Republic v. Hernaez
REITERATIONFacts
The Antecedents: During the Japanese occupation in 1943, defendant Ramon M. de la Rama, acting as negotiorum gestor for his co-defendant Pedro C. Hernaez, obtained loans totaling P14,786.61 from the Bank of Taiwan, Ltd. These loans were secured by chattel mortgages on standing crops belonging to Hernaez. The promissory notes carried 6% annual interest compounded quarterly. Procedural History: The Republic of the Philippines, as successor-in-interest to the assets of the Bank of Taiwan, Ltd., filed a collection suit against Hernaez and De la Rama on March 30, 1962. The trial court dismissed the complaint, ruling that the action had prescribed, considering the period from the maturity of the last note (October 27, 1944) to the filing of the complaint (March 30, 1962), even after deducting the moratorium period. The Petition: The Government appealed the dismissal, arguing that its action had not prescribed.
Issue(s)
Whether the Republic's action to collect the loans from the defendants-appellees had already prescribed at the time of the filing of the complaint.
Ruling
The Supreme Court reversed the decision of the trial court, holding that the action had not prescribed. The Court ordered the case remanded to the trial court for judgment on the merits, excluding the issue of prescription.
Ratio Decidendi
On Issue 1: The Court ruled that the action had not prescribed. Applying the ruling in Republic vs. Grijaldo and Republic vs. Rodriguez, the Court emphasized that under Article 1108 of the Civil Code, prescription does not run against the State when it sues in its sovereign capacity. The Court performed a forensic calculation of the time elapsed: (a) From the maturity of the first note (April 7, 1944) until the first moratorium suspension (November 18, 1944), only 7 months and 11 days elapsed. (b) Although the US Government acquired the notes in January 1946, it became a foreign sovereign upon Philippine independence on July 4, 1946, and could not sue because the moratorium laws remained in force in this jurisdiction until they were declared unconstitutional in Rutter vs. Esteban on May 18, 1953. (c) From May 18, 1953, until the Republic acquired the notes on July 20, 1954, only 1 year, 1 month, and 2 days elapsed. (d) Total elapsed time while the notes were in the hands of entities against whom prescription could run was only 2 years and 26 days. Once the Republic became the owner in 1954, the statute of limitations ceased to run entirely. Therefore, the filing of the complaint in 1962 was well within the legal timeframe.
Main Doctrine
The statute of limitations does not run against the State, and the moratorium laws enacted during the Japanese occupation and its aftermath suspended the running of the prescriptive period for actions to collect debts, thereby preventing the prescription of the Republic's claim.