Development Bank of the Philippines v. Ozarraga
REITERATIONFacts
The Antecedents: The Development Bank of the Philippines (DBP), as successor to the Agricultural and Industrial Bank, filed an action to foreclose a mortgage against the administrator of the Intestate Estate of Leon Cuñat. The indebtedness, amounting to P800.00, was incurred on August 7, 1941, payable in five yearly installments, with the last due on August 7, 1946. Leon Cuñat mortgaged a parcel of land as security and died in 1942 without any payments being made on the loan by him or his heirs. Procedural History: The Court of First Instance of Agusan dismissed the complaint, holding that the action had prescribed. The plaintiff, DBP, appealed this dismissal to the Supreme Court on the sole issue of prescription. The Appeal: The plaintiff-appellant contended that the action had not prescribed. They argued that the prescriptive period, which would have commenced on August 7, 1946, was suspended by the debt moratorium (Executive Order No. 32) and began to run only upon the lifting of the moratorium by Republic Act No. 342 on July 26, 1948. The appellant further claimed that prescription was interrupted by certain acts, including alleged inducements by the heirs to delay enforcement, the filing of a petition for the appointment of an administrator, and the sending of demand letters.
Issue(s)
Whether the action to foreclose the mortgage had prescribed. Whether the filing of a petition for the appointment of an administrator interrupted the period of prescription. Whether extrajudicial demands interrupted the period of prescription under Act No. 190.
Ruling
The Supreme Court affirmed the order of the lower court dismissing the complaint. The Court ruled that the action had prescribed, as it was filed beyond the ten-year prescriptive period counted from the lifting of the debt moratorium. The Court found that neither the petition for administration nor the extrajudicial demands interrupted the prescription under the applicable law (Act No. 190).
Ratio Decidendi
On Issue 1 (Whether the action to foreclose the mortgage had prescribed): The Court held that the action had prescribed. The indebtedness was due on August 7, 1946. However, the prescriptive period was suspended by the debt moratorium under Executive Order No. 32, effective March 10, 1945. The moratorium was lifted by Republic Act No. 342 on July 26, 1948. Since it was not shown that Leon Cuñat was a war damage claimant, the ten-year prescriptive period for the foreclosure suit commenced from July 26, 1948. The foreclosure suit was filed on July 13, 1959, which is beyond the ten-year period, thus rendering the action prescribed. On Issue 2 (Whether the filing of a petition for the appointment of an administrator interrupted the period of prescription): The Court ruled that the filing of a petition for the appointment of an administrator of the debtor's estate did not interrupt the period of prescription for the debt. The Court clarified that such a petition, even if filed by the creditor, does not serve the function of an action to enforce the debt itself. Therefore, this act did not have the effect of suspending or interrupting the running of the prescriptive period for the mortgage foreclosure. On Issue 3 (Whether extrajudicial demands interrupted the period of prescription under Act No. 190): The Court held that the extrajudicial demands made by the appellant, whether to the deceased debtor before his death or to his widow and children thereafter, did not interrupt the prescription. The Court emphasized that prescription was already running under Act No. 190, the applicable law prior to the New Civil Code. Under Section 50 of Act No. 190, written extrajudicial demands were not among the grounds that would renew a right of action. While Article 1155 of the New Civil Code now gives such demands the effect of interrupting prescription, this provision is not applicable to prescription that had already commenced under prior laws, as mandated by Article 1116 of the New Civil Code.
Main Doctrine
The Court held that the filing of a petition for the appointment of an administrator of a deceased debtor's estate does not interrupt the prescriptive period for the debt itself. Furthermore, under Act No. 190, which governed prescription at the time, written extrajudicial demands made upon the debtor or his heirs did not interrupt the running of the prescriptive period. The prescriptive period for the foreclosure suit, which was suspended by the debt moratorium, commenced to run from the date the moratorium was lifted by Republic Act No. 342.