G.R. No. L-8948; November 29, 1957
AGUSTIN LIBORO, ET AL., plaintiffs-appellees, vs. FINANCE AND MINING INVESTMENTS CORPORATION, defendant-appellant.

FACTS

The spouses Agustin Liboro and Socorro Lopez de Liboro, registered owners of Lot No. 2097, executed a second mortgage on the property in favor of defendant Finance & Mining Investments Corporation on May 3, 1939, to secure a debt. Plaintiffs filed an action on January 7, 1952, alleging the debt was fully paid on or about June 26, 1940, with money from a new loan from the Philippine Bank of Commerce, and that the defendant executed a deed of cancellation of the mortgage which was lost during the war. After selling the lot to their co-plaintiffs, the Liboros sought to have the mortgage annotations cancelled, but the defendant refused. Defendant, in its answer dated February 11, 1952, denied the debt was settled and counterclaimed for P13,784.33 (representing a balance of P6,855.55 as of December 31, 1941, plus interest). Plaintiffs moved for summary judgment, arguing the counterclaim based on the December 31, 1941 balance had prescribed. The lower court initially denied the motion, citing the Moratorium Law. After the Supreme Court’s decision in Rutter vs. Esteban, plaintiffs filed a new motion for summary judgment, contending the Moratorium Law did not toll prescription as it was declared unconstitutional. The lower court granted this motion, dismissed the counterclaim, and ordered the cancellation of the mortgage annotations. Defendant appealed.

ISSUE

Whether appellant’s defense and counterclaim based on the balance allegedly due as of December 31, 1941, are barred by the statute of limitations.

RULING

No. The Supreme Court reversed the order of the lower court. The Court held that the period of prescription was suspended by Executive Orders Nos. 25 and 32 from March 10, 1945, to July 26, 1948—a period of three years, four months, and sixteen days. From December 31, 1941, to February 11, 1952 (the filing of the counterclaim), ten years, one month, and ten days had elapsed. Deducting the suspended period, the prescriptive period had not yet expired. The Court clarified that in Rutter vs. Esteban, it did not declare the Moratorium Law unconstitutional ab initio but ruled its continued operation was unreasonable; thus, the suspension of the statute of limitations during the moratorium period was effective. The record was remanded to the court of origin for further proceedings.