G.R. No. L-8021. December 29, 1913.

FACTS:
Procesa Pelaez sold a house and lot to Flaviano Abreu under a pacto de retro on August 23, 1901, for P14,000. The written contract stipulated that Pelaez would remain as a tenant at a monthly rent of P140 and would pay taxes, insurance premiums, and repairs. Subsequently, the parties orally agreed that Abreu could lease part of the premises to other persons and apply the collected rents to the redemption price. Pelaez redeemed the property on December 16, 1902, paying Abreu P16,500, which the trial court found to consist of the P14,000 redemption price and P2,500 for rent. At the time of redemption, Pelaez owed back rent of P2,207.33, and Abreu had collected P1,150 from other tenants pursuant to their oral agreement. Abreu had also paid the 1901 taxes (P186.19) and an insurance premium (P100). The trial court found that Abreu did not credit the P1,150 in collected rents to the redemption price. It rendered judgment in favor of Pelaez for P863.81, representing the uncredited rents minus the taxes and insurance premium Abreu paid. Abreu appealed, arguing that Pelaez’s cause of action had prescribed.

ISSUE:
Whether the plaintiff’s cause of action to recover the uncredited rents collected under the subsequent oral agreement had prescribed.

RULING:
Yes, the action had prescribed. The Supreme Court reversed the trial court’s judgment and absolved the defendant from the plaintiff’s demand.

The Court held that the oral agreement allowing Abreu to collect rents from other tenants and apply them to the redemption price was a new and independent contract, separate from the original written pacto de retro. An action upon such an oral contract prescribes in six years under Section 43(2) of the Code of Civil Procedure. The right of action accrued on December 16, 1902, when the property was redeemed and the obligation to account for and apply the collected rents arose. The action was filed on November 15, 1909, more than six years later.

The Court rejected the application of Article 1973 of the Civil Code, which provided that prescription is interrupted by an extrajudicial demand. It ruled that Chapter III of the Code of Civil Procedure constitutes the complete law on prescription of civil actions. Section 50 of the same Code provides that the prescriptive period is renewed only by a payment, a written acknowledgment, or a written promise to pay signed by the debtor. A mere verbal demand, which the trial court found occurred in late 1905 or early 1906, is insufficient to interrupt or renew the prescriptive period under Section 50. Since Article 1973 of the Civil Code is inconsistent with and was effectively repealed by Section 50 of the Code of Civil Procedure, it could not save the action from prescription. Consequently, the action was barred.