Republic of the Philippines v. Dolores Infante
REITERATIONFacts
The Antecedents: In 1943, Dolores Infante obtained loans from the Bank of Taiwan, Ltd. totaling P683.10, with interest at six percent per annum, compounded quarterly. Procedural History: On September 15, 1961, the Republic of the Philippines filed a complaint to collect the debt. The defendant moved to dismiss on the ground of prescription. The Justice of the Peace Court dismissed the case, finding the action had prescribed. The plaintiff appealed to the Court of First Instance (CFI), which also dismissed the case on October 28, 1963, for the same reason. The Petition: The plaintiff appealed directly to the Supreme Court, contending that the lower courts erred in holding that the action had prescribed and in dismissing the complaint.
Issue(s)
Whether the Republic of the Philippines has the legal right to collect the loans from Dolores Infante. Whether the action to collect the loans has prescribed.
Ruling
The Supreme Court set aside the order of the lower court dismissing the complaint and remanded the case for further proceedings. The Court ruled that the action had not prescribed.
Ratio Decidendi
On the legal right to collect: The Court reiterated its ruling in Republic of the Philippines vs. Grijaldo (15 SCRA 681) that pursuant to the Trading with the Enemy Act, as amended, and Executive Order No. 9095, the properties of the Bank of Taiwan, Ltd. were vested in the United States Government. Subsequently, under the Philippine Property Act of 1946 and Transfer Agreements, these assets were transferred to and vested in the Republic of the Philippines. This successive transfer made the Republic the successor in interest and transferee of the rights over the loans, thereby creating a privity of contract between the defendant and the Republic, granting the latter a legal right to bring the action. On prescription: The Court held that prescription does not run against the State when acting in its sovereign capacity to protect public property, citing Article 1108, paragraph 4 of the Civil Code and prior jurisprudence. Furthermore, the Court found that the running of the prescriptive period was interrupted by the moratorium laws (Executive Orders No. 25 and 32, and Republic Act No. 342). Although these laws were later declared unconstitutional in Royal L. Rutter vs. Placido J. Esteban, they were in effect from their promulgation until May 18, 1953, suspending the prescriptive period during their effectivity. Therefore, the 10-year prescriptive period began on May 19, 1953. Since the loans had no maturity dates and were payable on demand, prescription could only accrue upon extra-judicial demand made on September 27, 1954. The action would prescribe on September 27, 1964. As the complaint was filed on September 15, 1961, it was filed within the 10-year period and thus, the action had not prescribed.
Main Doctrine
The Republic of the Philippines, as successor in interest to the assets of the Bank of Taiwan, Ltd., has the legal right to collect on loans. Prescription does not run against the State in the exercise of its sovereign functions, and the running of the prescriptive period for collecting the loan was interrupted by moratorium laws.