G.R. No. L-49112 - Agustin vs. Edu

The suit was filed by the Development Bank of the Philippines (as successor to the Agricultural and Industrial Bank) to foreclose a mortgage.
The defendant in the foreclosure action was Manuel S. Ozarraga, acting as the administrator of the intestate estate of Leon Cunat, the mortgage debtor.

The indebtedness amounted to P800.00, incurred on August 7, 1941.
The repayment was structured in five yearly installments, with the final due installment on August 7, 1946.
Leon Cunat executed a mortgage on a parcel of land as security for the said indebtedness.

Leon Cunat died in 1942, and neither him nor his heirs made any payments toward the debt.
The cause of action, relating to the debt, accrued on August 7, 1946 (the due date of the last installment).
The period was affected by a debt moratorium under Executive Order No. 32, issued on March 10, 1945, which suspended the accrual of prescription.

The debt moratorium was lifted by Republic Act No. 342 on July 26, 1948.
Since Leon Cunat was not shown or pretended to be a war damage claimant, the prescriptive period (10 years) began from the lifting date.

The plaintiff-appellant filed the foreclosure suit on July 13, 1959, well beyond the 10-year period counting from July 26, 1948.
The trial court, on the motion of the defendant-appellee, dismissed the complaint on the ground of prescription.
The plaintiff-appellant appealed the dismissal solely on the issue of prescription.

The plaintiff-appellant argued that subsequent acts by Cunat’s heirs (widow and children) induced a delay in enforcing the claim.
These alleged acts were not found by the lower court, and no evidentiary findings were made regarding them.

On July 18, 1958, a petition was filed by the appellant for the appointment of an administrator for Cunat’s estate, purportedly interrupting the prescription period eight days before its expiration.
The court held that such a petition, even if filed by the creditor, did not function as an action to enforce the debt.

The appellant cited various demand letters sent to Leon Cunat (in 1950, 1952, and 1957) and similar letters to his heirs.
Under the governing law (Act No. 190 prior to the New Civil Code), such extra-judicial demands did not interrupt the prescriptive period.

The appellant attempted to invoke Article 1155 of the New Civil Code, which now recognizes the interruption effect of extra-judicial demands.
The court ruled that Article 1116 mandates prescription to be governed by the law in force at the time, thus rendering Article 1155 inapplicable.

Whether the debt’s prescriptive period was properly computed considering the suspension under the war moratorium and the subsequent lifting by Republic Act No. 342 on July 26, 1948.
Whether any of the actions or events alleged by the plaintiff-appellant (i.e., acts of the heirs, filing a petition for administration, and sending extra-judicial demand letters) constituted an interruption of the prescriptive period.
Whether the application of Article 1155 of the New Civil Code was appropriate in determining the interruption of the prescription period, given that the debt originated prior to the Code’s effectivity.