G.R. No. 185277 - People vs. Gallo

On August 19, 1981, the defendant corporation, represented by Romeo V. Jacinto, together with Francisco C. Yu and Sheolin M. Yu as sureties, executed a continuing Surety Agreement in favor of the petitioner, a banking corporation.
The agreement bound the defendants jointly and severally to pay all credit accommodations, including trust receipts and other credit facilities incurred by the defendant corporation, together with corresponding interest, charges, and costs.

On December 3, 1982, defendant corporation, through Romeo V. Jacinto, executed Trust Receipt No. 63725 for P78,595.99 in favor of the petitioner, obligating itself to hold in trust certain merchandise (two cases of machinery) and either sell the merchandise or return it by March 3, 1983.
On February 14, 1983, defendant corporation, again through Romeo V. Jacinto, executed Trust Receipt No. L-17572 in the amount of P85,147.00 in favor of the petitioner, involving merchandise (one lot of electrical fixtures) with the agreement to sell or return the goods on or before May 15, 1983.

The defendants defaulted in complying with the conditions of the trust receipts, and by June 15, 1983, the outstanding obligation had risen to P327,844.03, less corresponding marginal deposits.
Despite repeated demands by the petitioner for payment on the account, no amount was remitted.

The petitioner, seeking recovery of the sum involved, initially filed a criminal complaint against the defendants before the City Fiscalas Office of Manila for violation of P.D. 115, which was dismissed on January 16, 1985 for failure to prosecute.
The petitioner filed a civil complaint on July 27, 1993, for recovery of the sum due under the trust receipts, even though the obligation had become due many years earlier.

Defendant Romeo V. Jacinto filed an Answer raising, among other defenses, that the action had already prescribed.
On February 14, 1994, the trial court heard the defendant’s motions, and on February 18, 1994, issued an order dismissing the civil complaint on the ground of prescription.
The trial court relied on the dates of the trust receipts (December 3, 1982, and February 14, 1983) and their respective due dates (March 3, 1983, and May 15, 1983) to conclude that the complaint, filed in 1993, was well beyond the applicable prescriptive period of ten years under Article 1144 of the Civil Code.
The petitioner subsequently appealed the dismissal to the Court of Appeals (CA) in CA-G.R. CV No. 45054. The CA reaffirmed the dismissal and held that the running of the prescriptive period had not been adequately interrupted.

The petitioner contended that extra-judicial written demands, as provided under Article 1155 of the Civil Code, should have interrupted the prescriptive period.
It relied on allegations that demand letters had been sent on July 17, 1984, which it argued were sufficient to halt prescription. However, the petitioner also admitted that some of the demand letters were returned to sender and that the respondents never received them.
The petitioner alternatively argued that the criminal complaint filed could count as an extra-judicial demand, although there was no record of proper notification to the respondents nor was the criminal case ultimately instituted in court.

The Supreme Court, while noting the petitioner's invocation of Article 1155 of the Civil Code, confirmed that there was no valid interruption of the prescriptive period.
The Court clarified that Act No. 3326, which the CA applied, is a penal statute and not applicable in computing the prescriptive period for a civil suit for breach of contract.
Accordingly, the Supreme Court denied the petition for review, holding that the civil complaint was barred by prescription.

Whether the petitioner’s civil complaint for the recovery of amounts due under the trust receipts is time-barred by prescription.

Determination of when the cause of action accrued based on the due dates specified in the trust receipts.
Consideration of whether any act (such as sending of demand letters or initiating a criminal complaint) effectively interrupted the prescriptive period claimed under Article 1155 of the Civil Code.

Whether the petitioner properly invoked Article 1155 of the Civil Code as a basis for interrupting the prescriptive period.

Examination of whether the extra-judicial written demands were validly effectuated and received by the respondents.
Analysis of the petitioner's assertion that the criminal complaint could qualify as an extra-judicial demand.

Whether Act No. 3326, as amended, is applicable to the present case involving a civil action for breach of contract, instead of Article 1155.

Evaluation of the nature of the action (civil vs. criminal) and the appropriate legal standard for computing the period of prescription.
Consideration of established jurisprudence regarding the interruption of prescription in cases involving written contracts.

Whether the actions taken by the petitioner constituted any interruption of the prescriptive period, thereby extending the time for bringing a legal action.