P733.35 with interest and attorney’s fees from the defendant-appellee, Venancio B. Aquino. The obligation was incurred on December 18, 1940, payable in 24 monthly installments, with the last installment due on December 18, 1942. The balance of P733.35 fell due on November 18, 1941. The complaint was filed on February 10, 1953. The Court of First Instance of Manila dismissed the complaint, holding that the action had prescribed. The trial court reasoned that the right of action accrued on November 18, 1941, and the ten-year prescriptive period ended on November 18, 1951. Since the complaint was filed on February 10, 1953, the action was barred. The trial court based its decision on the view that the Moratorium Law ( Republic Act No. 342 ) had been declared unconstitutional by the Supreme Court and therefore did not suspend the running of the prescriptive period.

ISSUE

Whether the plaintiff’s right of action has prescribed, considering the effect of the Moratorium Law on the running of the prescriptive period.

RULING

The Supreme Court reversed the decision of the trial court and held that the action had not prescribed. The Court clarified that in Rutter vs. Esteban, it did not declare the Moratorium Law ( Republic Act No. 342 ) unconstitutional and void ab initio. Instead, it ruled that the continued operation and enforcement of the law at that time had become unreasonable and oppressive. The Court reiterated that moratorium laws, which suspend remedies for enforcing obligations for a reasonable period, are within the police power of the State. Following its previous rulings in Vda. de Montilla vs. Pacific Commercial Co. and Manila Motor Co. vs. Flores, the Court held that the operation of moratorium orders and laws prior to the Rutter decision (May 18, 1953) had the effect of tolling the prescriptive period. Applying this, the prescriptive period for the plaintiff’s claim, which started to run on November 18, 1941, was suspended when Executive Order No. 32 (the second Moratorium Executive Order) was issued on March 10, 1945, and remained suspended until the Rutter decision on May 18, 1953. Since the complaint was filed on February 10, 1953, before the prescriptive period resumed running, only about three years of the ten-year period had validly elapsed. Therefore, the action had not prescribed. The records were remanded to the court of origin for decision on the merits.