G.R. No. L-11633; January 31, 1961
Intestate Estate of Francisco Ubat, deceased. Jose L. Soriano, petitioner-appellee, vs. Atanasia Ubat de Montes, et al., oppositors-appellees. Philippine National Bank, claimant-appellant.

FACTS

Eduardo Ubat obtained a loan from the Philippine National Bank (PNB) in 1936, secured by a mortgage on his land. Upon his death, his son Francisco Ubat inherited the property. Francisco later obtained his own loan from PNB in 1946. After Francisco’s death in 1954, intestate proceedings were initiated. PNB filed two claims: one for Francisco’s unpaid balance and another for the unpaid installments on Eduardo’s 1936 loan, which Francisco had inherited with the property.
The administratrix of Francisco’s estate admitted the claim for his personal debt but opposed the second claim regarding Eduardo’s loan. She argued the obligation was payable in ten equal annual installments and, except for the final installment due in 1945, all preceding unpaid installments had prescribed by the time PNB filed its claim in 1955. The lower court agreed, allowing only the tenth installment plus interest and attorney’s fees. PNB appealed, contending the entire obligation was still collectible.

ISSUE

Whether the unpaid annual installments under Eduardo Ubat’s 1936 promissory note had prescribed, thereby barring PNB’s claim against his estate.

RULING

The Supreme Court affirmed the lower court’s ruling that the obligation was divisible and that prescription had run on most installments. The legal logic centers on when the prescriptive period commences. The promissory note mandated payment in “ten equal annual installments,” creating an absolute duty to pay each installment yearly. Consequently, each unpaid installment gave rise to a separate cause of action. Under Article 1150 of the Civil Code, prescription runs from the day an action may be brought. Therefore, the ten-year prescriptive period began for each installment from its individual due date.
The Court rejected PNB’s argument that the debt was indivisible. While the note contained an acceleration clause making all installments due upon default, this was a permissive right for the bank’s benefit. The bank’s failure to exercise this right by filing an action for the entire debt after an initial default did not alter the separate maturity and prescriptive periods for each installment. However, the Court modified the computation, recognizing the suspensive effect of the Moratorium Law (Executive Order No. 32) on obligations during the Japanese occupation. This law tolled the prescription for installments falling due during its effectiveness. Thus, only the fourth and fifth installments (due in 1939 and 1940) were deemed fully prescribed. Installments from the sixth (due in 1942) onward were filed within the prescriptive period. The award of attorney’s fees was deemed reasonable. The estate was ordered to pay the adjusted amounts.