G.R. No. L-17467; April 23, 1963
NATIONAL DEVELOPMENT COMPANY, represented by its Agents, THE PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. JOSE YULO TOBIAS, defendant-appellee.

FACTS

The National Development Company (NDC), represented by the Philippine National Bank, filed a complaint on March 22, 1960, seeking to recover from Jose Yulo Tobias the sum of P6,905.81, plus interest and attorney’s fees. The claim was based on a promissory note dated and issued by Tobias on May 13, 1946, for P7,000.00, payable “on demand after date.” Upon being summoned, Tobias filed a motion to dismiss the complaint on the ground of prescription, arguing that more than ten years had elapsed since the note’s issuance and the accrual of the cause of action.
The Court of First Instance of Negros Occidental granted the motion and dismissed the complaint, holding that the action had indeed prescribed. NDC appealed this order, contending that the statute of limitations did not run against it because it was an instrumentality of the Government. In support, NDC cited the case of Government of the Philippine Islands vs. Monte de Piedad.

ISSUE

Whether or not the statute of limitations applies to bar the action filed by the National Development Company, a government-owned and controlled corporation.

RULING

The Supreme Court affirmed the order of dismissal, ruling that the action had prescribed. The Court held that the statute of limitations applies to the National Development Company. The legal logic is clear: while NDC is a government instrumentality, it does not exercise sovereign or governmental functions. The Court distinguished the cited case of Government of the Philippine Islands vs. Monte de Piedad, which involved the government itself, from the instant case involving a government-owned corporation.
The Court emphasized that NDC, as created under its Organic Act (Commonwealth Act 182, as amended), is subject to the provisions of the Corporation Law and is endowed with general corporate powers. It is authorized to engage in commercial, industrial, agricultural, and other enterprises for economic development. These are proprietary or business functions, not sovereign functions. Following established jurisprudence, such as Association Cooperative de Credito Agricola de Miagao vs. Monteclaro, the Court reiterated that government corporations performing business functions are not exempt from the statute of limitations. Other cited cases, including those involving the Price Stabilization Corporation and the GSIS, uniformly held that such entities are subject to the same rules as private corporations, including prescription of actions.
The Court further noted that NDC had been sentenced to pay costs in previous litigations, which would not be allowed against the Republic of the Philippines proper, underscoring its distinct juridical personality as a business corporation. Therefore, having filed its complaint beyond the ten-year prescriptive period for actions upon a written contract, NDC’s right to enforce the promissory note was extinguished. The defense of prescription was correctly sustained.