A.M. No. RTJ-20-2596 - De Leon-Profeta vs. Mendiola

Case Summary (A.M. No. RTJ-20-2596)

Facts and Transactional Details

Regina sold petroleum products on credit to Nida on various dates beginning in 2000. Among numerous transactions, three specific purchases were the subject of checks: a July 26, 2000 transaction (check amount P60,000.00) and two later transactions evidenced by checks for P44,092.00 and P66,168.50 (issued in November 2002). The three checks were dishonored by the drawee banks (the July 26, 2000 check dishonored on August 25, 2000; the November 2002 checks dishonored on April 4, 2003). Regina claimed broader outstanding balances for earlier and later purchases (including alleged amounts of approximately P616,169.75, P156,662.00, and P150,996.00), but the trial court limited recovery to the value of the three dishonored checks (total P170,260.50). Regina sent an extrajudicial demand on May 15, 2013 and filed a complaint for sum of money on June 4, 2013.

Procedural Posture

The RTC, in a decision dated August 18, 2014, rendered judgment in favor of Regina but confined liability to the aggregate value of the three dishonored checks (P170,260.50), plus attorney’s fees and costs, while dismissing the counterclaim and other claims. Nida appealed to the Court of Appeals, which, in a decision dated September 8, 2017, reversed the RTC and dismissed the complaint on the ground of prescription. Regina’s motion for reconsideration before the CA was denied on January 22, 2018, and she filed a Petition for Review on Certiorari under Rule 45 to the Supreme Court challenging the CA’s conclusion on prescription.

Issue Presented

Whether Regina’s action for collection of the sums represented by the three dishonored checks was timely — specifically, whether the prescriptive period should be reckoned from (a) the dates of dishonor of the checks, (b) the date of last partial payment (asserted November 8, 2012), or (c) the date of extrajudicial demand (May 15, 2013) — such that the complaint filed on June 4, 2013 would not have prescribed.

Legal Framework on Prescription and Accrual

The controlling Civil Code provisions are: Article 1145 (six‑year prescriptive period for actions upon an oral contract), Article 1150 (the prescriptive period is counted from the day the action may be brought), and Article 1155 (interruption of prescription occurs only by filing a suit, by a written extrajudicial demand, or by a written acknowledgment of the debt). The accrual of a cause of action is determined by the legal possibility of bringing the action — i.e., when the last element of a cause of action (the defendant’s violative act or omission) occurs. Jurisprudence distinguishes between written contracts (subject to a ten‑year period) and oral contracts (six years), and requires that any writing relied upon to invoke the ten‑year rule must, on its face, contain an express or fairly implied promise to pay.

Characterization of the Contract and Effect of the Checks

The courts found the underlying sales agreement to be oral. The issuance of the three checks did not, by themselves, transform the oral agreement into a written contract for purposes of the ten‑year prescriptive period because none of the checks contained, on their face, an express or implied written promise to pay the obligation in the manner contemplated by the ten‑year statute. The Supreme Court adopted the CA’s reliance on established jurisprudence (Manuel v. Rodriguez; PNB v. Buenaseda) holding that a writing must, by its own language, affirmatively indicate the promise to pay if the ten‑year prescription is to apply. Consequently, the six‑year period of Article 1145 governs Regina’s claim.

Accrual of the Cause of Action and Computation of Prescription

A cause of action for nonpayment accrued upon the dishonor of each check, which constituted the breach of the payment obligation. The relevant dishonor dates accepted in the record were: August 25, 2000 for the July 26, 2000 check (starting the six‑year period to August 25, 2006), and April 4, 2003 for the two November 2002 checks (starting the six‑year period to April 4, 2009). Because Regina filed the complaint on June 4, 2013, more than six years after those accrual dates, the claims based on those dishonored checks had prescribed.

Interruption of Prescription and Alleged Acknowledgments or Payments

Prescription may be interrupted only by filing of a suit, by a written extrajudicial demand, or by a written acknowledgment of the debt. Regina’s extrajudicial demand (dated May 15, 2013) postdated the expiration of the relevant six‑year periods and therefore did not interrupt prescription. Regina’s assertion that partial payments (notably an alleged payment on November 8, 2012) constituted an acknowledgment sufficient to interrupt prescription was not supported by satisfactory evidence. Under Article 1155, payment alone, unless manifested in a written acknowledgment signed by the debtor, does not interrupt prescription. The documentary record actually showed the last receipt for payments was dated November 21, 2006 for P2,000.00, which, if relevant, would at best have extended the actionable period only up to November 21, 2012 — still prior to Regina’s June 4, 2013 filing.

Limitation of Review by Final RTC Determination

The Supreme Court noted a procedural bar: Reg

Case Syllabus (A.M. No. RTJ-20-2596)

Court, Citation, and Panel

Supreme Court of the Philippines, First Division, G.R. No. 237140, Decision dated October 05, 2020; reported at 887 Phil. 135.
Opinion penned by Justice Lopez.
Decision concurred in by Peralta, C.J. (Chairperson), and Justices Caguioa, Lazaro-Javier, and Gaerlan.

