G.R. No. L-17078. January 29, 1962.
PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. FRANCISCO BUENASEDA, defendant-appellee.

FACTS

The Philippine National Bank (PNB) obtained a judgment against Philippine Lumber Distributing Agency, Inc. (PLDA). To satisfy this judgment, PNB, with court authorization, sued defendant Francisco Buenaseda to collect an unpaid balance of P4,025.85 for lumber purchased from PLDA in 1947. The last payment on this account was made on July 13, 1949. PNB filed the collection suit on May 7, 1957. The transactions were evidenced by 21 sales orders and 69 delivery receipts, some printed and some handwritten by Buenaseda.
The parties submitted a stipulation of facts, framing the issues as: (1) whether the transactions, based on verbal orders, sales orders, and delivery receipts, were oral or written contracts; and (2) whether PNB’s action had prescribed. The trial court examined the exhibits and found they did not themselves constitute written contracts containing an express or implied promise to pay a sum certain. Consequently, it ruled the action was based on an oral contract and had prescribed after six years.

ISSUE

Whether PNB’s action, filed in 1957 for transactions from 1947 with a last payment in 1949, is barred by the statute of limitations, which depends on whether the obligations are based on written contracts (10-year prescriptive period) or oral contracts (6-year prescriptive period).

RULING

The Supreme Court affirmed the trial court’s decision, holding that the action had prescribed. The legal logic centered on the definition of a “written contract” under the statute of limitations (then Act No. 190 ). For the ten-year period to apply, the writing itself must contain the essential terms of the agreement, particularly an express promise to pay or language from which such a promise can be fairly inferred without resort to extrinsic evidence.
The Court meticulously analyzed the sales orders and delivery receipts. It found that most documents were mere memoranda or acknowledgments of delivery, lacking any promise to pay, specifying amounts, or outlining terms of payment. Even the few documents containing amounts or notations like “charge to my account” were incomplete. Critical terms, such as the specific price, manner of payment, or discount agreements, were not contained within the four corners of the instruments and would require proof aliunde (external evidence). Since the promise to pay and its terms arose from facts collateral to the writings, the agreements were deemed partly oral and partly written. Consequently, they did not qualify as contracts in writing solely for prescriptive purposes. The obligation being effectively an oral contract, the six-year prescriptive period applied. The action, filed more than seven years after the last payment in 1949, was therefore barred.