Reich v. Schwesinger
REITERATIONFacts
The Antecedents: In 1937, Joseph Reich (defendant) borrowed 10,000 shares of stock from Edmund Schwesinger (plaintiff). Due to failure to return the shares, Reich executed a promissory note on February 1, 1937, for P4,500. In 1936, Reich also borrowed P4,000 from Schwesinger, for which he executed a promissory note on October 1, 1937. Both notes were payable on demand. Schwesinger made repeated demands for payment, but Reich failed to pay. Procedural History: The Court of First Instance of Manila rendered judgment in favor of Schwesinger, ordering Reich to pay the sums due with interest. The Court of Appeals affirmed this decision. The Petition: Reich appealed by certiorari, insisting that Schwesinger's causes of action had already prescribed by the time the action was commenced on June 21, 1955, arguing that the Moratorium Law did not apply to him as a British subject and that the outbreak of war did not suspend prescription for a Filipino citizen's claim against him.
Issue(s)
Whether the causes of action of respondent Schwesinger had prescribed when the present action was commenced on June 21, 1955. Whether the Moratorium Law and the outbreak of World War II suspended the running of the prescriptive period for the promissory notes.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals, holding that the causes of action had not prescribed. The Court ruled that the Moratorium Law and the outbreak of World War II interrupted the running of the prescriptive period.
Ratio Decidendi
On whether the causes of action had prescribed: The Court held that the causes of action had not prescribed. The promissory notes, being payable on demand, were deemed due immediately upon delivery. However, the prescriptive period, which would have normally commenced on February 1, 1937, and October 1, 1937, respectively, was interrupted. The interruption was due to the Moratorium Law, which was in effect from May 1945 to May 1953, and also due to the outbreak of World War II on December 8, 1941. Furthermore, written demands made by Schwesinger also contributed to the interruption. Consequently, when the action was filed on June 21, 1955, the ten-year prescriptive period had not yet elapsed. On whether the Moratorium Law and the outbreak of World War II suspended the running of the prescriptive period: The Court affirmed that these events did suspend the prescriptive period. Citing Adela Santos Vda. de Montilla vs. Pacific Commercial Company, the Court explained that war and occupation governments can cause disturbances that paralyze court processes. While statutes of limitations might not be suspended where citizens can still access courts, this is not the case for enemy aliens who are interned or in precarious situations. The Court noted that Instruction No. 28 of the Japanese Military Administration decreed the suspension of court actions affecting enemy aliens. The Court found it unfair to apply the statute of limitations to an alien creditor who was interned or in a precarious situation, making it difficult or dangerous to enforce rights. This principle was extended to a Filipino creditor whose debtor was an interned alien, as enforcing the right against a moneyless and helpless debtor, or seeking permission from the Japanese Military Authorities to sue, would have been fraught with danger.
Main Doctrine
The period of prescription of a cause of action is suspended during the existence of the Moratorium Law and upon the outbreak of World War II, particularly when the debtor is an alien enemy interned or in a precarious situation, making it difficult or dangerous to enforce the claim.