Nature of the Proceeding and Relief Sought

Petition for Review on Certiorari filed under Rule 45 of the Rules of Court.
Petitioners seek to set aside the Court of Appeals (CA) Decision dated September 8, 2017 and Resolution dated January 22, 2018 in CA-G.R. CEB CV No. 05317.
The CA had dismissed a complaint for sum of money filed by petitioner Regina Q. Alba against respondent Nida Arollado on the ground of prescription.
Core legal issue presented to the Supreme Court: the proper reckoning date of the prescriptive period for actions based upon an oral contract.

Parties and Capacity

Petitioners: Regina Q. Alba (Regina), sole proprietor of Libra Fishing, joined by her husband Rudolfo D. Alba as nominal co-plaintiff.
Respondents: Nida Arollado (Nida), joined by her husband Pedro Arollado, Jr., who was impleaded as her co-defendant.
Note: The petition refers to Nina Arollado in the Petition for Review on Certiorari (footnote in source).

Factual Background (Antecedents)

Regina is the sole proprietor of Libra Fishing engaged in selling crude oil, petroleum products and related merchandise.
On various dates beginning in 2000, Nida purchased on credit from Libra Fishing crude oil and other petroleum products.
Purchases (dates and amounts as listed in the record):
- August 22, 2000 — P616,169.78
- July 26, 2000 — P60,000.00
- November 12, 2000 — P44,092.00
- November 27, 2000 — P66,168.50
- November 29, 2002 — P156,662.00
- December 21, 2002 — P150,996.00
Checks issued by Nida (bank, check number, amount, date as in record):
- Chinabank, Check No. A0156896, P60,000.00, dated July 26, 2000.
- Maybank, Check No. 0001386418, P44,092.00, dated November 12, 2002.
- Maybank, Check No. 0001386598, P66,168.50, dated November 27, 2002.
The three checks were dishonored by the drawee banks.
Dishonor dates (as shown in the record):
- The July 26, 2000 check was dishonored on August 25, 2000.
- The November 12, 2002 and November 27, 2002 checks were both dishonored on April 4, 2003.
Regina demanded payment for the outstanding balance by extrajudicial demand dated May 15, 2013; Nida did not comply with the demand.
Regina filed a complaint for sum of money on June 4, 2013.

Pleadings, Defenses, and Trial Court Disposition

Nida, in her answer, admitted issuing the three dishonored checks but claimed she had settled amounts through installment payments and denied outstanding liability.
Nida asserted that, if any unpaid amounts remained, Regina's right to collect had already prescribed because the transactions occurred more than ten years prior.
Regional Trial Court (RTC), Branch 16, Roxas City, Capiz, rendered judgment on August 18, 2014:
- Granted plaintiffs' claim but limited defendants' liability to the total value of the dishonored checks.
- Ordered defendants jointly and severally to pay plaintiffs P170,260.50 (the total amount of the dishonored checks).
- Ordered defendants to pay jointly and severally P20,000.00 attorney's fees and litigation expenses, and costs.
- Dismissed the counterclaim and all other claims in connection therewith.
Regina did not appeal the RTC's limitation of liability to the value of the dishonored checks; she later raised contrary assertions only in the Appellees' Brief.

Court of Appeals Disposition and Rationale

Nida appealed the RTC decision to the Court of Appeals.
CA Decision dated September 8, 2017 reversed and set aside the RTC judgment and dismissed the complaint for sum of money as prescribed.
CA's reasoning summarized:
- The parties' agreement for sale on credit was verbal; thus Article 1145's six-year prescriptive period for oral contracts applies.
- The CA computed the six-year period from the date of dishonor of the checks (or at the latest until April 4, 2009).
- Because the complaint was filed on June 4, 2013, the action had prescribed.
Regina's motion for reconsideration before the CA was denied by Resolution dated January 22, 2018.

Petitioner's Arguments Before the Supreme Court

Regina argued that:
- The prescriptive period should be reckoned from the date of last partial payment by the debtor (Nov 8, 2012), which would mean the complaint of June 4, 2013 was timely.
- Alternatively, prescription should be reckoned from the date of the extrajudicial demand (May 15, 2013), which would also render the complaint timely.
Regina contended that partial payments and other acts interrupted prescription.

Issues Framed by the Supreme Court

Whether the action to collect the amounts covered by the dishonored checks was governed by the six-year prescriptive period applicable to actions upon an oral contract (Article 1145) or by the ten-year period for written contracts.
When does the prescriptive period commence (i.e., the accrual or reckoning date) for causes of action based on the dishonor of checks and oral sale on credit?
Whether partial payments or other acts by the debtor interrupted prescription