G.R. No. L-8377; August 28, 1956
MANILA MOTOR COMPANY, INC., plaintiff-appellant, vs. R.F. FERNANDEZ, defendant-appellee.

FACTS

On February 24, 1939, defendant-appellee R.F. Fernandez purchased a second-hand Ford Sedan from plaintiff-appellant Manila Motor Company, Inc. for P1,125, paying P100 in cash and agreeing to pay the balance in 34 fifteen-day installments with 12% annual interest, secured by a chattel mortgage on the car. By July 21, 1940, Fernandez had paid the first ten installments and part of the eleventh, leaving a balance of P775.17. Due to Fernandez’s default, Manila Motor Company filed a suit in 1940, and in March 1941, a judgment was rendered ordering Fernandez to pay P775.17 plus 12% interest and 25% of the total as liquidated damages and attorney’s fees. This judgment was never executed due to the outbreak of World War II and subsequent debt moratorium orders, and the judicial records, including the judgment, were neither saved nor reconstituted. On February 19, 1954, Manila Motor Company filed a complaint in the Court of First Instance of Manila to collect the indebtedness but later dismissed it to refile in the Municipal Court of Manila, which had jurisdiction over the amount. On April 13, 1954, a similar complaint was filed in the Municipal Court, where Fernandez filed a motion to dismiss, granted on the ground that the cause of action was barred by the statute of limitations. Manila Motor Company elevated the case to the Court of First Instance of Manila, where Fernandez again filed a motion to dismiss, which was also granted on the grounds of prescription and that the 1940 foreclosure suit constituted a waiver of any unpaid balance. Manila Motor Company appealed.

ISSUE

1. Whether the debt moratorium interrupted the running of the statute of limitations for enforcing the 1941 judgment.
2. Whether the present complaint is based on the chattel mortgage or on the 1941 judgment.
3. Whether the 1940 suit constituted a foreclosure that waived recovery of any unpaid balance.

RULING

1. Yes, the debt moratorium interrupted the running of the statute of limitations. Citing Ma-ao Sugar Central Co. vs. Barrios, the Supreme Court held that the moratorium (from November 18, 1944, to July 26, 1948) suspended the filing of suits for the enforcement of payment of debts. The complaint filed on April 13, 1954, was within the 10-year prescriptive period for an action based on a judgment, as the moratorium period of 3 years, 8 months, and 12 days should be excluded from the computation.
2. The present complaint is based on the 1941 judgment, not on the chattel mortgage. The allegations in the complaint specifically referenced the 1940 suit and the March 1941 judgment, its terms, and its non-execution due to the war and moratorium, which were sufficient to establish the judgment as the cause of action. References to the chattel mortgage were only to demonstrate the propriety of the 1941 judgment and to allow secondary evidence of its contents.
3. No, the 1940 suit was not a foreclosure that waived recovery of any unpaid balance. The allegations did not suggest it was a foreclosure suit, and Fernandez’s own motion indicated the car was commandeered by Japanese forces during the war, showing it remained in his possession and was not sold at public auction. Under section 14 of Act No. 1508 , only an actual sale of the mortgaged chattel in a foreclosure proceeding bars the creditor from recovering any unpaid balance.
The appealed order was reversed, and the case was remanded to the court of origin for further proceedings. Costs were imposed on defendant-appellee.